Majority of IFAs expect UK house prices to rise in next three years
Nine out of ten Independent Financial Advisers expect UK house prices to increase during the next three years.
Some 40% of IFAs would increase their own personal exposure to residential if it were easier to do so in a tax efficient way and 42% of IFA clients also more interested in residential property, according to new research.
The survey from Castle Trust, which offers investment products that track or beat the Halifax House Price Index, shows that between now and 2019, 86% of advisers expect house prices to rise with one in 20 anticipating a dramatic increase.
Also, when looking at the next 10 years, only 6% expect prices to fall and one in 14 think they will rise by over 50%. By 2024, financial advisers on average think that house prices will increase by around 21%, which would add £37,773 to the value of a typical home.
According to the survey, the most common barrier to investing in a buy to let property is concerns about tenants or lack of tenants with 51% mentioning this followed by 49% saying it is the deposit and 41% thinking it is a hassle.
‘It is clear that confidence in the entire UK housing market is finally taking hold and is no longer just confined to London and the South East. This is starkly apparent from our own results as we have witnessed record flows into our Housa products, presumably because their returns are tightly pegged to the Halifax House Price Index,’ said Sean Oldfield, chief executive of Castle Trust.
He explained that the firm’s Housa products provide a simple alternative to buy to let which has never before existed which opens up the chance for more people to invest in residential property who previously weren’t able to do so.
Investors across Castle Trust’s range of Housas have seen growth since they were first launched in October 2012 and its unique Protected Housa investment product which both protects the capital invested and tracks the Halifax House Price Index (HHPI), has delivered capital growth of 3.1% in its first month alone.
Oldfield described Housas as a low cost and tax efficient way to get exposure to the housing market. ‘Unlike property funds, there are no upfront or ongoing management fees. Housas typically qualify for inclusion as an ISA, Junior ISA or SIPP with a minimum investment of just £1,000. Investors are eligible for protection by the Financial Services Compensation Scheme of up to £50,000 per individual,’ he pointed out.
UK residential property is one of the most stable asset classes. Analysis by Castle Trust reveals that over the last 30 years, it has historically delivered annual returns of about 6% per annum, which is comparable with equities, and superior to commercial property, but with much less volatility than both.