Property vs investing: Which builds wealth faster in 2025?
Brits are unusually obsessed with property. It feels “safe”, offering a sense of stability. It is also visible (bestowing status) and tangible, giving the impression that your assets are “real”. Yet, the UK may be starting to shift its social attitudes towards property.
Homeownership is no longer seen as attainable for many people. For those considering it as an investment or as “part of their retirement”, there is a growing recognition that the housing market is volatile and hard to predict.
A deeper question behind all of this asks: “What builds wealth faster – property or financial investments like shares?”. The answer, as with most things in finance, isn’t black and white. In this article, our financial planners in London, Grantham and Leicester explore the pros and cons of each route, touching on performance trends, risk profiles, entry barriers and strategic opportunities available in 2025.
Definitions & market conditions
It helps to define what we mean by “property investment”. In the UK, this certainly encompasses buy to let (BtL) properties and other additional properties, like holiday lets. Arguably, it includes real estate investment trusts (REITs), which trade on public exchanges similar to an equity fund. However, here we are not really focusing on homeownership, where the debate centres more on other themes (e.g. “Should I invest or pay off my mortgage early?”).
Regarding financial investments, we are mostly discussing stocks, bonds, mutual funds and ETFs (exchange-traded funds). Less relevant are private equity, crypto, cash and vehicles generally more suited to “sophisticated investors”, such as venture capital trusts (VCTs).
With that in mind, what sort of market conditions have these asset types faced in 2025? So far, interest rates have been slowly falling in the UK. This is good news for both homeowners and shareholders. The former might enjoy lower mortgage repayments, whilst the latter might enjoy tailwinds to equity valuations as companies can borrow more cheaply to fuel growth plans.
Falling interest rates can also be good news for bonds. Existing bonds with higher interest rates become more favourable compared to newly issued bonds, which offer lower yields. This can result in prices getting pushed up for the former.
Risk, liquidity & taxes
So far, it is hard to generalise about which is better: property vs. financial investments. Both may enjoy tailwinds in 2025 as inflation normalises near 2%, and interest rates stabilise.
However, clear differences emerge when we consider risk, liquidity and taxes. In particular, property tends to be more “illiquid” compared to the types of financial investments we discuss in this article. In short, it’s generally harder to sell a property at a favourable price, at a favourable time, compared to when selling a financial investment.
There can also be a higher volatility risk associated with property investing. Whilst it is certainly true that financial investments can be volatile (just look at equity prices following the Liberation Day tariffs in April), it is easier to “smooth out” this volatility by spreading out investments over different asset classes, markets and companies. Many assets are also historically less volatile than others, such as UK government bonds (gilts).
Then there is the matter of taxes. Here, financial investments offer more options to an investor looking to protect their income and capital appreciation from HMRC grabbing. For instance, an additional property (e.g. a Buy to Let) cannot be held inside an ISA. By contrast, shares, bonds and cash can all be placed within this structure, enjoying tax-free capital gains, dividends and interest payments with the “wrapper”.
In recent years, there has also been a trend towards penalising property investors more harshly than financial investors. Whilst the latter have also suffered greater restrictions (e.g. the reduced annual exempt amount for capital gains), landlords have needed to contend with measures such as the elimination of Buy to Let Tax Relief.
How should I invest in 2025?
In general, our Grantham financial advisers suggest leaning towards financial investments when seeking to build wealth. This is not to say that property investing cannot be effective or desirable in certain cases. However, property investing has a higher barrier to entry (e.g. raising mortgage deposits for each BtL investment), and it is harder to diversify your portfolio when it is primarily concentrated in one asset class – i.e. the housing market.
Financial investing offers more choice to those with varying risk appetites. Not everyone has the stomach to invest in property, which can result in significant fluctuations in equity valuations and income payments (e.g., due to periods of tenant non-occupancy). However, more “cautious” investors can craft a portfolio that reflects their preferences – e.g. prioritising fixed-income assets like investment-grade bonds, which are considered “safer”.
With that said, property can certainly be a powerful addition to an investment portfolio. Here at Castlegate, we work with many successful property investors and help them mitigate risk, tax and volatility using tools and strategies tailored to their unique goals and needs.
If you’d like to make sure you’re taking the right steps to safeguard your financial future and build your investments, please get in touch.
Please note:
The value of investments can go down as well as up, and you may not get back the full amount you invested. Your capital is at risk. Past performance is not a reliable indicator of future results. Tax treatment depends on individual circumstances and may change in future. This content is provided for information purposes only and does not constitute investment advice or a personal recommendation. Any decision to invest should be made based on your own objectives and circumstances, ideally in consultation with a regulated financial adviser. Diversification does not guarantee returns but is an effective strategy to help manage investment risk.
