Britain is obsessed property.

For decades, “buy bricks and mortar” has been treated almost like a financial institution. I was brought up on the idea and remember being quite young when my parents said that I should buy a house as soon as I could.

Property is tangible; you can see it, touch it and rent it out. Stocks, by comparison, feel like a bunch of ever fluctuating numbers inside an app on your phone, that can fall or fly up the wall massively in the blink of an eye.

But if the goal is simply to build wealth over the long term, which is actually the better investment?

Property has one enormous advantage that most ordinary stock-market investors do not use: leverage. Imagine buying a £300,000 property with a £75,000 deposit.

If the property rises 5%, it has gained £15,000. Relative to your £75,000 of capital, that is a 20% gross return before costs.

That is pretty powerful and feels good.

It is also one of the main reasons property has created so much wealth for ordinary households in the past. But leverage works both ways.

A 5% fall also wipes £15,000 from the property’s value, equivalent to 20% of your original deposit. And unlike an ETF, the remaining £225,000 was borrowed money on which you are paying interest.

When mortgage rates are relatively high, that borrowing cost can bite. Property therefore has the potential to amplify returns, but it can amplify losses and expenses too.

A common mistake is to look at a property bought for £200,000 and sold years later for £300,000 and conclude that the investor made £100,000.

This isn’t normally true.

There is stamp duty, legal fees, surveys, mortgage interest, maintenance, insurance, service charges, letting-agent costs, empty periods and occasionally, the delightful phone call telling you that the boiler has died.

If it is a rental property, tax can take another massive bite - even more so from next year when the UK government raise taxes on landlords income from rental properties.

However, against that, the investor may also have received years of rental income while the mortgage balance gradually fell.

Conversely, Inflation also quietly works in the homeowner’s favour over time. A fixed mortgage debt does not rise with inflation, but wages, rents and prices generally do. That means the £200,000 you borrowed today becomes less significant in real terms as the years pass. You are still repaying the same nominal pounds, but those pounds are worth less than they were when you borrowed them. In effect, inflation gradually erodes the real value of the debt, making the house cheaper to repay over time — particularly if your income rises alongside inflation.

That is why property returns need to be measured as a complete investment rather than simply looking at the change in the house price.

The same applies to stocks. Looking only at the share price ignores dividends, fees and tax. The fairest comparison is always the total return after costs.

This is where equities become difficult to beat in my personal opinion.

I can buy a global index fund in seconds, own thousands of companies across multiple countries and sectors, reinvest the dividends and then do very little. Zero faff!

No tenants.

No leaking roof.

No solicitor.

No estate agent.

No mortgage renewal.

That simplicity is valuable because I do not have the time for investing to become a second job.

Global equities have also been exceptional long-term wealth builders. They give investors exposure to businesses producing goods, developing technology, raising prices, earning profits and expanding around the world.

Of course, markets can be brutal in the short term. A global stock portfolio can fall 20%, 30% or more during a serious downturn. The difference is that the loss appears on your screen instantly and your world can feel like it’s folding in.

Property feels less volatile partly because you cant see its value changing every day by looking at your smart phone.

Tax matters enormously, and it’s only going to get harder for ordinary people and landlords under the current administration.

Your main home enjoys some significant tax advantages, particularly because gains on a qualifying primary residence are normally outside Capital Gains Tax (CGT).

Investment property is different, and the government sees this as a taxable asset.

You can face additional-property stamp duty when buying, income tax on rental profits and potentially Capital Gains Tax when selling. Stocks held outside tax wrappers can also generate dividend and capital-gains tax liabilities.

But the Stocks and Shares ISA changes the equation significantly.

You can currently put up to £20,000 a year into ISAs, with investments inside the wrapper protected from UK tax on dividends and capital gains. Do that consistently for 10, 20 or 30 years and the value of that shelter can become enormous.

For long-term investors, being tax efficient is essential if you want to build long term wealth.

Stocks are extremely liquid. If I need £5,000, I can sell £5,000 of an ETF.

I cannot sell 3% of a rental property.

Selling a house may take months, involve thousands of pounds of costs and depend on somebody else being willing and able to complete the purchase. Property is therefore a much more concentrated investment.

You may have £100,000 of equity tied up in one building, on one street, in one town.

With a global ETF, that same money can be spread across thousands of businesses around the world.

That diversification reduces the importance of any single company, sector or country.

There are still powerful arguments for property.

A rental property can produce regular income and a mortgage allows investors to control a large asset with relatively little initial capital.

Rental income can contribute towards servicing the debt while inflation gradually reduces the real value of that debt. And unlike a stock portfolio, property is something you can actively improve.

Renovate it, extend it, improve the management or buy below market value and you may be able to create additional returns yourself.

That is much harder to do with a global index fund.

For me, stocks are the better core wealth-building vehicle.

They are diversified, liquid, scalable, cheap to own and highly tax-efficient when held inside an ISA and they also require very little work.

But I would not dismiss property.

Bought at the right price, financed sensibly and held for the long term, property can be an excellent investment. The important point is not to assume that one automatically beats the other.

The real calculation is always about:

Return after financing, tax, costs, time and risk.

Once you compare property and stocks on that basis, the difference will clearly show which option is best for you.

And whichever route you choose, the most important ingredient remains the same.

Time.

Let good assets compound for long enough, and they can do an extraordinary amount of the heavy lifting for you, whether that be property or stocks.

The Compounder
Long-term investing made simple.

The Compounder is for financial education and commentary only. I am not authorised or regulated by the Financial Conduct Authority and I do not provide financial advice, investment advice, or personal recommendations. Nothing published here should be taken as a recommendation to buy, sell, hold or switch any investment, fund, pension, ISA, crypto asset or financial product. Always do your own research and consider speaking to an FCA-authorised financial adviser if you are unsure.