Opinion

Is property still a safe investment?

5 min read

30 October 2013

For the first time since the recession hit, professionals are once again investing in bricks and mortar, which is a good indication of property still being a sound investment. However, as any financial guru will tell you, the key to making a property investment work is to ensure you never end up overexposed.

Many experts are now advising people that it’s the best time to invest in property because, when compared to other investments, the income and yield from bricks and mortar is much more compelling.

Property adds diversification to an investment portfolio

Property investments offer the chance to add diversification to a portfolio although the key to managing investment well is to never find yourself to be overexposed. Professional investors such as Robert Irving Burns recommend a four per cent property investment in a portfolio as being the optimum, offering a steady alternative income that could prove invaluable. The other draw being borrowing costs, which are steadily falling, making the deal more attractive from the outset.

Investing in property offers protection from inflation

When it comes to offering some protection against inflation, property investments appear attractive. Rents are increased annually and they tend to go up in line with other current price hikes. The result is that private, as well as commercial properties, offer a degree of protection from inflation. Over recent times, investors have expressed concern over the government’s policy on quantitative easing as a way to kick-start the economy, believing it could create higher inflation in the future. Therefore, the key to counteracting this is to invest in assets that are bound to grow in value enough so as to offset the increase in inflation or as a way to provide an income that exceeds it.

Investing in commercial property 

Financial gurus see commercial property as a good investment that would provide consistent returns over the next three years – it’s a lot less volatile than bonds, cash or shares, with commercial property investments being thought of as a sound way to gain a higher yield on the money invested.

In the past, when property was a “hot topic” as an investment, investors lost fortunes during the crash of 2007 and 2008. But things are different this time around; investors are more cautious and slower when putting their money into bricks and mortar. There’s no manic buying or selling in order to make a quick buck, because nobody wants to get their fingers burnt or be left out in the cold should things turn sour on the property front.

Property offers a tangible asset

Investing in property offers a tangible asset and although it cannot be traded in the same way as other investments, it is a reliable medium to long-term investment that yields a good return over a ten to 12 year plan. The two things investment property reliably offers are an alternative income and a capital growth on initial investment. Naturally, investors may buy properties in locations where the demand is constant and this includes university and college towns. Student rentals are viewed as offering some of the best rental yields in the whole of the UK and are set to continue to rise.

A large capital investment: Is it worth it?

For most people the purchase of their own home represents the largest investment they would ever make and this alone is enough for them. However, over recent times people have been tempted to get involved with “buy-to-lets” as a way to make their money and have enjoyed greater returns on their investments. This shows that by doing all the homework, investing in the right property is still an attractive option and does represent a safe investment in these troubled financial times.

Investing in bricks and mortar has always represented a sound way to make money work, so it yields better returns. However, investors are still nervous, especially after the disasters of 2007 and 2008. But things are moving at a slower pace. Investors are more cautious, which means risks are indeed lower. The question of whether property is still a safe investment – the answer is that you would not go wrong by including it in a portfolio because it adds value and diversification as well as offering an alternative income.

Aaron Hopkins is a professional writer

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