Shares versus property: the winner has not been the Aussie investor

Share investors and property owners have been left licking their wounds after a painful 2018. Better times are tipped for 2019, but don’t bet your house on it.

Picking this year’s winner between shares and property — Australians’ two favourite investments — has been more a game of avoiding the biggest loser.

Both have lost money in 2018, as property booms shifted into reverse and share markets everywhere went backwards amid rising global uncertainty.

On broad measures, property was the better performer nationally despite sharp falls in the Sydney, Melbourne and Perth housing market.

As of yesterday, national property prices are 6.4 per cent lower, according to CoreLogic data, while the Australian sharemarket is down 8 per cent for the year.

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Investment specialists say the outlook for both is uncertain, but a repeat of the losses of 2018 looks unlikely and there’s a chance of good gains later in 2019.

PROPERTY

There is no single property market in Australia and each state has its own price cycle. CoreLogic’s latest home value data illustrates this, with Sydney home prices down 8.8 per cent as of Friday, Melbourne down 6.9 per cent and Perth down 4.7 per cent.

Brisbane prices are flat, Adelaide is up 1.3 per cent, and for the year to November Hobart was up 9.3 per cent and Canberra up 4 per cent, but Darwin down 0.8 per cent.

Suburbanite’s Anna Porter says it’s good that states’ housing markets don’t all move the same way. Picture: supplied.

CoreLogic head of research said home values were expected to drift lower in 2019, “led by further falls in Sydney and Melbourne”.

Other capital cities could lose some momentum but should remain positive, he said. “It looks likely the Top End market (Darwin) will continue what is likely to be a long and gradual recovery in 2019, while the Perth market could also move back into positive growth territory.”

Valuer and Suburbanite CEO Anna Porter forecast Hobart’s housing market to have a “year of reckoning” with much of its recent growth to be wiped out by volatility.

Ms Porter said Adelaide home prices would benefit from “some of the biggest and strongest job-creating projects in the country”, while Brisbane houses could expect modest growth.

She said falling Sydney prices should stabilise late in 2019 but growth was still a while away, while Melbourne should continue to soften. “Anyone who has invested in Melbourne metro in the past six months will likely feel a bit of a sting in 2019.”

“Every state has its own cycle that you can track with data and analysis,” Ms Porter said. “There’s a lot of disparity but that’s a good thing because you don’t want all the states to cluster because we would be talking about massive downturns.”

SHARES

Aussie shares were flying high in August before tumbling by 12 per cent in the last four months of the year amid global worries about Donald Trump, trade wars, Brexit, overvalued companies and rising interest rates.

Nerida Cole from Dixon Advisory says global sharemarket volatility will continue. Picture: Richard Dobson

Fidelity’s Australian head of equity investments, Paul Taylor, said much of the uncertainty had now played out and company profits should improve in 2019.

“Despite dire predictions, I believe 2019 will be a stronger year for the Australian equity market,” he said.

Mr Taylor said banks could have a much improved year after the pain of the royal commission, while the consumer staples and healthcare sectors were the best positioned.

CommSec chief economist Craig James said fear rather than fundamentals had driven share markets in recent months. “In Australia, with companies in good shape and profits at record highs, 2019 looks a better year for sharemarket investors,” he said.

Mr James expects Aussie shares to rebound 10-12 per cent in 2019, with total returns rising to 14-17 per cent including dividends. “While above-normal growth is expected, this must be seen in the context of the below-normal performance in the latter part of 2018. The forecasts naturally assume that the US and China make progress on reconciling their trade disagreements,” he said.

Dixon Advisory managing director Nerida Cole said volatility was likely to continue for shares globally in 2019 and this could deliver bargains. “US fundamentals from an economic point of view are strong, and in Asia there could be some really good buying opportunities,” she said.

“But it’s not a market to be buying and hoping to make a short-term profit.”

The verdict for 2019? Shares prices are tipped to beat property prices overall, but you shouldn’t bet your house on it.

@keanemoney

Originally published as Shares versus property: the winner has not been the Aussie investor