Property VS Shares – Picking the Safest Investment

For the average investor, the return of their investment is a top priority. Finding the ideal investment is different in each situation – higher risk investments often have a greater potential for quicker financial reward, but come with the chance that things might not go so well.

There is an ongoing debate over whether shares or property make the better investment, and both sides have compelling arguments for which type of investment is the best choice. However, when it comes to safety in their return, property ticks more of the boxes.

If you’re looking to invest, here are a few reasons why property investment is a safer way to grow your income.

Solid Strategy

With stability come security – and property tends to be a very stable asset. The share market can often be a more volatile environment, with shares dipping and soaring much more quickly than the property market.

While property can still experience its own ups and downs, they tend to happen a lot more slowly which allows investors more time to plan ahead. Property tends to be a long-term investment for most people with less chance of a quick offload, meaning investors can take advantage of those long-term gains.

Physical Assets

The function of a property helps ensure its worth – everyone needs a roof over their heads, and with Australia’s steady population growth it’s not difficult to see how the demand for housing can make property investment an attractive enterprise.

Having a solid, physical asset is a plus point for property investors, instead of their investment being reduced to numbers on a screen. They can also put the work in to improve the value of their asset, being personally involved in its improvement – for example, with the flexibility to renovate, investors can help control how quickly their investment rises in value.  

Governmental Protection

The property market underpins the whole economy, and housing is a basic need for everyone. Because it’s such a vital part of caring for the population, the property market is one of the first areas that the government will protect when there are harder economic times.

For property owners, that means that they are more likely to receive assistance when the economy starts to dip, which are designed to enable them to keep their assets. Most recently, that was shown with the mortgage repayment freezes that helped homeowners navigate difficult times, as well as significant financial incentives for people who chose to build new housing.

Maximising Finances

While property does tend to require a significant initial investment, there are some major financial reasons that make property a more lucrative option. Financing property is commonplace, which means that investors can reap the full reward of interest and rising value without needing to come up with the full amount at the start.

Obviously, tenants help to pay off a property, which reduces the debt much more quickly and helps investors see a higher return on their investment. Owners can also claim tax benefits and write-offs for the properties they own.

In addition, once enough capital has built up in the initial property, investors can then use that equity to purchase further properties without needing an additional investment. That allows them to increase their portfolio without having to come up with a large initial deposit.

Potential Downsides

While property investment offers a solid, physical investment that tends to be much less volatile, there are some barriers that can make it a harder option for some investors to pursue.

Firstly, property requires a significant amount of capital up-front. That is mitigated by government incentives and the ability to get a mortgage, but the initial deposit that allows buyers to avoid LMI can be difficult to save.

While shares can be sold almost instantly and investors can choose how many to sell, property is different. Selling a property is an all-or-nothing decision, and it can take time. Property investment is ideal for those who are committed to the long haul, and who have the time and capital to invest in improving their assets.

Investing in Stability

Investing in property is a big decision. It comes at a significant cost and as a home for tenants, investors are required to upkeep the property and make sure occupants are well-housed.

But when it comes to stability, long-term investment in property offers a physical asset that will always be in demand, and a more stable option that avoids the rapid fluctuations that are associated with investing in shares.

Owning a property is more like operating a business – if you’re willing to work to see your property improve, you’re likely to do very well. Like any financial decision, it’s all down to personal circumstances and goals.

For investors with enough capital to begin, a long-term plan and desire for a secure investment, get in touch with the team at Love & Co to learn how property investment can enable you to develop a portfolio of assets and increase your wealth.