Buy-to-let returns beat all other mainstream investments
Every £1 poured into buy-to-let in 1996 is now worth £15 – outperforming cash, bonds and shares over the same period, a new market study suggests.
Buy-to-let investments have outperformed all major asset classes over the past 18 years, according to a study of the sector. As well as reflecting property price growth over the period, the data highlights the effect of borrowing – or “gearing” – which has hugely magnified total returns.
Every £1 invested in buy-to-let is now worth £14.90, if investors put down a deposit of 25pc and borrowed the rest via buy-to-let mortgages. These specialist loans first became available in 1996, the point from which performance is calculated.
This has produced net annual returns 16.2pc over the past 18 years, compared with 6.5pc if the same amount was put into the stock market.
Cash buyers who poured money into buy-to-let 18 years ago have now turned £1 into £5.07 – a net annual return of 9.4pc. The study, published today by former economist Rob Thomas, found that landlord returns outstripped the earnings from investments in cash, stocks and shares and commercial property. In the same time-frame, commercial property investments turned £1 into £4.49.
Cash savings were the worst performers, according to the report, where £1 is now worth just shy of £2. The study produced for lender Landbay did not include gold, which has fallen fast in recent years but was the best performing asset in the previous decade.