When people invest their money they do so for both an income return and capital appreciation. The enemy to both is often inflation , that corrosive element , that money moth that eats away at purchasing power.
30 years is effectively an Investment lifetime as it is a period that covers the majority of mortgage terms and business careers. In Britain in the last 30 years inflation has on average ran out at 3.24% per annum. A pound in 1993 is with inflation £2.63 pence today. ( the moth ate 60% of the note ).
Property in particular residential homes historically have been a hedge against inflation and I could bore you with examples. However if you had invested in two of the largest British Plc Property companies in 1993 their share prices in pound terms are exactly the same today. They have failed and because Institutions and Pension Funds invest in these you too may well have failed. Unlike a house the offices / shops and industrials have not been the hedge but the dredge.
The same share price today as in 1993 effectively means you would have lost 60% of your money. These companies British Land and Landsecs were bastions of Britain supposedly, alas not. The likelihood of rapid reversal is most unlikely especially as office blocks and high street shops die as a post Covid Consequence. Industrials ? ( where are the factories ? Storage warehouses ok bring in Amazon ) . The fact is bricks and mortar ain’t what it oughta.
Meantime we haven’t got enough homes but if we build too many the prices will come down in response to basic economics of demand and supply. We could of course convert the commercial space but refurbishing costs are higher than rebuilding costs. The numbers which ever way you look at it are askew , not adding up. For some ( shareholders in those companies as example. ) their number might be up.
How’s your numbers this morning ?
qbitblogger 