The UK stock market peaked in May 2018. Fast-forward to the present day and it’s impressive to see it coming incredibly close to those record highs since the economic challenges of a global pandemic and an invasion. With this positive performance in mind, it could be time to consider adding stocks to your portfolio. But how do stocks currently stack up against other investment methods?

The property market has been experiencing prices rising at an all-time-high pace. Between January 2019 (pre-pandemic) and January 2022, the average property price increased by over just 20%. So, while stocks may, historically, be a popular choice among investors, let’s not forget the potential of property, and the dilemma between the two may now be more important and relevant than ever.

But answering such questions is never black and white and, despite some encouraging trends from both markets in recent months, they retain their pros and cons. So, we explore some emerging trends in both markets to present a comprehensive picture of where investment opportunities may lie within stocks and property and draw light to the happy medium of investment bonds.

Emerging trends in the property market

The topic of responsible investing has become increasingly noticeable in recent months. Environmental factors now appear to have a larger part to play in many investment decisions as investors and landlords are paying closer attention to social and environmental implications when buying property, and there’s an amplified focus on areas such as urban regeneration and community engagement.

That’s not to say that the ‘usual’ considerations such as tenant quality, building type and location are no longer important, but new requirements have stepped into the limelight and formed a new, holistic approach to property investing. As JLL’s lead director of Global Cities Research Jeremy Kelly describes it: “There’s a broader responsibility beyond the requirement to deliver quick wins for shareholders” and there’s an “Expectation that real estate will step up and play a role in a more sustainable […] future”.

Flexible space is another trend in the property market that could be here to stay. Many office-based companies have embraced hybrid working since the initial lockdown in 2020 and this has become a permanent measure for numerous businesses around the world. To start with, working from home enabled home-seekers to take advantage of larger properties in cheaper locations as the need to commute temporarily disappeared. Two years later, the trend continues and it remains a popular choice to move further away from metropolitan areas and large city centres to rural or coastal towns where properties have been more cost-effective in recent years due to Covid-19. This means that tenants are showing an interest in shorter leases and increased agility to match their flexible working styles, which presents landlords with a “true opportunity to add value” and service the new demand, according to experts at JLL.

For potential investors, these changes to the property market could be seen as a true opportunity to add value and capture a new and wider market by adapting to evolving consumer needs.

Is now a good time to buy property?

While there are many new and exciting opportunities in the property market, prices have been rising sharply. The average house price in the UK increased by nearly 10% year-on-year to January 2022, with the average property price now standing at £292,000. Growing prices can signify attractive returns potential when buying property, but it can also affect affordability – for both tenants and landlords. If you’re a first-time landlord and don’t have the funds to buy a property outright, the process of taking out a Buy-to-Let mortgage can be difficult without previous experience of owning property. This is largely down to banks considering the lack of experience as a higher lending risk, which is intensified with rising property prices. Some contributing factors to growing prices include:

·         Increased demand since working from home began

·         The gap in supply and demand

·         The continued search for space amongst home-seekers

·         Stamp duty holiday

Should prices continue to increase, it could come become trickier to get a loan, there may be fewer products on the market, and it could be more difficult to find a cost-effective mortgage deal.

There is no guarantee how the market will perform in the near or distant future, and past trends are not a reliable source to draw predictions from. A positive way of approaching the question of ‘when is the right time to buy?’ is to consider that property market performance tends to remain for some time and doesn’t fluctuate on a daily basis like stocks, but it’s still important to be vigilant and accurately understand market performance before investing.

If you have the funds to purchase a property and are on the lookout for a mortgage, it’s a good idea to visit a comparison site to gauge the prices and spot the best deals, or read our blog on how to calculate potential returns to understand property profitability. Ultimately, it’s always advised to seek guidance from a financial professional to determine profitability and find the most suitable property investment for you.

Pros and cons of buying property

As the property market toughens, a popular question is ‘is buying a property still worth it?’. There are always pros and cons to every investment and how they outweigh each other depends on your personal circumstances, but some of the key pros and cons of buying property can include:

Pros	Cons
Owning a physical asset can offer an element of control	Substantial funds required upfront
Can provide a steady rental income	Ongoing costs and fees such as insurance, agency fees, and property upkeep
Likelihood for property value to increase over time	Reduced flexibility if there’s a need to sell quickly
Can offer tax advantages for landlords	Potential challenges with borrowing
Diversification opportunities through locations and property types	Possibility of void periods between tenants

Emerging trends in the stock market 

With the recent invasion of Ukraine, the stock market has experienced a significant drop. This has caused huge uncertainty among investors, resulting in many stocks being sold and the performance of UK companies having fallen by 2.8%. Along with the fallout of the pandemic, the stock market has been in a wobbly state in recent years, but there is some light at the end of the tunnel according to the below.  

It’s been found that UK stocks have outperformed the global stock market with a 9% increase since the end of 2021 while the global market fell by nearly 6% in the same period. If this trend continues to the end of 2022, the UK stocks will have surpassed global performance for the first time in the last 10 years.

Despite some doubts in the market caused by the Covid-19 outbreak, it seems that there is plenty of optimism across the board with continuing to invest in stocks. Below are the groups which have been reported most likely to participate in online trading during and post-pandemic:

Interestingly, enthusiasm remains high across a wide range of age groups, but it’s encouraging for the UK stock market to be faced with this attitude from prospective investors in such an uncertain economical and social climate. However, stocks can change abruptly and often a daily – if not an hourly – basis, so there is an element of volatility with stocks that is reduced when it comes to buying property.

Pros and cons of buying stocks

The stock market is commonly known for its rollercoaster performance, which will have varied implications depending on your aims as an investor. Some of the main pros and cons of investing in stocks can include:

Pros	Cons
Stock liquidity could allow for quick access to funds if needed	Selling stocks can lead to tax fees
Possibility of convenient diversification at lower cost and effort than property	The process of buying and selling stocks can be an emotional process
Fewer transactions required than property ownership	The stock market can be volatile and change abruptly
Opportunity to enter the stock market at a lower upfront cost than property	Returns are not guaranteed
Can be less complex to manage than property	The choice of stocks can be overwhelming

Bonds: A happy medium

Choosing the right investment for you isn’t always an easy or straightforward process. With so many benefits and downsides to every investment type, it can be challenging to gain a good enough understanding of their differences to come to a decision.

If, after weighing up the pros and cons of buying property and buying stocks, things are still unclear, you could consider the happy medium of investment bonds. Bonds can offer a passive approach to investing in the stock market without the hassle of keeping constant watch over performances, or the real estate market without the need to manage a physical property. Generally, bonds are suitable for mid to long-term time horizons but there can be flexibility, and they present a hands-off way of growing your investment with convenient diversification opportunities.

Summary

·         Choosing an investment is subjective and dependent of many variables such as time horizon and financial goals.

·         Responsible investing is a key emerging trend in the property market, and investors and landlords are increasingly showing care for additional factors such as social and environmental implications.

·         Demand for flexibility in the property market continues as hybrid working remains popular.

·        Doors open for potential property investors to service a new and wider target audience with emerging trends from home-seekers.

·         House prices have been on a sharp rise since the pandemic outbreak, which could pose difficulties as well as opportunities

·         Some pros of buying property can include prospects for steady rental income and the likelihood of increased property value over time.

·         Some cons of buying property can include large sums required upfront and various ongoing costs and fees.

·         The UK stock market appears to be somewhat unstable, but optimism remains high from prospective investors.

·          Some pros of buying stocks can include the possibility of quick access to funds and entering the market at a lower cost than property.

·         Some cons of buying stocks can include possible tax fees when selling and the sudden changes in stock performance.

·         Bonds can offer a happy medium between buying property and buying stocks.

Bonds: How to get involved

At Propiteer Capital, we offer three property investment types in the form of asset-backed listed bonds, which cover Residential Rentals, Branded Hotels and Development Properties. Our fixed-rate returns vary between 4.5% and 9.5% and there’s a variety of term times and exit notice periods for flexibility.

To find out more about us or to get more information on how to get involved, visit our website, or browse our portfolio for previous and ongoing projects.  

Rates are accurate at the date of publishing. For our latest rates, please visit our homepage.

 

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