New research shows that despite tax and regulatory changes restricting buy to let returns, this remains a far healthier investment than buying into ISAs.
London lettings agency Benham and Reeves has analysed data over the last 10 years looking at the average annual return when investing in a stocks and shares ISA, Cash ISAs and the Buy To Let sector, as well as what this return would look like based on an example investment of £20,000.
The research - which does not take into account inflation - shows that investing in a stocks and shares ISA has returned an average annual rate of growth at 2.3 per cent. As a result, a £20,000 investment 10 years ago would have yielded a return of £25,156 in addition to your original £20,000, although this climbs to £47,381 had you invested £20,000 on an annual basis.
A Cash ISA has been less productive - the average annual rate of growth sits at a negative 4.1 per cent - cumulatively this would be a significant loss of over £6,800 after 10 years.
Benham and Reeves then analysed the average annual net yield on a Buy To Let investment and the research shows that, at an average annual return of 4.3 per cent, it’s been by far the better option when compared to the two ISA options.
Those to have invested just £20,000 into bricks and mortar a decade ago would have seen this investment climb by £10,470 today. An ongoing annual investment of £20,000 per annum would see this return climb to £73,959.
Director of Benham and Reeves, Marc von Grundherr, comments: “The story of the ISA millionaire is one that is heavily publicised and many have looked to these products as a way to build wealth.
“There’s no denying that some have been successful in doing so, however, those with an eye on the long term simply won’t see a substantial return based on their historic performance over the last 10 years.”
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Never take too much store by such articles but fact checking may have helped.
Various sources including the respected "The Motley Fool' website state an average return of 9.63% over a ten year period. for a Stocks & Share Isa
ISA returns are tax free and far more accessible. It won't also require additional investment to make that return unlike a property where repairs and maintenance are required.
After all, you can't sell 2 doors and a window when you need quick cash.
The Vanguard US Equity Index Fund would have turned £10,000 in 2012 to approx £45k today, granted that would have been at the start of a record bull market which is very fortunate! Still average returns of anywhere between 8%-13% if you invested in the SP500 over the last 60 years.. Plus no tax in an ISA. Property can easily exceed 20% returns though if you factor in equity growth and leverage and a little homework.
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