You might ask, what has the plight of the Dartford
savers to do with the Dartford Property Market … everything in fact. Read the
newspapers, and every financial wizard is stating that with the decision of the
Bank of England’s Monetary Policy Committee in early August to cut the
Bank of England base rate to an all time low of 0.25 per cent, savers should
prepare themselves for interest rates to stay low well into the early 2020’s.
... And this isn’t some made up story to capture the
headlines of newspaper editors. The yield (posh word for interest rate or
return) on 10-year Government bonds is currently 0.61 per cent. This indicates
that the money markets believe that the Bank of England’s base rate will, on
average over the next ten years, be below the 0.61% rate they are buying the 10
year bonds at (because they would lose money if the average was over 0.61%). UK
Interest rates are going to be low for a long time.
For those who have saved throughout their working
lives and are looking for ways to maximise their savings, tying their money
into property could prove advantageous. You see as a saver, I did a search of
the internet and the best savings rate I could find was a 5 year fixed rate at
2.5% a year with Weatherbys Bank. Your £200,000 nest egg would earn you £5,000
a year – not much. However, on the other side of the fence, growth in Dartford
house prices and princely buy to let yields have made property investment in
Dartford an appealing option for many. According to my research, the...
Average Yield over the last five years for Dartford Buy to let property
has been 5.7% a year
… and average Property
Values in over the same period have risen by 39.0%.
Using these averages, the Dartford landlord’s property
would be worth £278,000 and they would have received a total of £57,000 in rent
– making the total return £335,000. Meanwhile, whilst our 8,730 Dartford (or
DA1, DA2 & DA3 to be exact) Saver’s, using the average savings rates for
the last 5 years, even if they had reinvested the interest, their £200,000
would only be £221,184.
There are risks as well as benefits to buy to let
though. As my blog readers know, I tell it like it is and investing in buy to
let means locking up capital in a property that may fall in value. Another
option would be stock market income based investment funds, which are paying
around 5%, especially if put your nest egg into a tax free Stocks and Shares
ISA. Although you can only add £15,240 a year into an ISA, but you would also
have the ability to sell up quickly if you want ... but one last thought…
The other side of the coin is that you cannot buy an
unloved ‘stock market income based investment fund’ and set about renovating it and adding value yourself. The
investment fund isn’t something that you can touch and feel, isn’t something
tangible, isn’t something physical, isn’t something concrete, it isn’t bricks
and mortar ... and that is why my fellow Dartford homeowners and Dartford
landlords is why the love affair of the British and Property will continue.
www.virotti.co.uk
