Is there a choice for investors after housing returns slump over the 2018-19 financial year?

Is there a choice for investors after housing returns slump over the 2018-19 financial year?
Is there a choice for investors after housing returns slump over the 2018-19 financial year?

The financial year just done was not a pretty one for property investors across Australia.

CoreLogic calculated total returns from residential property saw a fall of 3.3 percent in the 2018-19 financial year. Total investment returns is the value growth and gross rental returns.

Last financial year was the only financial year since at least 2005/06 that total residential property returns were negative.

The average return over the 13 year period was nine percent.

The best year was 2009-10 when the national return was almost 17 percent.

"Housing returns last year were worse than those recorded during the financial crisis and during the 2010-12 housing downturn," Cameron Kusher at CoreLogic noted, adding it was the combination of falling values and historically low rental yields that had driven total returns into negative territory.

Looking at the Sydney figures, it was the second consecutive financial year in which returns have fallen however, it was a larger 6.7 percent fall compared to the previous 2.7 percent fall in 2017-18.

They were the only years to record a fall since 2005-06, with the average Sydney return being 10 percent.

The best year was 2014-15 when the total return was 21 percent.

In regional NSW total returns were 0.5 percent down in the past financial year, the first time total returns recorded a decline in the past 14 years. NSW regional property saw an average eight percent over the extended period.

The combined capitals were down 4.5 percent, while all the rest was up 1.6 percent.

Kusher maintains that with the early signs that the rate of decline in housing values has now slowed and rental yields rising across most regions of the country, the prospect for total returns over the coming year looks a little stronger for some.

Sydney may see an improvement in returns although they may weaken in most of the other capital cities and regions elsewhere.

While the total returns from residential housing are not looking so attractive, residential property is not alone.

Try living off cash!

Outside of compulsory superannuation, property and shares are the two most common ways of building wealth in Australia.

Investors looking for the best place to invest always face a challenging decision, this year as much as ever. 

There are always the push and pull factors of residential property and shares so choosing the right strategy often comes down to investors’ own timeframes and preferences.

There needs to be an understanding the advantages and risks associated with both.

Be aware the ever present debate comparing the returns on shares with the returns on property tends to be seen through the prism of the commentator's bias.

The Australian share market recently hit an all-time high with the All Ords index surpassing its record in November 2007.

Once dividends are allowed for, the Australian share market had actually surpassed its 2007 record high back in 2013.

The Reserve Bank of Australia’s head of domestic markets Marion Kohler noted recently that the Australian sharemarket, once dividends are included, showed an average annual 8.5 per cent return since 1993.

AMP Capital chief economist Shane Oliver noted earlier this month that going through past bull market highs after a long period below can attract investors into the stock market so it could push on for a bit. 

My views that we shall see an exit of some sharemarket gains into the property market. Perhaps not the influx seen in past cycles, but enough to provide a fillip to the depth of property buying interest.



Jonathan Chancellor

Jonathan Chancellor

Jonathan Chancellor is one of Australia's most respected property journalists, having been at the top of the game since the early 1980s. Jonathan co-founded the property industry website Property Observer and has written for national and international publications.

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