July 2010

Tuesday, 13 July 2010

Will property out perform inflation?

 

Price Waterhouse Coopers have recently confirmed a view that I have held for some time, which is that property price inflation over the next few years will be modest at best. Their view is that property prices will struggle to keep pace with inflation. This will change the way many people view their property purchases from now on. For those of us simply wishing to buy a house to live in, nothing changes, but for those who see their home as an investment vehicle that will always increase in value and which can be borrowed against whenever the need arises, I’m afraid the game is up.

 

However, before we write off property as an investment vehicle completely let’s consider how other investments will do over the next ten years or so. Are we to assume that savings rates will out perform inflation? On current form I think not. Are we to hope that stocks and shares will out perform inflation? Maybe, but maybe not and only the bravest investors will be around to find out.

 

So compared with the alternatives perhaps good quality housing stock in good residential areas doesn’t seem like such a bad bet as some might think.