Investment trends: How does property compare?

As the UK moves towards the end of the year many have been scratching their heads with regards to where to put their money. Market sentiment appears to indicate that many investors are holding back until after Brexit negotiations have been concluded or, alternatively, until the new financial year.

Investment trends: How does property compare?

However, many market experts predict that little will change regardless of the outcome of the Brexit negotiations. With that in mind, we’re taking a look at some of the most popular investment options and seeing how they stack up against property investment right now.

Peer-to-peer lending

A market created and established by a small number of major players, peer-to-peer lending is essentially earning interest on money lent to strangers over the internet. Platforms such as Zopa, RateSetter and Funding Circle allow investors to lend their money out and earn interest on it for a relatively low risk.

Depending on the provider returns can be as high as 7% per annum, but there are a few catches.

Firstly, if you invest a large sum such as £50,000 then the chances are that it won’t be lent out straight away and will take some time. Whilst the cash is waiting to be lent you won’t receive any interest. Secondly, in order to achieve the highest returns you must agree to commit your money into the platform for anywhere between three to five years. Usually, to earn anywhere near the 7% you’d need to agree to a five year term.

Risk is fairly low, but it must be remembered that not all platforms operate a “provision fund” policy, where your money is protected against defaulting loans. This is also not covered by Financial Services Compensation Scheme should the company collapse, which has happened in the past.

Stocks and shares

Stocks and shares can offer some of the strongest returns for investors but there are myriad issues that need to be considered before you decide to dip your toe into the market.

First of all is deciding where you’re looking to invest your money. Intelligent investment strategies dictate that investors must hedge their bets and invest across a number of assets and companies in order to negate the risk of a sudden downturn in the market.

Similarly, appetite for risk is often the biggest indicator of where to invest funds. Those with an appetite for risk that may pay dividends but may also make large losses tend to invest in much risker businesses and shares whilst those looking for steadier returns tend to diversify their investments across the board.

The biggest issue with stocks and shares is volatility, and whilst it is possible to make returns in double digits it is also just as likely that you’ll make those same losses from being too aggressive.

Typically, for a reasonable risk portfolio managed by a fund, you can expect returns of up to 5% per annum.

Property

Finally we come to property. The popularity of owning an asset that rarely decreases in value has increased significantly since the late 1980s and has created its own profession in which landlords are able to make good money from the returns of renting out their houses.

The risk involved with property, in comparison to other forms of investment, is extremely small. Aside from the 2008 financial crash, you’d need to go back a good number of decades before finding a period where house prices and subsequent incomes took a significant dip.

Depending on your investment, the location and the type of property, yields can often exceed other forms of investment and serve as a versatile investment in that they can be sold and exchanged with relative ease.

The income from property ownership in the past five years has often exceeded the average income from other forms of investment and with construction and building increasing in major cities, many are buying new property straight from the planning stage in order to make the most of market stimulation.

There are many forms of investment out there for those looking for stable, income generating investments but, it must be said, property remains the most viable option for these goals.

If you are in the market for your next buy to let property investment then make sure to look at our portfolio of available investments today!


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