However, despite the general publics optimism, five consecutive interest rate rises since August 2006 are beginning to undermine confidence.
According to research from the Association of Investment Companies, of those who are buy-to-let property investors and/or have a second property, some 30 per cent of the general public, and 43 per cent of active investors believe that rate rises have affected the financial value or profitability of their property investments.
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From this group, some 7 per cent of the general public and 6 per cent of active investors are already losing money on their property investments either through a reduction in capital values or a drop in profitability due to interest rate rises taking mortgage payments higher than rental incomes.
Active investors and the general public express very different reasons for not putting their money into property. While the highest reason cited by active investors was that they didnt invest in the sector because their cash was already tied up in other areas, the general public said they simply couldnt afford to.
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Surprisingly both groups said fears that the market might crash were low on their reasons for not investing in property.
Of those that invest in property, both active investors and the general public believe property has performed strongly over the long run and this is why they invest in it. However, three times as many active investors as members of the general public say that they invest in property because it is a great diversifier.
Annabel Brodie-Smith, Communications Director, Association of Investment Companies (AIC) said: The general public and active investors optimism in the housing market could well be misplaced as there is increasing evidence that the housing market is slowing down following five rate rises and the recent credit crunch. This research demonstrates that the rate rises are already beginning to hit peoples finances and could well undermine future confidence.
Its clear that there is a great deal of confusion about property investment not only amongst the general public, but also from active investors. Investing in property can be a useful way to diversify an investment portfolio and thus reduce risk. Property investment companies give investors access to a wide range of commercial property both overseas and within the UK and have a closed ended structure which is particularly appropriate for property, an illiquid asset. Values in the commercial property sector have recently experienced a derating and further volatility is expected so investors need to take a long-term view and consider regular saving to help smooth out market volatility.
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