Property lands knockout blow to shares

Property lands knockout blow to shares

By Ray Fadel

19-04-2018
It’s little wonder Australians love buying and investing in bricks and mortar. In fact, around 70% of Australians own real estate, while just 31% of us hold shares.

The plunge in share values in the first weeks of February generated much concern for investors, and rightly so given the speedy falls. From their highs to their recent lows, the US and Japanese share markets plummeted 10%, Eurozone shares fell 8%, Chinese shares dropped 9%, and Australian shares lost 6%, according to research from AMP Capital. And don’t get me started on the recent bitcoin and cryptocurrency madness.

Also, don’t overlook the fact these share market plunges are occurring in a matter of days, and have many investors, particularly those retirees, who endured the alarming impact of the Global Financial Crisis less than a decade ago.

Owner-occupiers underpin the stability of bricks and mortar

Of course, there are times when property values will run a steady line, such as the case with Sydney values now. CoreLogic tells us that values in NSW capital fell by 0.9% last month. However, I must stress that this is a monthly fall and is nowhere near the declines experienced by the share markets in early February.

Unlike shares, investors don’t dominate the property market, and this circumstance helps minimise the volatility of bricks and mortar. Rather owner-occupiers, who are live in their homes for the long-haul, dwarf investor numbers. Moreover, the dominance of owner-occupiers effectively provides property investors with a safety net of stability that isn’t available to them if they have their money in shares – or worse Bitcoin.

Safe as houses

Real estate is an essential human necessity, but companies and their shares often come and go. In comparison, everyone will continue to need a roof over their heads.

We’ve all either owned, rented or lived in a property. This level of familiarity is central to the safety of bricks and mortar. On the flipside, shares represent uncharted and volatile waters for many.

Moreover, you can accelerate the value of a property by buying well in a suitable location and adding some extensions or undertaking a savvy renovation. With shares, returns are entirely out of your hands as an individual investor. Instead, share returns depend on how well the company is run by the executives and directors, the market-place where it operates, and overall market confidence, which is impossible to gauge for individual investors.