People who have saved a sizeable amount will be looking at where to invest it and they often fall into one of two camps – either looking at property, as a sure-fire way of getting an income in old age, or wanting to play the stock market. Both are viable options but it would pay them to take professional advice to ensure they choose the investment route that best suits them.
Research suggests that someone who bought a house in 1979 will have seen the value of the property almost double now. This means that a house that cost £93,000 then, would be worth almost £210,000 now – a real return of 125 per cent. They could therefore be forgiven for thinking that if they bought a buy-to-let property now, they could generate a stable income by letting the property to a long-term, reliable tenant.
This looks even more attractive with the current very low mortgage interest rates on the market and the fact that, for many people, renting a property for the long-term is going to be a necessity.
However, when compared with the stock market, letting property, with the built-in risks of losing tenants and being out of pocket for months on end, not to mention Stamp Duty and having to pay for the property’s upkeep, looks less attractive as a long-term investment.
Separate research shows that the FTSE All Share over the same period has comfortably outperformed the UK property market, with £10,000 invested in 1979 being worth more than £160,000 today. In addition, where pensions are tax-efficient and can be passed on to beneficiaries tax-free if the individual dies before the age of 75, a buy-to-let property could be subject to inheritance tax.
Of course, there is no guarantee that the stock market will continue to outperform the property market, but then neither is there a guarantee that the rental market will continue to be buoyant. Either way, it is down to the individual, who would be advised to have all the facts together before making a choice.