Matt Spence describes himself as an “accidental landlord”. When he met his wife Lucy, he was already on the property ladder – as was she.
The share price of Dixons Carphone has been in a slow decline
But unlike his wife, who had made a profit on her property, Spence bought in 2007, just before the global financial crisis and so his home had fallen in value.
“When we moved in together we sold my wife’s flat so we could buy a house together. It didn’t make much sense to sell as it was in negative equity,” he explains.
The couple decided to rent it out instead, and have been doing so ever since. However, while this has generated some additional income he points out that there have also been increases to the ground rent and some “astronomical” service charges to cover.
Spence, who lives near Manchester, says: “Only recently have I felt that prices are creeping back up. So hopefully I may have an opportunity to sell in the near future.”
He says the experience has put him off property as an investment.
Equity Investments Prove Unsatisfactory
Spence, 36, works for Dixons Carphone (DC.), the electronics retailer. He currently invests into his employer’s share save scheme. This is his first foray into equity investments, but to date he has not seen much of a return on his money.
Under the terms of the share save scheme, Spence has the opportunity to buy shares in the company he works for at a discount. Most share save schemes are three-year savings plans, where employees contribute each month, directly from their salary.
At the end of this period, participants have the option to sell these shares at their market value. If shares have fallen in value then employees can simply withdraw their savings.
As Spence points out, the share price of Dixons Carphone has been in a slow decline over the past three years.
Over the last year alone the share price has fallen by 38.74% according to Morningstar data. Currently, shares are priced at around 205p per share. At the end of 2015 they were worth 500p.
This shows the potential drawbacks of these schemes, as money is invested in just one company’s shares. Over the same period of time the FTSE 100 has made significant gains – particularly since the Brexit referendum.
Spence says: “I’m unlikely this year to see any return on my work share save scheme. But at maturity I can take back the money I’ve been investing – which I expect to be around £3,600. Because this has been taken direct from my salary it’s been a painless way to save. I haven’t really missed these contributions, so this will be a nice lump sum to get at the end.”
Spence says he’s in two minds whether to reinvest these savings. As the couple have two young children, aged two and four, Spence would like to use some of these savings for a holiday – perhaps to Disneyland in Florida.
He adds: “And we will need to replace one of the cars later this year. It would be nice if we could pay for this in cash, or at least put down a substantial deposit rather than taking a loan.”
Pension Saving a Priority
When it comes to longer term savings, Spence says the couple’s main focus is pensions. “My wife works in the public sector, so she is fine. I have two or three small workplace pensions from previous jobs,” he says. “One of my priorities for this year is to take a closer look at what they are worth and possibly consolidate them. I need to boost my own pension savings.”
Although he is committed to maximising his pension, Spence says his experience of having invested at the top of the property market makes him reluctant to commit too much to equities at present.
He adds: “My daughter has a collection of Premium Bonds as her grandparents have been buying them since birth. They regularly add to them for birthdays and Christmas. We may also look at investing in these for ourselves.”
