Despite the recent fall in home prices, the property market outperformed shares in the past 10- and 20-year periods.
The result is contained in the Australian Stock Exchange's annual Investment Performance report, issued yesterday, compiled independently by Towers Perrin.
The report measures the pre- and post-tax returns on shares, listed property, residential property, fixed interest and cash over rolling 10-year periods.
It found that between 1994 and 2003, residential property investments generated an after-tax return of between 11.4 per cent and 9.3 per cent, depending on investors' marginal tax rates.
Shares returned 8.1 per cent for those on the lowest tax rate and 6.1 per cent for those on the highest rate. Still, stocks remain attractive for those on fixed incomes, such as retirees. Last year shares had an average return of 4.1 per cent, with an average franking credit of 75 per cent.
The ASX's manager of retail trading, Lyn Armstrong, said it was the first time in the report's 12-year history that property had done better than the sharemarket. Advertisement Advertisement
"We knew this would probably be the year ... There were huge returns from property between 1996 to 2003," she said.
"What people should take out of the report is not that one is necessarily better than the other, but all of these [asset] classes have had very good returns over the last 10 years, and markets move in cycles. Ideally people should have a diversified portfolio.
"Today we have seen the All Ordinaries hit a record high, so perhaps we are starting to see the turn where property is at its peak."
The report found that at the lower marginal tax rate of 18.5 per cent, the after-tax return from property was 11.4 per cent, Australian shares 8.1 per cent, listed property 8.9 per cent, fixed interest 5.1 per cent and cash 3.8 per cent - all bettered average 2.6 per cent inflation in the period.
