Stuart Law, managing director at Assetz, said:“Property has massively outperformed the stock market over the Blair years, generating huge returns for UK investors. With no gearing, property is up 186 per cent from 1994 to end of 2006, while the stock market (FTSE 100) is up just 103 per cent over the same period.
“If property was purchased with a 15 per cent deposit, then the results are stunning. Property has returned 1241 per cent capital growth - 12.4 times your money as profit, while shares are up just 103 per cent - twice your money.
“Looking forward, I would expect ungeared property to roughly equal the stock market, but with less volatility. Over the next ten years the stock market is likely to be up around 115 per cent, whereas ungeared property will be around the same in the region of 8 per cent per annum.
“However, geared buy to let investment is set to massively outperform equities again, but we are likely to see greater fluctuations in the short term. Geared buy-to-let property bought today with a 15 per cent deposit and 85 per cent loan would return 7.7 times the original cash deposit investment as profit on the basis of 8 per cent growth per annum. Property would only have to rise by 1.6 per cent a year over the next 10 years to produce the same returns as equities before costs – something most investors think is very likely, given the supply and demand imbalance of housing in the UK today and for the foreseeable future.
“Property investment with large borrowings carries greater short term risk than just buying equities with no borrowings. However, in the long term investors are comfortable that in prime locations in the UK, there is a limit on new development and therefore there is only one way for prices to go over the next ten to 20 years. As long as investors take this long term view and do not over-extend themselves, they should do very well in years to come.”
