Midyear state of affairs: A closer look at the country’s markets
With market conditions changing at varying degrees across the country, seven experts from Property Investment Profession...
A report by a leading property analyst has shown that houses generally perform better than shares as long-term investments.
John Edwards, founder of research house Residex, conducted an analysis on the performance of houses in Sydney versus the ASX top 200 index over a period of 36 years.
While the data shows shares provide better returns when held for less than 24 quarters, or six years, houses won out over subsequent decades.
"Once we get past making an investment for about 24 periods at any point in time over the last 36 years, the most likely outcome is that a housing investment in Sydney would have outperformed the share market," Mr Edwards said.
According to Mr Edwards, he selected Sydney because it has been the weakest market over the last 10 years, despite its strong results recently.
In his view, property matures over a long period of time and analysis must take this into account.
"I have read many reports that indicate the share market is the better performer," he said.
"Reports achieve this notion by considering particular timeframes which happen to favour the share market."
He also warned investors that shares tend to be a riskier proposition than real estate.
“Shares are assets which are best traded. If traded well, the returns may be very high. However, this trading should be left to the professional as the risk can be very high,” he said.
On the other hand, he believes holding houses for less than six years is often a poor investment choice.
“A housing investment should probably never be made for a period of less than six years,” he said.
“Short-term investments in shares are far better than short-term investments in houses. The reason is simple – state governments have their hand out and take unfairly from purchases of houses (Conveyancing Duty),” he said.