The investment performance of shares vs. property was once again impressive in FY24.
The S&P/ASX 200 Index (ASX: XJO) rose by 7.83% and delivered total returns (including dividends) of 12.1%.
Meantime, the national median home price rose by 8% and delivered total returns of 12.2% (including rental income), according to CoreLogic data.
So, what's in store for the next financial year?
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Shares vs. property in FY25
Generally speaking, there is optimism among the experts for both shares and property in FY25.
In the share market, the hype around artificial intelligence (AI) is a strong tailwind, not just for tech shares but for every business, given AI's potential to meaningfully lift business productivity in many sectors.
The quintessential AI stock, Nvidia, rose by 192% in FY24. In Australia, Nextdc Ltd (ASX: NXT) shares rose by 45.4%, and Goodman Group (ASX: GMG) shares lifted 73.1%, both largely due to the AI tailwind.
Both the S&P 500 Index (SP: .INX) and the ASX 200 hit a new record high during the week. Speculation of an interest rate cut in the US soon will likely benefit Wall Street stocks, and as usual, this will flow through to ASX shares.
In the property market, we have the very unusual situation of property prices rising in most markets despite higher interest rates. Historically, when rates have moved higher, property prices have fallen.
The trump factor is very tight supply and demand in most markets, particularly the top-performing capital cities of Perth, Brisbane and Adelaide, which recorded exceptional price gains in FY24.
These markets are more affordable than Sydney and Melbourne, making them very attractive to investors, as well as young families willing to move interstate.
In FY25, the supply of homes for sale is likely to remain tight due to the construction crisis, which is being created by labour shortages and higher costs and limiting the number of new homes coming onto the market.
Also, a significant decrease in the average number of residents per home (brought about by more people living alone in the work-from-home era) will continue to limit the supply of rentals and homes for sale.
Demand will likely remain strong but may moderate somewhat due to lower immigration and affordability constraints.
What's the outlook for property values in FY25?
The Domain research team's key prediction for FY25 is rising property values in most markets, but at a slower pace for houses than in FY24 and a marginally increased pace for apartments in some areas.
The researchers expect new median house price records in Sydney, Brisbane, Adelaide and Perth.
They also think median house prices in Brisbane and Adelaide will go close to cracking the $1 million mark for the first time ever.
Here are Domain's predictions for property price growth across Australia in FY25.
| Location | Houses | Units |
| Australia | 3% to 6% | 2% to 4% |
| Sydney | 6% to 8% | 4% to 6% |
| Melbourne | 0% to 2% | 2% to 4% |
| Brisbane | 6% to 8% | 4% to 6% |
| Perth | 8% to 10% | 4% to 5% |
| Adelaide | 7% to 9% | 4% to 6% |
| Canberra | 0% to 4% | 1% to 4% |
| Regional NSW | 0% to 3% | 1% to 3% |
| Regional VIC | -3% to 0% | 1% to 2% |
| Regional QLD | 2% to 4% | 3% to 4% |
| Gold Coast QLD | 3% to 6% | 3% to 4% |
| Sunshine Coast QLD | 2% to 5% | 3% to 4% |
| * Forecast percentage change in house and unit prices by the end of FY25. | ||
What's the outlook for ASX shares in FY25?
Vinay Ranjan from Airlie Funds Management says investors should ignore predictions for where ASX 200 shares might go in FY25 and just focus on buying quality companies.
He points out that despite all the challenges for the ASX 200 over the past five years, including the pandemic and surging inflation and interest rates, the market has gone higher, albeit not in a straight line.
The S&P/ASX 200 Accumulation Index (which includes dividends) has delivered a total return of 47%, or 8% per annum over the five years to 3 May.
In a blog published on asx.com.au, Ranjan says:
In Airlie's view, the past five years have shown that buying and selling stocks based on a view of the market's impending movements is a fool's game.
… we believe investing in companies with strong balance sheets, and that are market leaders with pricing power, may help drive returns over the long term.
Looking ahead, Ranjan says there are three reasons to be bullish on ASX 200 shares in FY25.
He says corporate balance sheets are in good shape, and Australia continues to attract people and capital. He also points to the long-term stable returns and share price gains of the oligopolies of the ASX 200.
There are also three reasons to be bearish.
Ranjan says ASX 200 share valuations have re-rated higher and are unlikely to go much further until interest rates have peaked. He also points to sticky inflation and potential government intervention to reduce the oligopolies' power following the supermarket enquiries.
Here at The Fool, we've been busily reporting the outlook for many market segments since FY25 began.
Check out our FY25 outlook articles for ASX tech shares, ASX mining shares, ASX lithium shares, ASX bank shares, ASX gold shares, ASX uranium shares, ASX AI shares, and ASX 200 dividend shares.
And if you're the clever investor who ignores the shares vs. property debate and simply buys both, you can also check out our outlook for ASX real estate shares.
