Here at Stokemont, as RICS Registered Valuers, we always like to think outside the box when valuing property. In this blog post we will be looking into the various advantages & disadvantages of investing in gold and comparing these to the advantages & disadvantages of investing in property to try and establish which investment is more worthwhile.
Gold and property are physical assets which is a reason for why they are a popular option for investment.
What are the benefits of investing in gold?
A key benefit to investing in gold is that you do not need a significant lump sum of money to start your investment. You can either buy a large amount of gold or simply start off by investing in a small amount of gold.
Gold has a high level of liquidity and there is always a demand for it. This will allow you to buy & sell gold almost whenever you like and with little hassle.
The flexible tenure of gold is also beneficial as you can hold gold short-term and potentially benefit from a profit, but you can also hold gold for a long-term which will more likely provide a higher rate of return.
The risks associated with investing in gold are also relatively low, as although the price is constantly fluctuating in the short-term the long-term trend is always upwards.
What are the benefits of investing in property?
One of the main benefits of investing in property is that it allows you to generate income by leasing out the property. Alternatively, you can make use of the property yourself and the value will still increase with time.
Investing in property is very beneficial in the long term as the price of property will always increase over time. The reason for this growth is due to the ever-increasing population which constantly increases the demand.
Another benefit of investing in property is that you can increase the value of this by repairing or renovating the property.
The tax structure for property also brings benefits as the tax considers factors such as depreciation, cost of repairs and maintenance & costs of legal services which essentially means that your tax will be less.
Real estate has an incredibly low volatility which means that the price of property does not fluctuate frequently which reduces the risk of the of the investment.
So, should you invest in property or gold?
If you had invested £10,000 in gold in 2000 that investment would have been worth a total of £77,000 in 2021. This growth is substantially higher than the growth of property, if you had invested £10,000 in property in 2000 that would have grown to £32,700.
There are multiple reasons why gold may be a better option for investment. Firstly, there are on-going costs when investing in property. The property will require maintenance throughout its life and if the plan is to buy-to-let then the property will need regular refurbishment to ensure that it attracts new tenants. This differs from gold as there are no maintenance or carrying costs you can simply lock it away until you wish to sell it.
If it is a buy-to-let investment it is also common to have somebody else manage the property on your behalf. The cost for this can be somewhere between 10-15% of the rental income each month.
One of the major issues in investing in property is the low flexibility that it offers when compared to gold. If you decide that you wish to sell the property this can be a time-consuming process. Not only this, but there are also costs involved when selling a property including agent and legal fees but also the biggest cost will likely be Capital Gains Tax.
A good advantage of investing in gold is that you can sell part of your investment which is not possible with property. Additionally, the process of selling gold is a far less complex process, making it a far more liquid investment.
When investing in property a large sum of capital must be available for the initial investment which is a contrast to investing in gold as you can start your investment from as low as £50 and scale up as high as you wish.
The decision on where to invest your money should only be made by looking at the advantages and disadvantages of the option.
Investing in gold is often considered a good diversification investment option as typically its growth performs opposite to how real estate performs. There is no correlation between the growth rates of real estate and gold which means when real estate is performing badly gold is usually performing well.
For this reason, it would be advisable to invest in both gold and property as although relying solely on your investment in property ensures that the good years are very rewarding, it also means that the bad years are disastrous. By investing in both you are able to hedge this issue.
If you have a Property Valuation matter you would like to discuss with our team of Valuers, give us a call today and we will be more than happy to assist and advise.