Property offers a stable investment in volatile times

As the US debt crisis worsens international stock markets are taking a battering amid fears of another global recession. Wiping tens of billions of dollars off the Australian share market in only hours of news of a drop in the US credit rating, an acute nervousness has taken hold of local investors.

With share market activity volatile, investment security concerns have left many questioning their investment strategies, giving rise to the long-debated argument of bricks and mortar versus shares.

Both investment vehicles have created significant wealth for astute investors, but while there is no right or wrong answer to which is the best, there are clear fundamental differences that set them apart.

During a downturn bricks and mortar are typically a haven for investors who’ve pulled their money out of shares in reaction to negative financial market sentiment. Property offers a non-liquid, tangible asset and in most Australian capitals is underpinned by strong demand.

Whereas shares are subject to daily fluctuations, impacted by movements in the dollar, employment, interest rates, commodity prices, GDP and geopolitical factors to name just a few, property demonstrates a less volatile day-to-day proposition with a solid history of performance.

Figures show that Melbourne property values increased by 49.8% in the five years to June 2011, boasting an average annual growth of 9.95% per annum.

While an investment return of this kind may seem unremarkable to some risk-averse share market investors, it meant an annual growth of more than $55,000 in 2010 and a five-year growth of more than $230,000 for property owners whose property is on par with Melbourne’s current median house price growth trend.

Property is one of Australia’s best-performing investment vehicles. However, a sound investment portfolio typically comprises a mix of assets including shares, property and commodities and relies on expert advice from qualified professionals.