Shares versus Property

"Australian Shares" versus "Listed Property" - an historical perspective and comparison

This article is one of a series of SuperMail articles by Colin Grenfell, who is a superannuation consultant and actuary and Associate Director of SuperEasy.

Each article compares the long term performance of two investment sectors, such as Australian Shares, International Shares, Listed Property or Fixed Interest, or financial indicators, such as the Consumer Price Index (CPI), Average Weekly Ordinary Time Earnings (AWOTE), 90 day Bank Bill Rates or 10 year Bond Rates.

This article compares the investment performance of diversified portfolios of Listed Property securities and of Australian Shares over the 27 years from 31 March 1977 (when suitable data first became available for Listed Property) to 31 March 2004. The Listed Property performance is based on returns from the ASX Property Trusts accumulation index and since 30 June 2002 uses the GICS (Global Industry Classification Standard) based index. Both portfolios are revalued monthly based on market values.

First, let's examine what happened if $10,000 was invested in each of these two sectors at the start of the period, assuming that all investment income (ie dividends) was reinvested back in each sector, as occurs with some managed investments:

The next table summarises the results:

$10,000 invested for 27 years

from 31/03/1977 to 31/03/2004:

Accumulated to:

Shares

$422,800

Listed Property

$401,700

Difference

$21,100

Average annual

compound return

1st 9 yrs

2nd 9 yrs

3rd 9 yrs

27 yrs

23.00%

12.39%

9.66%

14.88%

19.62%

12.12%

12.38%

14.66%

3.38%

0.27%

-2.72%

0.22%

Standard deviation*

27 yrs

20.0%

10.2%

9.8%

Source: Austmod historical returns net of tax

* The "standard deviation" indicates, for normally distributed investment returns, that approximately:

(a) one-sixth of annual returns are less than (average - standard deviation)

(b) two-thirds are in the range (average - standard deviation) to (average + standard deviation)
(c) one-sixth of annual returns are more than (average + standard deviation).

The year by year investment performance for each calendar year ending 31 March has been:

The annual returns for the Australian Shares portfolio were negative 4 times in the 27 years, however
the annual returns for the Listed Property portfolio were only negative once in the 27 years.

In 14 of the 27 years the return for the Australian Shares portfolio exceeded that for Listed Property.

To give an indication of the trends in investment returns (and inflation) over the period, the next chart plots the ten year moving average compound returns per annum. The ten year moving average compound rate of inflation per annum, based on changes in the CPI, is also shown.

Disclaimer: This article is intended to be a factual analysis of past investment returns. It is not intended, nor is it to be regarded, as investment/securities advice. It does not take into account whether any particular investment or type of investment is suitable for your individual circumstances. It is strongly recommended that you seek professional advice before making any investment choice or decision.