As Warren Buffet said, ‘Price is what you pay, value is what you get’.
The world famous and legendary investor knew that when it came to making money you need to look into the long term and consider where your money will be coming from not just next year, in 3 years or 5 years, but in decades to come.
Another quote from Buffet was ““Opportunities come infrequently. When it rains gold, put out the bucket, not the thimble.”
Given the performance of property over the past few years, are we to expect that it will continue to rain gold, and if so, in the same quantities? The same type of gold?
These are all questions that, not just as property investors but as general investors, we should be asking ourselves.
So, let’s split this into a number of metrics that we could consider as measures of success in property investment. We should look at renters, yields, and prices.
Where do we think these will be in 2030?
Let’s take this in two parts. Firstly, it’s difficult to get nationwide predictions for the growth of renters overall for the UK. Different bodies and departments collate data for different countries such as Scotland and Wales, as well as in the north and south.
Having said that, there appears to be a good body of data for London. According to real estate firm CBRE the numbers of renters in London is estimated to rise by 122% by 2030.
Secondly, based on current rates, tenants privately renting are expected to make up 50.7% of the housing market by 2039.
These are fairly staggering figures, even in the context of a red hot property market in the UK right now.
According to data reported by Totally Money, the highest yields in the UK in 2019 were 10%, which were in Liverpool.
Going back through that data in more detail reveals that is an increase of 50% in ten years. If we apply that same thinking across the UK, we could be seeing yields in 2030 peaking at 15%. Given the number of renters we know we’re likely to have by that period it’s not outrageous to believe those predictions.
One simple way to look at this would be to take a property price in 2000 and compare it with the prices in 2020.
In this case a property in 2000 was worth £75,000 compared to £239,000 today, a rise of 318%. In this scenario, a house in 2030 would be worth £760,000, which seems unrealistic.
According to predictions by What Mortgage, the price of a house in 2030 will actually be £280.000, a rise of 17%, which still represents a tasty return on an asset of that size.
So with that in mind then, we can see that as property investors we’re not just experiencing a boom time that could end at any point, but a market that experience highs and lows but that will, over time, bring consistent and sizeable growth for your money.
Across all these key indicators that we’ve mentioned we can see that these indicators have all increased markedly over the years, and once we look at the same data over another 10 years, we fully expect that performance to be repeated.