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Buying property and shares

Q. I have heard various commentators say that shares and property rise by around 10 to 12% over a 10-year period. What do you think this of this generalisation? I want to do my calculations before I buy a property or some shares on borrowed funds. 

A. Great question and it’s one really worth asking. I have mouthed those words, but I have always added a couple more. I always say look at good quality shares and property. You see, I reckon the overall stock market goes up by 10 to 12% in Australia, but that market is driven by our top 20 big companies. I suggest those top 20 blue chip companies will make those returns, as would properties in great suburbs such as Paddington in Sydney and its equivalents in our capital cities. However, you need to buy the typical kind of house or unit in these areas to pick up the typical return. I know my colleague on Sky News Business Channel, Margaret Lomas, who is a property expert and author, says her real 10-year cycle return is less than 10% but she buys investment properties all around the country and some were bought when she was not as property smart as she is now. In addition, some are positively geared and so they’re not costing her anything, but their capital gain is slower. You can research suburb by suburb and town by town property returns, and these can be a fair guide. 

 

Important information:This content has been prepared without taking account of the objectives, financial situation or needs of any particular individual. It does not constitute formal advice. For this reason, any individual should, before acting, consider the appropriateness of the information, having regard to the individual’s objectives, financial situation and needs and, if necessary, seek appropriate professional advice.

 

 

Published on: Thursday, November 12, 2009

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