The latest market analysis by London lettings and estate agent, Benham and Reeves, has revealed that despite the government’s best attempts to dampen Buy-to-Let profitability, you’re far better off investing in bricks and mortar compared to chasing dreams of becoming an ISA millionaire.
Benham and Reeves analysed data over the last 10 years looking at the average annual return when investing in a stocks and shares ISA, a Cash ISAs and the Buy-to-Let sector, as well as what this return would look like based on an example investment of ÂŁ20,000.
The research shows that investing in a stocks and shares ISA hasn’t been a bad shout and over the last decade, they’ve returned an average annual rate of growth at 2.3%. 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, on the other hand, hasn’t been such a strong investment and, in fact, the average annual rate of growth sits at -4.1%. Meaning a £20,000 investment 10 years ago would have seen you down almost £7,000.
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%, it’s been by far the better option when compared to the two avenues of ISA investment.
Those to have invested just ÂŁ20,000 into bricks and mortar a decade ago would have seen this investment climb by ÂŁ10,470 today. An ongoing annual investment of ÂŁ20,000 per annum would see this return climb to ÂŁ73,959.
Director of Benham and Reeves, Marc von Grundherr, commented:
“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.
There really is no safer investment than UK bricks and mortar and the Buy-to-Let sector has outperformed both stocks and shares and cash ISAs quite considerably over the last decade.
Of course, the government has done its best to dampen this return but even with changes to tax legislation and an increase in stamp duty costs, rental market investments continue to yield very strong returns.”
Table shows the average annual growth rate across each investment option and the 10 year return based on a
starting investment of ÂŁ20,000
Year
Stocks and shares ISA (FTSE 100)
Cash ISA
BTL investment – direct comparison
Average annual growth rate
2.3%
-4.1%
4.3%
0
ÂŁ20,000
ÂŁ20,000
ÂŁ20,000
1
ÂŁ20,464
ÂŁ19,176
ÂŁ20,860
2
ÂŁ20,939
ÂŁ18,386
ÂŁ21,757
3
ÂŁ21,425
ÂŁ17,628
ÂŁ22,693
4
ÂŁ21,922
ÂŁ16,902
ÂŁ23,668
5
ÂŁ22,430
ÂŁ16,206
ÂŁ24,686
6
ÂŁ22,951
ÂŁ15,538
ÂŁ25,748
7
ÂŁ23,483
ÂŁ14,898
ÂŁ26,855
8
ÂŁ24,028
ÂŁ14,284
ÂŁ28,009
9
ÂŁ24,585
ÂŁ13,696
ÂŁ29,214
10
ÂŁ25,156
ÂŁ13,131
ÂŁ30,470
Return on Investment
ÂŁ5,156
-ÂŁ6,869
ÂŁ10,470
Table shows the average annual growth rate across each investment option and the 10 year return based on a
starting and ongoing annual investment of ÂŁ20,000
Year
Stocks and shares ISA (FTSE 100) – with ÂŁ20k investment each year
Cash ISA – with ÂŁ20k investment each year
BTL investment – direct comparison with ÂŁ20k investment each year
Average annual growth rate
2.3%
-4.1%
4.3%
0
ÂŁ20,000
ÂŁ20,000
ÂŁ20,000
1
ÂŁ40,464
ÂŁ39,176
ÂŁ40,860
2
ÂŁ61,403
ÂŁ57,562
ÂŁ62,617
3
ÂŁ82,827
ÂŁ75,190
ÂŁ85,310
4
ÂŁ104,749
ÂŁ92,093
ÂŁ108,978
5
ÂŁ127,179
ÂŁ108,298
ÂŁ133,664
6
ÂŁ150,130
ÂŁ123,836
ÂŁ159,411
7
ÂŁ173,613
ÂŁ138,734
ÂŁ186,266
8
ÂŁ197,640
ÂŁ153,019
ÂŁ214,276
9
ÂŁ222,226
ÂŁ166,714
ÂŁ243,489
10
ÂŁ247,381
ÂŁ179,846
ÂŁ273,959
Return on Investment
ÂŁ47,381
-ÂŁ20,154
ÂŁ73,959
Share
About the Author
Established in 1958, Benham and Reeves is one of London’s oldest, independently owned property lettings and sales agents. With specialism in residential sales, corporate lettings and property management in prime areas of London, the company operates from 21 prominently located branches and 14 international offices.