Property vs Shares for investment

[Entrep]

These 2 articles were referenced in the Black Monday NZX forum last week and I wanted to give them more prominence and hopefully get some more discussion and input from the smart members here.

https://stockhead.com.au/uncategoriz...ty-every-time/
https://aucklandpropertyrealitycheck...roperty-in-new

Like the titles, they essentially say that shares beat rental property as an investment and I can't say that I personally could see any issue with what they write.

So it's got me thinking about my situation. Anyone else care to opine?

[thegreatestben]

I'll give it a read, I've got both but probably a unique situation in rentals as I built them. Don't plan on putting any more money into property but looking to save/invest about a 3rd of our household net income a year.

Both articles look at the owner-occupier house as investments and as if most people in nz buy their house with the motivation or intention for it to be as an investment. I don't think that's true, atleast not when they buy it. Maybe once they gain a bit of equity and their incomes rise with time but ultimately most people want their own home, a space to be themselves without a landlord to consider.

Money isn't always the reason people do things, sometimes they make a lot of money from a decision even when they don't actively pursue it.

I don't think I've ever met anyone who is living or has lived out the scenario of renting and investing/saving the difference, everyone ends up either buying property or pissing the difference up against the wall.

[SBQ]

These 2 articles were referenced in the Black Monday NZX forum last week and I wanted to give them more prominence and hopefully get some more discussion and input from the smart members here.

https://stockhead.com.au/uncategoriz...ty-every-time/
https://aucklandpropertyrealitycheck...roperty-in-new

Like the titles, they essentially say that shares beat rental property as an investment and I can't say that I personally could see any issue with what they write.

So it's got me thinking about my situation. Anyone else care to opine?

You can ignore the Australian article because in Australia the treatment of owning multiple properties has a larger tax implication than owning Australian listed shares. In NZ, the tables are turned around where owning multiple properties benefit from tax free capital gains.

Like the financial advisors in NZ, they often leave out taxation because when you involve it, then the whole story changes... dramatically!!

Second link again, leaves out the issue of taxation in the scenario that the person renting would benefit more.

"Invest the initial deposit of $200,000 and the difference each month into the broader stock market (for e.g. a diversified market index like S&P 500), yielding an 8% annual compounded return (historical S&P 500 performance)."

IMO, 8% is a gross over simplification and is rarely reflected in most people's retirement investing account (ie Kiwi Saver). Unlike Kiwi Saver, the capital gain on the house grows 100% tax free and that's a leveraged gain which the person that chooses to rent will have no chance in borrowing $800K cash to invest in the stock market. Nevertheless, the author's 2 examples are too close in % return to be relevant. After 30 years of compound returns the difference of $260K?? That works out to be only a 6% difference. A bad year in the stock market could change the tables around easily (or a purchase of Tesla's stock 2 days ago would show owning the house would be ahead).

There's also intangible risks that are not factored in renting. For example you could be thrown out of the house or how about the cost of moving houses (as it's uncommon for a person to be renting in a house for 30 years)?

Bottom line is, it's a very poor example and the statistics clearly show that in NZ, no one is getting rich off Kiwi Saver (the most likely outcome of a person that rents and puts the excess into a managed fund scheme).

https://retirement.govt.nz/news/late...s-and-genders/

If renting had any appeal where the person could invest their disposable income in the stock market, then you would see a reflection of this in the Kiwi Saver stats. But on average $29K after 14 years since the inception of the savings scheme is very very pitiful.

BTW, see for yourself and wonder who are the ones that got rich? The ones I see in NZ have done it through owning multiple houses via leveraging. To this day, have not met a single person in NZ that has done otherwise by owning stocks instead.

[Bjauck]

I'll give it a read, I've got both but probably a unique situation in rentals as I built them. Don't plan on putting any more money into property but looking to save/invest about a 3rd of our household net income a year.

Both articles look at the owner-occupier house as investments and as if most people in nz buy their house with the motivation or intention for it to be as an investment. I don't think that's true, atleast not when they buy it. Maybe once they gain a bit of equity and their incomes rise with time but ultimately most people want their own home, a space to be themselves without a landlord to consider.

Money isn't always the reason people do things, sometimes they make a lot of money from a decision even when they don't actively pursue it.

I don't think I've ever met anyone who is living or has lived out the scenario of renting and investing/saving the difference, everyone ends up either buying property or pissing the difference up against the wall.

Back in my twenties in the 1990’s, many if not most of my contemporaries who bought a house regarded it as an investment first, home second. They were often encouraged by parents not to wait too long before getting on the “property ladder.”

Most did not have partners let alone families. However they bought to get a step on the property escalator and to build up equity mostly tax free. Those going overseas wanted an investment working for them whilst away and not face the likely over inflated price increases when they returned.

The current generation of twenty somethings have mostly ( there are exceptions of course) been priced out of doing that, certainly so without help from wealthy family. More are probably staying overseas for longer.