Tuesday, 11 April 2017

The one about the new £1 coin and the Edinburgh property market

I was in Sainsbury’s today buying my guilty pleasure (Irn Bru if you are interested, the diet stuff not the full fat nonsense!) when I was handed a new £1 coin in my change.  Anything that reduces the risk of me having fake money in my pocket is a good thing in my book so I am all for the new £1’s but, personally, I also think that they look quite nice.

This new £1 got me thinking about the value of money over time.  The time value of money is the idea that money available at the present time is worth more than the same amount in the future due to its potential earning capacity.  This core principle of finance holds that, provided money can earn interest, any amount of money is worth more the sooner it is received.

So back to my thinkings. 

The old £1 coins first appeared in 1983. 

If you had put £1 in your piggy bank back in 1983 it would be worth only 32p in real terms today as the effects of inflation etc would have greatly corroded its worth. 

However, if you put £1 into property in 1983 the capital value would be worth, on average, £2.42 in real terms today which is more than 7.5 times what it would have been worth in your piggy bank .... but that is only part of the ‘good news’ story. 

Capital growth on rental properties has a good chance of being greater than the average given that:
  • Most rental properties are 1 or 2 bed properties whose capital value has grown faster than the average.
  • As a professional buyer of properties, your expertise can help you pick properties whose capital value may well grow faster than the average.

And then of course there is my old favourite – capital growth is only part of the good news story of owning a rental property with income being the other key part of this story!  I would estimate that income would add a further £1.70 to the capital growth returns.

As my Father used to say to me – piggy banks are for loose change that you do not invest!

I’m happy to give free impartial advice to would-be investors to help find a property that suits your requirements so, if you are interested in spending your new £1 coins on property, get in touch.

# edinburgh #property #buytolet #realestate #ownermanagedbusiness #retirement #retirementplanning

1 comment:

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