Property versus shares: the pros and cons

Property and shares have long been two of the most reliable sources of income and capital returns for decades. But which investment is best? And which should you start saving towards in 2017? Read on as we weigh up some of the benefits of both investment strategies.

The benefits of investing in property

Many investors find real estate attractive simply because it’s a tangible asset. Unlike shares or bonds, property serves as a physical representation of your money. No matter what happens – whether the market rises or falls – you still have something to show for it.

Property investment is also much less susceptible to market fluctuations by comparison to traditional equity markets, which means it’s also much lower risk. While there’s some room for price fluctuations, the net value of your property is often relatively stable in the context of a healthy economy.

Not only are you exposed to a minimal amount of risk, but you can borrow a large proportion of your property’s value through lenders via what’s known as a reverse mortgage, which leaves room for other high-risk, high-reward investment plans and still have your home as a fall-back if the economy suddenly nose-dives into recession.

The benefits of investing in shares

When you build a portfolio of shares, it’s easy to access much of the needed information from the comfort of your very own home. Unlike the property market, investors can go online at their leisure and get real-time access to the exact share price that day.

Shares also attract a significantly lower proportion of extra fees by comparison to buying property, which can sometimes incur thousands of dollars in upfront and ongoing expenses added on top of the purchase price.

But the most attractive aspect that most investors find appealing is that you can invest in shares at almost any time – there’s no real limit on the amount of money you need to put forward. As such it becomes a much more achievable goal for the majority of the population, as they don’t have to save for a significant lump sum payment before making the decision to start investing.

Which should you choose?

It all depends on how you tolerate risk. Neither investment comes without some level of risk, but you can minimise your exposure for both investments by doing your research and talking to qualified professionals.

The most attractive aspect of property investment for many is that property is a tangible asset – you will always have something there to represent your investment. Shares on the other hand are heavily influenced by the success of the corporation in which you purchased the shares, meaning they can decline in value or simply evaporate completely (assuming the company goes bankrupt). The net value of any piece of real estate is directly related to those surrounding them, whereas shares constantly go up and down in value depending on global economies, industry sectors, and company performance.

Property on the other hand will always have a high level of demand, assuming you buy in the right area. It’s one of the best sources of long-term capital growth and will almost certainly grow in value over time. The same can’t really be said for shares, as they’re much more volatile.

So which should you invest in? It all depends on your financial and lifestyle goals. We recommend speaking with a good financial planner – and can recommend one to you.

Need help deciding?

If you want to talk more about the implications of investing in the property market, where is best to buy in Melbourne and what the rental return outlook is like, be sure to get in touch and speak to one of our friendly brokers today.