OREANDA-NEWS. Fitch Ratings has analysed the total return on purchased properties during the past 20 years assuming they had been sold today, and we estimate that owner-occupiers would on average enjoy total annualised returns of 6% of the purchased property price. Owner-occupiers who bought before 2002 or after 2012 would achieve average annualised returns in the 8% area.

However, not all owner-occupiers are in the same situation, as the return for some buyers is heavily reliant on property-price appreciation.

Occupiers who bought before 2002 are in a very stable credit profile, as the savings from unpaid rent outweighs the cost of owning a property - and the profitability of the property purchase is not threatened by property-price movements.

The savings from unpaid rents for properties purchased after 2002 have been instead lower than the average cost of owning a property. This makes the total return on these properties more reliant on dwelling-price movements and the eventual selling price. Properties bought in 2H12 or 1H13 - just before prices started to rise - have yielded an annualised return of around 7.0%, thanks to the significant price appreciation and the fall in mortgage rates.

If the property market were to stagnate, recent and future owner occupiers would need to rely on either rising rents or lower mortgage rates in order to make a property purchase a profitable decision.

A sudden house-price downturn would not only have an impact on the return on recently purchased properties but also on properties purchased in 2010 that had a lower price appreciation in annualised terms - and which have been exposed to property costs outweighing property benefits for a longer period.