A report released by ANZ economics – one of the leaders in property economics in Australia – titled “asset returns: the past, present, and future” states that residential property was the highest returning asset over the past 24 years. Even when costs and taxes were factored in, owner-occupied housing generated the highest average annual total returns (12.0%), followed by investor housing (9.6%) and equities (8.9%). Both owners occupied and investor housing indexes generated higher returns at a lower risk than equities.
The report notes that whilst much has been written about reduced yields on investor housing and house price ‘bubbles’ in recent years, housing (as an asset class) has continued to deliver remarkably strong and relatively stable investment returns. There are huge advantages that appropriate leverage (making capital gains from borrowed funds) can offer.
With only $20,000 cash invested (plus your upfront costs) it is possible to invest in a $200,000 property, making your earning potential that much greater than a non-leveraged investment such as shares or Superannuation. This, coupled with the market cycles, benefits of rent return, taxation relief in servicing those borrowings, and the significant growth achievable over time, ensure a property is a sound investment option.