History says that real estate has yielded returns of an average of 8% and can go up to 15% or more. The rental yield in Pakistan is around 7 to 9 percent, which is lower than other investment options, despite the growth in rentals. If you look at the other side of the coin, however, real estate can generate regular monthly revenue that a gold investment cannot.
Real estate can be an attractive option for long-term investments, where the value of the property increases over time. Without much volatility, real estate provides better returns than gold. Furthermore, when the market grows, so does the value of your property. Including real estate as part of your total wealth crunch is a wise strategy.
Investment in gold is valuable as it gives inflation-beating results. Over a period of time, returns from the gold investment are in line with the inflation rate. However, the dark side is when gold appreciates value, it is because there is a devaluation of the paper currency. Therefore, returns become insignificant in the case of gold investment.
Comparison Of Gold Investment Vs Property Investment
Capital Required
Now, the requirement for capital is the amount of money or financial resources you need to buy a particular asset or investment. Higher capital typically yields higher financial gains.
Gold
You need moderate capital for investment in gold. The present price of 10gm of 24 K gold in Pakistan, for example, is around Rs. 89,000. In short, in order to invest in gold, you need a fair amount of money.
Each day, the gold price fluctuates.
Property
You need a high level of capital for real estate investment. But keep in mind that higher financial gains come with higher capital. Rs.15 Lac and above may be required to invest in good projects developed by top construction companies or any property in Pakistan.
Liquidity
The simplicity of converting your investment into hard cash is liquidity. Various investments come with various ratios of liquidity. Some can easily be converted into cash, while some require a certain amount of time to convert.
Gold
Gold has strong liquidity. Simply go to a goldsmith if you want to sell your gold and he will convert your gold into cash at the current rate.
Property
Real estate, depending on the type of property you own and current market conditions, may have moderate to low liquidity.
Returns
Returns are the extra sum you earn from your investment. Each investment opportunity comes with a set return ratio.
Gold
Globally, in the last one month and 18.51 percent in three months, gold funds offer 11.43 percent returns. However, this rate fluctuates now and then.
Property
Real estate is one of Pakistan’s most lucrative investment opportunities because it not only offers you a tangible asset but also offers you a ROI of 20 percent and above.
And the best component?
Land is one of the few assets whose value overtime is always appreciated. It means your property’s overall value will always increase.
Volatility
Volatility refers to the process by which trends change in a certain market. There are abrupt changes in some investments, whereas some investments operate in steady markets.
The volatility of gold, for instance, is moderate and shifts with the dollar price. On the other hand, real estate volatility is quite low. A steady and gradual trend is followed by both investment opportunities.
Security
One of the most significant considerations of a good opportunity for investment is that it is safe and secure. Always invest in 100 percent secure and legit opportunities.
Gold
The market for gold is full of scammers. Always buy your gold from reliable sellers and do not forget to get your purchase receipt. Make sure the gold is original, as well. There have been many instances in the past where people sold fake gold to individuals.
The high chances of robbery are another drawback of owning gold. Always keep your gold in a safe location and do not disclose the data to individuals.
Property
The real estate industry, like gold, is full of scams as well. Also, invest in renowned and trustworthy businesses. Also, make sure the scheme is authorized by the development authorities of that area before making any kind of investment in any housing scheme. While investing in real estate, avoid the most common missteps, and enjoy a financially lucrative yet carefree and stable life.
Taxes
When you own an asset, you’ve got to pay the government a certain amount to hold it. A particular tax bracket comes with every investment opportunity. Zakat on an investment property depends on the revenue that you receive from it.
Gold
You do not have to pay any tax on it if you own gold. If you’re a Muslim, though, and you meet the zakat criteria, then you’re going to have to pay zakat for your gold.
Property
You have to pay property tax in Pakistan when you own a property. For the first year, the tax rate is 10 percent, 7.5 percent if sold in the second year, and 5 percent if sold in the third year.
What Would Be The Impact On Property And Gold?
Every investor feels the pinch, jobs are lost and day-to-day income is impacted when stock markets tumble. As fewer borrowers can raise the funds to move house or pay high rents, this takes some heat from the stock market.
This is also the very moment when institutional and knowledgeable retail investors switch their focus to gold. As a secure haven, during such market downturns, it tends to receive a significant injection of investment demand.
Gold Or Property? What To Choose
The great thing is that you don’t have to choose between property and investing in physical gold. If you are already a keen investor in property, then it may be worth taking your first steps to hedge your portfolio with gold investments. Possible threats to one asset class can be a benefit to the other, as we have seen. The two investment rules are thus fulfilled: property and gold are simple, tangible assets and if you own both, timing becomes less of a problem.
All of us know, however, that strong economic markets do not last forever. That is where it comes into play to own some gold. Relying solely on investment in property means that the good years are great, but the bad years are disastrous. Combining property and gold investment hedges the problem, so you should still receive both revenue and portfolio growth regardless of underlying conditions.
With Timing, Do You Need To Be Lucky?
Timing and cycles can make an enormous difference in your returns on investment. While gold prices may rise or fall in the coming months, the odds are convincingly in favor of a great opportunity for investment in physical gold now.
Instead of trying to delay the downturn in the stock market or property sector, invest in gold now while prices are comparatively low. Six months, or a year before the downturn, is better to have your portfolio insurance in place than one day after that.
