Why is real estate a better investment than gold?
The debate around gold versus land within the investment echelons is as old as time (pun intended). However, what can be settled is that tangible and inflation-resistant assets, including gold and real estate, come to the rescue during times of economic precarity. The investment climate of the post-pandemic era has been murky, and some sectors were drained overnight. Nevertheless, as experts had always opined, those who had invested in assets like gold or real estate could stay afloat. Now enough of the praises; it is time to compare gold and real estate investments and see which one fares better.
Gold versus real estate – which is the better option
During periods of the financial crisis, both gold and real estate help uplift your portfolio and support investment strategy as they are physical assets with higher return values. In addition, real estate has higher scope to generate more passive income, enabling you to earn steady returns. On the contrary, despite its apparent volatility, gold has much higher liquidity than real estate. However, the solution is not so simple when settling the gold versus real estate debate.
The ultimate answer of whether you should go for gold or real estate depends on a range of factors, such as your objective, time horizon, and much more. However, some guidance can help you make an informed investment decision. So, without further ado, let us gauge the pros and cons of gold and real estate investments, and why we believe the latter is a better option.
Investment in gold – pros, and cons
PROS
Gold is a precious metal and a physical asset that you can touch, feel, and taste. During a financial crisis, gold is a commodity whose relative value remains intact or even inflates. Thus, it is a much better alternative than cash, whose purchasing power decreases during inflation. Another advantage of gold is that it helps in the diversification of portfolios. In addition, gold is portable and can be quickly brought and sold, making it a viable liquid asset. Thus, encashing gold is convenient and speedy.
CONS
Gold does not have much growth value and only preservation value. In other words, people do not buy gold to increase their wealth; instead, purchasing gold is fueled by a desire to preserve it. Thus, investing in gold does not rake in passive income. The profit you accrue from gold comes only during the sale, which happens only when its value appreciates. Another major con of gold is that it is highly susceptible to demand and supply pressures, making it a volatile asset. Lastly, being a physical asset, you must store gold safely, as it is vulnerable to theft, and recovery is almost impossible.
Investment in real estate – pros and cons
PROS
Real estate or land is that tangible, physical asset that can vehemently assist you in wealth creation. By diversifying in multiple passive income properties, the scope of expansion inflates. The best part about real estate is that, unlike bonds and stocks, it ensures cash flow that is directly controlled by your decisions. Another significant benefit of real estate investment is that it promises steady returns and capital appreciation. For instance, as there is no property tax in Dubai, real estate serves as a strong hedge against inflation that yields healthy returns as rents and property prices move parallel to inflation.
CONS
The biggest demerit of real estate investment is its low liquidity, meaning that selling properties is cumbersome, especially when you want quick encashment. In addition, real estate requires maintenance, care, and management, adding to its costs. Lastly, the fruits of real estate investment are borne only after prolonged periods, thereby making it an exhaustive process.
Top five reasons why real estate triumphs over gold as a better investment option
As per Statista, the revenue of the global real estate market is currently valued at USD 9.5 billion (2021), and it is predicted to increase by 4.8 percent by 2030. The future looks promising for the real estate sector as the economy worldwide is opening up, and the flux of people, migrants, and office workers have begun. So, let us look at the top five factors that make investing in real estate more worthwhile than gold in contemporary Dubai.
Gold is a volatile physical asset whose prices sometimes hit an unexpectedly low threshold. However, property prices always increase, and the steady returns keep coming in, as rent runs parallel to inflation.
It is possible to increase the value of the real estate through repairs, renovation, landscaping, etc. Unlike gold, the value of a real estate can be altered as and when required.
Gold is a physical asset vulnerable to theft. Thus, you have to store it in a safe locker. On the contrary, a piece of land poses lesser safety threats, and if someone illegally occupies your land, it can constantly be retrieved by choosing a legal battle.
Investments also come with their fair share of tax hassles. However, in Dubai, the absence of property makes real investment a highly efficacious decision. In addition, the available tax deductions for real estates, such as rental repairs, cost of legal services, maintenance, etc., provide real estate investment an edge over gold.
Real investment is ideal if you want to take the longer route. When land is approached with a long-term approach, it becomes all the more profitable and continues to fetch passive income.