Is it still worth investing in property?

I mentioned in an earlier post about three 2br flats for sale, with an auction guide price of £250k combined. The flats were being sold off by the local council, and together they make up a freehold building. I went to view the property in person before the auction, and I had an interesting time checking the place out, and using a torch to explore the cellar. They were big rooms, and the current state of decoration and repairs needed were not terrible, with no structural damage. I reckoned they could be renovated with £20k per flat, or maybe even half that figure, by not using professional labour.

I was sure they would sell at auction for at least £500k combined, as they are in a dream location, next to a busy transport hub right in a city centre. Journey time to London by train = 15 minutes! They went for auction, and sold for 340k combined!

To give an indication of how good the deal was, there are virtually no 2br flats in that area for sale, and the few decent ones were going for at least 200k each, and they were not even as well located as that council property. A brand new housing complex has been built in the area by private developers, where they are selling 2br flats for 400k each!

So is it still worth investing in property? Of course it is, for the following reasons:

• If you just keep money in the bank, it will lose its value due to inflation. Money, buys "things" (assets), such as houses. When the value of "things" go up, your money in the bank may be too little to enable you to buy those things. I remember reading the divorce judgement papers of Paul McCartney and Heather Mills online, and seeing that the majority of his wealth was in things (assets), which went up in value more than his cash. Therefore, the majority of your wealth should be in assets (but still have a lot of cash in the bank, because cash is king).
  
• To benefit from the property market, you have to be invested in it. You have to be "in it, to win it".
• As long as the property you are buying is affordable to you (i.e. within your means), then you won't have too much trouble running it. Its only when you overstretch yourself that things have the potential to go very badly, very quickly. If you cannot afford to buy in a certain area, then don't buy in that area.
• Property is a good place to park your cash. Unlike the bank, it is a long term investment (at least 10 years).
• Historically, property has been a fantastic asset class. Not only does the value go up more than cash in the bank over 20 years, you can also collect rental income, or live in the property if you choose. Overly negative people always talk about the cost of maintaining property, but when you think about it, a property will probably only cost you a few hundred pounds a year to maintain, and maybe less than that. If you have home insurance (and you should) the cost of house maintenance is negligible. One of the worst things that could happen is the boiler going, at a cost of about 2k, but that would be a rare event. Houses are built to last for a very long time, and getting a survey before purchase should (hopefully) confirm this.
  
• The British are obsessed with property, and they will do whatever it takes to get their hands on it. Property in the UK, especially in London, will always be hot stuff. The only reason the market has slowed up is due to lack of lending. Once that is solved, expect mayhem, as the mad scramble for property begins anew.
  

Bank interest rates are at their lowest, currently 0.5%. Rates have never, ever been this low in England. For at least 5 years, I don't think rates will rise very high, i.e, into double digits, like some "experts" are predicting. Remember that at the peak of the housing market in 2007, people were struggling badly to pay their mortgages. The government is fully aware of the carnage that will result if interest rates are allowed to rise. Expect rates to remain low for some time to come.

Property is still worth buying, but you have to choose very carefully, and you have to buy cheap, and well within your budget. At the moment, the best way of doing this appears to be via auction, but even then, it is still very difficult to seek an appropriate property investment. Keep seeking, and you can find good investments, even in this market. That's what I'm trying to do.