Investors who purchased a buy-to-let property with a deposit of £25,000 in 2000 could expect to see a healthy £33,288 profit (133%) over the past seven years. This is significantly higher than the £1,443 (5.8%) achieved by those who invested this amount in the FTSE 100 over the same period.
The huge disparity between the returns available is due to the consistently strong performance of the housing market, and buy-to-let as a separate asset class, while the stock exchange has suffered some severe set backs.
The second most profitable asset class to invest in was gold, which has turned in a profit of £19,818, an increase of 79% on investors’ initial stake seven years ago. Cautious investors who placed their capital in a savings account did not enjoy the huge gains offered by the other asset classes although with a £9,755 profit, they fared considerable better than those who chose to invest in the high-risk stock market.
The results show a marked difference for those who cashed in the money they invested at the turn of the century at the same time last year. For those who invested in buy-to-let property in 2000 and sold in Q2 2006, they made a profit of 111%. Gold investors made a profit of 78% and savers of 32%. However those who invested in the volatile stock market actually made a loss – by selling in June 2006 they would have made a loss of 8%.
Lee Grandin, managing director of Landlord Mortgages, said: “While buy-to-let property may not be an option for everybody, our latest research shows that you can make considerable gains on capital invested in this asset class. However, it is worth bearing in mind that buy-to-let often requires more commitment from investors than other asset classes and should be treated as a business rather than simply an investment.
“Potential landlords need to make sure they do their research thoroughly and understand the nature of the market fully before they make this type of commitment. It is also worth bearing in mind that rental yields have been in steady decline over the past few years which has caused some difficulties. However, we believe rents are set to increase in line with rising house prices by the end of the year so this might ease some pressure.
“Whilst gold is a relatively under-utilised asset for most consumers, this has also provided healthy returns over the past seven years and it will be interesting to see if this continues in the long term. Investors who chose to stay close to home by investing in the FTSE 100 appear to have been burnt by the poor performance of the stock market and – in hindsight – might have done better by putting their capital in a savings account.”
