Housing and other assets on a graph

A good graph can show many things quickly and this one is intriguing. It was presented by Dr Shane Oliver at a recent AMP Broker webinar I attended.

Not financial advice here. The graph shows Australian returns for several important asset classes over the past 100 years if you had invested $100 back in 1926. Yes, that’s an very long time across multiple generations, but it gives a unique Australian view on how those asset classes have performed.

Cash and bonds have performed in the mid-single digits per annum which is quite reasonable for lower risk returns. Australian housing and shares have performed nearly twice as well in the low double-digits. According to the graph, shares perform better but, have more volatility compared to the more steadier growth of housing. This may reflect the inherent liquidity of shares as compared to houses. It is interesting over such a long period how closely these two asset classes have performed.

From an economics view, you can make the argument that if shares or property was say, much lower than the other, it would be bid back up in the market to match the returns over time. The thing I don’t know right now, is what this graph looks like for other countries. Look out for a follow up post.

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