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Look behind the averages

THE poor performance of the share market over the past year has brought a smile to the faces of investors who kept their money in residential property.

The median price of established houses in Perth rose a healthy 7.8 per cent in the 12 months to November 2001.

While share market returns were below average, the All Ordinaries Index (which tracks the value of Australia’s 500 largest companies) still rose 6.5 per cent for the year.

However, these averages are not always very meaningful. Individuals need to monitor the performance of their specific investments.

In the share market, there is usually a very sharp divergence between the best stocks and the worst stocks.

In the property market, the divergence is much less extreme, but a pattern is becoming clear – growth in property values across Perth is not uniform and in some suburbs is barely positive.

Take Langford, for instance. The average annual growth in property values in Langford over the past five years was just 0.3 per cent, according to data on REIWA’s website.

Other stragglers include Armadale (1.8 per cent) and Midland (2.5 per cent).

Numerous suburbs produced capital growth of just 4-5 per cent, including Leeming (4.2 per cent), Ashfield (4.4 per cent), Huntingdale (4.6 per cent), Leederville (5.0 per cent), Hamersley (5.1 per cent) and Myaree (5.2 per cent).

Rental yield (and dividend yield for shares) needs to be added to these figures to get the gross return, from which expenses need to be deducted for a net return.

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