（July 14, 2010）

THE property versus shares argument is always a closely fought contest and despite the global financial crisis and the recent share market crash, shares have narrowly outshone property in the past 20 years.

However, Australia's love affair with property is still justified, with residential property the top investment in the past 10 years.

The share market performance was based on annual after-tax returns, for those on the highest and the lowest marginal tax rates, the Russell Investments and Australian Securities Exchange Long Term Investment Report reveals.

It found shares delivered the best after-tax returns of between 7.8 per cent and 9.9 per cent a year for the past two decades, to December 2009.

This compares with 7.2 per cent and 9.8 per cent for residential property during the same period. Australian bonds came in third with average annual returns of between 4.5 per cent and 7 per cent.

The performances are based on "real'' returns, which take into account the costs involved with each investment and the tax paid on income.

Russell consultant Stanley Yeo says after-tax results are increasingly important to investors but many still do not include their impact when they assess their total returns.

"It is important for investors to consider that tax is essentially a cost of investing. Our results show what a significant difference it can have on the end outcome for investors,'' Mr Yeo says.

For example, on a pre-tax basis, the latest results were switched. Property achieved the highest average annual return of 9.8 per cent, just pipping shares, which returned 9.7 per cent.

On a shorter time frame of 10 years, residential property also took the top spot, before and after tax.

"The global financial crisis tested the resolve of many investors,'' ASX spokesman Will Wilson says.

The report offers an insight into performances of listed investments compared with other investment types and underlines the importance of investing for the long term, Mr Wilson says.

Investment returns (20 years to December 2009)
After tax (Top tax rate)
Australian shares 7.8 %
Residential property 7.2%
Listed property trusts 5.6%
Australian bonds 4.5%
International shares 3.4%
(Lowest tax rate)
Australian shares 9.9%
Residential property 8.8%
Australian bonds 7%
Listed property trusts 6.7%
International shares 4.3%

Before tax
Residential property 9.8%
Australian shares 9.7%
Australian bonds 8.9%
Listed property trusts 7.5%
International shares 4.8%

(Source from:news.com.au)