Finance advice
Assets, property investments

Is property a better asset class than shares?

By Bianca Dabu

Many people looking to create wealth are often torn between investing in property or investing in shares because while both asset classes have the potential for bringing good returns, they also pose different types of risks for budding investors.

There are those who prefer property for being tangible—a physical representation of their money—as well as the belief that it is harder to lose everything as the physical asset remains on land. On the other hand, there are people who are more eager to build a share portfolio because of the higher level of accessibility of information about their investment’s worth and the relatively small amount of money they need to get started.

Property investment generates income through rental payments while shares pay dividends, but which of the two actually brings better yield for the investor in the long run?

A lot of people would argue that shares consistently outperform the rate of capital growth of properties throughout a 10- to 20-year period. However, the growth rate in property and shares come closer as the investment reaches its 20-year mark—proving that time in the market is a significant contributing factor for the growth of properties. Moreover, property investment carries more appeal in terms of long-term returns based on initial investment amounts.

“Home buyers typically take out a home loan to purchase property, while it is less common for investors to take out a loan to invest in shares. Therefore, if you have a $100,000 deposit towards a $500,000 property purchase, the return will be a percentage of the $500,000,” according to real estate director Brad O’Mara. “Meanwhile, the return on $100,000 in share investments will simply be a percentage of $100,000—meaning there is a much greater return on property over time.”

Risk management

Both investment ventures obviously come with a certain level of risk, but which asset class has proven to be easier to manage?

Property investors often argue that the value of a tangible asset is more stable because it is dependent on the factors surrounding the market—information that could be gauged based on existing economic and historical data. On the other hand, shares are only as lucrative as the company is successful, so if the company goes into liquidation, an investor will most likely lose everything. The value of shares also fluctuates regularly across different sectors, making it harder to predict.

While property investors borrow a huge amount to purchase their asset, paying the mortgage for an investment property is also usually handled well by rent payments. “If for example, you buy a $500,000 property with 20 per cent deposit, once the mortgage is paid off, you have a $500,000 asset from an investment of only $100,000—this is before capital growth,” Smart Property Investment’s Georgina Brown said.

Simply buying in the right area will almost always ensure the growth in value of a property as demand remains consistent—a strategy that does not really apply when investing in shares. Despite these good arguments for property, a budding investor must be careful with negatively geared properties and decisions based on tax policy, which could both derail one’s investment journey when failed to be done the right way.

At the end of the day, due diligence is important to determine which asset class fits your capabilities and limitations as an investor, and which of all your options would the best way to achieve your specific financial goals.

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  ["title"]=>
  string(72) "Mortgages in a tighter lending economy and why Brisbane is a good option"
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  string(72) "mortgages-in-a-tighter-lending-economy-and-why-brisbane-is-a-good-option"
  ["introtext"]=>
  string(255) "

Tune in to the latest episode of Property Showcase, the podcast with the inside track on the products and businesses that will help turbocharge your portfolio, maximise returns and make your overall investment experience seamless and stress-free!

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To hear more about these services, make sure to tune in to this episode of Property Showcase!

 Make sure you never miss an episode by subscribing to us now on iTunes!

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Son Pham is the accredited Head of Mortgages at Rethink Financing\/Rethink Investing. He has over 6 years\u2019 experience writing loans, over 12 years in the wealth management industry working for the likes of CBA, AMP and private practice and he is also a licenced financial planner (AFSL 326450). He has multiple investment properties that are cash flow positive which help pay his mortgage on his home and fund his lifestyle.<\/p>\r\n

Son is able to write all types of residential and commercial property loans.<\/p>\r\n

In this episode of Property Showcase, head of mortgages at Rethink investing Son Pham joins host Tim Neary to unpack how an investor should approach getting a mortgage in place with banks tightening down on serviceability.<\/p>\r\n

Hear from\u00a0Son\u00a0about:\u00a0<\/p>\r\n

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  • The pitfalls that he has seen people get into<\/li>\r\n
  • Interest only loans and if that is the way to go<\/li>\r\n
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    Whether it\u2019s building a successful property portfolio or investing in one of their Development Funds, Open Corp can help you through every stage of your investment journey. The team has 40 property specialists who collectively have been involved in over $4 billion worth of property transactions and the acquisition of more than 8000 homes and investment properties.<\/p>\r\n

    In this episode of Property Showcase, director of investment services for Open Corp Michael Beresford,\u00a0joins\u00a0editor of Real Estate, Tim Neary to share why he disagrees that the cooling market means that the best times are behind us.<\/p>\r\n

    In this episode, hear from\u00a0Michael\u00a0about:\u00a0<\/p>\r\n

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    • Why Brisbane is a good investment option right now<\/li>\r\n
    • How he wants to help clients take advantage of the current market<\/li>\r\n
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Mortgages in a tighter lending economy and why Brisbane is a good option
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Will Magee has had ambitions to enter into the Australian property market for quite some time, but it has been more than just finances holding him back.  Having been granted permanent residency just two weeks ago, Will is wasting no time and is now in the process of signing papers and finding his first investment property.

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In this episode of the Smart Property Investment Show, Will joins host Phil Tarrant to share why he is purchasing his first property in partnership with his brother, discuss the complications that can arise from such a strategy, and unpack the ongoing plan for building a joint property portfolio with his brother.

Will will also share how they approached saving for their first property, why he is taking out the mortgage in his name exclusively, and share their savings plan for the year ahead.

If you like this episode, show your support by rating us or leaving a review on iTunes (The Smart Property Investment Show) and by following Smart Property Investment on social media: FacebookTwitter and LinkedIn.

If you have any questions about what you heard today, any topics of interest you have in mind, or if you’d like to lend your voice to the show, email [email protected] for more insights!

RELATED AREAS OF INTEREST:

From property in Australia to a ski lodge in Japan
Mortgage Trusts, an alternative first step for property investors
Should a real estate title be in one person’s name only?

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A property investment plan years in the making
object(stdClass)#1203 (52) {
  ["id"]=>
  string(5) "18287"
  ["title"]=>
  string(75) "Regional Victoria showing up Melbourne in price performance, new data finds"
  ["alias"]=>
  string(74) "regional-victoria-showing-up-melbourne-in-price-performance-new-data-finds"
  ["introtext"]=>
  string(139) "

Median house prices in regional Victoria outperformed that of Melbourne in the June quarter, the latest REIV figures reveal. 

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Median house prices in the regions rose 4.0 per cent to $419,500 but in Melbourne they dipped by 0.6 of a percentage point to $840,000.

The result in Melbourne was due to a 0.8 of a percentage point fall in prices achieved at auction; this was despite a lift of 2.3 per cent in private sales.

Inner Melbourne suffered due to auction prices, where median prices fell by 4.9 per cent to $1,459,000 but it was middle Melbourne that was hardest hit, with a 5.4 per cent drop to $974,500.

Outer Melbourne had a good quarter with the median rising by 0.5 of a percentage point to $681,000.

Apartment prices in regional Victoria grew by 3.7 per cent to $304,500 while the metro media was up by 0.5 of a percentage point to $604,000.

REIV President Richard Simpson said that despite fewer sales, many sectors of the market were performing well.

“2017 was a bumper year and while the trendline has flattened, despite the fall in median house prices in the June quarter, median prices are still up this calendar year for both houses and units, in Melbourne and in the regions,” Mr Simpson said. 

In particular there was been strong growth in regional centres which is probably due to the first-home buyers’ concessions said Mr Simpsons.

“The first-home buyers’ concession has been a boon for regional areas. A new entrant to the property market buying a house at the regional median will pay no stamp duty, while a first home buyer of an apartment in Melbourne at the median price would pay stamp duty of nearly $25,000,” he said.

Mr Simpson said that more prospective buyers are looking towards regional Victoria which is also having an effect in Melbourne.

“Melbourne’s outer perimeter continues to grow. Small increases in the June quarter mean that the median prices for both houses and units have risen over 10.5 per cent from a year ago.

Mr Simpson said moving forward that vendors need more realistic expectations as the highs of 2017 are now over.

“Negative chatter about the future of the sector coupled with stronger lending controls by financial institutions has created some uncertainty and vendors need to be realistic with their price expectations,” Mr Simpson said.

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Regional Victoria showing up Melbourne in price performance, new data finds

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