fbpx

Property investment vs stocks and shares.

Property investment vs stocks and shares.

October 12, 2021

One of the major questions that investors face is what they should put their money into in order to achieve the maximum possible returns. The most common conundrum is whether property or stocks and shares are the most favourable option.

These are the two most well-known and accessible types of investment, and both have attractive characteristics which will appeal to different types of investors. Here, we will explain both and point out the positives and negatives.

Property

The UK property investment market is known around the world as an opportunity that is both profitable and stable. For many, property is a safe bet that offers the prospect of long-term returns in a simple format.

When you purchase a property to rent out, you are doing so with the potential to earn two streams of income: capital appreciation and rental income. The former is the profit you make over the initial purchase price when you sell the property down the line; the latter is the steady monthly income you receive from tenants paying rent.

This dual income stream is a major advantage of property investment – and the best part is that the ongoing supply and demand issue (known as the ‘housing crisis’ by many) means that there is little prospect of a slowdown in growth, and therefore profit, anytime soon.

The UK Government estimates that as many as 345,000 homes are needed each year in the UK. However, the reality is that we are only building approximately 240,000 a year. That means that every 12 months sees the available supply drop even further, ensuring that demand, house prices and rents continue to increase.

With this in mind, it is no surprise to see Savills predict that the average UK house price is set to increase a further 21.1% by 2025. Some areas such as the North West (28.8%) and the West Midlands (24.0%) will exceed that and see even more impressive growth – making property in Manchester and Birmingham even more desirable as an investment than ever before.

This combination of profitability and stability is extremely rare and makes UK investment property a very strong choice for investors looking at reliable, long-term profits. This profitability can be magnified by investing off-plan and purchasing a property at a below-market rate which will instantly have earned significant capital appreciation upon completion.

For more information about investing off-plan in the UK, get in touch with our team today by clicking here.

Stocks and shares

Investing in stocks and shares is an altogether more volatile prospect than property. While the potential rewards are high, the chances that you will get that reward are both unreliable and much lower. It is rare that you will be able to find a stock that grows enormously without taking a large risk.

The two income streams available when investing in stocks and shares are capital gains (when you sell your shares) and dividends (which are when you receive a portion of a company’s profits relative to how many shares you have). Despite sharing this superficial similarity to property investment, investing in stocks and shares has some features which are quite different.

A point in favour of stocks and shares is that a range of mobile phone apps and other small companies are now making it easier than ever to invest – though it should be noted that using a service like eToro or Acorns is unlikely to net you the big payouts.

Likewise, it is possible to enter the world of stocks and shares at a much lower entry point than property. Buying a bundle of shares is not as expensive as buying a property. However, again it is worth noting that unless you are buying in bulk – and therefore putting a large amount of money in – it is highly unlikely that you will be able to make the enormous returns that are the main potential benefit of this type of investment.

The third point to bear in mind about investing in stocks and shares is that they are nowhere near as reliable as investing in property. Whereas the property market is stable and demand is increasing year-on-year, the stock market is vulnerable to factors outside of your control.

The most obvious recent example is the Covid-19 crisis. Whereas property continued to grow throughout it, and demand grew more than ever, it is estimated that more than £191bn was wiped off the FTSE 100 at the beginning of the crisis. Furthermore, many are predicting a tough period ahead for the stock market thanks to a global economy that remains uncertain – in stark contrast to the UK property market which common consensus agrees will continue to grow.

Both the property market and the stocks and shares have their benefits but, overall, property investment is the way forward for most investors thanks to its reliability and the strong growth ahead of us.

For more information about investing in UK property, get in touch today and speak to our expert team by clicking here.

Author

Sanjit Dhanjal.

sanjit@opulentinvest.com