Is It Better to Invest in Property or Save in 2023?

To determine whether traditional savings or investing in property is the better option for you, it’s important to understand the fundamental differences between the two. Saving money refers to gradually setting aside funds, often in a high-interest savings account, for emergencies or future expenses, while investing involves allocating money to specific assets like oil, stocks, or property with the goal of growing it. While investing carries more risk, it can yield greater returns, especially if you do your research on what to invest in. Property investment is one of the most common and reliable investment options.

Property investment is one of the most popular forms of investment, and like all investments, it carries risks and potential returns. Traditional savings methods, on the other hand, carry little risk but often yield minimal returns, especially with the current low interest rates on savings accounts.

Recent reports from the Bank of England indicate that more people are dipping into their savings than any other year since the 1970s. This is likely due to the fact that the best ISA rates in the UK barely exceed 2%, which is significantly lower than the rising cost of living across the UK.

For example, a £100,000 pot in a savings account with an average annual interest rate of 1% will be worth £110,462 in 10 years. On the other hand, purchasing a buy-to-let property with £100,000 cash that offers a 5% net annual yield, £600 monthly rent (with £100 monthly costs) and increases in value by 20% in 10 years will be worth £180,000 including rental profit.

Here are 10 reasons why investing in property trumps saving in 2023.

1. Potential for long-term appreciation in property value: Property values can increase over time, especially in areas that are experiencing population growth or economic development. This can lead to significant capital gains for the property owner.
2. Potential for rental income: Investing in rental properties can provide a steady stream of income, especially if the property is in a desirable location with high demand for rental housing.
3. Diversification of investment portfolio: Property can be a valuable addition to an investment portfolio, as it can provide a different type of return compared to traditional investments such as stocks and bonds.
4. Potential for tax benefits: Property investors may be eligible for certain tax deductions, such as mortgage interest and depreciation. It’s important to consult with a tax professional to understand the specific tax benefits of investing in property.
5. Potential for leverage: Investing in property often involves taking out a mortgage, which allows the investor to leverage their money to purchase a more expensive property than they could afford to buy outright.
6. The ability to physically see and touch the investment: Property is a tangible asset that can be seen and touched, which can provide a sense of security for some investors.
7. Property can be a tangible asset that can be passed down as inheritance: Property can be passed down to future generations as a form of inheritance, which can be a useful way to build wealth over time.
8. The possibility of generating passive income through renting: By renting out a property, an investor can generate passive income without having to actively manage the property.
9. Property can act as a hedge against inflation: Property values can increase with inflation, which can provide a hedge against the erosion of purchasing power over time.
10. Property can be a stable long-term investment: Property can be a stable long-term investment, especially if the property is in a desirable location with strong demand for housing. It’s important to note that the property market may fluctuate, so it’s important to do research and consult with professionals before making any investment decisions.