ASX 200 shares vs. property: AMP reveals predictions for 2024 growth

AMP chief economist Dr Shane Oliver reveals his price growth predictions for both asset classes this year.

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The S&P/ASX 200 Index (ASX: XJO) is tumbling on Tuesday, down 1.3% to 7,758 points in early trading.

ASX 200 shares have risen by 1.71% in the year to date. The benchmark index's journey in 2024 has been bumpy, but it has included a new all-time record high of 7,910.5 points set on 2 April.

Shares vs. property: Which one is winning in 2024?

Meantime in the property arena, bricks-and-mortar investments in most capital city and regional markets have experienced a smoother ride this year.

The national median home value is up 3% in the year to date, according to the latest CoreLogic data.

Regional property values are growing faster than city values. The combined regional markets' median is up 3.3%, and the combined capital city markets' median is up 2.9%.

Therefore, property is outperforming ASX 200 shares in the year to date.

But AMP chief economist Dr Shane Oliver reckons that's going to change.

ASX 200 shares to deliver 9% growth in 2024: AMP

AMP anticipates 9% growth for ASX 200 shares in 2024 vs. 5% average growth in property values.

In a new blog, Dr Oliver says ASX 200 shares should rise from here.

He tips the benchmark index to settle at about 7,900 points by year's end. That's just below its April peak and indicates there is more volatility ahead for ASX 200 shares.

Dr Oliver said:

Easing inflation pressures, central banks moving to cut rates and prospects for stronger growth in 2025 should make for reasonable investment returns this year.

However, with a high risk of recession, delays to rate cuts and significant geopolitical risks, the remainder of the year is likely to be rougher and more constrained than the first three months were.

Property prices to rise but at a slower pace vs. ASX 200 shares

In terms of property values, Dr Oliver expects lower average price growth this year compared to 2023.

He comments:

So, after an average 8% gain last year, we expect that national average home prices will rise again this year but with national average gains a bit more constrained at 5% as still high interest rates act to restrict demand and rising unemployment boosts distressed listings.

The supply shortfall points to upside risk, but the delay in rate cuts and talk of rate hikes risks renewed falls in property prices as it's likely to cause buyers to hold back and distressed listings to rise.

Dr Oliver expects a continuing divergence in the performance of capital city markets, commenting:

Home price gains are likely to remain widely divergent though with continued strength likely in Perth, Brisbane and Adelaide for now partly helped by interstate migration but softness in other cities, particularly Melbourne and Hobart.

CoreLogic points out that the supply of homes for sale is a key element keeping price growth strong in Perth, Adelaide, and Brisbane. Stocks levels are currently 40% below their five-year average for this time of year in Perth and Adelaide and 34% lower in Brisbane.

Looking ahead, Dr Oliver says there are signs of weakness in property.

Interestingly, there are some signs of a softening at the margin: auction clearance rates have cooled from their highs; new listings are up sharply in some cities possibly reflecting rising distressed listings; and after leading early in the property upswing, top quartile property price gains are the weakest in most capital cities as affordability and borrowing constraints are starting to bite pushing buyers into lower-priced property.

If you are considering ASX 200 shares vs. property for your next investment, check out our article on the pros and cons of each asset class.

Motley Fool contributor Bronwyn Allen has no position in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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