Property Transaction Costs

The pros and cons of property v share investing have long been debated. One big disadvantage of property is the transaction costs. If I buy a $250,000 basket of shares I can complete the transaction for a cost of approx. $300. Not only that, but the process can be completed in under a minute. Now, I am guessing transaction costs for a property of equivalent value might be around $10,000 (ballpark)? If that’s nowhere near it, tell me from the property you have bought what a more appropriate figure is.

OK, so volume of transactions can account for the low costs for shares, but should the difference be that huge? I think the property transaction process is inefficient and there is scope to streamline it, and prune the costs. The share transaction process and costs have been made more efficient over the years. There was a time when brokerage was around 2.5%, whereas it is now as low as 0.12% and can of course be done online without talking to a broker. I accept that buying property does not have the simplicity of buying shares, but surely there is scope to prune excessively high transaction costs. And what about the paperwork and all the checks to be carried out?

An example…

I decide to buy some Westfield Holdings shares. Press a few keys. Deal done. Next week I feel I made a mistake and now have a better opportunity with Unitab shares. Press a few keys. Deal done. And hey, it’s possible I might have even made a few dollars in the process of switching.

I’m not arguing shares are a better investment than property. I think they are both good under the right conditions. However, the efficiency of share investing is hard to beat as long as property continues to have a cumbersome transaction process.

Wez.