Property Market
Buying a property is generally viewed as a long-term safe wealth creator investment. Recent ATO data shows that more than two million Australians have invested in residential property.
The total value of Australia’s residential property market recently surged to $9.9 trillion after growing at the fastest annual pace on record in 2021. Residential property prices rose 23.7% through 2021, meaning that the collective value of the wealth of property owners increased by $2 trillion in just one year alone!
The Australian Bureau of Statistics data (May 2022) revealed that investors accounted for more than 33% of all loans nationally.
There are three main wealth creation benefits of buying a property
Capital compound growth
For example, if you bought your property for $3,000,000 and it increased in value by 6% every year, after one year, it would be worth $3,180,000, for a growth of $180,000.
The more time passes, the higher the compound growth. After 20 years at 6% increase every year, that same property would be worth $9,621,500
That’s why it would benefit you to take a long-term view if you’re after capital growth.
2. Income.
3. Tax deductions: Investment property can benefit from tax deductions related to expenses and property value depreciation.
Disadvantages of property investments
Owning property entails expenses and risks, such as;
1.Liquidity.
2. Upfront stamp duty.
3. Maintenance.
4.Interest rates rises.
6. Tenancy and vacancy issues.
Share Market
Australia has one of the highest levels of share ownership in the world. In fact, thanks to compulsory superannuation, virtually all Australian adults who’ve worked after 1992 own – or have owned – shares.
Even outside of super, more than half of all Australians are directly invested in shares, according to the ASX.
The long-term view: shares v property
In the past 20 years or so, Australia’s share market has experienced some sharp falls and steep rises – but the overall trend has been upwards. In the early part of the 2000s, the ASX200 – which measures the value of Australia’s largest 200 listed companies – generally performed strongly. In November 2007, it reached a market peak of 6851.5.
Then the GFC hit, and prices fell rapidly. By March 2009, the ASX200 had lost 54.5% of its value, falling to 3,120.8. It wasn’t until a decade later – or July 2019 – that it once again reached its pre-GFC high.
Over that same period, the property market also had its ups and downs. The national median price fell 8.5% during an 11-month period at the height of the GFC before recovering again to reach its pre-GFC high by the end of 2009.
From there, the national property market performed strongly. Sydney performed even better still, growing rapidly in 2010 – when values rose 12.7% – and again from 2013 to 2017, when the prolonged boom delivered growth of 65.7%.