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  • 23 Dec 2015

SHARES OR PROPERTY - WHAT THE EXPERTS SAY

As we congregate at Christmas parties and family gatherings over the festive season, there's one topic of conversation that's sure to come up - shares or property! It's an age-old topic on which everyone has their own view, depending on their own experiences. Some investors swear by shares; others say real estate is the only way to go. So who will be right in 2016?

In a way there is no right or wrong answer - as people will continue to invest in whatever they personally feel comfortable with. Others follow the popular belief that if shares are up, property is down, and vice versa.

But if we have to pick one answer, it would be . . . both! The savvy investor will always have a mix of shares and property - so that whatever is happening in the market, one of them is likely to be making money!

 

Mix of investments

If you have the right mix of investments in your portfolio, you should be able to make a positive return in almost all markets.

According to a report produced by Russell Investments and the Australian Stock Exchange (ASX), it has been a very tight race between property and shares over the last 20 years.

Property has returned a slightly higher gross return, or before tax return, at 9.8% p.a., however when factoring in for taxation, Australian shares have been the best performer.

However, there are advantages to investing in bricks and mortar. For example, you can borrow money to buy property - you can't borrow to buy shares. Then, having bought the property, you can borrow more!

 

Increase the value

You can also improve your property, thus increasing its value. And, you directly administer this asset and have control over it - ie rent the property, collect the rent.

Okay, so far then our property versus shares debate is pretty level. However, because there is always a however, here's an interesting fact.

About two million Australian households now rent their home, a figure that has almost doubled in the past 30 years.

Many people rent because they simply can't afford to buy, or can't get a loan. But, it seems, more and more people are choosing to rent, shunning the responsibility - and cost - of owning and maintaining their own property.

It seems that in the same way the saying, 'A job for life' is no longer true, the Australian dream of owning your own home is no longer as true for many of us.

 

Melbourne will be hot in 2016

So what this tells us is that investing in property might be a very wise move indeed as we head into 2016.

But where? The man who accurately predicted Sydney's housing boom in 2013, Louis Christopher of SQM Research, says Melbourne will be the top performer in 2016. Indeed, the Melbourne market is tipped to rise by up to 13%.

And interestingly, it won't be the prestige or bayside suburbs that top the list, but the budget and middle price range suburbs, such as Noble Park, Carnegie, Clayton, Brunswick East, Ashwood, Ringwood and Mount Waverley.

In Sydney, the standouts are likely to be Tempe - due to low prices, high rental demand and proximity to the city and university; Dulwich Hill - leafy streets and great transport; Kingsford - relative affordability so close to beaches, and Parramatta - due to the $2 billion Parramatta Square urban renewal project going ahead.

Suburbs to watch, according to the experts, are Thornleigh, Hornsby and Ambarvale.

 

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