Should You Invest in Real Estate in 2023?

The Spotlight

10 minutes read

Jan 24, 2023

man carrying a house on his shoulders with an expensive price tag representing the important costs of real estate investment

Is it a good idea to invest in real estate in 2023? Maybe...but this year, gold and precious metals can be just as interesting.

A new trend has recently emerged on social networks: finfluencing.

Finfluencers give their followers investing advice and money management tips. Besides other things, they usually talk about crypto, stocks... and real estate.

Why? Because real estate is a reassuring physical asset that promises good returns, especially with Airbnb and other short-stay apps booming. 🏠

So, should you rush into real estate investment after watching countless TikToks and reels on the subject? How accurate are they?

Let’s take a look.

Buying a house isn't that easy

man holding a tiny house in his hand and inspecting it with a spyglass

There's no doubt that buying an apartment perfectly situated in the city center can be a great investment... as long as you have access to it.

A dramatic increase in property prices

Every city is different, but the overall trend in the eurozone is the same: the price per square meter of real estate has skyrocketed over the past decades:

+11.8% in Belgium,

+10% in France,

+8.6% in Spain.

And if this explosion seems to have reached a plateau for the moment, with even a slight drop in prices in some places, it’s mainly because prices have recently risen at a record pace in the last couple of years. Indeed, following the Covid crisis, real estate prices have increased by roughly 10% in many countries, sometimes even reaching a 30% or 40% increase in some cities.

So, it's not easy to become a homeowner these days unless you win a lottery or get an unexpected inheritance.😉

Loans are harder to get

Today, skyrocketing inflation is forcing banks to lend less to encourage savings instead of consumption.

Bank interest rates keep going up, making investing and borrowing more expensive.

💡What assets are easier to buy than real estate?

You don’t have to be King Croesus to invest!🙂

Here are some alternative assets you can invest in if you've only got a few hundred pounds to spare:

  • Savings accounts
  • Index funds
  • Gold and precious metals (we’ll get to it later).

💡Read our SPOTLIGHT for more beginner investing tips.

The hidden costs of real estate

hand carrying a house with a tax price tag attached representing the high taxes on real estate investment

While your property can be a source of income, it also comes with some extra expenses that shouldn't be overlooked.

Property tax

Varying from country to country, property tax is a constant expense you have to pay as long as you own property.

In many cases, property taxes are calculated based on the value of your property and the local tax rate.

Here are a few examples:

🇬🇧 The U.K.: The amount of tax you will need to pay on your property will depend on a lot of factors, including how much your property costs, where it is located, and what you plan to do with it.

If you buy a property as a private owner, you will have to pay the Stamp Duty Tax, which usually ranges from 0 to 17%, depending on the purchase value, your immigration status, and whether you have another property.

🇨🇭 Switzerland: If you own residential property, most cantons will require you to pay the property taxe, amounting to around 0.2 to 0.3% of the estimated value of your property.

Moreover, owning an apartment, a house, or a plot of land in Switzerland means you have to declare it on your tax return.

🇫🇷 France: Besides the property tax, you might also have to pay real estate wealth tax and housing tax.

💡A quick tip:

Estimating current and future costs is part of investing in real estate.

Be sure to pay extra attention to taxes, and not just those on your property, but also those coming with your rental income.

Other compulsory (and sometimes unexpected) costs of real estate

Many personal finance experts agree that, when owning a house, the biggest costs will be the unexpected things that happen after you buy it.

Here are some out-of-pocket expenses you might not have considered when buying a home:

  • Homeowner’s insurance: this is a type of accident insurance covering any losses to your property, including interior damage, loss of personal belongings, etc. Your home location can affect how much it costs.
  • Co-op costs: when buying an apartment, regular costs will go toward the upkeep and management of the communal spaces.
  • Maintenance and home repairs: the older the home you buy, the higher the chances of future repairs. And if you plan on renting it out, expect some regular upkeep costs due to general wear between tenants. 🤷
  • New legal standards: with new and much-needed environmental and urban laws regularly implemented, most houses and apartments will likely require some work in the coming years to remain up to date with these new legal standards, and energy-saving upgrades can be quite costly!
  • Moving fees: when moving into a new place, you've got to also move your stuff somehow. It’s that simple, but it’s an expense many people often forget. Of course, moving costs will vary based on how far you’re traveling, but hiring professional movers can be quite costly.

💡What are the risks of real estate investment?

Besides hidden and unexpected costs, real estate investment often comes with some risks, such as bad location, costly maintenance, hidden structural problems, and problem tenants if you’re renting out your home.

Gold vs. real estate

man on unicycle juggling with his investments in gold and real estate

While real estate is a physical investment, it has a few downsides, including accessibility, taxation, maintenance, extra charges, etc.

Are there any other physical assets that don't come with the same risks?

Gold, an investment accessible to everyone

When it comes to costs, gold investment is much more flexible than real estate.

Basically, gold investment can start at around a hundred pounds or euros, based on your investment appetite and needs, as well as the amount of money you’re willing to spend.

You can always buy smaller 1g, 2,5g, or 5g gold bars.

The art of making your investment work for you

“Paperwork” and having to “handle your investments”.

If these words make you break out in cold sweat, gold may be an interesting investment option for you. Unlike real estate, it won’t require any unexpected repair works or refurbishing.🙂

First, gold is usually sold in a secure package, which protects it from scratches and other damage.

Second, if you store your gold products right, you don’t have to worry about their maintenance and insurance.

The bottom line is, gold is a long-term investment and a form of savings that will sit safely in your vault, and that will always have value in good times or bad.

Gold is subject to a relatively simple tax system

There can be two kinds of taxes on investment gold: the precious metals tax and the capital gains tax.

Sometimes, capital gains tax can be avoided. For example, if you live in France, you can get exempt from this tax after 22 years of owning gold.

Investment gold or real estate: what to remember?

To invest, not to invest? Let's try to see it more clearly! 👇

Below, is our real estate vs. investment gold comparison, a cheat sheet on the key criteria and costs to consider before you jump in.

table listing the main costs of investing in real estate vs investing in gold

What are the key takeaways?

  • Every investment, whether it’s real estate or physical gold, needs some thought. Before you get in, make sure you know your tax obligations and the current tax situation.
  • Real estate isn't the only physical investment. A good alternative is to invest in gold and precious metals.
  • While real estate investing comes with some additional, and often unexpected, costs, investing in gold can be quite flexible, depending on your goals and appetite.
  • While your property can bring you monthly income, gold is a long-term investment and a form of savings.

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