Property is too much effort. I’m using shares to fund my retirement
For years, I've dreamed of owning a property back home in my native UK. Ideally, a warehouse conversion by the Thames. Or failing that, a refurbished Victorian terrace in leafy west London.
I’ve wasted hours poring over property portals, checking what's out there, and I bet I’m not the only expat who does that.
Owning a property in one the world's great cities is the ultimate dream for the internationally mobile. If you have fulfilled it, lucky you.
So what is stopping me, aside from the small matter of raising the necessary £750,000 or so?
Even if I could get my hands on that kind of money, I have a sneaking suspicion I wouldn't take the plunge.
Because owning a second property involves an awful lot of expense and effort, and a good deal of worry too.
It is worth buying somewhere back in your home country, if you plan to return there one day. That's a different matter.
As a pure investment, though, I think there are easier ways of generating income and capital growth for your retirement.
I keep nearly all of my long-term wealth in stocks and shares, and it's staying there, despite the market crash.
In fact, I’m responding by buying more shares, to take advantage of today's reduced prices.
This stamp duty holiday may tempt you
I still find myself dreaming of that London riverside duplex or desirable period character property, though.
I blame UK Chancellor Rishi Sunak for that. On 8 July, he announced a stamp duty holiday on UK purchases, which runs until 31 March next year.
This will save buyers a maximum £15,000 on properties up to £500,000, and the tax break isn't restricted to local homeowners.
Buy-to-let investors and second homeowners will also benefit, even if they are living overseas.
People like me.
I imagine a lot of expats are suddenly switching onto London property as a result, and not just Brits.
That £15,000 is a big saving, even though investors and second homeowners still have to pay a 3 per cent stamp duty surcharge.
Those living overseas have another financial incentive to act. The day after the stamp duty holiday ends on 1 April 2021, a new surcharge on foreign buyers kicks in, this time set at 2 per cent.
This means an expat who buys a UK property worth £500,000 from next April will have to fork out £25,000 more in upfront tax.
The housing market is going to change
If you are tempted, tread carefully. Buying an overseas property should never be done lightly – or in a hurry.
Global house prices could be shaky as people emerge from the Covid-19 lockdown. They may crash when government job support schemes end.
Buying property is also expensive. As well as purchase taxes, you face legal bills, mortgage arrangement charges, removals fees, and potential refurbishment costs.
Ongoing charges are expensive too. You could be on the hook for ground rent, service charges, local taxes, insurance, heating, lighting and broadband, as well as maintenance and repairs.
Running your second property can be just as expensive as your main home.
Plus you may pay local income tax if you rent it out, and capital gains tax when you finally sell.
It never ends.
I'm finding that split-level penthouse apartment a little less tempting now.
Shares are much cheaper and easier
Today may also be a risky time to invest in shares, but they still remain my first port of call.
Shares are much cheaper and easier to buy. Especially if you invest in low-cost exchange traded funds (ETFs), where fees start from just 0.07 per cent a year, with no initial upfront charge.
You also have to allow for your investment platform's fees, and a small dealing charge, but these are minimal by comparison.
You can reduce your exposure to another crash by drip-feeding in a regular monthly amount, rather than a one-off lump sum. This way you can turn today’s turbulence to your advantage, as you will pick up more shares on the dips.
I'd rather do that than take out a huge mortgage against a tiny one-bedroom living unit whose value may plunge if house prices crash.
Shares and funds have another advantage. You can trade them in seconds. By contrast, property is illiquid. Buying and selling takes months. Even longer if you cannot find a buyer for a property you want to offload.
There’s no trouble with tenants
You can generate income from your property by letting it out to tenants. Let someone else pay for it. It's a good plan.
This is effortful, though. You have to find tenants and replace them. If you are unlucky, you might have to evict them. They may leave your property in a poor state.
Thanks to the pandemic, some landlords face some tough conversations with loyal tenants whose income is under threat through no fault of their own.
Do you fancy having that responsibility? I don’t.
You could pay a local letting agent to handle the tricky management tasks for you. In return, they will take around 15% of your rental income.
If you simply trade stocks and shares online, you don't have to worry about any of that.
Shares are still my first port of call
This isn't an either/or decision. You can invest both in shares and property.
Diversification is always good.
However, from a purely investment point of view, I believe the ease, cheapness and flexibility of investing in stocks and shares, as well as bonds, gives them the clear edge.
That won't stop me dreaming about my London pied-à-terre, but in practice, the stock market is the main home for my invested wealth.
Harvey Jones has been a UK financial journalist for more than 30 years, writing regularly for a host of UK titles including The Times, Sunday Times, The Independent and Financial Times. He is currently the personal finance editor of the Daily Express and Sunday Express, and writes regularly for The Observer and Guardian Unlimited, Motley Fool and Reader’s Digest.
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