Over the years, there have been unending debates on the better investment between real estate investments and stock investments. While the truth is visible from afar, this article is going to clear your mind on the two investments.
For over 10 years, real estate investors have earned better investment returns than those that choose to trade at the Nairobi Stock Exchange. This means real estate investments are the most efficient investment for long-term basis. In fact, as per the analysis of the Stanbic Investments Management Services, income from the real estate industry has been recorded to be three times more than that of stock investment, since the year 2000. Further, the earnings from the real estate sector have been consistent and inflammation-proof contrary to that of stock that has had its shares go up and down, barely out spacing inflation.
During the report of the Stanbic investments management analysis, Mr Anthony Mwithiga chief investment officer in the company noted that the analysis proved their belief of property investment being the strongest asset class, which has been inflammation-beating and still underexploited. He also added that the resilience of the real estate market as a long term investment scheme had been proven by the high demand of housing which helped to sustain the prices of property during the bad economic times.
The analysis by the Stanbic investments management was based by comparison of capital profits, price appreciation and equities in the market. Capital profits are acquired when an investor buys a property then later sells it to make a profit.
The analysis of the Stanbic also revealed that the wealth from real estate investment grew by 183%, the equity market growing at only 125%.
Based on the analysis, the rental yield against the interest rate trends for the 91-day Treasury Bills from 2000 to 2010, the rate of rental yields was 0.9% above the 91-day Treasury Bill. Also, the report noted that within the 10 years, the key drivers for capital profits were made from townhouses and stand-alone houses. The lowest capital gains in the real estate sector were recorded from the apartments in the residential sector. This was due to the oversupply in the market, mainly in areas that had a bias to the medium end of the market.
What else makes real estate investments greater than stock investment?
Unlike in stocks where investing with borrowed money would be making a great mistake, you can take advantage of the financing channels that are always available, without adding any risk. With this leverage, low investment returns can be easily amplified.
- Passive income
In real estate, passive income can be easily earned through the letting of investment properties. For example, an investor may choose to buy and hold property as he waits for its value to increase. By renting out the property, the investor will be able to earn from the property passively without affecting the value of the property.
- Tax advantages
Players in the real estate market get to enjoy tax advantages that those in stock investment don’t enjoy. When one buys an investment property, they can write off the purchase price for a specific number of years with the advantage of tax deduction known as depreciation. It would be nice if those in stock investment would have similar features, but they don’t.
As many investors have embraced stocks as the traditional way of investment, the above article has proven that real estate is a way better type of investment. To start your journey into real estate investment, search on our website the type of property and location you would wish for and make great investment returns. You can also call 0784448888 for more information.