Buying physical gold or real estate: what's the best investment in 2022?
Buying physical gold or real estate :
What's the best investment in 2022?
That's the question you're asking yourself if you have a little nest egg and want to save or invest for the long term! While real estate is the most popular way to build wealth, physical gold remains a safe haven to counter the negative effects of crises. According to theEnquête sur la Qualité de l'Habitat en Wallonie, the proportion of home-owning households in Wallonia, which has remained stable since 1991, is around 67%. Belgians' real estate assets (land + buildings) will amount to 1,648 billion euros in 2020. As for their savings, in October 2021, Belgians had just over 298 billion euros in their accounts. That's around five billion more than at the same time a year earlier. So should you invest in physical gold or real estate in 2022?
Should you invest in gold or real estate inn 2022 ?
Purchase Or vs Real Estate: time comparisonthe over 50 years
There were two main periods when the yellow metal outperformed real estate. The first was from 1971 to 1980, when the world suffered oil shocks, the Vietnam War and the end of the dollar's convertibility to gold. Deflation set in and gold soared to 1600% in the United States, while real estate climbed 70%. Then, from 2002 to 2017, the economy went into deflation following 3 key events: the emerging countries crisis of 1998, the bursting of the internet bubble in 2000 and the credit crunch of 2007. During this period,gold outperformedreal estate, witha price of 300% for gold versus 200% for real estate in Paris.
From 1993 to 2002, the Internet revolution with its increased productivity and the end of the 1987 crisis led to an inflationary environment. During this period, gold underperformed by -20%, while Paris real estate broke through with +85% and even +110% in Singapore.
But what does this mean?
- Goldoutperforms real estate when the economy is indeflation.
Gold outperforms real estate when growth is weak or when governments print too much money. - Real estate outperforms gold when the economy is doing better and there's growth.
Buying gold or real estate in 2022?
Savers and investors are wondering which is the best long-term investment in terms of profitability and reliability.
According to this 50-year historical comparison, gold outperforms real estate. However, there are 2 points to bear in mind:
- the notion of the long term: is it good for an 8-10 year project or a 50 year project? The results will not be the same.
- investment: prices, and therefore value, fluctuate according to positive or negative events. So, above all, you need to think about the balance of your assets.
Considered safe havens, gold and real estate do not serve the same purpose. Investing in real estate allows you to build wealth, supplement your income, prepare for retirement or save on tax. Investing in physical gold, in the form of ingots or coins such as 20 gold francs, enables you to secure part of your liquid assets. It's a form of precautionary savings.
Buying gold or real estate are two complementary investments that can help you diversify your portfolio. Choosing one over the other depends on your project and objectives. Let's take a look at the pros and cons of buying physical gold or real estate.
Investing in gold and real estate in 2022 advantages and disadvantages
Investing in physical gold and real estate provides a tangible, transferable asset. Both are linked to the law of supply and demand. While gold prices also depend on geopolitics and concerns about the financial system and the future, housing prices are determined by other factors (such as demographics, household solvency, interest rates, construction...). The criteria for the value of gold and real estate are very different!x
Profitabilityé
As far as returns are concerned, yellow metal does not generate income (such as interest), but retains the value accumulated over time. As for buying real estate, it can be used as a primary residence or as a rental investment. In the latter case, real estate can provide income through rents, which are indexed to inflation. However, real estate also has a cost (maintenance and taxes) that gold does not.
The difference between the purchase price and the sale price must also be taken into account. This corresponds to the costs generated by the transaction. For gold, this is around 1%, while for real estate it is 11% (taking into account taxes and associated costs).
Using the example of an investment of €50,000 over 10 years launched in 2005, the profitability of real estate comes out on top with an average annual return of 14%, ahead of gold with 12%.
Availabilityand liquidity
Gold is fungible. This means that a 1-gram gold bar in Belgium will have the same value as a 1-gram gold bar in Australia. Real estate, on the other hand, is not fungible; each property is unique. A m2 will not have the same value depending on the type of property, its geographical location... you need to call in an expert to value your property.
If you need to, you can sell your gold in Wallonia in just a few minutes, thanks to a specialized Comptoir such as CaraOr. To sell a property, you'll need to allow several weeks or even months (to find a buyer, administrative delays) and rely on various intermediaries (estate agents, bankers, notaries, technical experts, etc.). The gold market therefore offers more immediate liquidity than the real estate market.
What's more, the high selling price of real estate is undoubtedly the main drawback, whereas gold today is an affordable product. A saver can invest in the yellow metal for a few hundred euros, whereas real estate requires more capital.
Fees, taxes andtaxes
The cost of buying gold varies according to the commission charged by specialist stores and the quantities purchased. Investing in real estate involves a number of costs that are higher than those for gold:
- real estate agency fees between 5% and 10%,
- notary fees of between 3% and 7%, depending on the property,
- diagnostic costs,
- any bank charges related to a loan.
You also need to think about thecost of keeping gold and thecost of maintaining a property!
For gold, we recommend keeping coins and ingots under seal to protect them from depreciation. Some people prefer to keep their gold in a safe at home, but we recommend using a professional precious metals custodian. Fees for this service are around 1% per annum. For real estate, maintenance costs are higher and, above all, more unpredictable, especially for older properties.
When it comes to taxing gold in Belgium, it's very simple. Whether you buy, sell or own, there are no taxes!
For real estate, there are several taxes:
- property tax: the tax rate is 1.25% for the Walloon region and 2.25% for the Brussels region. Communal surcharges raise the effective rate from 18% to 50% or more, depending on the commune in which the property is located.
- municipal tax ranging from 0% to 8.5% (the average rate is 7%). Non-residents with taxable income in excess of €2,500 from Belgian real estate must pay a municipal surtax of 7%.
- capital gains tax: certain special cases are subject to taxation. As a general rule, households are not taxed on capital gains.
When you compare buying and selling conditions, costs and long-term returns, gold comes out ahead of real estate investment. Howevern addition to the financial aspectbeing aoffers additional advantages in everyday life; qhen the yellow metal helps to secure savings and property assets in times of crisis or hard times. So we can't consider buying physical gold and buying real estate as competing investments. They are complementary. Investing in stone and yellow metal allows you to diversify and protect your portfolio.
Would you like to invest in physical gold via bullion or coins? Contact your nearest CaraOr office in Wallonia to discuss your project. Our experts will answer your questions in a friendly and secure environment.