Can’t see the forest for the houses?
Also: Christmas shopping.
Quick question: Which of the following grew fastest in the last year: New Zealand house prices, New Zealand shares, hedged overseas shares (hedging removes the effects of foreign exchange movements), or unhedged overseas shares?
Surprise, surprise, it wasn’t house prices. Bigger surprise still: house prices came last.
I have to admit here that the house data is a bit old. The latest Quotable Value quarterly house price data is for the period ending June 30, whereas the share figures are for September 30. But, given that the house price boom seems to be slowing, I doubt if more recent data would boost house performance.
The numbers are: New Zealand shares grew 19 per cent in the year to September; hedged overseas shares grew 18.1 per cent; unhedged overseas grew 15.2 per cent; and house prices grew 13.7 per cent in the year to June. (The share figures include dividends and are after tax; the house figure excludes apartments.)
I’m not knocking house price growth. The 13.7 per cent follows a year of 22.2 per cent growth, which follows a year of 16.2 per cent growth. There’s no denying the boom.
It’s just that shares have grown even more, and few people seem to realise that.
As I’ve said many times before, you can’t judge an investment by one year’s data. And it’s true that, if we go back a few years, overseas share performance was awful.
But New Zealand shares continue to look good going backwards. Their three-year performance is slightly better than houses and their five-year performance is slightly worse.
How about seven years? New Zealand shares returned an average of 11.9 per cent a year; house prices rose an average of 8.5 per cent a year.
In the late 1990s, overseas shares, too, had their day in the sun, producing returns of more than 30 per cent a year for several years.
At the same time, the house price index dipped 5.5 per cent and then slowly rose, in total going nowhere for four whole years, from December 1997 to December 2001. I wonder how many people remember that.
- New Zealanders are so preoccupied with housing that we don’t take enough notice of other possibilities.
- Our memories are short — too short, given that property and shares should be long-term investments.
As we all rush out to spend too much on Christmas presents for one another, it’s worth pondering whether stuff makes us happier.
Research suggests it doesn’t. But you don’t even need to look at the research. Look around you. Who seems happy?
Everyone I have discussed this with agrees that there seems to be no correlation between who is happiest and who owns the most stuff.
Rather than giving more to people who already have too much, you might like to consider giving to a charity in their name.
World Vision (www.giftsofhope.org.nz or 0800 800 776), Oxfam (www.oxfam.org.nz or 0800 400 666) and probably others have programmes under which you can buy a goat, seeds, a sewing machine or other items for families in real need, and make the gift on behalf of your spouse, child, parent or whomever.
You get cards to give your family members stating what they have given — which just might brighten their Christmas more than yet another toy.
And the recipient family gets stuff that really will make them happier.
Move fast, though. It may already be too late to get your cards back before Christmas — but you can always tell your family what’s up, and give them the card soon after.
No paywalls or ads — just generous people like you. All Kiwis deserve accurate, unbiased financial guidance. So let’s keep it free. Can you help? Every bit makes a difference.
Mary Holm is a freelance journalist, a director of Financial Services Complaints Ltd (FSCL), a seminar presenter and a bestselling author on personal finance. From 2011 to 2019 she was a founding director of the Financial Markets Authority. Her opinions are personal, and do not reflect the position of any organisation in which she holds office. Mary’s advice is of a general nature, and she is not responsible for any loss that any reader may suffer from following it.