hand draw house against blue skyA question that I often face as a financial advisor is, “would I be better putting my money into property?” The answer is, that it very much depends on your personal circumstances and you should sit down with an advisor to discuss those circumstances in full.

As a general rule of thumb, if you are looking to purchase an asset, property might be the right way forward, but, if you are looking for an investment then perhaps you should look elsewhere.

You should retire in your house, not on it.

Michael Kitces : A Home Can Be an Investment, But Only If You Treat It That Way

The run-up in real estate in the late 1990s and especially 2000s—followed by its decline since the 2006 peak—has produced a significantly distorted perspective on the value of a home as an investment. For a few years, owning your own home seemed like the ultimate investment, and in recent years with the fall in prices there's been a swing in attitudes back toward renting and a general pessimism about real estate. The truth is somewhere in the middle.

The ultra-long-term reality is that, according to data from Robert Shiller, the real (inflation-adjusted) return on house prices has been just about 0%, albeit punctuated by some sharp booms and busts along the way. While many have built significant long-term equity in their homes, it has been less about real investing returns and more about the simple result of investing with leverage in something that appreciates at the rate of inflation, and having a mortgage obligation as a form of "forced savings."

[Exert from The Wall Street Journal online: Read more here.]

The way to think about a home's investment potential is to consider it a long-term investment, similar to a savings account. With a typical home, you can expect average annual appreciation of 3%-5%. However, that would be a considered a low annual return in a well managed offshore savings account.

NB: If you were to sell a property in the UK after April 2015, and were non-resident at the time, you would be subject to Capital Gains Tax, and that can amount to 28% of any profits.

If you are looking for an investment, there are many more avenues available to an expatriate than property, please make an appointment and we can discuss the options available to you.

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