Shares beat out property price rises

AUSTRALIA’S share market is improving at twice the pace of house prices and its winning performance is tipped to continue in the year ahead.

Data from the Australian Securities Exchange and CoreLogic show that while share prices rose almost 11 per cent in the year to December, home prices nationally have climbed an average 5.2 per cent — halving from their annual growth rate of 10.4 per cent in May.

A sinking Sydney housing market — which has been hit by stretched affordability, rising supply and crackdowns on risky mortgages and investment loans — is the main reason for property’s poorer performance.

Investment returns from both shares and property look better when their dividend and rental incomes are added, rising 15 per cent and 9 per cent respectively in the past year — way above returns from cash savings that are near 2 per cent.

CoreLogic’s head of research for Australia, Cameron Kusher, said Sydney’s 0.7 per cent drop in home values last month had lowered its annual growth to 5 per cent and was likely to fall further, while Melbourne’s current 10 per cent growth was expected to slow down or potentially fall.

“Slower growth or falls in the two largest housing markets in the country is likely to slow the headline (national) rate of growth further over the next 12 months,” he said.

“Even if every other capital city saw an acceleration in value growth — not something that we are expecting — it would likely not be enough to offset the slowdown in Sydney and Melbourne.”

Hobart’s property market has been leading the nation for growth during the second half of the year.

In contrast, share markets around the world are climbing and most forecasters say 2018 is looking positive, albeit with increased risks in some countries, such as the record-breaking US.

Catapult Wealth director Tony Catt said the world was now showing synchronised growth after the painful postglobal financial crisis years.

“We’ve finally cracked it,” he said.

“Alternatives such as residential and commercial property don’t look that enticing and I think for the share market the weight of money will be there.”

Mr Catt said the share market’s growth this year had been driven by resources, mining services and healthcare companies.

AMP Capital has predicted total investment returns from Australian shares to be about 8 per cent next year, but estimated residential property to be just 1.5 per cent.