RESIDENTIAL property has long been considered the most secure extended-term investment in Australia, and represents the country's largest store of personal wealth.
Reserve Bank calculations in 1990 showed that per capita private wealth was around A$74,000 (about HK$407,000), with 65 per cent, or A$48,300, of that amount derived from domestic property.
Over a 20-year-term, median house prices in Sydney have climbed by an annual average rate of 11.3 per cent, according to the latest Housing Activity Report from Hooker Research. But this rate of return is substantially boosted with the financial leverageof a mortgage.
Home owners with a 75 per cent mortgage would have seen their equity rise at an annual average rate of 19.3 per cent.
Yet even this is unrealistically low, suggests the Hooker report, since it is based on a misplaced ''buy-and-hold'' assumption.
Few home buyers remain in the same property for two decades. More commonly, they move or ''upgrade'' about every five years.
Assuming just one upgrade five years after taking out the original mortgage, then re-investing in a larger house, also with a 75 per cent mortgage, the return over 20 years would have climbed to an annual average of 23.9 per cent.
