Property vs shares: Which investment brings better returns?

By Gregory Harris

Diversity

It's the age-old backyard barbeque debate; what will make you more money – investing in the property market or shares?

Most people will have an opinion that sees them sitting vehemently in one camp or the other. The people who sit in camp 'property investment' generally prefer to invest in this as it is a physical asset and tends not to be as volatile as the share market appears to be.

The share market enthusiasts will value the liquidity of this investment class as it allows them greater flexibility.

Share portfolios can be diversified, they tend to involve lower transaction costs and they can create an opportunity for capitalising on economic cycles. While it's a hotly debated topic between friends, this is also one of the main questions we get from our clients when they come to see us for advice on wealth accumulation.

The truth is, there are pros and cons to each investment class and each are very different investments with different features, particularly in terms of growth, tax implications, volatility, liquidity and your ability to leverage.

Diversified approach

It really depends on your individual financial situation as to which investment opportunity is right for you. In fact, our most successful wealth accumulation strategies rely on a diversified approach to an investment portfolio.

If we look back on the last ten years of property and share markets performance, we can see a fair representation of the results and a realistic comparison between the two investment classes. According to RP Data the average price of a house in Port Macquarie at the end of 2008 was $370,000.

In 2018, the median house price is now $568,000. An overall gain of 52%. Not bad, however this doesn’t consider what you've spent to maintain the property over that time, let alone the stamp duty on the initial purchase.

Comparatively, if you had a share portfolio made up of an average mix of ASX200 companies and it was worth $370,000 in 2009, today it would be worth a little over $602,000.

A profit of 63% and the ability to manage your tax position more effectively. A diversified approach means we don’t have to pick the winner. Instead we create an opportunity for consistency in returns as we expose you to a mixture of asset classes.

This also reduces your overall investment risk.

Find out more

Greg is a Certified Financial Planner®. He enjoys simplifying the many complexities around investing and assisting his clients to meeting their financial needs and objectives.

If you would like to learn more about diversifying your investments, you can contact Greg on 02 6583 1735 or gregory.harris@morgans.com.au.