Property and shares: What investors can expect in 2021-22

House prices up 13.5 per cent. Aussies shares up 27 per cent. Global shares up 37 per cent.

We’ve just finished a fabulous financial year, and it came during a pandemic that has crushed economies and officially claimed four million lives but most likely millions more.

Nobody expects a repeat of the Covid financial crash we saw in March 2020 that freaked out investors everywhere, but experts say shareholders and landlords should not expect another stellar performance in 2021-22.

Here’s what’s likely to happen this financial year, although the past couple of years have taught us to expect the unexpected.

PROPERTY

The latest CoreLogic data shows Australia’s 13.5 per cent jump in home values in 2020-21 would have been stronger if not for stragglers Melbourne (up 7.7 per cent) and Perth (up 9.8 per cent).

Darwin led the property price rises with 21 per cent growth, while Adelaide was up 13.9 per cent, Brisbane 13.2 per cent, Sydney 15 per cent and Hobart 19.6 per cent. Regional prices surged 17.7 per cent.

Property investors can add an extra 3-4 per cent to those returns thanks to rental income from tenants, but real estate specialists say softer price growth is likely this financial year.

The pace of price rises has slowed, homes are a lot less affordable than they were a year ago, and a record number of homes are approved to be built in 2021-22. Add the prospect of higher mortgage interest costs, which are already climbing in the fixed rate space, and it looks likely that growth in home values will be solid but not spectacular.

Australian companies’ share prices climbed an average 27 per cent in 2020-21.

AUSSIE STOCKS

Australia’s sharemarket hit a record high last month before drifting slightly lower in the past fortnight.

Local stocks lagged global shares growth in 2020-21, but don’t expect us to be playing catch-up this year. Economists and analysts expect our market to rise – but not by too much.

The market’s current dividend yield of about 2.8 per cent is well below its 40-year average of 3.7 per cent, and hasn’t been this low since before the 1987 stockmarket crash.

That doesn’t mean our market will crash – because Covid crunched dividend payments and damaged yields – but it does suggest that shares may now be fully priced or overpriced.

GLOBAL STOCKS

US shares reached fresh record highs last week but global investment specialists say the global market has a “fragile exuberance” that could easily be shattered by more shocks.

State Street Global Advisors says US market leadership is likely to give way to “a more international scope” in 2021-22. Rising interest rates and increased inflation are two of the biggest threats to growth, it says.

Others think the bull market will continue until December.

CRYPTOCURRENCY

Nobody really has any idea what the crypto world has in store for investors after bitcoin and other digital currencies boomed for most of 2020-21 before halving in value in the last couple of months.

Some fear a crypto winter is here, part of bitcoin’s four-year cycle that sees it slump at least 80 per cent before rebounding and booming again. Bitcoin believers say another bounce is coming.

The future direction of crypto? Toss a coin.