Why Property Won’t Fund Your Retirement

Missing TWO Essential Criteria …

In a recent insight I wrote about property being a risky strategy for your retirement.  Particularly if your overall wealth is heavy in it.

Since then, I evaluated further to reveal the true extent of underperformance for residential buy-to-let property.

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Two Essential Criteria   

Any investment must meet at least one of these 2 criteria (ideally both):

1. Capital Growth (in excess of inflation)
2. Income (in excess of cash rates)

Without #1, the asset gets destroyed by inflation.  Without #2, your money can earn more elsewhere.

All investments in our Investment Academy meet one or both criteria PLUS need to be passive and tax-efficient. 

So I wanted to check how property really stacks up on both criteria …

Criteria 1:  Capital Growth?

To get a sense for future capital growth, it helps to know the long-term trend.

I evaluated the Nationwide House Price Index over the last 50 years to obtain the trend …

Several important observations stuck out:

• Growth has trended down over the last 50 years.
• In the 70s and 80s, house prices averaged around 12% growth.  That meant house prices doubled every 6 years.
• In the 2000s the growth rate edged down to 10%.
• Then in 2008 we had the Global Financial Crisis.  Which resulted in lower average growth of 5% In the 2010s.
• After a post-Covid spike, we appear to have settled in the 2-3% range with the last reading at 2.3%.  That equates to prices doubling after 31 years.
• So how does Essential Criteria 1 look?  Unfortunately, a growth rate of 2.3% falls well short of inflation that is currently running at 3.8%.

But It Gets Worse … 

It turns out that REAL house prices (adjusted for inflation) have actually declined since 2007 …

That’s certainly not a prerequisite for a good investment, nor does it make for an asset to store your wealth.

That will probably surprise many property investors.

Criteria 2:  Income?

Many people invest in property for income.  Does property really stack up on the income criterion?

I did a quick cashflow calculation for a purchase of a standard buy-to-let with a gross rental yield of 6% (the UK average is 5.6%).

In the calculation below I used:

• Purchase price of £100,000
• Mortgage with 75% loan-to-value (=25% deposit)
• Mortgage rate of 4.25%
• Management 8% of rent

Note: I didn’t include voids, refurb costs, service charges, taxes, accounting fees etc – which all reduce income. 

So property also fails Criteria 2. 

Better Investments …

How you invest for a secure retirement is a life-changing decision.  Not enough people give it much thought.

Choose investments that provide Growth, Protection, Income, Tax-efficiency, and are Passive.  Our GPI Portfolio system has all 5.

And it’s not just about stocks.  We’ve helped thousands of investors (many were very heavy in property) to create a diversified financial assets portfolio which includes Gold, Options, REITs, Bonds, High Dividends – as well as regular Stocks/ETFs.

The Returns?   A Side-by-Side Comparison …

The table below compares resi property to stocks & financial assets for growth, income, and other attributes …

And remember to not confuse volatility with permanent loss.  Diversified stocks have never made a permanent loss.

Is Property Dead?

It’s not as passive or profitable it once was – as the analysis above shows.

Dedicated professional investors can, and will, be more successful in identifying value-add angles and BMV opportunities.

So it’s not dead, but it has changed a lot in the last few years.  I own residential property and, whilst i’m not looking to sell down my portfolio immediately, I know many landlords have done so.  

3 Key Takeaways

1. Make sure your investments tick the Growth or Income boxes.  Ideally both.  That’s critical for future financial security.
2. Ensure your portfolio is increasingly passive and tax-efficient as you get older.
3. Be properly diversified.  Don’t rely on one asset class to support your retirement plan – that’s a risky strategy.

Get Accelerated Guidance to Create a Secure and Passive Retirement …

 For accelerated and personalised guidance to create your diversified portfolio in the correct way – LIVE with me and our coaches making sure you’re doing it properly – Sign Up Now

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Always Remember:

• Time in the Markets always beats timing the markets
• Stay Diversified 
• Minimise those leakages:  Fees, Inflation, and Taxes
• Financial Markets are a great source of recurring income  
• ETFs, Balanced Funds and Options achieve all the above
• Being educated helps you outperform 99% of the population

… to ensure your investments work for YOUR financial freedom (not someone else’s)     

And … 

For more guidance, our Investment Academy will help you implement all of this in a step-by-step way.   

Thousands of people have learnt how to diversify and pound-cost-average into low-cost, set-and-forget ETFs & Funds for inflation-beating growth.  And Options to create recurring income.

Click here to learn about our Investment Academy

Finally …

– Don’t take the above as advice as it may not apply to you personally

– Your Capital is at Risk

– You may not be covered by the FSCS

– Anything mentioned in a podcast or in a previous article was valid at that time and may not continue to be now