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5 Investments That Are Better Than Property in the UK

Jasmine Birtles 28th Jun 2024 No Comments

The cost of buying property in the UK seems to be going up by the day! First-time buyers will need a fork out over £50k (on average) to secure their first home and it doesn’t get any easier for people looking to upsize or buy a second property.

The cost of properties has gotten so high that a third of millenials may never be able to afford to buy a home and many others will continue to rent into their forties.

Luckily, buying property isn’t the only way that you can build wealth. In fact, I personally think that considering other investment options is essential in the current housing market!

In this week’s column, I wanted to take a look at 5 high-yield investments that are better than property investing in the UK.

1. ETFs

We’ve spoken a lot about ETFs recently on MoneyMagpie and that’s because they are a great way to invest!

Check out our recent ETF webinar with Vaneck.

Exchange Traded Funds, or ETFs, are a brilliant alternative to property investment. Essentially, ETFs are investment funds traded on stock exchanges, similar to individual stocks.

ETFs are designed to mirror the performance of a specific index, like the S&P 500 or Nasdaq. So, when you invest in an ETF, you’re buying a diversified group of assets that track the index’s performance.

Annual returns on ETFs can vary from 3% up to 25%, with lower risk options at the lower end of this range.

By doing your homework and spotting profitable opportunities, you can easily achieve a higher return over a year than you would with a rental property.return of ETFs, investments that are better than property

Average return of top ETFs in 2021. Source: Investodpedia#

2. Cryptocurrency

Cryptocurrency investing can be volatile, but it can also be very rewarding!

You’ve probably seen those crypto traders flaunting their huge returns on social media or at least heard about them in the news. While it’s important to remember that people can exaggerate the truth, cryptocurrency does have the potential to yield much higher returns than traditional investments.

To understand the ins and outs of cryptocurrency, you might want to check out my guide on what is Bitcoin (and other cryptocurrencies).

Due to the volatile nature of the crypto market, substantial growth over short periods is possible. Recently, Bitcoin surged from around $40,000 to $74,000 in just three months.

Spotting these opportunities requires a lot of market research and understanding of how crypto works. If you’re interested in investing in cryptocurrency, consider taking a course or consulting an expert who can guide you towards profitable investments.

3. REITs

Real Estate Investment Trusts (REITs) are an excellent way to invest in property without the hefty down payment.

A REIT allows everyday investors to get involved in the real estate market without buying and managing properties themselves. Think of it as a mutual fund, but instead of stocks and bonds, it invests in real estate assets.

A standout feature of a REIT is that it must distribute at least 90% of its taxable income to shareholders as dividends. This means investors can enjoy a steady income stream from rental payments and property sales.

But can REITs beat traditional property investments?

They sure can! Data from Savills showed that, between 2010 and 2020, the average total return for a REIT in the UK was 7.2%, compared to 6.4% for residential property over the same period.

Some platforms let you invest in REITs from as little as £50, making them far more accessible than buying property.

investments that are better than property

4. Value Stocks

For a long time, stocks have outperformed properties by a significant margin. This makes the stock market a worthy consideration if you are looking for investments that are better than property. 

In particular, value stocks can offer generous returns to investors who can identify undervalued opportunities.

So, what are value stocks?

A value stock is a stock trading below its intrinsic value, meaning it has significant growth potential! Value investing is a strategy famously used by Warren Buffet – if you get it right, it can be very profitable.

Some popular value stocks today include Toyota Motor Corp., Berkshire Hathaway, and Procter & Gamble.

You could use our guide on how to find undervalued stocks to find other hidden gems.

5. Startups

We all dream of starting our own multi-million dollar business. But, for many people, that dream is a little out of reach! One way to get a slice of the pie, without starting your own business, is to invest in startups.

Investing in new businesses can be incredibly rewarding, especially if you invest in a small company that turns into a giant.

Imagine having invested in Facebook or Microsoft at the beginning!

There are several ways to invest in startups in the UK, such as crowdfunding, venture capital trusts (VCTs), and becoming a business angel.

Of these, crowdfunding is the most accessible. By investing money via crowdfunding, you receive equity in the startup. As the company grows, the value of these shares can increase, generating significant returns.

However, investing in startups can be risky! There’s no guarantee that the business you invest in will succeed. It’s crucial to thoroughly research the fundamentals of the business before making any decisions.

The Best Way to Beat the Property Market

If you’re looking to build wealth with investments that are better than property, diversification is key.

A diverse portfolio means having multiple different investments, rather than putting all your eggs in one basket!

The ability to diversify is one of the main advantages of investing in assets other than property. Unlike hefty house deposits, many online brokerages offer low minimum deposits, allowing you to spread your funds across various assets.

Diversifying reduces the impact of losses and increases your chances of investing in an asset that will generate returns.

This is not financial or investment advice. Remember to do your own research and speak to a professional advisor before making any investment decisions. There is no guarantee that the value of an investment will go up.

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Jasmine Birtles

Your money-making expert. Financial journalist, TV and radio personality.

Jasmine Birtles

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