Thinking about investing in the UK housing market, but not sure whether it’s a good idea right now?
Are stocks any better?
These are all valid concerns for investors as we enter the second quarter of 2023.
Here’s what we are doing.
Stormy Time Ahead for UK Housing Market
Investing in property is generally a safe investment.
We’ve all heard the phrase – “safe as houses.”
That’s because house prices usually go back up, even after a collapse.
So sellers usually end up making a profit.
However, at the time of writing, it really looks like a BAD time to invest in property.
Especially when the UK is in the grip of a cost of living crisis.
The spillover is having a massive impact on mortgages.
It has been estimated that nearly 2 million Adjustable Rate Mortgages (ARMS) could be reset.
That could leave mortgage holders paying double each month to their lenders.
Rates were 2% just three years ago.
Now they are touching 5%.
Many UK homeowners see more than 50% of their monthly take-home pay go on mortgage repayments.
That could become a whopping 70%-80%!
Mortgage Lenders Fear The Worst
The Bank of England recently conducted a survey of mortgage lenders.
Its findings prove alarming.
It showed that lenders were bracing themselves for a tsunami of loan defaults.
That’s because thousands of customers are struggling with their credit card payments.
And unsecured credit loans.
Inflation at 10% isn’t helping.
Not only that, new investors looking to get on the property ladder are finding it hard to get loans.
The number of approved mortgages was 46,100 last November, down from 59,000 the month before.
It means the sale of houses (excluding pandemic lockdown periods) fell to its lowest level for more than 12 years.
This trend looks set to continue further into 2023.
The Evidence Tells Its Own Story
There’s no doubt property can be lucrative.
And buy-to-let is generally a very good investment.
But given all the facts so far in 2023, it would be fair to say investing in property is not looking too attractive!
So, where does that leave the eager investor?
In one word – stocks.
Stocks Are Still On Sale!
Stock investing has created long-term wealth for millions of people over the years.
In fact, selling stocks on an exchange goes back to when it was invented in 1611!
What does that mean?
It means that more than 400 years later, stocks are still making people rich.
And that does not look like a trend that is going to stop any time soon.
Investing in stocks has even created millions of millionaires.
There are 25 million millionaires living in the US alone right now.
And around 2 million in the UK.
Stock investing has played a major part in that success.
Even now, investors are still picking up shares in major brands and household names.
Which is only ever going to be profitable in the future.
Back To The Question
Which is the better option for investors right now – stocks or property?
Here’s a bit of math to chew over.
Let’s say you want to be a millionaire.
Which investment vehicle is the most likely to make that happen?
Well, consider this figure – £53,935.
That is the average house deposit needed if you were buying in 2021.
And that is for ONE property.
Imagine what you could do with £53,935 if you put that into stocks.
Exactly, you could buy HUNDREDS of stock!
In HUNDREDS of different companies and industries, and even start-ups.
Factor in two magical words and you have a hat-trick of wealth-building potential.
Those words are:
- COMPOUND INTEREST
- TIME
When these two get to work on your money, there’s no stopping your wealth creation.
Your Wealth Keeps On Building
You can see the power of compounding in action for yourself with this Calcolatore di composizione.
The point is, you might make a profit on the sale of a house but the property doesn’t benefit from compounding.
You don’t buy and sell property like you might sell stocks – unless you are a multi-billionaire.
And there aren’t that many of them.
With stocks, we’re talking everyday investing.
It’s this regular investing in stocks that helps build a portfolio of stocks.
The bigger your collection, the more chances you have of adding to your wealth.
Long-term, you can be gaining 8-10% from a diversified portfolio each year.
That can easily make the £1,000,000 figure a reality.
That’s not to say there isn’t any risk in investing in stocks.
There is.
But that reduces considerably when you learn investing risk management.
And only invest with sums you can comfortably afford to lose.
But if you use the 1:3 risk-reward strategy, then 1% is all you ever lose at once.
That’s certainly better than losing a fortune on the risky property market!
Conclusion
The UK housing market is set to take a battering.
That means stocks have to be the wise investor’s choice of asset.
As we hope we have demonstrated here, there are many reasons why that is so.
But if you want to find out more about stock investing, get in touch with us here at Padronanza degli investimenti.
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