Property market or stock market; where should I invest?

What could I make from property?

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
Current £284,950
10 years £175,378
20 years £135,054
30 years £54,026

**Source: UK Land Registry Data

What is the value of your property?

Why invest in property?

You are investing in an asset which appreciates with time

Despite the recent changes and some of the drawbacks of investing in property, it offers the reassurance of a concrete asset. Shares exist on paper or a screen, so they can feel less tangible. Property is simply more comfortable for many people.

You can add value to push up the price of a property

There’s not much you can do to influence whether your existing investment in shares goes up or down, and you would probably need advice to rebalance a portfolio. With property, you can create equity for yourself by improving the asset. You could buy a property that needs work, and although this will increase initial spending to get it right, the resulting increase in property value will usually provide good returns.

Property is less volatile as an investment than the stock exchange

For many people, property is easier to understand than stocks and shares, and historically has demonstrated robust growth over time (see the table above). While both property and share prices could fall, meaning you could lose money on your investment if you need to sell it at a specific point in time at a lower price, the rate of this change for UK property, is comparatively more stable to that of acute share price shifts. Also, any property profits could be enhanced by the underlying capital growth in the value of the property.

Rents have increased at fastest annual rate in 16 years

The rental market is still booming, with average asking prices outside of London being 8.6% higher than the same time last year. London’s average annual growth is now 5.9% higher than the same time last year.*

Which should you invest in?

Without sitting too much on the fence, this is very much a personal decision. You should seek the advice of a qualified professional when it comes to investing. As property experts, we believe that buy-to-let property offers some of the best returns overall. Buy-to-let property does take a little more time and effort, but if you use a good letting agent, it can be fairly hands-off.

Curious to see if your property has increased in value?

This article isn’t personal advice. If you’re not sure whether an investment is right for you, please seek advice.

*HomeLet Rental data, December 2023
**UK Land registry