Hard landing for Sydney — but it only _just_ lets the stock market catch up!
Apparently the Sydney property market is still slowing down — and other cities may be following. Meanwhile Perth and Darwin are growing from mining dollars — and mining companies are turning into property developers.
The growth data presented in the article seems a little confusing to me. Yes, the All Ordinaries has grown by 40% — but that only helped it catch up to the average price of housing in capital cities (see graph below). And Perth and Darwin outperformed the All Ordinaries by 37% and 20% respectively (from December 2004 to June 2005).
As previously discussed, the stock market — requiring more risk — should, on average, provide greater returns. And in general (as the graph shows), it does. But in 2003, the housing boom pushed temporarily past the stock market in growth, and it is only the recent strong performance of the stock market (e.g. the resources sector) that has helped it catch up. So if you invested in the stock market in December 2004, you’d be pretty happy right now, but if you invested in 1994 (as the articles discusses), you’d actually be in pretty much the same place as a property investor (which the article doesn’t communicate — at least, not clearly).
Update: See a similar houses vs stocks graph from ‘House of cards‘ in The Economist.
