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Shares vs property: which'll make you the most money?

Samantha Menzies
Senior editor – Finance
Source: Getty Images

Falling house prices are forcing millions of Australian investors to rethink the merits of property investment versus shares.

Lending to property investors last year fell to its lowest level since records began in the mid-1980s, Reserve Bank of Australia data shows.

And in response to forecast price falls of up to 25 per cent in Sydney and Melbourne, investor concern may be rising, Steven Korner, a financial adviser with Omniwealth, told Morningstar.

Korner points to a client who was weighing the option of buying a property versus buying a portfolio of shares and credit assets.

“They were saying ‘we went to buy a home, but property is decreasing in value, would we be better off looking at shares’?”

But Korner warns that swapping from property to shares isn’t a reliable way to mitigate losses.

Property and listed assets have different characteristics, but they are still linked to overall economic conditions, he said.

According to Pumped on Property’s Ben Everingham, both shares and property have a solid, long term track record in Australia, America and Europe.

He argues that property investment is still more suited to people who are looking for stability, lower risk, long term gains, consistent cash flow and lower maintenance.

However shares are more suited to Aussies who are looking for short term gains and who don’t have a huge amount of capital and investors who like to be active.

Here are Everingham’s pro’s and con’s for both property and shares investment;

  PROS CONS
PROPERTY INVESTMENT – With 70% of Australia’s owning property to live in, property is less volatile than shares.

– Australia’s population is expected to exceed 50 million people by 2066, according to the ABS, providing strong future demand for housing.

– Banks can lend up to 90% of the value of a property.

– You can physically see and touch property.

– A quality property can provide strong, long term capital gains, along with strong cash flow.

– A quality property can be an extremely low maintenance investment, with the right team in place.

– Well timed shares can provide high returns over a short period of time.

– Shares can provide strong dividends.

– You can pick your shares, based on your personal risk profile.

– You don’t need a huge amount of money to start investing in shares.

– You can sell shares quickly.

 

SHARES  Well timed shares can provide high returns over a short period of time.

– Shares can provide strong dividends.

– You can pick your shares, based on your personal risk profile.

– You don’t need a huge amount of money to start investing in shares.

– You can sell shares quickly.

 

– Share values can fall dramatically.

– A shares value can fall to $0.

– You are reliant on a company and its employees to continue making a dividend.

– Share values fluctuate daily and must be watched carefully.

– Understanding the share market takes time.

– It’s more difficult to get finance for shares

 

Source: Pumped on Property

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