As another year of investing draws to a close, let's review the biggest trends in ASX shares vs. property.
First, let's take a macro view.
At the time of writing, the S&P/ASX 200 Index (ASX: XJO) is up 5.76% in the year to date (YTD). If we add the typical 4% dividend return on top, we get a total estimated return of 9.76%.
The two best months of the year for share price gains have been July, when the ASX 200 rose 4.18%, and November, when it lifted 3.38%.
The ASX 200 has reset its all-time record high many times over throughout the year. The latest record was set on 3 December at 8,514.5 points.
Meantime, the national home value rose for a 22nd consecutive month in November, according to CoreLogic data. It's now up 5.2% YTD, with total annual returns (i.e., capital growth plus rents) tracking at 9.6%.
So, there's not much competition between shares vs. property in terms of overall returns in 2024. Based on current trends, both asset classes will deliver total returns of 9% to 10%. Very satisfactory!
Of course, certain ASX shares and property markets have outperformed these averages.
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Outperformers of 2024
In terms of best-performing ASX shares for price growth this year, ASX 200 biotech Mesoblast Ltd (ASX: MSB) has had a rip-snorter, up 681% YTD.
Buy now, pay later company Zip Co Ltd (ASX: ZIP) has had an incredible comeback, with the share price up 356% YTD.
And the relentless rise of Life360 Inc (ASX: 360) shares has continued, with the share price up 194% YTD.
In terms of property, Perth has been the clear outperformer among the capital cities. Regional Western Australia has also been the strongest regional market.
The median home value in Perth is up 19% YTD to $808,090. The median home value in regional Western Australia is up 15.5% to $541,743 YTD.
Shares vs. property: Key investment trends of 2024
In the share market, the best-performing market sector for price growth in 2024 has been ASX tech shares. The S&P/ASX 200 Information Technology Index (ASX: XIJ) is currently up 47% YTD.
It's interesting to note that several ASX tech shares have outperformed the much-lauded US Magnificent Seven this year.
The second-best sector to date has been ASX financial shares, with the S&P/ASX 200 Financials Index (ASX: XFJ) up 25% YTD.
The financials sector includes bank shares, insurers, and financial services companies.
Big bank stocks have had a great run in 2024, so much so that the Commonwealth Bank of Australia (ASX: CBA) overtook BHP Group Ltd (ASX: BHP) as the largest stock by market capitalisation earlier in the year.
In the property market, we have seen a two-tier performance in 2024.
The mid-sized capitals of Perth, Adelaide, and Brisbane have outperformed, with median home price gains of 19%, 12.6%, and 11.2%, respectively, YTD.
On the other side of the coin, home values have fallen 2% in Melbourne and 0.1% in Hobart. The Canberra median is steady, while the Sydney median has gained just 3.1%.
Why is Melbourne weak and Perth strong?
Melbourne being the weakest capital city of 2024 is a very interesting trend.
Melbourne is a vibrant international city that has been rated among the world's best for lifestyle. It's set to become Australia's biggest city in just eight years, according to the Centre for Population. Yet it is now our third cheapest capital city for housing. Why is that?
The weak Melbourne market is partly due to Victoria building more new homes over the past 10 years than any other state or territory. So, supply is much better. Demand has also been moderated by fewer people moving to Melbourne, as well as lower investor activity due to new land taxes.
Other interesting trends in the property market this year include more young families being willing to move interstate for cheaper housing, and investors adopting the same mindset for better overall returns.
Western Australia has been a key beneficiary of these two trends.
According to the Australian Bureau of Statistics, Western Australia recorded the strongest population growth in FY24, up 2.8%.
The state economy is booming, with new jobs attracting many new residents from the East Coast. In fact, Western Australia just recorded the strongest economic growth of all the states and territories for the first time in more than a decade, according to CommSec's latest State of the States report.
People are now earning better money in Perth than in Australia's two biggest city economies, Sydney and Melbourne. This creates another reason to move there—it's easier to cope with the cost-of-living crisis when you're on a higher wage.
The latest data from the Bureau of Statistics shows median weekly earnings of $1,500 in Perth and $1,442 in regional Western Australia. This compares to $1,450 in Melbourne and $1,416 in Sydney. (Earnings are highest in Canberra at $1,688 per week).
Despite strong growth in median prices, Western Australia still offers better housing affordability than the East Coast capitals. The median house price in Perth is $842,227. This compares to $1,482,750 in Sydney, $974,396 in Brisbane, $972,753 in Canberra, and $923,422 in Melbourne.
Weekly rents are also higher, and this, combined with strong capital growth, has caused a spike in investor activity. Total annual returns for all dwellings in Perth are currently tracking at a whopping 26.4%. This compares to 6.5% in Sydney, 16.6% in Brisbane, 4% in Canberra, and 1.4% in Melbourne.
At the start of this year, Joe White, President of the Real Estate Institute of Western Australia, said the state was "the current hotspot for Eastern States investors".
Whilst activity is now slowing down following very strong price growth, East Coast investors remain engaged in Perth and regional markets, White told Australian Property Investor magazine this month.
As we head into 2025, Tim Lawless, CoreLogic's research director, says all capital city markets are now "losing steam".
This is partly because the supply of homes for sale increased over the Spring season.
At the same time, demand has waned a bit due to continuing high interest rates and costs of living.
