Leading article: Safer than houses - stocks are on the up

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The Independent Online

This year, for the first time since 1999, the London stock market produced a better return for investors than property. The news will be scant consolation for those who experienced the stock market crash of the late Nineties, who are still painfully out of pocket. And one year's reversed fortunes do not necessarily herald a long-term boom in share prices. But it could be a hopeful, and healthy, straw in the wind.

The solid rise in share prices is one beneficial trend to note from 2005. The other is the stabilisation of house prices. Despite dire predictions from some economists, there was no crash. There was a significant slowing in the rate at which house prices rose, but the bottom did not fall out of the market. We were not revisited by the negative equity horrors of the early 1990s. Property remained a good investment, but not as good - over the past year at least - as the stock market.

None of this should astonish. That house prices have continued to rise reflects the shortage of homes in Britain in the places that people want, or need, to live. With the population rising, more people living alone and home-ownership still the long-term aspiration of most people in this country, the housing market is far from saturated. Compared with a decade ago, too, credit is still cheap and the tax incentives available under buy-to-let schemes have encouraged those who can afford it to keep buying. But credit is not as cheap as it was. More cautious lending over the past year has had the desired effect.

There is, of course, an element of sod's law. No sooner have amateur investors taken one message to heart and left what they saw as the volatility of the stock market for the supposed reliability of bricks and mortar, than the tables are turned. Once again, they find themselves on the wrong side of the curve. The experts are ahead.

It is possible that at least some of the money that went into the stock market over the past year was diverted from housing by those scared of the forecast crash. But if the change presages a longer-term shift away from the preoccupation with home-ownership as a profit-making enterprise and towards more balance in investment portfolios, that is all to the good. Money invested in the stock market is money invested productively. We would like to see more of the same in 2006.

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