Investors Seek Property Market More Than Shares
In the public perception, property investment has always trumped investment in shares. Perhaps it is a psychological thing or maybe it can be attributed to the ease with which we can relate to the real estate market. Whatever the case may be, there has been a definite inclination towards “brick and mortar”, so to speak. However, this is not to say that the share market is not proliferating and we are not growing up as share traders in our own rights. It is just that the love for property investment beats other pursuits. Let us take a look at a few reasons why this is the case.
Real estate is easy to master
In the share market, we come across terminologies like Float Shrink, Depository Trust, and the Einhorn Effect. While dealing with funds, we pass through terms like tracking error and asset allocation. Juxtapose this jargon against some of the terms of the real estate industry: two-bedroom flat, rental rate, demand-supply and you will get why many of us think of ourselves as experts in the industry before we have even crossed the intermediary stage (or even when we’re still novices). This is one great reason why we love to stick to the property market.
The power of leverage can be used better
Leveraging works a lot better in the property market. Suppose you have put $100,000 in shares and the market shoots up by 50%. You automatically gain $50,000. If you have put $100,000 instead to buy a $400,000 apartment and the market shoots up by 50%, you stand to gain $200,000 on your investment. This is the power of leverage.
No margin calls in the property market
Have you heard of a margin call on property investment? If you make an upfront payment of 15% and for some reason the value of your home erodes by 15%, does the bank ask you to put 15% more as another upfront payment? The answer is an unequivocal NO. Think about a spread-betting account in the share market. Here, you either have to come out of the market or fork out more money to keep the deal open.
Lack of liquidity is a bonus in the property market
While many are enticed by the idea of liquidity in the world of the share market, I think that it is illiquidity which wins the stakes for the property market. Even experts can feel the heat when having to work their minds over something so frequently. In addition, share market does not give you time to react on most occasions. Only those really good at the game manage to beat the market.
Contrarily, the spread of real estate is such that at each stage you can bank on data, research, expert opinion and trends without being timed out by a sudden change. Even the most sudden change in capital growth figures will give you a month to contemplate.
