“Bricks and mortar” are tangible and relatable, whereas the concept of how much you’ll need to live off in later years feels distant and impossible to know for sure. People’s financial aspirations have often been far more focused on property than liquid assets such as stocks and shares.

But is it healthy — for individuals or for the economy?

Britain faces a retirement savings crisis. A report by Scottish Widows found the percentage of people not on track to afford the widely accepted “minimum” standard of retirement has risen from 35 per cent to 38 per cent since 2023. 

While auto-enrolment has been a huge step forward in getting people investing for retirement in the first place, it risks giving the impression that it will be enough. 

What’s more, piling wealth into property is potentially a dangerous strategy if it means overlooking other assets. It cements your risk into one asset class and typically one area (one street even). Even an owner of multiple properties will not get anywhere near the diversification they would have from a well-balanced investment portfolio offered by any standard pension scheme.

That’s even without touching on the tax and compound return benefits of investing in a pension.

Granted, asset managers and investment platform owners would have plenty to gain if the nation was even half as interested in their pension. But it’s also one of the major challenges for society.

For those who have funnelled wealth into owning more than one property, the tax burden of doing so has been rising sharply in recent years — from the disappearance of tax relief on mortgage interest payments to reductions in capital gains tax allowances and higher stamp duty on second homes. The new Labour government is extremely unlikely to be any more lenient on this than the Conservatives were.

Property, interest rates and lack of supply

It’s also important to remember that property is highly leveraged via mortgages, which for buy-to-lets are typically interest-only. This leaves investors vulnerable to rapid shifts in interest rates. As we saw last year, dramatic swings in rates left many paying much more per month than they budgeted for. Big housing downturns can create forced sellers and leave people at risk of falling into negative equity.

Part of the reason why property has been such a darling among Britons is the strong house price growth of recent decades. According to Land Registry data, the average price of a home in England nearly quadrupled between 2000 and 2024.

But this has partly been down to a lack of supply. Chancellor Rachel Reeves has promised to turbo-charge housebuilding, with the aim of delivering 1.5mn homes during this parliament. Any help to facilitate more institutional investment in the UK housing market is to be applauded. If Labour follows through with its commitment, these supply problems may ease — reducing competition and bidding wars over homes.

And while one shouldn’t compare apples with oranges, it’s arguable that property is more overvalued than stocks (at least in the UK).

Property versus stocks

Analysis by abrdn suggests house prices are close to historically high levels compared with earnings. The average home now costs about six times average earnings. This ratio has been rising, albeit with some peaks (such as during Covid) and troughs (the Great Financial Crisis).

By contrast, the price/earnings ratio (a bellwether of how under- or overvalued share prices are) of the FTSE 100 currently sits at lows last reached in the aftermath of the GFC. At about 14 times earnings, FTSE 100 valuations are below the average of the past 30 years. This suggests a potential valuation imbalance between property and the stock market.

Admittedly, it is likely to be a different story when looking at markets such as the US, where stock valuations are much higher.

Apples vs oranges – property vs pensions?

The apples/oranges point should not be understated: weighing property against pensions is not an equal comparison. Everyone must have somewhere to live. However, it’s crucial we address the UK’s property-pensions imbalance.

Recommended Personal pensions Entrepreneurs, are you paying enough into your pension? Aside from the personal benefits of easing the retirement savings crisis, there would be wide economic benefits too. It is well documented that part of the reason for the UK’s slow economic growth in recent times has been poor productivity. A big contributor is low levels of fixed asset investment (in tangible assets such as machinery and infrastructure).

In the 40 years to 2022, fixed investment in the UK was the lowest among the G7 economies. By increasing pension savings, we could boost investment into critical infrastructure and other private market assets — potentially boosting productivity.

Not only would this make the country less reliant on “the kindness of strangers” (in other words, foreign capital) to fund much-needed infrastructure upgrades, it should also grow the economic pie for everyone. When people pile their wealth into property, we see none of these wider benefits.

Making investing for the future simpler

It is hugely important that investing for the future becomes simpler, more accessible and more attractive.

There are several ways this could be achieved, from introducing better, more interactive retirement planning tools to progressing the government’s “pot for life” proposals. These would make it much easier for people to engage with their pensions by consolidating their funds in one place.

Policies to encourage pension saving among the self-employed are also much needed. Among this group the retirement savings question is even more pertinent as they do not benefit from auto-enrolment.

As the government prepares an upcoming review of the pensions landscape, all of these ideas should merit its attention.

Successive governments have introduced stimulus after stimulus to support the UK property market — with stamp duty cuts, Help to Buy and more. Yet there has been nothing remotely comparable to help boost UK share ownership. Scrapping stamp duty on UK shares, for a start, could be instrumental in building an investing culture in the UK.

It is time pensions and investing got the airtime they deserve.