Equities can be a safer option than property over the long-term

Despite expert predictions that the average price of a home will tumble by as much as £40,000 by the end of next year, almost five million people in the UK still think that their home is the only investment they will ever need, according to research from long-term investment provider, Skandia.

At a time when millions of households are facing the prospect of negative equity and the ONS has revealed that the number of people saving into a pension has plummeted, Skandia has conducted research to highlight the risk of relying solely on property as a long-term investment.

The research suggests that if £30,000 (the average cost of a home in 1983) had been invested in equities rather than property 25 years ago, today it would be worth more than £545,000 compared with £174,000, which represents the equivalent property growth.

Skandia’s research has compared the performance of house prices (based on the Halifax House Price Index) and the performance of equities (based on the performance of the UK Equity Income sector). The findings have revealed that, over a 25 year period, money invested in the UK Equity Income sector has grown by a rate more than double that of house price growth (1718% vs. 480%).

Michelle Cracknell, Strategy Director at Skandia, commented on the findings: “Continuous house price falls have highlighted how risky it is to rely on property alone as a long-term investment. Our research suggests that, over the past 25 years, a time-frame which has seen similar conditions to the current economic climate, equities have consistently outperformed the returns from cash. However, while equities offer good investment opportunities for those who can afford to save over the long-term, they also come with associated risks.

‘Financial security is built by spreading your risk and the biggest winners are those who invest across a wide variety of sources. If you’re unsure about what is available the best thing to do is to get advice from an expert.”