CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 75% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money.
US English

FTSE vs. property: which performs best over the longer term?

By Angelique Ruzicka

12:13, 16 March 2022

Model houses and coins on table representing finance
House prices across the UK rose by 10.8% in the last 12 months – Photo: Shutterstock

The phrase ‘as safe as houses’ is often bandied about, giving the perception that investing in property is a sure bet. Most stock markets had a bumper year in 2021 but, despite this, the UK property market still managed to beat equities on growth.

House prices across the United Kingdom rose by 10.8% in the last 12 months according to figures highlighted by the UK Property Investor Show from the Government’s Housing Market Index.

During the same period, the FTSE 100 Index of leading shares increased 9.6%. Meanwhile, the FTSE 250 decreased by 4.79%.

Is this the only realistic measure of performance? And does the property market always outperform the stock market long term?

Devolved nations vs. worldwide stock markets

The UK Property Investor Show also points out that England’s growth rate lagged Scotland and Wales. Scotland saw property prices rise by 11.2% while Wales enjoyed an increase of 13% in 2021.

But even England’s performance outperformed most worldwide stock markets during 2021. The US Nasdaq increased only 0.48%, the Dow Jones Industrial Average added 7.61% and France’s CAC 40 which rose by 9.19%.

However, property wasn’t the best performer overall. The US S&P 500 gained 26.89% last year. But this doesn’t deter the supporters of property investing. Rob Stross, a marketing consultant at the Property Investor Show, told Show House magazine that Scotland was the only housing market that could compare to the S&P in “brute strength” terms.

What is your sentiment on US30?

39966.8
Bullish
or
Bearish
Vote to see Traders sentiment!

Pros and cons of property and stocks

Looking at property over the last 12 months and comparing it to stock market performance may not be fair play, some may argue, particularly given some of the unprecedented events we’ve had to endure.

Stock markets have been volatile thanks to the Covid-19 pandemic and the war on Ukraine has upset certain sectors of the market, which can skew the results over a short period of time.

While investing in property may seem robust, it’s certainly not fool proof and property price crashes in 1991 and again in 2008/2009 are testament to that. Also, if you consider the costs involved both at the start of investing in property – it’s a far bigger outlay to consider versus a basic stocks and shares ISA (individual savings account) which can be started with a £500 deposit or from as little as £25 a month.

BTC/USD

65,622.40 Price
-0.400% 1D Chg, %
Long position overnight fee -0.0616%
Short position overnight fee 0.0137%
Overnight fee time 21:00 (UTC)
Spread 106.00

ETH/USD

3,339.72 Price
-4.230% 1D Chg, %
Long position overnight fee -0.0616%
Short position overnight fee 0.0137%
Overnight fee time 21:00 (UTC)
Spread 6.00

Gold

2,395.84 Price
-0.520% 1D Chg, %
Long position overnight fee -0.0193%
Short position overnight fee 0.0111%
Overnight fee time 21:00 (UTC)
Spread 0.60

XRP/USD

0.62 Price
+2.650% 1D Chg, %
Long position overnight fee -0.0753%
Short position overnight fee 0.0069%
Overnight fee time 21:00 (UTC)
Spread 0.01168

Investors need to consider the large deposits and taxes needed for property purchases. In 2021 deposits on average came to £53,935 for the average first time buyer. Then there are the ongoing costs such as maintenance costs that can eat into any initial investment or gain that’s made.

No instant cash in property

So, while property prices may have gone up, can you claim not to be in the red if you subtract the liabilities? Another downside to property is that it can’t offer instant cash if you need the money in a hurry.

While you can get additional income through renting a property out (if you choose the buy to let option), there’s also void periods to factor in (when people aren’t renting).

Investing in stocks, meanwhile, can also offer income in other ways. Equity trader, Neil Smith, explains: “The stock market is very liquid and if you need to liquidate it’s very quick to do so, whereas a property transaction is weeks or months.

“If you’re reinvesting and compounding dividend income that can have a significant increase in the return over a decade’s horizon.”

Exposure to property

For those who don’t have the cash yet to invest in property but who still believe that bricks and mortar are a good investment, there are plenty of ways to access the housing market (both commercial and residential) through the stock markets or funds.

For instance, the UK’s Real Estate Investment Trust (REIT) sector consists of 59 companies with a combined market capitalisation of £55bn as of the end of June 2020. Investors in the FTSE 350 REIT would’ve seen their investments go up 21% in the last 12 months.

Smith adds: “You can make money investing in property stocks. If you look at British Land or Land Securities, they are very agile and creative and that’s just looking at the commercial side. Investors could have a mix and could split between commercial and residential builders as well as small sprinkling of the agency side by investing in the likes of Savills.”

Ultimately, investing in the stock market and in property can be done simultaneously and investors aren’t forced to make a choice between the two. This is probably a good thing given that higher mortgage rates are already affecting the demand for new homes.

Markets in this article

BLNDgbp
British Land
3.900 USD
-0.115 -2.890%
FR40
France 40
7480.7 USD
-80.3 -1.060%
FR40
France 40
7480.7 USD
-80.3 -1.060%
FR40
France 40
7480.7 USD
-80.3 -1.060%
FR40
France 40
7480.7 USD
-80.3 -1.060%

Rate this article

Related reading

The difference between trading assets and CFDs
The main difference between CFD trading and trading assets, such as commodities and stocks, is that you don’t own the underlying asset when you trade on a CFD.
You can still benefit if the market moves in your favour, or make a loss if it moves against you. However, with traditional trading you enter a contract to exchange the legal ownership of the individual shares or the commodities for money, and you own this until you sell it again.
CFDs are leveraged products, which means that you only need to deposit a percentage of the full value of the CFD trade in order to open a position. But with traditional trading, you buy the assets for the full amount. In the UK, there is no stamp duty on CFD trading, but there is when you buy stocks, for example.
CFDs attract overnight costs to hold the trades (unless you use 1-1 leverage), which makes them more suited to short-term trading opportunities. Stocks and commodities are more normally bought and held for longer. You might also pay a broker commission or fees when buying and selling assets direct and you’d need somewhere to store them safely.
Capital Com is an execution-only service provider. The material provided in this article is for information purposes only and should not be understood as investment advice. Any opinion that may be provided on this page does not constitute a recommendation by Capital Com or its agents and has not been prepared in accordance with the legal requirements designed to promote investment research independence. While the information in this communication, or on which this communication is based, has been obtained from sources that Capital.com believes to be reliable and accurate, it has not undergone independent verification. No representation or warranty, whether expressed or implied, is made as to the accuracy or completeness of any information obtained from third parties. If you rely on the information on this page, then you do so entirely at your own risk.

Still looking for a broker you can trust?

Join the 630,000+ traders worldwide that chose to trade with Capital.com

1. Create & verify your account 2. Make your first deposit 3. You’re all set. Start trading