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Ignore falling house prices! I’d rather buy FTSE 100 stocks than a buy-to-let property

Back in March, FTSE 100 stocks immediately felt the impact of the coronavirus meltdown. By 23 March, the index had plunged more than a third to just below 5,000. By contrast, the damage done to house prices has been harder to gauge, as the market has been locked down for seven weeks.

Today, we got an indication as we learned that the Nationwide house price index fell 1.7% in May. That’s the steepest month-on-month decline since the financial crisis. This may tempt some would-be landlords who will see this as an opportunity to pick up a buy-to-let property at a reduced price. Personally, I’d stick to shares.

Nobody had to wait to see what Covid-19 would do to FTSE 100 stocks. It totally hammered them. The index fell more than 2,500 points. By some measures, it was the fastest crash in history.

House price fall has further to go

Inevitably, this scared many investors away, but The Motley Fool responded as it always does to a crash. It urged readers to buy shares. We think a market meltdown is the ideal time to invest in top FTSE 100 stocks, because you can pick up your favourite companies at greatly reduced prices.

You have to take advantage of these moments, because the rebound can come faster than you think. The early stages of the recovery are typically the most rewarding, because that’s when FTSE 100 shares shoot up as sentiment swings overnight. We saw that in April.

Right now, the FTSE 100 trades at 6,230, still well below its peak. The recovery was largely driven by unprecedented global fiscal and monetary stimulus, which means share prices could continue to climb higher even as the global economy tips into recession.

This gives investors the confidence to buy and hold shares despite current uncertainty. FTSE 100 stocks include plenty of bargains. If you buy them at today’s low valuations and hold for the long term, that should make you richer over the longer run.

I would view today’s Nationwide house price figures as a warning. There isn’t really a market in property right now. The Office for National Statistics and Rightmove have both suspended their indices, due to lack of transactions.

FTSE 100 stocks are much less effort

Nationwide’s figures are based on its own mortgage book, and will be even more limited. We may get a clearer idea in the autumn, when the furlough scheme ends, and people discover whether they still have jobs.

Some have suggested buy-to-let landlords may rush to sell, rather than buy. Many were disillusioned by the Treasury’s tax attack on the sector. Others will have struggled to collect rent during the crisis, or be in need of cash.

Personally, I’d rather buy FTSE 100 stocks. You can invest for as little as £500, and trade in seconds. Pricing is instant. That’s in marked contrast to the housing market, where values are impossible to gauge.

Buy-t0-let is too much bother for me. FTSE 100 shares are how I aim to build my wealth for the future.

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Harvey Jones has no position in any of the shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. 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.