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06.09.2023

Property or stock market?

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Nadia Khan DipPFS Cert CII (MP), Wren Sterling

Property or stock market?

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  • Many British people have for decades been somewhat obsessed with comparing their property with their pension or pitting their buy-to-let place against their stock market returns. It makes for a rich vein of dinner-party conversation but is otherwise a difficult comparison to make.
  • The different types of assets, shares or bricks and mortar have very different qualities and performance records and the differences between the two approaches have become even starker in recent years.
  • Yes, owning your own home makes a lot of sense when compared to renting all your life and paying off someone else’s mortgage. But with house price inflation far surpassing wage growth and huge deposits required, home ownership is often out of reach for many people. All that said, the criteria for purchasing a property to call home are very different to those for buying a property as an investment.
  • Meanwhile owning a property whether as an investment or a home requires a lot of outlay. Some of these costs will be one-off upfront fees, such as a deposit, stamp duty and other taxes, and legal fees. Other costs will be ongoing, such as mortgage payments, insurance premiums and maintenance.
  • One of the attractions of property is that it is a physical asset that you can see and feel, unlike shares which these days are just a line of text in your online account. However, that physical presence comes at a cost. You can’t change the location of a property, or sell just a part of it, or indeed sell all of it whenever you feel like it.
  • Shares and funds have different liquidity characteristics that means some are more easily sold than others but in general terms, it tends to only take a few days to get your money back, and you can sell just a part of your holding and retain some.
  • A commonly held view is that investing in property is less risky than investing in shares. This is hard to really quantify as shares are traded daily with prices updated every second. This means they might look more volatile than properties, which are valued less frequently only ever really if someone is buying or selling a property, or applying for a mortgage.
  • But risks apply in both cases. Share prices can rise and become overvalued and there is a risk that a company might collapse, meaning you get back less than you first invested. Property, on the other hand might see you having to put thousands of pounds into repairs and property prices can also fall, which might influence if or when someone can sell or the amount of money to be made. In both cases the risks can be managed and reduced, but never removed entirely.
  • stock market
  • Long term planning
  • Buy To Let
  • Investment
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Nadia Khan DipPFS Cert CII (MP) Wren Sterling

I am an Independent Financial and Mortgage Adviser and have worked in Financial Services for over 12 years. During my career I gained experience in assisting both individual and corporate clients.…
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