Is now the time to invest in property or stocks? Both come with their own set of risks that investors should be aware of. Let’s explore…
There’s no doubt that the property market is changing, and many savers with money in the bank may be considering whether their money would be better off invested – for instance in shares or property.
So, where should you invest? Let’s consider a couple of areas…
You’ll need less money to start investing in shares
Investing in shares means that you won’t have to deal with the potential risk of void periods (where a rental property is unoccupied and generates no income) or problems with tenants. But, investing in the stock market comes with other short-term and long-term risks, including the potential to lose your capital regardless of the stocks’ previous performance.
As you’re probably acutely aware, saving up a deposit to buy a property is no easy feat, as you will need a significant sum of money. You’ll probably need a mortgage and typically a 25% deposit. With shares, there is no minimum amount that you need to invest, but any investment in stocks often involves trading fees and commissions that will vary between providers.
Understand your investment objectives
Before you begin your investment journey, there are several important factors you need to consider, including what you hope to achieve, the length of time you’re happy to have your money tied up and how easily accessible you need your funds to be - for example as a ‘rainy day’ fund.
Both property and shares are considered to be long-term investments, but your money is less accessible in property. Keep in mind that values for both types of investment can fluctuate, so you could lose out if you are investing for the short term. Finally, and most importantly, invest only what you can afford.
Some shares are liquid – so you can sell them more easily
Liquidity can be a benefit of shares over property. This means that you can cash in your investment quickly if you need to, or sell just a few shares to raise some extra cash for yourself. In the short term, however, this may result in losses, as the value of the bought shares may have decreased due to market fluctuations or there may be penalties for withdrawing early. A balanced portfolio attempts to balance risk and return, and may contain a cash or money market component for liquidity purposes. What this means will depend on your personal circumstances, risk appetite and your investment objectives.
What do the numbers say?
Of course, the numbers don’t say it all, but they can offer you an indication of the differences between values gained when looking at how they’ve changed over the last 30 years.
Shares and property values fluctuate and tend to grow over time. However, as we’re property experts, we’ll stick to what we know best, which is the property market. For any specifics on the stock market, it would be best to speak to an independent financial adviser.
The table below exemplifies by how much property values have increased over the last 30 years. Please note, that these are only averages for the whole of the UK and do not reflect any regional differentiations, or the increases and decreases the property market will have experienced over the years.
Timeframe to 2024
|Average property prices
**Source: UK Land Registry Data