Shares vs Property

The share market and property market often compete for a slice of the investors’ pie. In an effort to compare the two asset classes, Place Advisory has used the ASX All Ords Index to represent the share market, alongside the Inner Brisbane apartment market. These have been compared over the past 30 years to provide a full picture of both assets and to provide a review of their long term performance.

Long Term Performance | Shares vs Property

Prepared by Place Advisory. Source RP Data/ASX

To start off with, what do these two markets represent?

  • Place Advisory has used the ASX All Ords Index within this report as it is Australia’s premier market indicator, representing the 500 largest companies listed on the ASX.
  • The Inner Brisbane Apartment market, which is currently going through a tougher period of sales, refers to all apartment sales within a 5 kilometre radius of the Brisbane CBD.

As shown above, both markets have experienced numerous highs and lows over the past 30 years. Generally speaking, both asset classes have moved in similar cycles, with the exception of the Global Financial Crisis where we saw a significant variation between shares and property. Significant volatility and decline was recorded across share markets globally, when the GFC’s impacts were recognised in financial markets. Overall, the property market has outperformed the share market over the past 30 years, with the Inner Brisbane apartment market recording 6.5% price growth per annum, whilst the share market has recorded an annual return of 4.5%.

10 Year Performance | Shares vs Property

Prepared by Place Advisory. Source RP Data/ASX

The graph above demonstrates how the share market and the Brisbane apartment market has performed in terms of growth, over the shorter ten year period. Overall, the share market is much more volatile in comparison to the property market, with greater fluctuations from period to period. For example, in the wake of the Global Financial Crisis, the share market recorded a 44% decline in 2008, which then saw a 36% increase in the following year.

Over the past 12 month period, the ASX recorded strong growth. As at 31 December 2016, the All Ords Index stood at 5,719, reflecting an increase of 7% compared to the previous 12 months. Meanwhile, Brisbane’s apartment market saw a decline of 4%, recording a median price of $485,000.

Below we have summarised the major differences between shares and property.

Summary

Overall, property is deemed to be the safer option, particularly if you are looking for stability and long term growth. However, if you are an investor seeking strong capital growth, liquidity and willing to take some risks, the share market may be the way to go. At the end of the day, informed decisions based on fact and good investment timing will generally see better returns on investment.