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The age-old comparison of property versus shares has been discussed by investors for decades.
Anyone involved in either industry has their preference as to which asset class is perceived to be more or less risky, and subsequently which has performed better over time.
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These investment categories have always been strongly correlated and, as such, move closely together. Both classes benefit from growth in the other; money made in the share market will be invested back into property, and vice versa. However, as a result of the credit crunch and onslaught of the GFC, these two asset classes have become significantly divergent in their trends bringing about the largest long-term separation in trend lines throughout the past 30 years. This blog touches on what motivates people to pick a particular asset class, and which investment option is the most stable choice.
While property and shares have always been strong competitors, Brisbane’s strengthening property market is seeing more and more investors taking the plunge and investing in real estate.
The latest quarterly report from Place Advisory shows that an increasing number of investors are choosing to enter the inner-Brisbane property market. The combination of low interest rates and affordability resulted in record-breaking sales for the inner-city apartment market during the June 2014 quarter. This three-month period saw 1,083 unconditional sales across 57 inner-Brisbane projects – the highest level of unconditional sales ever recorded in a single quarter for the inner-Brisbane market.
The June quarter’s recipe for success comes from a mixture of ingredients; in particular the delivery of affordable product, a record-low interest rate environment, a diverse buyer profile (which includes interstate and international investors), and an improvement in local sentiment. Brisbane’s relative affordability when compared to other east coast capitals such as Sydney and Melbourne is another reason for increased investor interest, with the River City suddenly becoming a culturally on-par, but significantly cheaper option.
In the long term, shares have offered a greater level of growth. Coupled with the ‘get rich quick’ appeal, this investment option can be fairly enticing. However, what goes up must come down and shares are notoriously prone to economic volatility. On the other hand, property offers investors the opportunity to add some stability to their portfolio. The increasing number of investors diversifying their assets is proof that confidence in property is rising, which is evident when looking at the surging levels of development and growth currently occurring in Brisbane.
In terms of stability, property is the clear winner when it comes to an investment vehicle. Brisbane is only just beginning to enter the next property upswing and with the strengthening market, relatively low prices and all-time low interest rates, the time to invest in property has never been better. However, regardless of what asset class they align themselves with, all investors seeking capital growth should be aware that timing is critical and neither shares nor property are completely foolproof. At the end of the day, research is imperative and you must fully understand your investment, goals and objectives in order to recognise the returns applicable.
