Interestingly last week, we discovered that the Australian share market has outperformed all other international markets over the past 110 years. The returns averaged around 10-11% per annum, however, this varied quite a lot on a year-to-year basis. As you know the last 3 – 5 years have been quite difficult for the share markets, which shows the importance of taking a longer-term view.
Research shows property returns in the last ten years have seen 5-6% capital appreciation and 3-6% income, giving an overall figure of between 8-12% for property. The range varied depending upon suburb and configuration.
Interestingly enough the final destination of these two asset classes is quite similar, it’s the journey that is quite different. The main difference between the two is that this journey for shares is much more volatile than it is for property, which tends to be more consistent.
Over the long term we have seen the average return on shares to be around 11% and property around 12%. Generally, when shares go up or down, property will also go up or down in different cycles.
We refer to this as the Investment Clock.
The Investment Clock is a guide to when the various asset classes such as property and shares are expected to perform at different times of the economic cycles, and this is often demonstrated in a clock face. When shares are peaking at 12 noon, property can be languishing at 6pm.
We have not necessarily seen this in the last few years, in fact property and shares have been quite consistent, and I think that the GFC has changed a lot of the long term held beliefs on investments and cycles.
The good news for all our investors is that on the world stage Australian shares are seen to have been one of the strongest performing markets over a consistent long period of time, being the last 110 years. Australian property has also been seen as a stable asset class that has, from time to time in recent years, outperformed the stock market.
At Solid we are encouraged that our investors have largely selected property as their core asset class. Property has been less volatile and far more stable as well as a more straightforward investment suffering fewer highs and lows in the medium to longer term.
As I have always said, it doesn’t matter whether you invest in shares or property, the most important thing is that you are investing.
Lynne Wilton and Nick Stratus, Solid Group