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Is residential property in the UK a good investment?

Extracts from this document...

Introduction

Abstract The Housing Market in the U.K. has been the subject of much interest in recent years. Housing is unusual in that not only is it used for living, but for many people it forms part of their investments. This investigation looks at whether or not investing money into residential property would be financially beneficial to the investor. Only the U.K. market is investigated due to the fact that comparing more than one market within the extended essay word limit would not be viable. Similarly the focus is only on residential property rather than other property types. In order to establish whether or not residential property is a good investment it is compared to several other types of investment: The FTSE 100, Gold and a high interest savings account. This enables an argument to be set out that uses real figures to compare property to other investments incorporating graphs to illustrate the data. These results are an illustration of past trends within different markets and suggest that the U.K. Housing Market would have been a good investment. However, it is recognised that timing is important so the figures are then rebased. As a consequence the conclusion is seen to be different. Knowledge has been used to suggest how the housing market may act in the future and it is believed that the U.K. Housing Market looks as if it is set to slow down in growth over the next few years and that now is perhaps not a great time to invest money into residential property in the U.K. Word Count: 258 Contents: 1 Title Page 2 Abstract 3 Contents 4 Is Residential Property In The U.K. A Good Investment? 5 " 6 " 7 " 8 " 9 Four graphs - UK house price index, FTSE 100, Gold/troy ounce; Base Rate. 10 Graph - �50,000 invested in various different asset classes since 1984 11 Analysis of research 12 Graph - Four different asset classes with January 1994 as the base point 13 ...read more.

Middle

The U.K. Housing Market is at the moment in an unstable state, everyone is talking about soaring house prices and the property bubble and all that is required to burst this "bubble" is a change in the attitude of future investors. Once the investor has made a decision that the U.K. Housing Market has become over priced then they will simply refuse to pay the soaring prices leading the U.K. Housing Market into a decline. Anyone thinking of buying into the U.K. Housing Market that has not taken the question of the "bubble" into serious consideration should think again and perhaps they should wait until the fears of a recession in the property market have been quelled or indeed the suspicions of a fall in the property market have been confirmed and wait until the recession is over. People that are already in the property market will perhaps have to endure tough times ahead watching their asset shrink with a slow down in U.K property prices lurking. Over the years the housing market has proven to be volatile. The data suggests that housing is a good investment but it still leaves the question of: will housing be a sound investment in the future? The inelastic supply of houses means that house prices are largely determined by demand factors such as interest rates, inflation and income. There are however other factors that will influence the housing market, these include speculation and demographic factors. Timing is also very important when making an investment as the data illustrates. The health of the housing market will strongly reflect the overall health of the economy as history will show us. The future of the U.K. housing market seems as if it is set to slow down. The prospect of earning large returns on a housing investment looks to be difficult but by no means does this imply that it is impossible. ...read more.

Conclusion

July-98 119.67 167.17 75.03 132.90 August-98 118.91 150.34 72.46 133.73 September-98 119.22 145.04 77.67 134.57 October-98 120.39 155.76 76.97 135.38 November-98 119.68 164.51 76.65 136.13 December-98 117.77 168.48 75.79 136.84 January-99 117.30 168.86 75.03 137.52 February-99 117.92 176.86 75.55 138.15 March-99 121.47 180.30 73.32 138.78 April-99 122.30 187.66 75.42 139.39 May-99 125.20 178.32 70.86 139.99 June-99 127.55 180.96 69.08 140.57 July-99 129.52 178.48 67.32 141.16 August-99 130.08 178.90 67.27 141.75 September-99 129.75 172.69 78.07 142.37 October-99 133.39 179.16 78.70 142.99 November-99 132.52 188.94 76.02 143.65 December-99 133.84 198.48 75.89 144.30 January-00 136.06 179.53 74.21 144.99 February-00 135.65 178.50 77.10 145.72 March-00 137.82 187.31 72.96 146.45 April-00 139.66 181.22 71.99 147.18 May-00 139.17 182.13 71.20 147.92 June-00 139.31 180.80 76.39 148.66 July-00 139.90 182.30 72.54 149.40 August-00 139.71 191.11 73.27 150.15 Date UK House Price Indexed FTSE 100 Indexed Gold $/troy ounce Indexed Base Rate Indexed September-00 141.70 180.27 71.70 150.90 October-00 140.96 184.40 69.81 151.65 November-00 141.91 175.91 70.78 152.41 December-00 137.98 178.21 71.70 153.17 January-01 137.32 180.36 69.60 153.94 February-01 140.23 169.49 70.18 154.68 March-01 143.41 161.35 67.58 155.42 April-01 147.56 170.89 69.29 156.13 May-01 149.33 166.00 69.52 156.81 June-01 152.85 161.60 71.10 157.50 July-01 153.37 158.35 69.76 158.15 August-01 155.00 153.08 72.09 158.81 September-01 154.11 140.43 76.63 159.34 October-01 154.14 144.34 73.51 159.87 November-01 158.28 149.03 71.78 160.41 December-01 159.34 149.43 73.11 160.94 January-02 160.45 147.92 73.93 161.48 February-02 163.89 146.09 77.86 162.02 March-02 166.39 150.98 79.30 162.56 April-02 169.78 147.94 81.03 163.10 May-02 176.97 145.64 85.56 163.64 June-02 182.38 133.36 82.26 164.19 July-02 185.28 121.61 79.46 164.73 August-02 184.17 121.07 81.97 165.28 September-02 191.43 106.59 84.88 165.83 October-02 201.35 115.70 83.44 166.39 November-02 204.53 119.41 83.02 166.94 December-02 198.98 112.85 91.25 167.50 January-03 201.89 102.17 96.52 168.06 February-03 205.53 104.70 91.80 168.58 March-03 207.80 103.49 88.02 169.11 April-03 213.16 112.44 88.94 169.64 May-03 211.98 115.94 95.52 170.17 June-03 208.89 115.45 90.75 170.70 1 Sloman (1998) 2 Mason (2003) 3 Grant & Vidler (2000) 4 Mason (2003) 5 The Economist (2003) 1 ...read more.

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