Invest in property over shares, says real estate expert

by Julia Corderoy05 Nov 2014
A small cash deposit will go much further in the property market than investing in shares, according to a real estate expert.

Zaki Ameer – who founded wealth creation mentoring program, Dream Design Property – says that despite the property and the share market providing very similar returns over the long term, banks and lenders value the short to medium term reliability of the property market much higher than that of the shares market.

“When it comes to margin lending for the share market, blue chip shares can expect 50% leverage, but for new or risky shares, much less.  On the other hand, lenders are comfortable to hand over 95% for property,” he said.

“So, someone who had $200,000 to invest either in cash or as equity in their home could do much more with it in the property, than in the share market.”

The other major benefit of the property over the shares market, according to Ameer, is the fact that it takes on average three months for a property to settle, as opposed to fluctuations in value by the second.

Although, this doesn’t mean investors should assume that property investment is completely safe with guaranteed positive returns, he said.

“Just because property is not as volatile as the share market, it doesn't mean investors can afford to be less cautious with their investment strategies.

“Common mistakes that inexperienced property investors make are investing in property with the sole purpose of attracting a loss so that they can claim tax benefits, in a popular structure called negative gearing. Obviously, what they don't realise is that this then limits their future borrowing capacity to build on their property portfolio and create serious wealth.”

According to Ameer, many property investors also make the mistake of investing in the latest 'property hotspots', such as mining towns.  This mistake can potentially cost investors their entire investment portfolio and even their own home.

“If you are going to invest in a mining town, you may as well invest in shares. Traditionally, property is renowned as being far less volatile than shares. But if you are going to invest in a mining town, you have as much security over the long term as you would as if you invested in shares,” he said.