Finding the right way to invest is one of the big challenges in the modern world, as we need to weigh up many diverse options to make a decision.
With Manchester currently having one of the UK’s most promising property markets, how does investing in property here compare to a stock market investment?
What return can you expect on Manchester property?
Recent reports suggest that Manchester and Glasgow are the best UK cities, apart from London, for property investors. With annual property value increases of over 15% and an average rental yield of more than 5%, this is a type of investment that’s been giving impressive returns.
The British property market isn’t guaranteed to grow in value every year, but if we look at long-term price charts for Manchester or for the country as a whole, we can see a generally upward trend. In the case of Manchester specifically, property experts pinpoint factors such as excellent transport links and a lack of suitable properties on the market as reasons why prices continue to grow.
The city’s population has been growing at twice the average UK rate, with the city centre showing a particularly strong increase in the number of residents. It was named the UK’s most liveable city in 2022 and around 80% of all FTSE companies have a presence here, indicating a booming business scene that’s encouraged many newcomers to look for employment in Manchester.
What about the stock market?
Since we’ve seen that many FTSE companies are based in Manchester, you might like to start there. The FTSE 100 covers the top one hundred British companies listed on the London Stock Exchange, including names like Rolls Royce, Tesco and NatWest.
Unlike the property market, the stock market can be extremely volatile over short spells but tends to produce a solid return over longer periods of time. Since it began in 1984, the FTSE 100 has produced an average annual price return of 5.4%, although some years have been far better than others.
You can also look further afield by considering the likes of the S&P 500, which is shown here on the ES futures chart for e-mini futures. The S&P 500 is based on the biggest 500 companies listed on the New York exchanges and includes Apple, Microsoft and Amazon, among others. As such, this index covers a huge variety of industries and the stocks chosen to go on it have to be liquid and tradable as well as being part of a company with a high market capitalisation. The S&P 500 has a total return averaging over 11% for the last 15 years.
Which approach is best?
Either of these investment methods can prove to be suitable for different types of investors. Property investing and rental income yields are very much in the news in Manchester thanks to the rising prices and strong demand. However, the property market tends to be viewed as being ideal for a longer-term investment rather than a quick profit.
Stock market investing can be more volatile, although in theory investing in a broad index like the FTSE 100 or the S&P 500 mitigates this by covering many industries and giving a return based on the overall economy.
Take a look at both methods of investing to see which one meets your needs and risk profile most closely. They’ve both worked well for many investors, but each carries different types of risks to take into account.
