Money matters – should I invest in real estate or stocks?
Living in the UAE offers many opportunities including higher salaries, and we all know it would be better to invest that money rather than spend it on living the high life, but working out where to invest can be confusing. Today, we are focusing on helping you weigh up the pros and cons, to decide whether to invest in real estate or stocks, and it is important to do your research and make informed decisions. For example, if you receive a cold call from someone saying they found your profile on social media and have a great investment opportunity for ex-pats like you, the caller is unlikely to have the best interests of either you or your money at heart.
KEY SIMILARITIES OF INVESTING IN REAL ESTATE AND stocks
Let’s start with the similarities. If you are deciding whether to invest in real estate or stocks, it is wise to have money set aside that you are prepared to invest for the long-term if need be, in order to ride out any market fluctuations.
It is of course possible, given a combination of the right market conditions, good knowledge and research as well as a dose of good fortune, to make a large amount of money very quickly if you invest in real estate or stocks, but, to be sure of a good return, it is better to be prepared to place your money for a significant period of time.
Another similarity is that taking professional advice can give you a significant advantage. You can consult a qualified financial adviser if you are considering investing in stocks, although be wary of those who are selling adviser incentive-driven products, and question them thoroughly before you embark on any investments with them. Or, find a reputable agent to help you negotiate a property deal. You will be spoiled for choice when looking for someone to help you buy properties in Dubai or choose a villa for sale in Ajman, including those that specialise in helping to develop property portfolios for investors.
stocks vs real estate – THE KEY DIFFERENCE
To start with the obvious thing to consider when deciding whether to invest in real estate or stocks – the latter is a tangible, bricks and mortar, as the expression goes, and it is unlikely to be taken away, (unless, of course, you fail to make payments), except in extreme circumstances, such as in the event of a natural disaster. Investors in stock markets, particularly those who are new to the game, may find their money existing only on paper unnerving, as there is a feeling of their cash being subject to forces beyond their control.
THE ADVANTAGES OF INVESTING IN REAL ESTATE – end users
While the vast majority of the UAE population is made up of ex-pats, necessitating the need for them to leave for pastures new or their home country at some point, more and more ex-pats are making the country, at the very least, a semi-permanent home, starting and building businesses, enrolling their children in schools and universities, and of course, buying homes. The advantages of owning your home as opposed to renting are well known but worth repeating for those deciding whether to invest in real estate or stocks.
Buying off plan, which is common in the UAE due to the speed of development, is a popular choice for many, as you have the advantage of lower prices than for a complete property, making it something to really think about when deciding whether to invest in real estate or stocks. Other upsides include owning a brand new home, you can also have your pick of the size, number of bedrooms and permanent fittings, effectively having a hand in designing your home from scratch. If you decide to have a mortgage on the property, the money you hand over each month is going towards owning your home, rather than to a landlord, and even if you buy a complete property, you can alter and customise it, subject to your building or community regulations, to your own taste.
Finally, when it comes to your time to pack up and leave the UAE, you may make a tidy profit when you sell your home. If you have invested for the short term and experienced a decrease in the market, you can always rent out the property and sell once the market improves, a serious consideration to think about when weighing up the pros and cons of stocks vs real estate.
ADVANTAGES OF INVESTING IN REAL ESTATE – INVESTORS
Of course, end users are not the only people who invest in property. Investors who have large amounts of capital can and do buy a number of properties in different areas of one city, or indeed different countries around the world, in order to spread their risk. It is particularly common in Dubai, as well as other parts of the UAE, where premium properties are often offered for extremely reasonable prices off-plan. Regulations introduced in recent years have helped bring about the maturing of the Dubai off-plan property market, mitigating risks for investors by legally requiring the payment of instalments to be linked to construction milestones. This avoids the problem of investors having to pay for properties for which construction has stalled.
HOW TO be a REAL ESTATE investor
As an investor, the property you will buy may be somewhat different from the home you would buy as an end user. The most important issue to consider, of course, is how much money you stand to make from the property, in other words, the return on investment (ROI). Your ROI will have a lot to do with your personal circumstances – if you are buying property that does not need any significant work for cash, your expenses will be low, and you stand to make a great return.
Landlords who do best in the short term are likely to be those who buy when sales prices are low but there is a high demand for rental property, as they stand to benefit from increasing property prices while also making a good rental return. Read our blog on the best areas to invest in Dubai property to help you make informed decisions during your property search.
DUBAI PROPERTY investment
According to our data, the average return on investment for prime property areas such as Downtown and The Springs has increased over the past year. The way for you to calculate return on investment is to browse property prices for a specific type of property, for example, 2-bed apartments for sale in Downtown, and check the rental prices for 2-bed apartments for rent in Downtown, calculate your expenses, such as your mortgage payments using the ‘mortgage’ button below the picture of your chosen Bayut listing, and you should have a rough idea of your return on investment.
THE ADVANTAGES OF INVESTING IN STOCKS
Ask any financial adviser worth their salt, and they will tell you that the key to successful investing is to spread the risk, invest in different areas, such as in real estate, cash and stocks, and should one area experience a significant downtown, you will be sheltered from excessive losses by possible gains in others. The upshot of this is that when thinking about whether to invest in real estate or stocks, that the answer may be “both”. However, not all of us are fortunate enough to have the capital to spread the risk, so let’s look at the advantages of focusing on stocks.
First of all, according to a reputed major international funds manager, dating back to when records began in 1926, stock markets have historically offered the best returns, 10% annually before inflation. In addition, while there have been huge stock market crashes, as long as you are invested for the long term, while you may incur temporary losses, history shows that the markets will recover. Finally, the beauty of stocks is that you can invest a relatively small amount to begin with, particularly as a first-time investor.
HOW TO INVEST IN STOCKS
There are online platforms where investors can freely trade stocks, some of whom make a substantial living. However, if you are new to investing in stocks, it would be wise to do some pretty serious research before embarking on that course of action. We are fortunate in Dubai that we have one of the region’s key financial hubs, the Dubai International Financial Centre (DIFC), which is home to not just multinational banks and major law firms, but also a wealth of asset management firms who can advise on investments.
We hope that you have found this information on the advantages of investing in property versus stocks interesting. Stay tuned to the UAE’s best property blog for more fascinating insights and real estate news from across the country.
