3 reasons I won’t be investing in buy-to-let property in 2021

Could a housing market crash be coming in 2021? I’m steering clear of buy-to-let property for that reason (and others). I much prefer investing in shares.

The content of this article was relevant at the time of publishing. Circumstances change continuously and caution should therefore be exercised when relying upon any content contained within this article.

Mother, father and child girl in new house with a cardbox roof. Symbol of protection and property.

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Buy-to-let is a popular way of generating a second income stream. I’ve never been keen on the buy-to-let model of investing, but for many it’s an exciting venture. And that dream is alive and well this year thanks to the stamp duty holiday created from the coronavirus crisis. This has spurred a mini property boom with both buy-to-let landlords and residential buyers. However, according to the Halifax, which is Britain’s biggest mortgage lender, the increase in average property prices now far outweighs any stamp duty holiday savings.

While I understand the structure of the buy-to-let property market, I much prefer investing in shares. I find it fascinating, plus it’s fairly simple and I can start with little capital. Here are three reasons I won’t be investing in buy-to-let property in 2021.

A housing market crash could be imminent

The property sector looks dicey to me, with so many people losing their jobs and businesses closing down. In fact, there’s a good chance house prices could crash in 2021 in some parts of the country, and that could make the stock market crash look tame. That’s because the stamp duty holiday created a surge in buying activity, pushing house prices up.

In fact, UK house prices are at an all-time high in some areas. It’s not just the stamp duty holiday, though. People seeking to escape the confines of their lives for something new have also exacerbated this trend. Idyllic rural areas are seeing an upturn in demand and in house prices, in some places as people migrate.

Unfortunately, this might not be sustainable without government support, so there is a chance a housing price correction could happen.

Investing in buy-to-let requires a large lump sum

There’s no getting away from it, I need a large lump sum to get started in buy-to-let property investing. It’s a reason so many people struggle to get on the property ladder in the first place, let alone afford to buy a second property.

The stock market doesn’t require huge sums of money to get started. With a Stocks and Shares ISA I can begin with as little as £25 a month. The more money I can invest, the quicker I’ll achieve financial freedom, but the barrier to entry is low. Therefore, the sooner I start, the sooner I’ll build my wealth. I like a buy-and-hold approach to stock market investing because it’s a great way to build a stake in high-quality businesses gradually. With careful monitoring and research, I can build a stocks portfolio that brings me a nice regular income.

The stock market is much less hassle

The vaccine rollout gives us hope of a return to normality. With it, companies can get back on track. Brexit still looms large, but it will soon be done and we can begin rebuilding the economy again. Buying and selling shares is easy when sticking with high-liquidity markets such as the FTSE 100 and FTSE 250. If I want to sell shares in a company, I can do it straight away, whereas if I want to sell a property it could take months. There are also very high fees, maintenance and property management woes to contend with in the buy-to-let game. Share-dealing fees are tiny in comparison, and I can do it all without ever leaving my home.

Should you invest, the value of your investment may rise or fall and your capital is at risk. Before investing, your individual circumstances should be considered so you should consider taking independent financial advice.

Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

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