Q – Why invest in the Prime London Residential Market?
A- Impressive annual returns
Residential is the best long-term performer out of the UK’s main asset classes. Hearthstone Investment reports that Residential property has been the best long-term performer out of the UK’s main asset classes over the last 41 years to 2011 giving 13.8% p.a. over the period.
Hearthstone conclude that given the lack of credible investment vehicles for Residential property, UK investors have been missing out on impressive annual returns of 13.8% for more than four decades.
The analysis, which examines returns data from the last 41 years, shows that although commercial property has proved to be one of the more appealing asset classes of the early to mid noughties, the UK’s residential market has provided better investment returns – something that has been largely ignored by the investment world. The analysis also shows:
By comparison, the equity market (the multi-asset manager favourite and next best performer) recorded a total return of 12.3% p.a. (FTSE All Share Index)
The Sharpe ratio, which characterises how well the return of an asset compensates the investor for the risk taken, is more than twice as high for residential property than it is for commercial property, the next best perfomer.
A final point worth noting in 2012, research undertaken by Credit Suisse concludes that residential property has provided a long-term capital appreciation that is similar in magnitude to gold. .
To conclude residential investment is an important part of investment portfolios with positive annual returns, together with low correlation to other asset classes and a low volatility profile and should be an integral part of any investment strategy.
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