With property prices rising across the board and rental prices struggling to keep pace, the profitability of buy-to-let investments is continuing to take a hit.
Buy-to-let investing has come under scrutiny from major political parties, and the prospect of a Labour government and Jeremy Corbyn potentially coming to power in December’s general election will certainly not help.
While the probability of Labour coming into government can be debated, the general election is just around the corner, and who knows what the result is going to be after an unpredictable few years in the political environment.
It would be the latest blow to the sector, which has been hit by reforms introduced by the Bank of England’s Prudential Regulation Authority (PRA) and HMRC, driving tax rates higher for landlords with multiple properties.
As a result, I’d see investing £5k or £10k, or indeed any other amount in shares as a better investment in November 2019 than buy-to-let. Not only does it potentially offer higher returns, it may be a less risky means to generate extra capital for retirement.
Investing in stocks from the UK’s primary index, the FTSE 100, seems to me like a potentially more profitable investment. Here are two companies I’d invest in rather than the extra hassle of a mortgage.
Building a portfolio
Investing for the long term in quality shares is key to a good portfolio, and I think homebuilders Berkeley Group Holdings (LSE:BKG) fits the bill.
Taken over the last five years, shares in the company have almost doubled and now sit at 4,455p, while in the last 12 months the share price has grown more than 25%.
It must be said that Berkeley (and other property developers in general) very much operate in a cyclical investment environment, whereby if wider economic growth slows, so does their own individual growth.
As my fellow Fool Harvey Jones has pointed out, Berkeley is facing struggles with prices under pressure in two of its biggest markets, London and the South East. However, outperformance in other areas and a strong ability to generate cash has led to its share price growth, alongside surging demand for housing.
I foresee that trend continuing and that’s why I’d buy the Berkeley share price for my portfolio at the current price.
Making a (Pri)mark
Primark owner Associated British Foods (LSE:ABF) is up almost 25% year-to-date on the back of a series of positive quarterly results, the most recent of which showed sales and pre-tax profit growth of 2% YOY.
ABF has the luxury of having very low levels of debt, and has a reputation for being a family-run business with a solid long-term investment strategy.
The company has continued its expansion of Primark stores across Europe and the US and there could be plenty more room for growth here, although the Sugar part of the business has been experiencing a slump and is worth keeping an eye on.
All in all though, I’d still see ABF as a solid investment and more likely to provide a profitable return than a buy-to-let investment.
conorcoyle has no position in any of the shares mentioned. The Motley Fool UK has recommended Associated British Foods. 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.