Puzzle Finance Blog

Property or shares: where should you invest ?

When it comes to investing their hard-earned cash, Australians have always been partial to bricks and mortar and consistently rising property prices have guaranteed a solid investment return. As an alternative investment strategy, the Australian share market has also delivered results for investors, with shares reaching a five-year high last month.

When it comes down to the crunch, however, where should you invest your money? Property or shares?

How do the two compare?

In a 2013 analysis by the Australian Securities Exchange (ASX) and Russell Investments, titled Long-term Investing Report, shares came out on top – outperforming residential investment property over both a 10-year and 20-year time period.

The analysis found that after accounting for taxation and costs, Australian shares returned 8.9 percent capital growth in the 10 years to December 2012, while residential investment property returned 6.5 percent. Over a 20-year time period, the gap between shares and property was almost non-existent, with shares returning 9.8 percent growth and property returning 9.5 percent.

“In the long term, both asset classes – property and shares – perform similarly,” said Steve Crawford, owner of Experience Wealth Advice and Victorian director of the Association of Financial Advisers.

Which option is right for you?

The first step to choosing the best investment option for you is to identify your goal, according to Crawford, and ask yourself questions such as: are you motivated by a financial or lifestyle goal? Do you want an asset that increases in value or provides an income, or does both? What is your timeframe?

“If you want to grow your income in a shorter timeframe, property takes longer to provide a return,” Crawford said. “If your goal is to slowly build an asset that provides you with extra income you don’t have to work for, shares win the battle every time. 

“If you are putting your money into shares, you should go into it with the view that you’re not going to touch it for five to 10 years to mitigate any volatility in the share market,” he added.

If you don’t have a sizeable sum for a deposit on a property, the share market may be more accessible than the property market. You can start building a share portfolio with a relatively small sum – as little as $5000 or $10,000 can get you well on your way and deliver regular income in the form of dividends.

Buying property can also entail hefty stamp duty, which adds to the cost of entering the property market. Stamp duty rates vary in each state, but as an example a $600,000 property in NSW may incur $22,490 in stamp duty and in Northern Territory, the stamp duty the same value property would be $29,700.

Building equity

The advantage of property over shares is that you can use the equity you build in property to borrow against it, according to Crawford.

“Stamp duty can be prohibitive but the trade-off is you can borrow against property in the future. I’ve had clients who bought an investment property first, then used that equity to buy their forever home,” he said.

In conclusion, Crawford said there is “no investment silver bullet”. Where you choose to invest your money comes down to your goals and circumstances. And a lot of research and shopping around.

Posted by ratecity.com.au on 1st November, 2013 | Comments | Trackbacks

Bookmark and Share

The trackback URL for this page is http://www.puzzlefinance.com.au/trackback?post=27601332


There are no trackbacks for this post


There are no comments for this post

Post a Comment

HTML is not allowed in comments, http://... will be automatically linked.

Name (required):

Email Address (not displayed):

Comment (required):

To help prevent spam, please enter the word bell here:

Puzzle Finance Blog

About Puzzle Finance


September 2017
August 2017
July 2017
June 2017
May 2017
March 2017
February 2017
January 2017
December 2016
November 2016
October 2016
July 2016
June 2016
May 2016
April 2016
March 2016
February 2016
January 2016
December 2015
November 2015
October 2015
September 2015
August 2015
July 2015
June 2015
May 2015
April 2015
March 2015
February 2015
January 2015
December 2014
November 2014
October 2014
September 2014
August 2014
July 2014
June 2014
May 2014
April 2014
March 2014
February 2014
January 2014
December 2013
November 2013
October 2013
September 2013
August 2013
July 2013
June 2013
May 2013
April 2013
March 2013
February 2013
January 2013
December 2012
November 2012
October 2012
September 2012
August 2012
July 2012
June 2012
May 2012
April 2012
March 2012
February 2012
January 2012
December 2011
November 2011
October 2011
September 2011
August 2011
July 2011
June 2011
May 2011
April 2011
March 2011
February 2011
January 2011
December 2010
November 2010
October 2010
September 2010


Purchase or Rent (1)
The Age (1)