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Gold vs property


Property and gold are often both considered “safe” investments, without the fluctuations of high-risk alternatives such as the stock market. So, which one is best for safeguarding wealth in an uncertain world? 

The graph below tracks how much an investment made in 2004 of £10,000 in gold or property (represented by the UK House Price Index) would be worth, tracked against inflation. 

Gold Vs other Asset classes over last 20 years

As you can see:

  • A property investment of £10k: is worth £21,005, growing more than equities but substantially less than gold. 
  • £10k invested in gold: would have been worth  £70,710k at the end of 2023, significantly more than the rise in inflation 

Property is often the largest investment people make in their lifetimes. 

The property market has been on a steady upward trajectory since the crash of 2008, but as the crash showed, there is still the possibility of volatility even in bricks and mortar. Surging inflation has prompted the Bank of England to raise rates quickly, with more rises expected after years of ultra-low rates.

This has forced mortgage rates up quickly and substantially, pricing some buyers out of the market. House price forecasts from the Office of Budget Responsibility forecast a decline of 10% by 2024. Meanwhile, gold has proved time and time again that it both protects against financial uncertainty and offers a real chance to grow your investment portfolio. 

Comparing Property & Gold

Physical asset 

Gold

Gold’s rarity and immutability are the key reasons behind its abiding value. It’s a physical asset that can be held and owned directly which reduces any counterparty risk. 

It requires storage though, either in a secure vault or a secure safe in the home or other premises.

Property

Property is also a physical asset and as such shares its immutability with gold. The likelihood of damage beyond repair is very small, and as property is usually the most valuable asset a person owns, it is often passed onto the next generation. 

That is, when it is paid off. Mortgages last decades and are subject to the vagaries of interest rates. If the funds from a property are needed, the costs associated with liquidating the property must be taken into account. 

Liquidity

Gold

Gold is always in demand and very easily liquidated anywhere in the world. A buy back guarantee means your investment can be liquidated very quickly, often within a day. Gold coins come in smaller denominations than bars so can be partially liquidated depending on need. Gold is often seen as almost as liquid as cash but without much of the risk of inflationary erosion in value. 

Property

Property is a very illiquid asset. The process of selling up and releasing funds from a property can take months, or longer if there is a chink in the buying chain. There are also costs related to the sale, and capital gains taxes if selling a holiday home or buy to let property.  

Risk

Gold

The risks associated with gold are small. The price may fluctuate in the short term but the long-term trend is upwards, and when interest rates go up or there is an inflation squeeze, the value of gold usually goes up as well. There is a much lower level of counterparty risk with physical gold compared to other assets as well. 

Property

Buying a property to live in is usually a lifestyle choice rather than an investment one – you need a place to live and it’s better to buy than rent. But there are risks to buying property, including buying at the top of the market and going into negative equity if the market corrects, or taking on a large mortgage and then struggling to pay it if or when interest rates go up.  

Taxes

Gold

Gold can be a very tax-efficient investment depending on individual circumstances. Investment-grade gold bars and coins are VAT free and gold coins minted by the Royal Mint are capital gains tax-free as they are legal tender.  

Property

The taxes associated with property vary depending on individual circumstances but second homes or investment property is subject to capital gains tax, and there is stamp duty payable on the purchase of property over a certain threshold.  

As you can see:

  • A property investment of £10k: is worth £21,005, growing more than equities but substantially less than gold. 
  • £10k invested in gold: would have been worth  £70,710k at the end of 2023, significantly more than the rise in inflation 

Property is often the largest investment people make in their lifetimes. 

The property market has been on a steady upward trajectory since the crash of 2008, but as the crash showed, there is still the possibility of volatility even in bricks and mortar. Surging inflation has prompted the Bank of England to raise rates quickly, with more rises expected after years of ultra-low rates.

This has forced mortgage rates up quickly and substantially, pricing some buyers out of the market. House price forecasts from the Office of Budget Responsibility forecast a decline of 10% by 2024. Meanwhile, gold has proved time and time again that it both protects against financial uncertainty and offers a real chance to grow your investment portfolio. 

Comparing Property & Gold

Physical asset 

Gold

Gold’s rarity and immutability are the key reasons behind its abiding value. It’s a physical asset that can be held and owned directly, which reduces any counterparty risk. 

It requires storage though, either in a secure vault or a secure safe in the home or other premises.

Property

Property is also a physical asset and as such shares its immutability with gold. The likelihood of damage beyond repair is very small, and as property is usually the most valuable asset a person owns, it is often passed onto the next generation. 

That is, when it is paid off. Mortgages last decades and are subject to the vagaries of interest rates. If the funds from a property are needed, the costs associated with liquidating the property must be taken into account. 

Liquidity

Gold

Gold is always in demand and very easily liquidated anywhere in the world. A buyback guarantee means your investment can be liquidated very quickly, often within a day. Gold coins come in smaller denominations than bars, so can be partially liquidated depending on need. Gold is often seen as almost as liquid as cash but without much of the risk of inflationary erosion in value. 

Property

Property is a very illiquid asset. The process of selling up and releasing funds from a property can take months, or longer if there is a chink in the buying chain. There are also costs related to the sale, and capital gains taxes if selling a holiday home or buy to let property.  

Risk

Gold

The risks associated with gold are small. The price may fluctuate in the short term, but the long-term trend is upwards, and when interest rates go up or there is an inflation squeeze, the value of gold usually goes up as well. There is a much lower level of counterparty risk with physical gold compared to other assets as well. 

Property

Buying a property to live in is usually a lifestyle choice rather than an investment one – you need a place to live, and it’s better to buy than rent. But there are risks to buying property, including buying at the top of the market and going into negative equity if the market corrects, or taking on a large mortgage and then struggling to pay it if or when interest rates go up.  

Taxes

Gold

Gold can be a very tax-efficient investment, depending on individual circumstances. Investment-grade gold bars and coins are VAT free and gold coins minted by the Royal Mint are capital gains tax-free as they are legal tender.  

Property

The taxes associated with property vary depending on individual circumstances, but second homes or investment property is subject to capital gains tax, and there is stamp duty payable on the purchase of property over a certain threshold.  

Want to learn more about physical gold investment?

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