Property versus Gold – where should you invest?
Gold and property have historically been considered to be two of the safest types of investment and a suitable, risk-averse means of safeguarding wealth for the future. This may have been true several years ago but today, property is a less attractive prospect. Thanks to increasing inflation and a deteriorating housing market, gold has risen far above property to outshine it as a long term, stable investment option.
The end of an era?
The UK property market has enjoyed a boom over the past decade, with properties steadily rising in value across the UK.
With high levels of Chinese investment driving this boom, the cracks are beginning to show with a loss of momentum shrinking the UK property market.
In 2018, house price values began to drop as Brexit uncertainty ate into gains made over the last decade. While London house prices remained around 50% higher than in 2007, the average house price fell 0.4% y-o-y (following adjustments for inflation) to Q3 2018. By October of 2018, the national house price growth had slumped to a five year low – a sign of things to come.
With the demand for buy-to-let properties dropping sharply, affordability being stretched to its maximum capacity, a lack of stock, interest rate increases and a slow decrease in the value of property, many people who have chosen to invest in bricks and mortar have seen a loss on their investment. Far from being the traditional safe haven, we could now be seeing property as an investment risk.
Rises to stamp duty and the impending Brexit all put additional pressure on the UK property market. In fact, some experts suggest that many are set to make significant losses on their property portfolio value.
Inflation is also expected to rise post-Brexit, meaning that mortgages will become more expensive and more difficult to obtain. This means that any investor looking to liquidate property assets will have much longer to wait before a sale is achieved.
Compare this gloomy outlook with the far more positive sentiment surrounding gold and it’s clear that gold is the more favourable longer term investment option.
Gold is far easier to liquidate than bricks and mortar and can be exchanged for a wide range of global currencies or goods quickly and easily with minimal lead time. Gold also asks very little from the investor, unlike a house or commercial property, both of which require constant maintenance to ensure they do not lose their value.
New rules and regulations for landlords have a detrimental impact on the returns property investors receive making property even less attractive as an investment class. With most tax reliefs now been phased out, investors and buy-to-let landlords will now also find themselves paying more tax or placed in a much higher tax bracket to add insult to injury.
Gold is free from capital gains tax when managed correctly and can help investors reap greater rewards when compared to any other investment type due to the range of tax advantages available.
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