Was 2021 as good as it gets?

Research by Rainmaker Information shows that for super fund members who are also homeowners, 2021 was as good as it gets.

Homeowners nationally saw the value of their properties jump more than 20%. Australian shares finished the year up 17%, and super funds notched up gains of 15%. That's the third best super fund calendar year return in 17 years. 

According to Rainmaker, for a super fund member who started the year with $100,000 in super, owned an average house and held some shares, 2021 generated about $170,000 tax-paid income. And that's on top of the $63,000 median salary.

What’s interesting is that property prices were the talking point last year. That’s not surprising given the exceptional rise in values we saw. But shares and super (which is often chiefly invested in shares) have outperformed property over time.

A report by Aussie Home Loans, which looked at how property prices nationally have risen since the 1990s, found that over the last 30 years, house prices have recorded annualised growth of 5.6%, or 4.7% for apartments. This gels with Australian Bureau of Statistics data that shows around 6% price growth annually over the past decade.

That’s well below the 10.1% average annual total return (dividends plus capital growth) dished up by Australian shares over the past ten years.

Even our super has outpaced property market gains. SuperRatings found balanced super funds have achieved average annual returns over the past decade of 8.4%, rising to 9.5% for funds with a growth strategy.

Of course you can’t live in your super fund or share portfolio. But these results show that the property market isn’t the only way to build wealth.

Yes, I’m a big fan of home ownership. After all, paying off a home loan is a type of forced saving.

However, for Australians who feel they are priced out of the market, growing an investment portfolio of directly held shares or exchange traded funds – and maybe adding to your super, can let you tap into healthy long term returns to boost your financial wellbeing.

Paul Clitheroe is Chairman of InvestSMART, Chair of the Ecstra Foundation and chief commentator for Money Magazine.