The couple opposite me had their house for sale for ages. Months and months and months. It finally sold in March to an investment buyer, and it’s currently rented out.
Interestingly, it’s quite easy to find out the prices that houses have been selling for in an area if you use the website houseprices.co.uk. The information dates back to about 2000, and the house opposite me has sold three times in that period
- March 2008 – £102,000
- July 2004 – £91,000
- March 2000 – £24,000
So the nice couple with the baby made £11k on their house in 4 years, which works out as an annualised rate of return of 3.15% per year. Which is about the same, or slightly more than, the rate of inflation in the same period. Interestingly, the people before them made an absolute killing. They made a £67,000 profit on the house, which works out to an annualised rate of return of 36.19%.
House prices in the UK have increased on average at 2% above the rate of inflation since the 1970s. But this is very much not the rate of return each year in that period. In the case of the houses on my street, they seem to have had their biggest rates of return in 2000 to 2003. And not done very much at all in the last section of the boom. I think it goes to show that if you’re using them as an investment, houses need to be kept for a long period of time for any capital gains to be realised.
This is why if you buy a house it should be because you plan to stay their for 5 or more years. Given what I saw of the property details of the house opposite me, it’s slightly nicer than my own, and I think that my house is worth around 10% less than that house, and more importantly about 5% less than the amount that I paid for it.
I’m not the only person who is not doing well out of their primary residence at the moment. Cleverdude thinks that his house in metro DC is now probably back down in value to the price that he paid for it, which puts paid to any plans that he might have had to move. I’m contemplating changing jobs in a few months time, and I’m going to be limited to the city that I currently live in. For various reasons this is a good choice for me anyway, which is lucky because having to sell up now would be a bit of a disaster.
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