Property investment or the stock market: which pays more in Spain

It's the question almost everyone with savings to put to work asks themselves: is it better to invest in property or in the stock market? The honest answer is that it depends on your profile, your time horizon and, above all, how you calculate the return. Here is the real comparison, with data and no bias towards either option.

Historical returns: the real data

The Spanish stock index, the IBEX 35, has delivered an average annualised return of roughly 5-7% over the last 20 years (including dividends). The US S&P 500, which is more diversified, has returned close to 10% a year over the same period. Spanish property has delivered a total return (capital growth plus rent) of between 6% and 10% a year in the big cities, although with a lot of variation depending on the area and when you bought.

The numbers are similar, but property has an advantage that rarely shows up in comparisons: leverage. If you buy a €100,000 property with €20,000 of your own and an €80,000 mortgage, and the property rises in value by 5%, you've made €5,000 on an initial investment of €20,000: a 25% return on the capital you actually put in. That doesn't exist in the stock market without derivatives.

The real advantages of property

• Accessible leverage (mortgages) that multiplies the return on your own capital
• Monthly cash flow from rent (shares pay dividends, but not monthly)
• A tangible asset that you understand and can visit
• Less emotional volatility: a property doesn't fall 30% in a day
• The chance to create a capital gain through renovation and active management

The real advantages of the stock market

• Total liquidity: you sell in seconds if you need the money
• Instant diversification with small amounts of capital
• No active management: an index fund doesn't need your time
• No maintenance costs, local taxes or tenants
• Endlessly scalable: you can invest from €50

Which suits you best, depending on your situation

If you have less than €30,000 of capital, the stock market is probably more efficient: property needs a minimum amount of capital to get in, and diversifying is difficult with little money. If you have €50,000 or more, a stable income and a horizon of 10+ years, leveraged property can generate higher returns. And if both options are within reach, combining the two assets is what most solid portfolios do.

If you choose property: Start with our beginner's guide or analyse discounted assets on RadarPro.