Bitcoin and buy-to-let. Investors in either asset could describe 2018 as being a year to best forget.
It’s been particularly bad for the cryptocurrency this year, its value diving by more than 80% from the record peaks of $19,345 hit almost exactly a year ago to current levels around $3,500.
Things haven’t been as catastrophic for buy-to-let participants this year, although a slew of further tax changes and the impact of deadening — or in the case of London, reversing — home price growth has hardly made the sector a bed of roses.
So what does the new year hold for both asset class, and which one would I rather hold as we enter 2019?
Buy-to-let
It’s often said that there’s no safer investment than in bricks and mortar, and in times gone by — well, certainly over the past quarter of a century — that was the case.
Successive governments talked big about soothing the UK’s growing supply shortage but followed this up with very little action. That set the stage for astronomical home price growth over the period and making it a Mecca for the ‘average Joe’ to make a nice stack of cash by letting out their old properties, or by snapping up a second (or more) home for renters.
The buy-to-let explosion, though, exacerbated that undersupply of available housing, and the government, along with the Bank of England, has been going to war with the sector in recent years, overseeing a tightening up of mortgage eligibility and restricting tax relief.
The Treasury believes that there’s much more scope to tax the sector, too, perfectly illustrated by even more tax relief changes in October’s autumn budget. Courting the many millions of voters stuck in the rental trap is an increasingly popular trick in Westminster. And with a general election possibly just around the corner, it wouldn’t come as a shock to see additional steps to hammer landlords in 2019.
The biggest issue for many would-be and existing landlords, though, is the fear of crashing property prices should we fall out of the EU without a deal. The Bank of England recently forecast that home values could collapse 35% over three years in that event.
Bitcoin
With the buy-to-let market becoming ever-riskier, is Bitcoin a better place to stash your cash for 2019? I would argue not.
Even in times of severe economic stress and a consequent fall in house prices, investment in property at least gives you something tangible and physical to cling onto, and an asset to hold in the hope that the housing market will eventually recover.
Cryptocurrencies, though, is almost impossible to value, and there’s still a wide divergence of opinion over what the new-age currency is worth. Has the bubble surrounding the unregulated asset now burst and could it be worth next-to-nothing by next year? Or is the outlook still robust and could it still hit six-figure valuations over the next decade?
I’m not interested, frankly. The key to sound long-term investing is to buy assets that you would be comfortable to hold for a minimum of five years. In the current climate I wouldn’t be happy to hold Bitcoin for five days, let alone longer. That said, I’d also give buy-to-let a miss given the growing web of regulations and rising costs now associated with second-home ownership.