The experts have had their say, but what do investors on the ground think when it comes to the choice between property and shares?
Property trumps shares for long-term gains, but investors need to research their purchases well and shouldn't dismiss the potential of the local share market to provide strong yields.
That’s according to social media respondents to Smart Property Investment’s questions surrounding the properties versus shares argument during the past week.
Jane Slack-Smith, responding via LinkedIn, explains that the sheer size of the property market combined with the basic human necessity for accommodation makes property investment the safer bet of the two.
“The basic facts: the property market is worth $6 trillion, the Australian listed stocks, $1.5 trillion. Everyone has to live somewhere, and 70 per cent of people own or are in the process of paying off a home. Hence 30 per cent rent,” she explained.
“The key to knowing where to buy comes down to a few things. Knowing who you are buying for – is it yourself or a tenant, and knowing what your buying criteria needs to be to make your purchase as a home or an investment work for you. In my opinion, regardless of buying for yourself or as an investor, you can make money if you understand that buying the right property, in the right location with the right finance reduces the risk of this investment decision.”
Steven Vasiliadis, also responding via LinkedIn, stated that the local share market still offers strong yielding opportunities for investors who know where to look.
“I think for the savvy investor there is some very good value in the ASX at the moment with dividend yields unmatched by property investment. Stick to blue chips with great yields and long-term growth prospects. Companies like Woolworths and BHP are at great value at the moment, and offering net yields of between eight per cent and 10 per cent,” he wrote.
Jay Baumann warned all investors to remember that the key to success lies in their timing, writing: “There is a bubble brewing and you don't want to be the last one holding the can. Just know when to buy and when to sell!”
Mahsoud Azimi commented in a similar vein, stating that patience is the key to successful property investment.
“Property is always safest investment in Australia, but if you're looking at quick money, [it's] not a good option.”
David Keel, responding via Facebook, believes in property over shares – provided investors direct their money toward well-situated properties.
“Over the long term there is no safer bet than residential property in Australia – provided you do your homework and invest in the right areas. Property will always trump shares for the simple fact that you can safely leverage more money into residential property – banks are happy to lend 80-90 per cent of a property's purchase price. You can do this with shares also, but as the article alluded to, shares can be very volatile and the chances of getting a margin call are a lot higher – being a forced seller at the worst possible time can seriously impact your wealth,” he wrote.
“A $500,000 property growing at five per cent is preferable to a $100,000 share portfolio growing at 10 per cent, and you could be in either financial position with the same starting capital. You could say that the ability to leverage is the 'independent umpire' when it comes to any shares v property debate. With that being said, using debt magnifies your gains as well as your losses – as people who have invested in mining towns will be discovering (much to their chagrin). The key is to invest in areas with a diversified economy, strong population growth and a fixed supply, i.e. capital cities,” he added.