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Debate over bricks and mortar v stocks and shares

It is an age-old debate and is resurrected in times like these. So it is no surprise that it finds its way onto the property forums this week.

Like most arguments there are two sides – either you believe that bricks and mortar will outperform stocks in the long term or you are of the opinion that shares will ultimately bring a better return.

But as posters on the totallyproperty.com forum point out it all depends on what you mean by the long term.

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It is easy to say that in recent times property has outperformed 'most Anglo-Saxon stock markets' but one poster, tooquick, who used to work in the City says; 'If you plan to make money over a three to five year time horizon then the stock market can be far too volatile to achieve that safely. If, on the other hand, you measure returns over 25 plus years then stocks will frequently outperform property and many other asset classes.'

So is now a good time to put money into stocks. 'I personally would be reluctant to put much into the world's stock markets at the moment. I know prices look low but I'd prefer not to watch them fall even further after sticking my hard-earned cash in,' he replies to that question.

The overall opinion is that bricks and mortar are always going to be less volatile than stocks and therefore the boom and bust will be less harsh. As Mark Twain said; 'Buy land because they have stopped making it.'

In these stringent economic times buying and even moving abroad to a country that is cheaper might seem a really attractive option. The Brits and Irish, in particular, have been doing it for years.

If you want really cheap then somewhere like Hungary might be an option. On the face of it property is cheap and Budapest seems a decent kind of City to live in. But a post on the Channel4 property forum gives some interesting information for those tempted by really cheap property prices.

Poster chutzz has £46,000 to spend and has worked out that he can live in the UK with a huge mortgage or buy an apartment in Budapest and live almost mortgage free. He acknowledges that there are 'some economic problems' and that his salary will be less than in England but seems keen to go.

It is an interesting scenario as the replies to this post show, in particular one from a poster who has Hungarian neighbours. They are a surgeon and a nurse who came to the UK because their income was so low. The nurse even took a jog as a shop assistant at one point because it paid more.

They point out that everything costs more in Hungary including basics like food, fuel, clothes and cars and they pile their car high with 'cheap English goods' every time they go back.

The exchange rate is poor, tradesmen are 'corrupt' and jobs are poorly paid and not as secure as it might seem at first glance. What about tax and healthcare? This is typical of the kind of information that can be found on the forums which you will never get from an estate agent yet is vital to any investment decision.

One of the most vital decisions the new President-elect Barack Obama will need to address is what the US is going to do about climate change. It has long been acknowledged that Bush didn't do much. What has this got to do with property investment you might ask? Well, according to an interesting post on the landlordzone.co.uk forum global warming is going to have a serious affect on decisions property investors will make.

Ski resorts, sunny tourist destinations and low lying towns and cities will all be affected eventually by extreme weather conditions. But landlords on the forum aren't terribly impressed and are not interested in taking the issue seriously judging by the silly replies which degenerate into jokes about yoghurt.

For ski resorts, however, it is a serious point. A lot of resorts in the Alps do now market themselves as all year round destinations. But resorts in Lapland are using slogans like 'guaranteed snow' and becoming cheaper – its just the booze that is expensive.

There seems little enthusiasim at present to invest in ski resorts. Even those who have bought property in places like Bansko in Bulgaria are desperately trying to get out and selling at a loss.

However in the US there isn't much excitement on the forums about Obama's big win. The cut in interest rates is causing far more comment. According to posters on the biggerpockets.com forum it isn't having much effect on mortgage rates; in fact, they report that mortgage rates are going up.

This is because in the US mortgage rates are based on the 10 year Treasury Note. Lowering short term rates pushes up inflation and that usually leads to a rise in the 10 year Treasury Note. Seems that in the US if you are a property investor you just can't win at the moment.

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