Property - the best performing investment 

18 June 2004 

A new report compiled by Towers Perrin for the Australian Stock Exchange’s (ASX) Annual Investment Performance Report for 2004 showed property provided the best investment return over the last 10 and 20 years.

The report compared before and after tax returns on different investment classes and included stocks, residential property, listed property trusts, fixed interest and cash over a rolling 10 year period. 

The results showed over the decade between 1994 and 2003, residential property returned an after tax profit of between 9.3% and 11.4% depending on the investor’s marginal tax rate. 

During the same period, shares returned between 6.1% and 8.1% depending on the investor’s marginal tax rate, while fixed interest returned 5.1% and cash returned 3.8%.

Inflation over the same 10 year period was 2.6%.

Over the 20 year period between 1984 and 2003 returns from residential property ranged between 15.1% and 11.5% depending on the investor’s tax rate. 

During the same period, returns on Australian shares ranged between 11.7 – 10.5%, listed property returned 11.8 - 8.5%, fixed interest returns ranged between 10.7 – 5.4% and cash returned between 8.0 – 3.7%, depending on the marginal tax rates. 

Over the same twenty year period inflation averaged 4.0%.

The residential property measure was calculated as a population weighted average return across major capital cities. Increases in value are based on median house prices obtained from the Real Estate Institute of Australia. Data from the Australian Bureau of Statistics is also used to make adjustment for capital improvements. Net rental income allows for vacancy rates, maintenance expenses, management fees, government charges, insurance and acquisition and disposal costs. 

The start of the twenty year period was prior to the introduction of capital gain’s tax and therefore capital gains have not been calculated in the original investment. However, capital gain’s tax has been calculated on any reinvestment of income subsequent to the introduction of capital gains tax.