Gold v Shares v Real Estate over the last 10 years
I’m a Real Estate agent !. Why ?. Because I unashamedly love and endorse my product. It’s really good for you. You can’t have enough and everyone should try to get some . It empowers people and helps build families and communities. It’s the safest and surest way to having a comfortable life.
Out of curiosity, I thought I would measure how over the last 10 year Gold , shares and real estate compared. It’s been difficult times and there has been a lot of talk about the best place to have your assets. The difficulty in comparing each category is Real Estate is measured in thousands of dollars while shares can be measured in cents. To look at apples with apples I have taken a Gold price graph (from paydirt.co.nz) and the NZ share price graph (from the NZX top 50) and the medium Real estate price for NZ ( from REINZ.) They all cover the period from January 2006 until June 2015 I have then standardised these by measuring each assets movement on a scale of 1-50 . Forget about where the lines start , because they each started in different positions. Gold was low , Real estate was high. The important point is where they were in January 2006 compared to where are they now. ( June 2015 )
Gold . A pretty good investment over the last ten years. It’s fair to say gold is in its golden years because of the Global Financial Crisis and has performed out of its skin. If you started with a $1,000 gold ingot you now have a $3000 gold ingot. Your asset grew around 200% over this time. You would not have received any additional income from holding it.
Shares . Not so good. If you started with a $1,000 portfolio you still have a $1,000 portfolio. You will have received dividends of around 3-5% over this time so you should have received about $300-$500 in cash as well. But what about splits and share buy backs etc?. Yes I know! it’s only an quick comparison so don’t be so pedantic and what about the fact that the NZX50 only measures the 50 top companies. If one of them goes broke or has a bad run it simply drops out of the equation altogether and doesn’t affect the NZX 50. (I’m still holding my Chase Share Certificates waiting for them to reappear in the NZ50X, but I’m not bitter)
Real Estate. If you went in with a $1,000 property (I know there’s no such thing, but this is just an comparative exercise! Really! Did your mum raise you on lemons or something? ) you should have an asset worth around $3,000. If you had rented your $1,000 house out you should also have around $500 cash as well.
The real estate figure used is the NZ medium so doesn’t differentiate Auckland from the rest of the country, but it’s the best way to compare apples with apples. If I was like the NZ stock exchange I would only use my best performing cities as a measure. The REINZ 5X. Auckland, Queenstown, Wanaka, Tauranga and Hamilton
So purely on the return it’s easy to see why real estate is such a popular and sound investment. The other thing this graph shows is the relatively steady rise in real estate over time. It has the odd short term dip but nothing compared to the roller coaster ride of the share market and gold. It looks to me like Real Estate is a sound investment strategy while the Share market and gold are closer to gambling. You are trying to pick highs and lows and getting in and out at the right time.
There are a number of other reasons why Real Estate has so many followers as an investment, such as the effect of gearing, but for this article it’s purely about the return. So why do new Zealanders have such a strong fascination with property? Because they are smart that why!