The great debate: Shares or property?
For as long as both have been in existence, Australians have argued for and against shares or property holding the leading spot for the best investment. But the reality is, they’re both good – but for different things. So what really leads to financial freedom? Let us try and convince you…
To have financial freedom, you need stability. The share market is highly volatile. The S&P/ASX 200 Index shows market volatility and in one 52-week period between 2014 and 2015, it had a low of 9.5 and a high of 30.5. That’s a huge variation for just one year. Property on the other hand, tends to be highly stable. Median sale prices scarcely reach double-digit change in a year and this leads on to the second point…
Because the share market is so volatile, you can never be too sure about anything. There is so much change for so many reasons and this means it’s a much higher risk investment. Property on the other hand, is relatively low risk. A fantastic quote by Mark Twain makes this very clear, “Buy Land. They’re not making it anymore.” It’s true and is exactly why it’s always going to be a great investment option. Population growth is rife right across the country and it’s expected there will be 30.9 million people living in Australia by 2056. This huge population will need housing. The demand will increase, supply will decrease and land will just continue rising in value.
When you buy property – as an investment, not owner-occupier, a number of tax-man benefits come with it. Firstly, negative gearing makes life pretty good! The tax office allows you to write off investment expenses against tax, lowering your bill and offsetting any shortfall between rental income and holding costs. You can also benefit from depreciation, which is the decline in value of the actual property, fixtures and fittings over several years. It ends up being a saving of thousands each year that you otherwise wouldn’t find.
It’s tried and tested
If you look at the BRW Rich 200 list, property is a consistent source of wealth for those who are at the peak of financial freedom. If you think about someone you know who created wealth in other ways, they have probably invested their surplus funds into property too. Historically, it’s one of the safest, lowest-risk high-return investments you can make.
The one thing you have to remember though…
A smart buy of shares could turn into a huge cash surplus quickly if you buy and sell at just the right time, but it’s a risky game. If you want to build solid, reliable wealth that you know will grow over time into something bigger and better? Then property will always be your safe choice.
Tell us, have you invested in property, shares or both?