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Shares set to outperform property October 13, 2011, 3:02pm
While owning your own house in Australia has been the best way to generate wealth over the past two decades, new research shows that shares are the asset for the future.
While property has enjoyed unbeatable returns over the past 20 years, research from ANZ predicts that shares will be the winner over the next decade.
The report, Asset returns: Past, Present and Future, shows that since 1987, owner-occupied housing has delivered annual returns of around 12 per cent. The capital gains tax exemptions that apply to owner-occupied housing were identified as a key component in the asset class’s high returns. Even when other taxes and costs were factored in, it is clear that owning your own home in Australia during the 90’s and 00’s was a great way to increase wealth. (More From Yahoo!7 Finance: Easy Ways To Diversify Your Portfolio)
The next best performer over the 24 year period was investor housing, which provided slightly better returns than shares. Next in line were government bonds, term deposits and commercial property.
While property has enjoyed a long period of superiority, the ANZ report indicates that the next ten years could be the decade of the share market. The bank analysed projected rates of return for the major asset classes and results showed that shares were likely to be the strongest performer. (More From Yahoo!7 Finance: Why Stocks Aren't That Scary)
Yahoo!7 Finance expert Peter Switzer recently commented that while people were understandably worried about share market volatility, sticking with quality stocks over the long term was still a solid investment strategy.
"With shares - provided they are quality ones that pay good dividends - you hover between what you get in cash or term deposits and the chance for the periods where the returns are 10-12%," Switzer said.
"These are crazy times for stocks and challenging times for investors and it has meant that many scaredy cats have run to cash, which can be understandable if your super is running out" Switzer added, "But if you're in stocks and your super is reasonable, there are plenty of good arguments to stick solid with stocks". (For related reading, see Don't Run Away From Stocks)
The report predicted that commercial property could also provide strong returns in the coming decade, possibly surpassing owner-occupied housing in profitability.
Commercial property includes retail space and offices through to car parks and industrial properties like warehouses and factories. When risk was factored into the forecasts, shares and commercial property looked to delivery similar returns. (More From Yahoo!7 Finance: Peter Switzer: Why I'm Solid With Stocks)
