Confidence in residential bricks and mortar falls 80%

The number of people who think that their home is the only investment they will ever need has fallen dramatically over the past six months, according to long-term investment provider Skandia.

At a time when expert predictions suggest residential house prices will fall by 20 per cent in the next two years, the number of people depending on their home to cover the costs of their retirement has fallen by 80 per cent in the last six months.

In April this year, 10 per cent of respondents - the equivalent of almost five million people if extended to the whole population- claimed that their home was the only investment they would ever need, compared with just two per cent – or 960,000 people nationwide - in October 2008. Across all the regions, the number fell significantly.

Michelle Cracknell, Strategy Director at Skandia, commented on the findings: “It is a very high risk strategy to invest in residential bricks and mortar alone as your sole investment to fund a retirement. It is always risky to put all your eggs in one basket; instead we advise people to take a broader approach to their investments and retirement planning. Initially, you should work with a financial adviser, who can help you build a financial plan to achieve your objectives and goals. It is then a case of implementing that plan which most typically is done through building a balanced and diversified investment portfolio that matches your attitude to risk.”

In order to highlight the risks associated with relying solely on residential property as the only investment required for the long-term, Skandia conducted research to compare 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 three times that of house price growth (1534% vs. 444%).

The research suggests that if £30,000 (the average cost of a home in 1983) had been invested in equities rather than residential property 25 years ago, today it would be worth more than £490,000 compared with just over £163,000, which represents the equivalent property growth.