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If you have a pot of money to invest, you may question whether to put it into UK investment property or the stock market. Most financial advisors would recommend a mix of investments from those that are very safe to those which have greater risk, but the potential of a higher return. The balance of an investor’s portfolio is dependent on their attitude towards risk and whether they are more interested in capital growth or an income. Most investors are looking for both capital growth and a good return on their money. The UK investment property market shows house prices increasing by 305% since 1996 and rental yields in 2007 at 5.45%. (Source: Landlord Mortgages). Capital growth had slowed by the end of 2007 to just over 5%, but has averaged more than 10% pa (Source: HBoS). Whereas the stock market (FTSE 100) has grown by just 52% in the same time period giving an average dividend yield in 2007 of just 3.13% and capital growth of 3.8% - FTSE 100 2007 vs. 2006 (Source: Digital Look), Other research by the Bank of England suggests that the UK investment property market is not overpriced (Asset Pricing and the Housing Market), although there are frequently reports in the media of a decline in the property market, it usually means decline in the rate of growth not an absolute decline. Although caution and research should always be undertaken before committing to any investment (the value of investments can go down as well as up), the outlook for the UK property market as an investment still appears to be solid particularly with the governments estimates for the population increase over the next 25 years and the decrease in the rate of new house building.
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