Wall Street Stocks Vs. New York Real Estate: Which Is A Better Investment?

Property

Wall Street Stocks Vs. New York Real Estate: Which Is A Better Investment?

How would you have fared over the past 20 years if you purchased stock or bought Manhattan real estate in 1997?

Published on 6 September 2017

“Where should I put my money?” is always the question on investors’ minds, and stocks and property are two popular, age-old investment avenues. If history is anything to go by, property is typically the safer option, as the downsides tend to be lower and real estate prices don’t fluctuate as substantially as equities. There are also a lot more tax advantages to investing in property. However, depending on the timeframe in which you look, stocks can sometimes obliterate property returns, and vice versa.

Here we take a look at the performance of Manhattan residential real estate versus the Nasdaq and Dow Jones Industrial Average over the past 20 years, and see whether Wall Street or New York City property came out on top in this epic battle of investments.

Nasdaq

On 4 August 1997, the Nasdaq index closed in New York with a value of 1,605.45 points. Consisting primarily of technology companies such as Apple, Intel, and Microsoft, the index has soared over the past 20 years as these companies have grown into global tech giants. There have been some ups and downs including the tech bubble, which burst in the early 2000s, and the recession in 2008. On 31 August 2007, it was at 2,596.36 and if we fast forward to 31 August 2017, the index’s closing value stood at 6,428.66 points. That represents an incredible rise of 300.43%.

If you had invested in a portfolio that followed the Nasdaq and matched its returns, then – without measuring inflation, taxes, dividends, etc. – a US$100,000 investment in 1997 would equate to US$400,430 today – not a bad return on a 20-year investment. Tech stocks have done extremely well compared to most equities globally and have been a bright spot in the US economy since the recession of 2008. For example, Apple stock was at around US$21 per share in 1997, today it’s at US$165.05, including three splits.

Dow Jones Industrial Average

Looking at the Dow Jones Industrial Average (DJIA), its value on 6 August 1997 was 8,198.45 points, 30 August 2007 saw it hovering at 13,238.73 points, while its closing value on 31 August 2017 was 21,948.10 points. That’s a gain of 166.7% over 20 years and a US$100,000 investment in 1997 would be worth US$266,700 today. Heralded as the first index in the US – with its roots dating back to 1896 – the Dow consists of 30 blue chip stocks, a few of which can also be found on the Nasdaq. The wide range of these top companies provides an excellent benchmark to see how the US economy is performing.

Manhattan real estate

However, neither stock market index can compete with the Manhattan real estate market over the same period. The past 20 years have seen the median price for a residential property on the island surge from US$239,000 in 1997 to US$814,000 in 2007. As of August 2017, Manhattan’s median residential property price hit US$1.39 million, marking a breathtaking rise of 481%. That same US$100,000 investment in Manhattan property would be worth US$581,000 today – without taking into account taxes and inflation. There haven’t really been too many major dips in the New York City real estate market past 20 years either. Not everywhere in the US has remained so resilient, however property in Manhattan can be seen as a stable investment with a strong upside.

The Bottom Line

Based on this comparison, property appears to be the obvious choice for investors as it has outperformed Wall Street over the past 20 years. There are some elements that one should consider though. An investor with an equity portfolio usually has some diversification in what they hold. If one holding is not performing well, others can counter-balance that. If you just hold real estate in one market, you have significant exposure to that market, and any downturn can have a great impact on your entire holdings. Stocks are also more liquid than real estate, meaning you can sell them fairly effortlessly. However with its impressive rise of 481%, this time around, Manhattan real estate beats Wall Street equities hands down.

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