Property Vs Shares

By Jason Fittler

The age old question should I invest in property or shares? 

If we just go and look at historical returns to make this decision you will get it wrong.

The question you need to ask yourself is, “What investment is right for me, right now to meet my investment goals in the required time?”

You need to look at your financial situation. The structure of how you are going to invest. Then work through the variables to find the investment, which suits you.

Let's break it down.

Gross Return

– Over 10 years the gross return for shares was 9.2%pa compared for property of 6.1%pa.

– Over 20 years the gross return for shares was 8.7%pa compared for property of 9.9%pa.

Tax rate

– Over 10 years on a low marginal tax rate the gross return on shares was 9.4% on Property 5.4%.

– Over 10 years on a high marginal tax rate the gross return on shares was 7.1% on Property 4.2%.

– Over 20 years on a low marginal tax rate the gross return on shares was 8.9% on Property 9%.

– Over 20 years on a high marginal tax rate the gross return on shares was 6.9% on Property 7.5%.

Inside of Superannuation. The return on shares was 9.6% for 10 years and 9.1% 20 years. For property it was 5.4% for 10 years and 9.1% for 20 years.

Borrowing 50% to invest

– Over 10 years on a low marginal tax rate the gross return on shares was 11.1% on Property 4.4%.

– Over 10 years on a high marginal tax rate the gross return on shares was 9% on Property 4.3%.

– Over 20 years on a low marginal tax rate the gross return on shares was 9.2% on Property 7.3%.

– Over 20 years on a high marginal tax rate the gross return on shares was 10.1% on Property 8.7%.

Confused?

What this shows is that your return will depend on the time you have to achieve your goal. The tax rate you are on. The structure you intend to invest through, and if you plan to use gearing.

Remember that the investment choice is the last decision not the first.

Work out your goal, then the level of risk you are happy to take. Look at what tax rate you are on and then what structure is best for you. 

As you can see from the above figures the choice of investment makes little difference.

But, your time frame, tax rate, ability to borrow and investment structure makes all the difference.

If you like more information please call me on (07) 4771 4577.