Shares or property – what's best?
It's your choice because both bricks and mortar and stocks are on the up, says Julian Knight
Saturday 20 July 2013
These are heady days for UK property prices and the London Stock Exchange. For the first time in a long while, according to property website Rightmove, house prices are rising once again across the whole of the UK.
We are not quite partying like it's 2008, but we may be seeing a little more than just the ubiquitous green shoots in the property market.
As for the stock market, the green shoots have possibly moved into full bloom. Since the nadir of the eurozone late last year, markets – with one or two hiccups along the way – have generally powered upwards; largely off the back of stronger growth in the US.
So which is best right now to deliver returns an investment in property or shares?
Much of the nation's wealth is tied up in housing – around £4trn by the latest estimate – and with huge population pressures, as well as a limited supply of land to develop, there are those who suggest the recent rise in house prices is simply the market settling back on its seemingly inexorable upward path.
What's more, buy-to-let investors are benefiting as fewer people can afford the deposit to climb onto the housing ladder and are forced to carry on renting.
Trevor Greetham, director of asset allocation at Fidelity, said: "In a reversion to pre-bubble form, the UK looks set to enjoy a housing-led recovery. The recent Royal Institution of Chartered Surveyors survey was very strong, pointing to a sharp rise in UK house prices and recovery in the economy."
Darius McDermott, managing director of Chelsea Financial Services, is also bullish over UK property prices: "I'm actually more positive on property than I have been for some time. A couple of managers I have spoken to expect mid to high single-digit returns (6-8 per cent) over the remainder of 2013 and for the following couple of years."
Mr McDermott, though, cautions against return-hungry investors diving into direct buy-to-let, which have major fees involved and, of course, can be subject to punishing "void" periods, when the property is vacant and not earning any rental return.
It is also possible to make money from the overall moves in the property market. The Castle Trust fund, for instance, promises to track the Halifax house-price index and peg returns to that.
All property investment must come with a large health warning that prices can go down as well as up, and interest rates, at historic lows for the past four years are bound to increase in the future.
In fact, the Resolution Foundation recently said that the best-case scenario, where interest rates rise by current expectations and family-household income growth is strong, will see 700,000 households spending more than 50 per cent of their income on repayments. As a result, some could end up in arrears or even repossessed.
Markets have looked beyond the doom and gloom headlines and enjoyed strong growth, far higher than house prices. In addition, many companies are sitting on large stockpiles of cash which raises the potential for mergers and acquisions, normally good news for investors.
As for dividends, these are on the up too as corporations return to profit after a poor couple of years. All this has led to a bull stockmarket, with, in the main, rising share prices.
To iron out the peaks and troughs of stock market performance Mr McDermott recommends investors consider ploughing in regular, small amounts of cash rather than big lump sums, which could be made just before a dip in market prices. Another way to reduce volatility is to invest in an investment fund rather than a single company share. These will spread their money around a range of companies. However, you are reliant on the quality of the fund manager.
"Finding a manager with a good track record, consistently outperforming the market is key. They have the professionalism to monitor the investments they make on an ongoing basis, much more so than the overwhelming majority of private investors," Ben Yearsley from stockbroker Charles Stanley said.
Alan Smith, chief executive of Capital Asset Management, reckons the track record of shares is better than property: "Over the long term, shares have tended to outperform property (when dividends have been reinvested) but of course that outperformance comes with additional levels of inherent volatility."
All investments can go down in price as well as up but shares can be particularly volatile, an unexpected profits warning or legal case emerging can send individual company share prices plunging. As for stockmarkets more generally, these can move against investors in double-quick time off the back of poor economic news.
Charlie Ellingworth, from Property Vision, sums up the dangers: "The volatility of the shares market has put off a number of investors as they have seen share prices plummet and rocket several times within a short time frame."
Most financial experts believe that when it comes to cash or shares, the answer is have a bit of both.
Budget 2015: George Osborne is set to get tough with further cuts in public spending
Bargain Hunter: Our exclusive deal cuts the cost of buying foreign currency by 20 per cent
Simon Read: 'Taylor Swift tickets purchased on Viagogo were cancelled hours before the concert'
Simon Read: You're guilty until proven innocent when HMRC sends in the tax credit detectives
Bank-beating exchange rates on your international payments
- 1 BBC told new political editor must be 'impartial' with Nick Robinson reportedly stepping down
- 2 Number of young homeless people in Britain is 'more than three times the official figures'
- 3 The map showing the most dangerous tourist destinations in Europe, according to the Foreign Office
- 4 The biggest first date turnoff has been revealed
- 5 German man found living with 300 rats in tiny apartment
More Britons believe that multiculturalism makes the country worse - not better, says poll
Nathan Collier: Montana man inspired by same-sex marriage ruling requests right to wed two wives
Greece crisis: IMF was pushed around by Angela Merkel and Nicholas Sarkozy – and now it is being humiliated
'I wish the BBC would stop calling it Islamic State' – David Cameron unleashes frustration at broadcaster
Forget little green men – aliens will look like humans, says Cambridge University evolution expert
Girl, 7, stares down hate preacher at Ohio festival with pro-LGBT rainbow flag gesture
iJobs Money & Business
£15000 - £17000 per annum: Recruitment Genius: This company offers a range of ...
£15000 - £16000 per annum: Recruitment Genius: Customer Service Advisors are r...
£20000 - £25000 per annum + OTE £45K: SThree: SThree were established in 1986....
£40000 - £60000 per annum: Recruitment Genius: A Compliance Manager is require...
Day In a Page
Previously two semi-detached properties, this five-bedroom home is spread over three floors with a large breakfast kitchen, orangery, office and gym on the second floor.
This five-bedroom home enjoys countryside views over the Blyth estuary to Southwold, offering flexible living space with a ground-floor annexe - ideal for use as a holiday let.
Close to the market town of Eye, this four-bedroom detached home offers a double-height living room which takes the place of the original, 19th-century, chapel nave.
Dating back to the 19th century, this four-bedroom home needs modernising. Spanning three storeys, the red-brick house has a fireplace, a small terrace and a cellar.
Just outside of Cambridge, this single-storey home offers three double bedrooms, a living room with vaulted timber ceiling and ladder steps that lead to a mezzanine study area.
This six-bedroom Georgian home is on three floors with open fireplaces, a two oven Aga, an annexe, and cottage gardens with outbuildings and a car barn.
A former coach house, Glebe Farm Stable is now a three-bedroom cottage with a double car barn, an attached office, kennels and an outbuilding that's currently used as a gym.
Located beside an impressive Victorian viaduct, this four-bedroom home has an open-plan living area that is glazed on two sides, with skylights and high ceilings.
A former furniture workshop, this three-bedroom home has high ceilings and painted brick walls, in a village setting only fifteen miles from the coast.
This five-bedroom stone townhouse features a pine staircase and an Inglenuk fireplace, double doors from the lounge give access to an enclosed courtyard.
This five-bedroom, detached home blends traditional and modern design; the sleek kitchen features a gas hob and oven set within an exposed chimney breast.
Moored in Chelsea's Cheyne Walk, this houseboat offers two double bedrooms and a teak deck that's ideal for al-fresco dining.
Surrounded by woodland, this five-bedroom manor house has plenty of outdoor storage space in the form of three converted loose boxes, two smaller outhouses and a woodstore.
This six-bedroom home is set amongst three acres of grounds. Currently a large family home, Clift Hill has potential to make a B&B or countryside retreat, subject to change of use permissions.
This Grade II-listed three-bedroom home is situated on a private road, just a short walk from the sandy beaches of Frinton-on-Sea.
Less than five miles from Malmesbury, this four-bedroom cottage comes with equestrian facilities and gardens that extend to approximately three acres.
Spanning three storeys, this late-Victorian five-bedroom farmhouse is a spacious family home with a modern interior and B&B potential.
With an original church arch, this triplex one-bedroom church conversion has a light, spacious, feel and comes with a secure off-street parking space.
This recently-refurbished three-bedroom home has bi-folding doors that lead out to a decked seating area - ideal for alfresco dining this summer.
Well-located for coastal walks and popular restaurants, this detached four-bedroom home offers views over farmland, to the Solent, the Purbecks and Bournemouth.
If you love high ceilings, school conversions like this one are bang on the money. This two-bedroom flat is minutes from Burgess Park and the foodie haven at Borough Market.
Set within a church conversion in Bermondsey, this two-bedroom maisonette combines existing features, such as original arches and brickwork, with a contemporary finish.
In the pretty market town of Bungay, this grade II-listed Mill House is arranged over four floors, offering four bedrooms and three reception areas.
This four-bedroom Edwardian home offers a combination of original features and contemporary design after a renovation by the current owners.
This four-bedroom home offers a vaulted ceiling in a breakfast room that's ideal for summer entertaining with doors that open to the patio and garden.
On the market for the first time in more than 50 years, this six-bedroom home is a project with vast potential - spread over three floors of living space.
This five-bedroom home comes with a range of outbuildings including a large barn which could be converted into a self-contained granny-flat or rental.
Surrounded by rolling countryside, this four-bedroom barn conversion comes with a self-contained, one-bedroom annexe that could serve as an office or a holiday let.
Located near Harrogate town centre, this five-bedroom Victorian terrace is arranged over three storeys while a current study serves as an optional sixth bedroom.
A ground-floor flat in a country house, located a mile from Sway; this two-bedroom home would make an ideal weekend retreat on the edge of the New Forest.
On a popular residential lane in Caterham on the Hill, this four-bedroom family home offers a secluded garden and a convenient location for local schools and public transport.
Just a short walk from Westerham green, this three-bedroom cottage has a light kitchen with exposed brickwork and double doors that lead to a south-facing garden.
In a prime spot opposite the River Thames, this one-bedroom flat has an 18sq ft reception room with glass doors that open out to a private terrace.
Set in the hills above Llanwrda Village, west Wales, this 18th-century three-bedroom farmhouse has holiday-let potential from a separate barn conversion and annexe.
This charming end-of-terrace townhouse is arranged over three floors, with two double bedrooms and a private courtyard garden located at the rear of the property.
Located in the University area, this semi-detached five-bedroom home is arranged over three floors - there's even a rear garden and off-road parking too.
Only a few minutes' drive from the charming town of Marlow, this two-bedroom home sits on the private riverside estate of Harleyford.
This detached four-bedroom home in Middleyard is arranged over two floors, with features that include a wood-burning stove and bespoke oak staircase.
In a row of eight detached Georgian residences, this five-bedroom home offers views of The Sound, Mount Edgcumbe and Cornwall from its impressive veranda and full-length balcony.
If you love cooking for friends this two-bedroom flat - complete with views of the iconic Battersea Power Station and an open-plan kitchen/dining area - will go down a treat.
Located above Grasmere village, this five-bedroom home is arranged over three floors and offers countryside views across Grasmere Lake towards Silver Howe.
This four-bedroom detached home comes with a double carport, useful workshop, garden and two walkways that offer views of the adjacent countryside.
With space for an equestrian business, a greenhouse for growing your own veg, a wine store and a gym; this five-bedroom home has all the ingredients for a country retreat.
The decked roof terrace of this two-bedroom flat is perfect for summer drinks while large windows and ample storage space make for a light and spacious interior.
Set sail for this four-bedroom farmhouse in Cowes. With five acres of land and an indoor pool, this home oozes character. There is even potential to let a one-bedroom annexe.
Surrounded by approximately 15 acres of grounds, this six-bedroom grade II-listed home has been extensively refurbished yet retains many period features.
This four-bedroom home comes with a two-bedroom cottage and commercial office, with planning to extend, in a stunning courtyard setting.
In a pretty Norfolk village, this four-bedroom family home is surrounded by landscaped gardens, with even a self-contained annex for guests.
A few miles from the seaside at Perranporth, this four-bedroom farmhouse sits amongst nine acres of idyllic grounds - including a lake and two barns used as holiday lets.
This five-bedroom home is arranged over three floors of a converted Victorian hospital, offering spectacular views of the Pentland Hills - only three miles from the city centre.