Transparency and liquidity the key

Published in the Herald Sun, May 2012 by Karina Barrymore

Forget annual returns - transparency and liquidity have been highlighted as the two biggest issues in the ongoing debate on whether investment property or shares are better.

Profit and annual returns might see-saw between the two asset classes on a regular basis but the ability to see what's happening during transactions and to buy and sell quickly are more important, according to Dale Gillham.

The analyst at fund manager Wealth Within says when it comes to these two investment issues, shares are streets ahead of property.

"Putting returns aside, important issues for investors are liquidity and transparency," Mr Gillham says.

"There is no competition when it comes to liquidity and transparency between shares and property as the share market wins hands down on both.

"When it comes to the property market I'd suggest that in some way the lack of transparency with reporting asset prices misleads investors and ultimately costs them money."

Every transaction and price on the share market is recorded and reported within a millisecond and is available for anyone who chooses to see, he says.

"Price manipulation (of shares) is quite hard and, if it actually does occur, it would normally balance out quickly because of the liquidity and transparency of the market.

"However, with property, finding out details of actual transactions is often a huge challenge, if not impossible to get, and it is also not timely information. 

Unless you show up at every auction or ask each agent personally, how do you know what each house sold for?

"Understanding what price trends are doing in both shares and property can save you thousands and, surely, in this technology age, the sale of each house could be reported in a very timely manner and made available to all."

According to a 2011 report published by the ASX and fund manager Russell Investments, residential property was the best performer after costs measured over the past 10 and 25 years in Australia.

Property returned 10.1 per cent a year for the past 10 years and 11.6 per cent during the past 25 years.

In contrast, Australian shares returned 8.4 per cent and 10.8 per cent over the same periods. 

Shares, however, performed best over a 20-year period, returning 11 per cent per annum while residential property returned 10.2 per cent.

Back to Articles