Flats and townhouses outstrip stocks

APARTMENTS and townhouses in Melbourne have outperformed the stock exchange as an investment in the past 30 years, according to Oliver Hume research.

Between September 1980 and September last year, the price of a unit in Melbourne rose by an average 8.9 per cent a year compared with the sharemarket’s 7.7 per cent.

By comparison, Adelaide and Sydney apartment prices did not fare as well as the sharemarket, at respectively 7.1 and 7.4 per cent a year.
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The 2007-08 collapse in the equities market also highlighted the steadier returns from property, according to the Oliver Hume analysis. A comparison of the S&P/ASX 200 Index and the Real Estate Institute of Australia median price of units found the sharemarket outperformed units until September 2007, when the global financial crisis struck.

Oliver Hume’s national general manager of research, Andrew Perkins, said that at various points in the past three decades shares and unit prices intersected during market highs and lows. ”It just shows that the set-and-forget nature of property can provide less-spectacular returns but it also highlights the volatile nature of the ASX,” he said.

In the 1982 recession, property and equities intersected while in the late ’80s, equities dropped in value as property prices surged.

Mr Perkins said a unit bought for $50,000 in 1980 was now worth about $450,000. ”This price growth is without taking into account depreciation and income that would further boost investment returns,” he said.

In the December quarter, 38 new projects were announced in metropolitan Melbourne. Mr Perkins said if they were built, this would be equivalent to about 4300 units, lifting the yearly total to about 180 projects, or about 20,000-plus units.

Posted by Philip Hopkins – The Age Busin on 2nd February, 2011