Stocks & Shares Vs Property for investors in 2016
We’re just over two weeks into the New Year and its equities Armageddon out there! If seeing the stock index numbers turn to red wasn’t enough, there are headlines everywhere telling us how bad things are. One of my personal favourites is from the Wall Street Journal which screamed “RBS Warns: Sell Everything”..
At the same time, industry experts and economists’ forecasts – including those from lenders Halifax,Nationwide, the Council of Mortgage Lenders and online estate agency Rightmove – for UK residential property combine to give an average outlook for prices to rise somewhere in the region of 6% this year.
At a glance it certainly seems pretty clear that property looks to be the better investment bet this year. Let’s look a little deeper and see if the same result emerges.
To begin with, what’s really happening in the global stock markets and is it that bad? Well, it’s a combination of issues that have investors spooked right now.
China is probably the largest cause for concern. With economic growth there apparently slowing down more quickly than anticipated, demand for oil and other global commodities is falling. Interest rates are also on the radar with expected rises sparking fears over the end of cheap money and supportive monetary policy. And, falling oil prices aren’t expected to recover any time soon, and could even fall further!
There are, of course, other things going on, including the fact that stocks and shares have been rising for a longer period than is usual. But it’s the three mentioned above that carry the most significance.
Looking at property, the news is generally more positive. In particular, the important points such as a continued lack of supply and low (and slowly rising) interest rates are both supportive of rising house prices. That’s surely a key consideration when you are assessing your property portfolio or thinking about buying a buy-to-let property, possibly at auction.
Why are those two points supportive of rising house prices? On the lack of supply, if there isn’t enough of a thing, in this case residential property in the UK, then it becomes more valuable and the price rises. With respect to interest rates, yes they will begin to rise at some point in the next 12-18 months. But, they will do so VERY slowly which means that any mortgage rate rises associated with that should be equally slow and not push monthly payments too high too quickly.
Aside from the very current issues going on, property will always have something that stocks and shares don’t. It is a real, tangible asset. With bricks and mortar you are able to see and modify what you own.Stocks and shares, while real, are only worth the piece of paper they’re printed on, and then, only for a set amount of time. If everything goes wrong, you may struggle to get fair recompense as equities go up and down, sometimes on a whim.
So, even with a more detailed look it’s still pretty clear that the safer investment – when compared to stocks and shares – is property.
The Wall Street Journal
The Council of Mortgage Lenders
The Telegraph online