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Property precedes shares over long term: study

Shares make better short-term investments but property is a superior long-term investment, according to a report by a leading property analyst.

Residex founder John Edwards discovered that shares provide better returns when held for less than six years, but that houses won out over subsequent decades.  It came after he conducted an analysis on the performance of houses in Sydney versus the ASX top-200 index over a period of 36 years. Mr Edwards said he chose Sydney because it has been the weakest market over the last 10 years, despite its strong results recently. In his view, property matures over a long period of time and analysis must take this into account.

"I have read many reports that indicate the share market is the better performer," he said. "Reports achieve this notion by considering particular timeframes that happen to favour the share market." He also warned investors that shares tend to be a riskier proposition than real estate. “Shares are assets which are best traded. If traded well, the returns may be very high. However, this trading should be left to the professional because the risk can be very high,” he said.

Mr Edwards added that holding houses for less than six years is often a poor investment choice. “Short-term investments in shares are far better than short-term investments in houses. The reason is simple – state governments have their hand out and take unfairly from purchases of houses (conveyancing duty),” he said.

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