Fancy making money from house prices rising, without actually buying property? The new HouSA from Castle Trust tracks the performance of the Halifax House Price Index.
Castle Trust has launched the HouSA, a fixed-term investment which offers the chance to make money from house prices rising, irrespective of whether you own a property or not.
Your investment is linked to the Halifax House Price Index, one of the biggest property price indices. The return on your cash – which is invested over a three-, five- or ten-year term – then depends on what Halifax reckons is happening with house prices.
The HouSA comes in two different forms – the Income HouSA and the Growth HouSA. Let’s take a closer look at how they vary.
Castle Trust’s Income HouSA
The Income HouSA offers a fixed income every three months.
Here’s what Castle Trust reckons you can expect to make:
|
HouSA term |
Capital return based on change in Halifax House Price Index |
Annual income |
|
Three years |
100% of any rise or fall |
2% |
|
Five years |
100% of any rise or fall |
2.5% |
|
Ten years |
100% of any rise or fall |
3% |
If you invest directly, you’ll pay income tax on the interest and capital gains tax on the profits. None of these taxes will be due if you invest through your ISA or pension.
If the Halifax House Price Index falls over the term of your investment, you will lose cash.
Castle Trust’s Growth HouSA
The Growth HouSA is slightly different, with Castle Trust claiming that whatever happens, you will outperform the Halifax House Price Index.
If the index rises, you earn a higher rate than that increase. And if it falls, you lose less than the amount it has fallen by.
Here’s what you’ll get:
|
HouSA term |
Return if Halifax House Price Index rises |
Return in Halifax House Price Index falls |
|
Three years |
1.25 times the percentage rise |
0.75 times the percentage fall |
|
Five years |
1.5 times the percentage rise |
0.5 times the percentage fall |
|
Ten years |
1.7 times the percentage rise |
0.3 times the percentage fall |
On the downside though, you won't get any income from this product. You'll just get a capital gain if house prices rise.
What happens to my money?
The selling point of the HouSA is that you get to invest in the housing market without actually having to put your money into bricks and mortar. So where does your money go?
Some of your money is kept in cash or gilts. You can find out more about gilts and what they are like as an investment in Why gilts matter.
The rest of your cash is used to pay for Castle Trust’s other big idea, Partnership Mortgages. Check out Get an interest-free mortgage for 20% of your home for more on that product.
You won’t be able to access your cash before the end of the fixed term.
How much can I invest? Is my money safe?
Investments in HouSAs start from £1,000 and are capped at £1 million. You can invest through a stocks and shares ISA, in which case you cannot invest more than your ISA allowance.
You’ll pay up to 3% in charges, depending on what you agree with your financial adviser.
And your money is secure- or at least the first £50,000 is – as Castle Trust is authorised by the FSA and is a member of the Financial Services Compensation Scheme.
The Halifax House Price Index
The performance of your cash is entirely dependent on the findings of the Halifax House Price Index, so it’s worth taking a closer look at exactly how that index works and how reliable it is.
The big problem is that the data used to work out the performance of house prices comes exclusively from Halifax’s own lending. The argument is that as Halifax is the nation’s largest lender, its mortgage book is a representative sample of what’s happening with house prices.
Let’s see how the Halifax House Price Index has reported prices over the past 12 months, compared to the Land Registry figures, which cover all property transactions and so offer a far more comprehensive sample.
|
Month |
Halifax House Price Index average house price |
Month-on-month change |
Land Registry average house price |
Month-on-month change |
|
August |
£160,256 |
-0.4% |
£163,376 |
+0.3% |
|
July |
£161,094 |
-0.6% |
£162,900 |
+0.8% |
|
June |
£162,417 |
+1% |
£161,777 |
+0.1% |
|
May |
£160,941 |
+0.5% |
£161,677 |
+0.5% |
|
April |
£159,883 |
-2.4% |
£160,417 |
-0.3% |
|
March |
£163,803 |
+2.2% |
£160,372 |
-0.6% |
|
February |
£160,118 |
-0.5% |
£161,588 |
+0.1% |
|
January |
£160,907 |
+0.6% |
£161,545 |
+1.1% |
|
December |
£160,063 |
-0.9% |
£160,384 |
-0.2% |
|
November |
£161,731 |
-0.9% |
£160,780 |
+0.3% |
|
October |
£163,311 |
+1.2% |
£159,999 |
-0.9% |
|
September |
£161,132 |
-0.5% |
£162,109 |
-2.6% |
As you can see there are some pretty significant differences there. Just last month Halifax reckoned house prices fell by 0.4%, while the Land Registry registered a rise in house prices. In March this year, Halifax reckoned house prices jumped 2.2%, while the Land Registry found that house prices fell by 0.6%.
With this investment, you aren’t investing in the housing market, you’re investing in Halifax’s experience of it.
That’s not necessarily a bad thing – you may make more money as a result. But it’s something to bear in mind.
What do you think? Is this an attractive way to invest in the housing market? Or should you stick to buying actual properties if you want to make money from property? Let me know your thoughts in the comment box below.
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