The biggest investment most of us will probably ever make, will be the purchase of our home. Even though we’ve recently seen property prices drop, we’d hope that in the long term they’re an asset that will grow in value faster than inflation and provide us with an opportunity for long term capital gains. But is it really as good an investment as it seems? You would hope that stocks and shares investments grew at a rate above inflation too, but they have an advantage over a property, in that you don’t have to spend lots of money to maintain them.
For instance, you may think that it’s amazing how much the value of your home has risen since you bought it, but then when you think about how much you’ve spent on decorating, maybe doing up the kitchen or garden, insuring it, making repairs, etc, then maybe it’s not such a big increase after all the money you’ve pumped into it over the years.
Of course, the real value of your home is being able to enjoy living in it, and even though it might cost a lot to make sure you keep it decorated nicely, that’s part of the fun of having your own property. So even though with stocks and shares investments, you don’t necessarily have to keep putting money into them, how much enjoyment do you get from the piece of paper saying that you own so many shares compared to the amount of time that you spend at home?
Increases in property values and investments aren’t the only way we become better off.
One way that we are all getting, in a way, better off without realising, is that technology and goods are improving every year. Maybe we don’t notice the prices drop because we always want the newest and best things out, but we can now buy the things that we’re top of the range 20 years ago at a fraction of the price. How much would it of cost to buy a Sega Mega Drive computer, a 12 inch TV and a mobile phone that is too big to fit into your pocket? These days you could probably find all that for under £50, whereas you’d had to have saved for months and months to buy all that 20 years ago. Another way of looking at it would be to think of what you can get today for the same sort of money, maybe a Nintendo wii, 36 inch plasma HD TV and an iphone.
In the long term property prices will increase roughly in line with our average earnings, and the quality of our homes and the nice things we have inside them are getting better at a rate that you cannot measure, which makes each generation better off than the one before, without them even realising.
Because buying your home is the most exciting investment you can make, it is important that you seek independent financial advice to ensure that you can obtain the best mortgage deal you can. Kieron Bassett Financial Services are an Independent Financial Advisers and we are open six days a week. Contact the office on (01524) 832057 or via e-mail info@kieronbassett.com to arrange an appointment.
Jason Hinde CertPFS