Property versus Shares - check out this great excel tool!

Is your house a palace?  During my money saving tips (without the BS) segment, I talked about how frustrated I get when people brag about how much they have made from buying and selling their home.

This is a typical conversation “I bought the house for $150K and sold for $300K, therefore, my profit was $150K”.   What a silly way to analyse the way an investment is performing.   Talk about sticking your head in the sand.

What about interest, maintenance, buying and selling costs?   I could come up with a big long list of expenses associated with property, but you are all clever enough to know what they are.  Don’t get me started on stamp duty.   Also, be careful when reading quoted returns published in newspapers.

For example, the latest figures might say that properties in your suburb have increased by 12% in the past year.   Sure it makes you feel good, but you fallen into the trap.   This is the average increase.  Your particular home might not represent the average.

How many sales occurred in your area?  If the number was small then the figures are not really a true indication of the price change.   The biggest mistake people make is to forget that lots of home owners and investors have renovated their properties.

A new kitchen and bathroom can easily cost $30K+.   Has the price in your area increased because of land values, or a greater desirability of people to live in these lovely newly refurbished houses.    Quoted figures do not take this into consideration.   Just food for thought.

Anyway, I also mentioned a great little tool that MLC have put together.   It’s an excel based tool that compares the established house price index for all the leading capital cities of Australia against a range of market indices, such as the All Ordinaries Accumulation Index (top 500 Aussie shares with income reinvested).

The data for the house prices were supplied by the Australian Bureau of Statistics (I therefore trust it).  A word of warning though.   The tool only supplies info to December 2007.  As you know the sharemarket has fallen a bit since that time, approximately 25%.  Surprisingly, the figures still look quite good for share investors.   Would love to know what you think.    Cheers and thanks for visiting the site.  Josie Kay

property versus shares - which is better? MLC Dec 07

ps.  this is a free service.  I rely heavily on word of mouth, so would be really chuffed if you told your family and mates about this website - free money saving techniques, advice & tips from a certified financial planner - no strings attached.

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AND OF COURSE YOU MUST READ THIS: Don’t forget that the above information is general in nature and not specific to your goals and objectives. It is recommended that you seek personal financial advice specific to your needs.