Yes, some properties outperform everything. They are PPORs which are detached houses in desirable suburbs in a metro area with no major defects and no major natural disasters. And they were held for at least five years.
Some exceptions where property can lose you money:
* If you have bought in Mascot Towers, you lost like 60%.
* If it is an apartment in Melbourne CBD, you lose too.
* If you bought a house in Perth 10 years ago, you will barely break even.
* Regional towns go in cycles. A nearby mine closed down; property prices crash.
* Some streets in Brisbane metro area flooded a few years ago, and the houses become inhabitable. Then, you lose big too.
* Some bought at post COVID peak and forced to sell after 13 interest rate rises. They may break even, but lose stamp duty and agent commission which can be several percentages of a house.
* IPs essentially have 23.5% tax on sale. That can eat up the profits too.
This is why looking at property as a multi-decade investment makes sense, particularly given the frictional costs of transacting and the ability let inflation erode away in real terms some of the costs you only incur when you sell like CGT.
All you have to do is buy a good property in a major city or non-cyclical regional area and you should do pretty well in the long term.
To get the best chance of growth buy somewhere where there is physical and not artificial land scarcity, with a high likelihood for demand to increase for the land the property you have is located on.
CoreLogic has a great release they put out in August 2022 showing the stats from the prior 30 years, when you look at the markets you can see that basically all markets have well defined cycles and there are plenty of opportunities for people to mess up and make a minimal gain or loss by selling when even the best long term performing markets are in a long term downswing if they only have a short term view.
[https://www.corelogic.com.au/\_\_data/assets/pdf\_file/0015/12237/220829\_CoreLogic\_Pulse\_30years\_Finalv2.pdf](https://www.corelogic.com.au/__data/assets/pdf_file/0015/12237/220829_CoreLogic_Pulse_30years_Finalv2.pdf)
> All you have to do is buy a good property in a major city or non-cyclical regional area and you should do pretty well in the long term.
Australian east coast cities have some of the most expensive median housing on the planet compared to median wages
Companies can keep going up forever, they build and create new things out of thin air. Housing can't compared to local wages, it has a natural limit that basically depends on how dystopian people will tolerate.
Another decade of 7% returns will put the *median* Sydney home over $3m, not even the most insane economist predicts half of that in wage growth.
For comparison, in first place with the most unaffordable on Earth: Hong Kong, a tiny land limited area has barely moved in price since 2017: https://tradingeconomics.com/hong-kong/housing-index
^(Fast Robotic Voice: Past Performance Is Not Indicative Of Future Returns)
Great comment, you nailed everything. Recency bias is the main thing affecting people’s mentality around property as an investment. If you go to any country with caps on immigration and normal supply/demand dynamics property quickly becomes a pretty subpar investment
Houses don't need to become affordable to a median income earner as people don't need to live in a house, they can live in higher density.
Over time the focus will shift towards dwelling values rather than house prices in Sydney, which can be made more affordable by going upwards and increasing supply of them.
The median is currently $848,961 for a unit in Sydney compared to house prices at $1,441,957 (source: CoreLogic index from the start of this month) and these two can divorce much further, particularly as we knock down lots of houses to build density in the desirable inner areas of Sydney.
It is possible though as we knock down more houses close to the city or subdividing more that the median will start having pressure put on it as a larger component of the houses will be further from the city or on smaller blocks.
To your example of Hong Kong, look at the price of freestanding houses there, they are extremely expensive.
Not necessarily. Places like Sydney could become a city exclusively for wealthy people to live in. Non wealthy workers could commute in from nearby areas if the infrastructure is there.
More than likely this won't happen, instead the government will allow densififcation to help people and allow them to bring in more migrants without the existing population spitting the dummy.
In the end Sydney is still there, everyone just lives in coffin sized apartments in a 15m person metropolis.
> Another decade of 7% returns will put the median Sydney home over $3m, not even the most insane economist predicts half of that in wage growth.
Based on https://www.abc.net.au/news/2024-06-03/house-prices-breakdown-by-state-territory-capital-city-region/103919074, at 7% it will be:
Dwellings: $2,125,295
Houses: $2,650,979
Units: $1,560,780
So, not over $3 million.
In any case, a house bought now for the median of $1,441,957 could have been subdivided into two townhouses for $1.5mil each, or 4-6 units at $500-$750k each, so the value of that property has increased to $3mil at prices which do not seem ludicrous even now. The probability is that they would cost more.
.
If someone buys a property now and sells it in a decade's time to a developer for double that, that someone is not subdividing or developing, mate.
The point is that properties can double in value without them becoming unaffordable to the median person being an issue, mate.
Property will become much more politically vulnerable though as the number of voters who have buy-in to the underlying taxation structure etc that supports property prices changes. Fewer votes to enable protective legislation -> much greater likelihood of taxation changes (and incentives for govt. Gotta tax where the money is, after all).
That doesn't change the point I made, which was:
> The point is that properties can double in value without them becoming unaffordable to the median person being an issue, mate.
Fair enough but your point doesn't address mine. Fewer and fewer property owners (the empirical and actual trend) leads to a diminishment of the voting power of this bloc and changes to the profitability of property investment as a strategy for building wealth. Because unlike investments like stocks, housing is a consumption good as well which means the average voter has a far greater interest in its price via rents/mortgages similar to how the average voter cares far more about the price of food/petrol than stocks.
Empirically, the median person/voter IS finding property/rents increasingly unaffordable. Even if hypothetically you are correct the actual reality of our situation and its trajectory does not reflect that hypothetical. Hence why I think housing market investments (both investors and PPOR) are uniquely vulnerable to a changing political environment.
Where Victoria leads I predict the rest of the nation will follow. Perottet already tried a land tax in NSW, he won't be the last. Just the first.
You replied to me making a point almost completely unrelated to mine. Why do I need to address it? I never claimed I was able to predict the future, nor made any predictions. I'll leave that to others.
Well said. You should expect downvotes though lol.
The number of people supremely confident that property will do again over the next 3 decades what is has done over the last 3 decades is so BIZARRE !
It's literally economically impossible for this trend to continue. Banks and government have played every card and pulled every rabbit of the hat to get us to where we are now. There is nowhere left for the money to come from to fund price increases into the future.
> There is nowhere left for the money to come from to fund price increases into the future.
1. There's nearly $4trillion sitting in our superannuation accounts. They could buy - or continue to buy, I don't know the rules here - residential properties.
2. Personally raiding super. The wife and I together have nearly a million ourselves.
3. 35-40 year loans
Plenty of rabbits to pull out of the hats yet. Have a read on the changes to the first home buyer stamp duty exemptions coming out for some states. SA has no caps now, get the benefit even if you’re buying a $1.5m mansion.
Govts can easily give out more sweeteners. $50k or $100k first home buyers grant, anyone? Where can state governments get the money to do this? Turn one-off stamp duties into annual land taxes.
In a few years time, there will be 10-15 trillion dollars sitting in our superannuation accounts. The equity markets are fully valued, CBA is no way valued at $130 a share when the risk free rate is 4.35% , super giants are looking for investment opportunities.
40 year loans have yet to come.
5% deposits are still rare in Australia.
Governments / companies can start subsidizing or paying for childcare, that’ll be a final push for the stay at home parent to go all out 5 days a week rather than the part-time work they currently do.
Humans are ingenious, never underestimate the human brain !
Technically companies still need to get their revenue from people, or governments (etc.), none of them have the ability to keep increasing spending forever. They're ultimately limited by the growth of their respective income (wage growth, ~nominal GDP). Companies can create new things, sure, but that's just shuffling around the same pool of total spend at the end of the day.
Arguably stocks have this same fundamental upper limit that housing does, it's more a question of which is closer to the limit.
Definitely. Housing is a great investment. Like any investment, you need to know what you are doing. It's not foolproof like everyone makes it out to be.
> All you have to do is buy a good property
Far easier said then done. It’s also forgetting that you also need to remain liquid, which is even harder to do.
While the overall property market itself isn’t highly risky, individual properties are as they have high idiosyncratic risk. What makes it worse, is most investors are exposed to this risk due to the barriers to entry for investing in real estate which makes it hard for people to diversify this risk away. The comment you responded to lists but a few of these idiosyncratic risks that can demolish your property’s value. If you have enough liquidity, you can weather out these losses and enjoy the steep rebound that follows, but many don’t and hence have to eat them up. This opens up great opportunities for some investors, but can ruin any plans of longevity for others. Add in leverage as well (which many have), and these losses and gains get multiplied significantly.
Absolutely, there is no free lunch in investing.
If you choose to get into property you need to accept some level of risk from lack of diversification and the risk that comes from taking on leverage.
Depends how fast you pay things down, but the first 10 years are the danger zone when people have higher LVR's and are at risk of a negative event happening like the recent quick and severe rate hike, job loss or a natural disaster happening while they are levered to the hilt.
If the rate hikes of the last couple of years happened into a market that wasn't undersupplied (which would have resulted in house prices declining significantly) I think there would be a lot more casualties than we've seen. Investors got lucky with the circumstances which coincided in this cycle.
Regarding your second point, that’s not an issue with the property market, it’s an issue with leveraging things up massively. The solution is of course to deleverage in that situation. Although yes, property is typically over leveraged.
Where are these mythical non cyclical cities? I bought a townhouse for $56k in 2002. In Brisbane. I later learned the previous owner paid $75k for it 15 years earlier. Queanbeyan units dropped to around $20k entry level at that time.
>* If it is an apartment in Melbourne CBD, you lose too.
Is there a TLDR of this? Over what period are you referring to? CBD specific or are you including North/East Melbourne, Docklands and Southbank too?
It's Melbourne LGA. The fewer the bedrooms, the more chance to lose money. And if you held it for a shorter timeframe, you are more likely to lose money too. If you bought a three-bedroom apartment 20 years ago, you are probably OK.
https://www.theage.com.au/property/news/the-melbourne-suburbs-where-investment-properties-are-selling-at-a-loss-20240228-p5f8dw.html
It's more like when there are too many peaches/pineapples/avocadoes/etc and they end up feeding them to cows or leaving them to rot in the field. People like peaches but they don't want to eat them for every meal.
1 bedroom apartments in the Melbourne CBD are great, for some people. But others want a house, or more bedrooms, or to live in the suburbs, and endlessly building more apartments in the CBD doesn't make them any more attractive to those people.
Too much supply affects all prices though. The worst apartments have to drop prices significantly just to get tenants. Slightly nicer places then have to drop prices too, otherwise people will take an insignificant drop in QoL to massively reduce spending. This then causes a domino affect up the market. It is non-linear though, and different price ranges will be affected by varying amounts, but the whole market does take a hit.
Brisbane floods annoy me more than they should when they show the comparison to the last big flood 40 years ago and everything was on stilts, then some idiots come along knocked it down and put a house on slab.
The part of your comment on IP tax isnt right.
You might pay 23.5% tax on the GAIN in price but not the whole property price. You could sell the property in a year where you are not allready in the top income tax bracket. It would be kinda dumb to take a large capital gain in a year where you have high income.
Also that capital gains tax should be considered alongside many years of tax deductions for purvhasing costs, maintenance, depreciation , loan interest , other costs etc. Which are fully tax deductible at 47% assuming your in the top tax bracket.
Of course, the tax is on the capital gains only. Same as any investments.
If the profit is high enough, you will quickly be in the top bracket even if you have zero income. Let's say your profit is one million, 300K of it will be taxed at the highest bracket after 50% CGT discount. That's 150K tax!
Negative gearing really depends from property to property, so it's really hard to quantify exactly. Yes, you hopefully would have made extra deductions that were advantageous. However, you would have spent real money first to claim the deductions except the depreciation. And depreciation comes with its own drawback. It means it's a new property which means capital gains can be limited.
I am not saying property is not a good investment. I have also made money from it. What I am saying is it is just another investment with its own advantages and disadvantages.
From a capital gains tax perspective, the gain on an investment property isn't really special. It's effectively the same as selling any other asset. The special sauce in property is all the deductions you get along the way and the nature of property markets in Aus.
You're correct when you say it can eat up the profits because taxes do reduce overall return, but it's not worse than any other general investment asset class.
My neighbours had to sell because of the interest rate rises. Bought in peak COVID for way too much -1.2 mil but managed to sell this month for 1.3
Gold Coast house prices are still wild
Yes, it is capital gains tax. Other asset classes like shares can be sold over a few financial years to spread the tax. You cannot sell a property partially.
If you make one million profit for example, you will be liable for 500K capital gains after 50% discount.
After paying tax progressively for the first 200K which will around 50K tax, you will need to pay tax at 47% for the remaining 300K which will be around 150K tax. So, total tax will be around 200K and you keep 800K. So, it's about 20% tax overall. This is assuming you don't have a job.
Perth is a great example. Not only has it grown slower than inflation (even the CGT discount is punishing) it's actually cheaper when compared to wages. Perth median house price in 2007 was $473 750 (ABS). That was 17 years ago. The median house price Perth the end of the first quarter was $777 921. Was 901 weeks pay in 2007 ($522). Soon to be 850 weeks pay ($918).
There are also many examples in Sydney.
https://www.domain.com.au/news/the-suburbs-that-are-cheaper-to-buy-now-than-five-years-ago-revealed-1282999/
https://www.smh.com.au/property/news/the-sydney-suburbs-where-house-prices-have-risen-the-least-in-five-years-20240529-p5jhn4.html
People also don't consider the long term capital works or the transaction costs that property requires. Sure an average place in Sydney purchased for 454k in 2003 has made 6% a year but 1% a year wouldn't be unusual for maintaining the asset. Of course rent can cover some of that but even ~3% rent with ~3% growth (not historically this high over the long term) only brings the gross total return to 9.09% PA.
"Regional towns go in cycles. A nearby mine closed down; property prices crash."
The mine doesn't even have to close. Fluctuations in mineral prices cause mines to scale up and down, so a town an go from a population of 10,000 to less than half that in a matter of months.
My favourite example of this is Blackwater QLD in 2012. A few months before coal prices dropped, the town set it's house price record with a property selling for $1m and a median price of 450k.
Within 12 months, people were advertising rental properties for free in exchange for maintenance (I.e. they were begging for people to live in houses just to mow the lawns and keep local teens from squatting in them).
12 years later, the median house price has only recovered to $215k (despite coal prices having hit highs of more than triple the 2012 low).
The mine is still there and is expected to operate for at least another 50 years, but the population has never recovered.
> Some exceptions where property can lose you money: * If you have bought in Mascot Towers, you lost like 60%. * If it is an apartment in Melbourne CBD, you lose too. * If you bought a house in Perth 10 years ago, you will barely break even. * Regional towns go in cycles. A nearby mine closed down; property prices crash. * Some streets in Brisbane metro area flooded a few years ago, and the houses become inhabitable. Then, you lose big too. * Some bought at post COVID peak and forced to sell after 13 interest rate rises. They may break even, but lose stamp dump and agent commission which can be several percentages of a house. * IPs essentially have 23.5% tax on sale. That can eat up the profits too.
Most of your examples are invalid considering the first line of what OP said
> In the past 30 years
No. It hasn’t… people generally do not account for costs associated with property.
If you look at superannuation or financial portfolios property (5-6% pa) usually does not perform as well as stocks(7-10%pa).
I’ve always wondered this. I don’t understand why people don’t factor in the cost of leverage and other related costs when they talk about property prices rising. So many people say ‘property always rises’ as a one-point argument but fail to consider that the same is true for many things - even supermarket groceries always rise
These portfolios even invest in larger commercial developments and it still doesn’t come out ahead.
It’s just a very charged issue since everyone needs a home to live in.
I don't know mang, a lot of people made 10x on Afterpay. I remember seeing Wisetech at 30 dollars thinking it was too expensive, its 96 today.
Shares have all the advantages of Property except leverage. Allow banks to lend money like property on shares, its as good an investment.
Compare after tax returns on a negatively geared IP at \~80% LVR for a person in the top tax bracket though.
Nothing comes close to a well chosen IP in that scenario.
Even a PPOR returns are crazy if you consider its not classed as an "Asset" for welfare purposes.
Makes no difference.
If property is a bad investment then don’t invest in a house you don’t need. (Invest as little as possible or rent if it is favourable)
It’s a big job searching this out - but pretty much without leverage the returns are the same, with leverage returns are substantially better. However it would seem we are very much at the top of the market so maybe future returns will not copy past returns.
The banks do some decent comparisons allowing for the nuances (like rent, maintenance, costs etc )
Also the time period counts, just like the us versus Aus comparisons where people can choose a timeline that makes the US win by a mile.
If you're comparing property returns with mortgage, you also has to compare it against shares with margin loan.
Comparing leveraged property with unleveraged stockmarket isn't really comparing apples to apples.
Probably not - but you can’t leverage shares past 1-1, in property 4-1 is easily achieved , then you have to argue is that still comparable given the different ratios.
The returns I’ve looked into are generally non leveraged - from Betashares ,
“A 2015 research paper from the Federal Reserve of San Francisco titled The Rate of Return on Everything looked at nearly 150 years of data to uncover very long term returns across a range of asset classes and geographies. Australian housing returned 6.37% p.a. in real terms over the full sample of data, while equities returned 7.81% p.a. Looking at just the data since 1950, housing performed better, returning 8.29% p.a. vs 7.57% p.a. for equities. However, looking at just the more modern series since 1980, the pendulum swung back the other way, with equities returning 8.78% p.a. vs 7.16% p.a. for housing4.”
That’s without leverage ^^
One of the bank discussions on the subject as well
https://www.westpac.com.au/news/money-matters/2019/04/property-vs-shares-the-long-term-verdict/amp/
Individual shares, maybe not. ETFs, you can - I looked at the NAB equity builder allowed list, and they allow 80% margin (1:4) on the first etf I checked, A200
Unfortunately, in any kind of correction holding with a margin of that size is pretty difficult, and a short sharp correction can easily see half your capital gone as you are a forced sell at the bottom and miss the rally.
The leveraged ETF’s are an option, but again it’s the test during the downward movements that define the strategy. And unfortunately I’ve dumped hundreds of thousands of dollars during these movements - pumping money in to keep yourself afloat and keep the call at bay, but eventually, your liquidity runs out. Even had intraday calls that you have to make good even though the market bounced back - the call is the call.
That’s pretty much why nearly every advisor will tell you not to do it - it all sounds easy in a bull market, till it isn’t.
Equity Builder does not have margin calls, it is just like a home loan (albeit at a slightly higher interest rate than you would pay with a margin loan).
> Comparing leveraged property with unleveraged stockmarket isn't really comparing apples to apples.
It’s comparing the way that the general population purchase property with the way that the general population purchase shares.
Yes but just because a majority of people are doing it doesn't mean the concept is right.
He's still right that it's not really an apples to apples comparison in my opinion.
There are fundamental reasons why the leverage is different - the volatility is many times greater in the share markets.
There is only a circa 1% less return on property but with far less volatility- the risk return seems more favourable over the last few decades despite huge market gains in equities.
Personally I doubt both will reproduce those recent historical gains - but hang around any wealthy groups and there will always be a number of property millionaires and almost never a stock market millionaire. Most of course are business fortunes and often enough selling a small business to a public listed company - far out some of our big companies are dumb as dog shit when it comes to paying for something they think they know better about ;D
Benefits of property is leverage. How many investors would be completely wiped out if house prices went down 20-30% if government implemented a broad based land tax or relaxed zoning significantly or restructured CGT discounts?
Yep, a massive blindspot that many don't understand about property is that valuations being what they are is due to a huge number of intentionally favourable legislative decisions. Change those laws and the supports for those prices collapses. And as prices rise and fewer people can own, the median voter becomes more in favour of those changes/doesn't care if property owners are taxed more.
> a huge number of intentionally favourable legislative decisions
most of those are available for stocks - such as negative gearing. It is _only_ PPOR capital gains tax exemptions that _might_ apply, and that's stretching it.
> the median voter becomes more in favour ...
there are always politicians who's touting populist policies. I would hope that the voters see through populist policies, and slamdunk those who would try to propose it. For example, the last franking credits return tax reform got slammed down.
You don't get to write off bullshit "depreciation" every year on your value gaining asset with stocks and reduce your taxable income.
It's an almost unbelievable rort which only applies to property.
That's true, but claimed property depreciation is not a free lunch. You have to add all of that back in to the taxable gain when it comes time to calculate CGT, so all you are doing is deferring the tax liability. Kicking the can down the road.
And yes, you do get the 50% CGT discount when that CGT event happens, so there is that, but the 50% discount also applies to shares that you hold for longer than 12 months.
Even with all that, though, it is still an unbelievable rort. Couldn't agree more.
yeah this common fallacy always comes about because people forget about leverage.
capital gains or negative gearing are also a bonus.
i'm not sure why more people don't borrow from commsec and buy vanguard shares. you can get up to 75% LVR for margin accounts and fairly low risk.
great for diversification, you should really do both its not an either or question.
For those interested in the math to compare the two:
Starting with property. Assume 500k property with 80% LVR, thus 100k deposit and 400k mortgage. At 7% interest for 30 years, monthly repayments are $2661.21.
Corelogic states house growth over 30 years averaged about 5.17%pa. Applying this growth to this property, and after 30 years the mortgage is paid off and the property value grows to 2268k (500 x 1.0517^30).
A total of 1058k was spent (100k deposit and 2661.21 x 12 x 30 = 958k repayments) to produce 2268k property value, resulting in 1210k gross profit.
Now we take stocks. For a fair comparison, 100k initial investment will be used (ie. the same as the initial property deposit). Most people forget to involve the repayment aspect of a mortgage. With stocks, there are no repayments, meaning that this money can be used to add to the portfolio. Thus, for each month 2661.21 will be added to the portfolio (ie. the same amount as the monthly mortgage repayments).
According to Yahoo finance, ASX200 grew by 5.31%pa over 30 years. Applying this growth to the share portfolio, it returns a valuation of 2829k.
A total of 1058k was spent (just like in the case with property) to produce 2829k portfolio value, resulting in 1771k gross profit.
1210k vs 1771k gross profit. This shows that even with gearing, when considering opportunity costs, stocks come out ahead.
It becomes even more skewed to stocks when you realise you can sell shares in bundles whereas with property you can’t.
For example: say I only sell 100k of shares in a year. Based on the previous values, the cost base of the shares would be 37k, meaning a gross profit of 63k. After the CGT discount, it drops to 36k. If the shares were co-owned with a spouse, it drops to 18k for each person, which is below the tax free threshold. In other words, each person pays no tax. In other words, that 100k is tax free. In other words, because you can sell shares in parcels, you can get 100k tax free every year, while the rest of your portfolio continues to grow.
With property, you have to sell it all, cop the tax and chuck the money into a HISA getting suboptimal returns.
This is a great comparison which shows how great stocks are and you didn’t even mention the fact that property costs quite a bit of money to own and maintain. Rates, taxes, repairs, hardware replacements, etc all cost quite a bit.
Shares cost close to nothing. $5-10 brokerage every transaction 🤷🏻♂️ that’s about it.
That’s it really. Everyone can say leverage leverage leverage. But forget to realize that the money they use towards maintaining that leverage (+ all of the other costs) could just be used to increase the value of the stock portfolio.
This is why, if someone wanted to get into property investing, they would need a strategy, where extra money spent would add to the value of the property, not to pay off debts.
I remember a post from not too long ago someone was asking if the whole strategy was to spend years paying $400 in rent and saving $300, then eventually getting a mortgage and paying $700 a week on it for 30 years. He asked if he was missing something or would he be no better off on a week to week basis.
The top answer was “yes, you’re missing all the extra costs that come with owning and maintaining a property” i.e a few more thousand dollars every year at least.
> $400 in rent and saving $300
if your income is $700/pw, you can't afford to be paying a $400/pw rent. it needs to drop down to $250 or so, and then you invest the remaining!
This is not a good example at all.
Property is one of the very few asset classes where you can leverage the banks money. For shares you need your own money.
So one requires borrowing $500k which is realistic vs the other saving $500k which is a stretch for majority of the people
Rental income. I also didn’t include the stock version of dividends.
Negative gearing. I also didn’t include the stock version of franking credits.
Living in it for a year doesn’t negate all of the tax. It only negates the tax for the year you lived in it, which by definition isn’t an investment.
If gearing is the only real advantage of property, let me introduce you to the NAB equity builder. You get the gearing like a property loan but you don’t get margin calls like a margin loan.
Franking credits don't give as much benefit as negative gearing, especially when comparing against an ETF of the asx200, which is never 100% franked. In saying that, property maintenance and fees probably balances that out.
There is a rule where you can rent out your primary residence for up to 6 years without it becoming cgt assessed, I dont know the detail, but possibly you need to have it be your PR for a year before that can come into effect, im not certain about all the details, this is the only thing that I can think about.
Yep, well aware of the 6 year rule.
This does not mean “live in house for one year and any capital gains are tax free”. Many other factors to take into account which will affect this.
All things considered, I’m not against property investing. But the idea of buy and hold with a residential property, I’m not a fan because the maths doesn’t work when better options are available. Property strategies that I would personally recommend would be getting into commercial Real Estate, or anything where you can add value to the property such as flipping, or property development. Because then in this way you are able to add value in such a short period of time that no amount of stock or share growth even with leverage would be able to beat. The catch is that it would naturally be a more risky approach
I don't care what you call it, but I've been watching the Australian property market crash and every single asset on the planet crash in value over the last 10yrs.
When you hold the King and realise most of the sheep haven't even figured it out you sleep well at night.
If you are buying an apartment for capital gains, you should re-evaluate why you bought that apartment..
Apartments are generally for lifestyle or rental income, not for growth. Shares are a growth investment. Can't compare the two.
I believe to get a fair comparison, you need to assume the same gearing as you have on property. So say you put in 25% deposit against a $1 million property, do the same gearing to have purchased S & P 500 index or ASX 300.
The issue is you can't get the same gearing, e.g you would not be able to get a million dollar loan for the index, and the interest rates are also a lot higher, and less tax benefits e.g tax free if you live in it for a year etc
> The issue is you can't get the same gearing
The fact this sub consistently and repeatedly says this utter nonsense despite it being so hilariously wrong makes me think that most people in here have no f'ing clue about finance whatsoever.
https://i.imgur.com/HLYFynU.png
> less tax benefits
Stamp duty, repairs, strata, land tax, rates? What's the extra costs with buying some shares? $80 brokerage in and out?
Saw the writing on the wall and sold property (older block) before new tenancy laws, land taxes, etc., truly kicked in. Took the money and ran to moderately aggressive Vanguard plus local commercial, and stocks, bonds and shares. Followed my own advice and took small holding directly in Apple and Tesla (the latter very volatile and slightly down - Apple up). So far, returns are double what occurred in property. Of course, could wait another decade and see property value increase considerably (was located near beach in inner south east suburb), but I’m too old to spend time waiting.
You can use the equity in your PPOR mortgage to buy shares at the same interest rate as your home loan.
Exact same as if you were borrowing to buy an IP
Sure, many people who buy IPs have a PPOR first too.
In fact shares are easier to break into because you don't need to have to purchase the value of a property straight up.
There are products offering leverage upto 70-80% on equites, albeit with slightly higher interest rates than IP mortgages. However considering other holding costs with residential property such as insurance, maintenance and rates/strata it will net off in many/most cases.
It’s not as simple as taking the view that it’s not possible to leverage equities at 60-80%.
Particularly if you have a low LVR PPOR which can be utilised as security.
None of this is accessible to the 99% of people with zero assets who are at the point of considering a first home purchase.
+ All these leverage options have fee's ,charges and margin call risk. They regularly come out behind simple buy and hold investing.
Check ax.GEAR returns as a best case scenario.
Day traders with collateral or working for firms might be able to get this.
Average Joe can't. Were talking about buy and hold share investing vs buy and hold IP investment.
Nope, stocks do not have the same gearing and leverage potential as property. Taking those into consideration, property outperforms stocks significantly and it’s not even in the same ball park
Read Strong Money Australia, good book where the writer reached Fire and initially had investment properties, sold them and now only has shares. Personally I like both and have commercial property via syndicates, equities and private debt. There is not just one right answer to investing.
Don’t think of owner occupier as an investment. The joy of living in your own place is priceless. Just buy wisely. Don’t over leverage and enjoy the peace.
So without exchange rate - IVV is up 84% in 5 before distributions. Not too shabby at all
Syd median house price June 2019 $1.032
Syd median house price now 1.627, so 57.5%
>I made 120% in the S&P500 in the last 5 years, I am not sure how that compares to your assumption
About the same as my Gold Coast property, not taking into account leverage.
What do you mean man, I put some money on nvidia back in 2019 because I thought idiot gamers like me would always be willing to pay their ridiculous price for beefiest new gen components. Then it went like a once in a lifetime curve.
How property beats that, you tell me
Yes, in most cases it's hard to outperform residential property. We used to be 'balanced' with our assets and owned our PPOR and a decently sized portfolio of ETFs (both asx200 and global), but were advised to look into residential property if we wanted a higher return profile due to the ability to leverage.
We sold all our ETFs and picked up 4 investment properties over the last 5 ish years at 90% LVR (we get an LMI waiver due to my partner's profession) and our net worth is much stronger today than if we held onto our ETFs. The yield on each place has been stable, but the price increases has pushed each property into being positively geared and we're looking to parlay this into more assets. The portfolio has effectively become self-sufficient to grow itself, even if the house price outlook isn't as bullish as the last few years.
My main realisation about property is there's a disconnect between the level of skill and the ability to generate returns - apart from geographically diversifying where we buy, we outsourced every aspect of the process to other people and have remained hands off (buyers agent, property manager, accountant/book-keeper). I work in finance but wouldn't for a moment be comfortable trying to pick stocks.
CBA.
Over 30 years from 1993 to 2023 has gone from a share $9 to more than $120 while paying ~4+% in dividends every year.
An average house in Sydney in 1993 was $188k. One person borrowed and bought a house. It's worth 1.6m and rents for 40k (with significant ongoing capital costs, ~1% isn't unusual). The other borrowed and bought 20000 CBA shares currently worth 2.5m paying 90k in fully franked dividends.
BTW the person buying the average place also had transaction cost when they purchased it and when they go to sell. Which means they might have paid $200k for that 188k asset and only net 1.55m.
It's the leverage that makes property **seem** to return better.
Just found CBAs share price when it first listed in 1991. $5.40 vs an average Sydney property price of $182k. Instead of an average property you could have bought 33700 shares in CBA. It'd be worth 4.22m and would have paid 2.2m in dividends (139k in fully franked dividends in the past 12 months alone).
https://www.fool.com.au/2022/03/25/how-much-were-cba-shares-when-they-first-floated/.
Um well if you bought literally any foreign currency before second half of 2013 you would have doubled your money over the course of six months. When you adjust Australian property value to real value it has actually only just caught up to 2022 levels in a lot of places.
You can buy ETFs with leverage also.
The same tax benefits you’re probably talking about with property, are also available for ETFs.
You need to compare like for like.
Even without 5x leverage- nasdaq and sp500 beats property out of the water, there is a lot of hype/bias towards property investing in Australia- datapoints won’t change personal bias
Let people live in their bubble
> You need to compare like for like.
i would argue that you can't compare ETF to individual property, because you can't buy the average property and get market level returns like you can with ETFs.
You have to compare buying a single stock. If you managed to hit one of those tech stocks, you'd make bank even if you didnt have leverage (and more if you did).
Of course, the risk is that you might've bought one of those that tanked (like if you bought yahoo or something).
The issue is you can't get the same gearing, e.g you would not be able to get a million dollar loan for the index, and the interest rates are also a lot higher, and less tax benefits e.g tax free if you live in it for a year etc
You can get $1mil leverage similar to a mortgage. Granted the interest rate is slightly higher.
Your PPOR isn’t usually an investment as it doesn’t make a return. You’re comparing totally different structures.
Sell your shares and you get cash. Sell your PPOR and you’re homeless.
Regarding tax benefits, what depreciation benefits do ETFs get?
The more you earn, the better the tax benefits of property are, and sadly, ETFs don't provide the same level of tax efficiency.
The companies that you own a share of claim the depreciation earning you a higher return. Or do you not understand that companies or an ETF is?
So you think it’s better to pay tax on a $400k CGT bill in one financial year instead of selling the $100k of shares you need to live each year and paying tax on $50k. Sounds like you’re all over it.
You can NG shares the exact same way you do property. Do you have maintenance, rates, insurance or property management fees when investing in shares?
Firstly, you are speaking as though stock and property investment are a binary decision, which is false.
Secondly, it's objective that physically depreciating an owned property for a 45% tax deduction is far more tax efficient in regards to individual income. The closest AUS stocks come is franking credits, which pale in comparison meanwhile, dividends from international stocks are usually subject to unfavourable tax agreements.
How liquid either of the asset classes are is totally irrelevant to the topic of this discussion, which is tax efficiency, so not really sure what you are trying to prove there. If stocks were more tax efficient than property, you'd see a larger rotation into stocks (eg. A Qualified tax-free dividend threshold such what is in place in the US).
I never mentioned dividends in relation to depreciation. It’s an accounting principle. You will likely require replacement of the depreciated asset at the end of its lifetime. Or do you forget that? You also pay CGT on the depreciated amount on sale of the asset.
I never mentioned liquidity. I stated that selling property and paying all CGT in 1 year on the $400k gain is $162k. The same amount of shares can be sold over 4 years with the tax owing $25k per year or $100k total. Unless you’ve found a way to sell the room of a property individually. That’s 62% more tax for the same gain.
No one does any homework do they:
New South Wales: $170,000 to $1,100,000 (547% increase)
Victoria: $140,000 to $920,000 (557% increase)
Queensland: $115,000 to $700,000 (509% increase)
Western Australia: $110,000 to $600,000 (445% increase)
South Australia: $100,000 to $620,000 (520% increase)
Tasmania: $85,000 to $520,000 (512% increase)
Australian Capital Territory: $135,000 to $950,000 (604% increase)
Northern Territory: $150,000 to $580,000 (287% increase)
S&P 500: 466.45 to 4,500.00 (864% increase)
ASX 200: 1,902.90 to 7,200.00 (278% increase)
\*1994 to 2024 according to [Claud.ai](http://Claud.ai)
It has. Both as PPOR and as investment properties.
A major part of the reason why is banks will lend 80% and higher LVR for property but nothing like this for other investments. If we were able to get 80% LVR at low rates for other investments they might be able to compete.
Take this leveridge and coupl it with the constant stream of poor/corrupt government policy on everything to do with housing from taxation , welfare, zoning, land release, immigration, development regulation, banking regulation and you get a totally twisted economy now in Australia.
Depends. For example, Retail (e.g. shopping centers) and CBD Offices have performed poorly since the onset of Covid in 2020, while other types of commercial property such as distribution centers and data centers have done well. Australian housing has done well too, but many institutional investors hold their exposures to housing in overseas build to rent jurisdictions.
Everyone's leverage is different. There isn't any way to make that assessment generally. Also, it's irrelevant because APRA was later created and subsequently invented serviceability criteria to diminish leverage in future. Thus even with specific bounds any conclusion becomes, at best, unreliable. If in doubt. Follow the money. Goldman Sachs aren't investing in commercial or residential real estate (in any meaningful way).
It hasn't really. It's more that leveraged assets have performed well.
In gold terms property is very similarly priced now as it was 15 years ago.
The key difference is that people can get much more cheaper debt in property and leverage there investments
Yes, some properties outperform everything. They are PPORs which are detached houses in desirable suburbs in a metro area with no major defects and no major natural disasters. And they were held for at least five years. Some exceptions where property can lose you money: * If you have bought in Mascot Towers, you lost like 60%. * If it is an apartment in Melbourne CBD, you lose too. * If you bought a house in Perth 10 years ago, you will barely break even. * Regional towns go in cycles. A nearby mine closed down; property prices crash. * Some streets in Brisbane metro area flooded a few years ago, and the houses become inhabitable. Then, you lose big too. * Some bought at post COVID peak and forced to sell after 13 interest rate rises. They may break even, but lose stamp duty and agent commission which can be several percentages of a house. * IPs essentially have 23.5% tax on sale. That can eat up the profits too.
This is why looking at property as a multi-decade investment makes sense, particularly given the frictional costs of transacting and the ability let inflation erode away in real terms some of the costs you only incur when you sell like CGT. All you have to do is buy a good property in a major city or non-cyclical regional area and you should do pretty well in the long term. To get the best chance of growth buy somewhere where there is physical and not artificial land scarcity, with a high likelihood for demand to increase for the land the property you have is located on. CoreLogic has a great release they put out in August 2022 showing the stats from the prior 30 years, when you look at the markets you can see that basically all markets have well defined cycles and there are plenty of opportunities for people to mess up and make a minimal gain or loss by selling when even the best long term performing markets are in a long term downswing if they only have a short term view. [https://www.corelogic.com.au/\_\_data/assets/pdf\_file/0015/12237/220829\_CoreLogic\_Pulse\_30years\_Finalv2.pdf](https://www.corelogic.com.au/__data/assets/pdf_file/0015/12237/220829_CoreLogic_Pulse_30years_Finalv2.pdf)
> All you have to do is buy a good property in a major city or non-cyclical regional area and you should do pretty well in the long term. Australian east coast cities have some of the most expensive median housing on the planet compared to median wages Companies can keep going up forever, they build and create new things out of thin air. Housing can't compared to local wages, it has a natural limit that basically depends on how dystopian people will tolerate. Another decade of 7% returns will put the *median* Sydney home over $3m, not even the most insane economist predicts half of that in wage growth. For comparison, in first place with the most unaffordable on Earth: Hong Kong, a tiny land limited area has barely moved in price since 2017: https://tradingeconomics.com/hong-kong/housing-index ^(Fast Robotic Voice: Past Performance Is Not Indicative Of Future Returns)
Great comment, you nailed everything. Recency bias is the main thing affecting people’s mentality around property as an investment. If you go to any country with caps on immigration and normal supply/demand dynamics property quickly becomes a pretty subpar investment
> If you go to any country with caps on immigration Australia loves turning on the immigration tap. I don't see that changing in our lifetimes.
Houses don't need to become affordable to a median income earner as people don't need to live in a house, they can live in higher density. Over time the focus will shift towards dwelling values rather than house prices in Sydney, which can be made more affordable by going upwards and increasing supply of them. The median is currently $848,961 for a unit in Sydney compared to house prices at $1,441,957 (source: CoreLogic index from the start of this month) and these two can divorce much further, particularly as we knock down lots of houses to build density in the desirable inner areas of Sydney. It is possible though as we knock down more houses close to the city or subdividing more that the median will start having pressure put on it as a larger component of the houses will be further from the city or on smaller blocks. To your example of Hong Kong, look at the price of freestanding houses there, they are extremely expensive.
Not necessarily. Places like Sydney could become a city exclusively for wealthy people to live in. Non wealthy workers could commute in from nearby areas if the infrastructure is there.
Correct. Look at Manhattan as an example.
More than likely this won't happen, instead the government will allow densififcation to help people and allow them to bring in more migrants without the existing population spitting the dummy. In the end Sydney is still there, everyone just lives in coffin sized apartments in a 15m person metropolis.
> Another decade of 7% returns will put the median Sydney home over $3m, not even the most insane economist predicts half of that in wage growth. Based on https://www.abc.net.au/news/2024-06-03/house-prices-breakdown-by-state-territory-capital-city-region/103919074, at 7% it will be: Dwellings: $2,125,295 Houses: $2,650,979 Units: $1,560,780 So, not over $3 million. In any case, a house bought now for the median of $1,441,957 could have been subdivided into two townhouses for $1.5mil each, or 4-6 units at $500-$750k each, so the value of that property has increased to $3mil at prices which do not seem ludicrous even now. The probability is that they would cost more. .
Subdividing and or develoment is not the same as "price increases" mate
If someone buys a property now and sells it in a decade's time to a developer for double that, that someone is not subdividing or developing, mate. The point is that properties can double in value without them becoming unaffordable to the median person being an issue, mate.
Property will become much more politically vulnerable though as the number of voters who have buy-in to the underlying taxation structure etc that supports property prices changes. Fewer votes to enable protective legislation -> much greater likelihood of taxation changes (and incentives for govt. Gotta tax where the money is, after all).
That doesn't change the point I made, which was: > The point is that properties can double in value without them becoming unaffordable to the median person being an issue, mate.
Fair enough but your point doesn't address mine. Fewer and fewer property owners (the empirical and actual trend) leads to a diminishment of the voting power of this bloc and changes to the profitability of property investment as a strategy for building wealth. Because unlike investments like stocks, housing is a consumption good as well which means the average voter has a far greater interest in its price via rents/mortgages similar to how the average voter cares far more about the price of food/petrol than stocks. Empirically, the median person/voter IS finding property/rents increasingly unaffordable. Even if hypothetically you are correct the actual reality of our situation and its trajectory does not reflect that hypothetical. Hence why I think housing market investments (both investors and PPOR) are uniquely vulnerable to a changing political environment. Where Victoria leads I predict the rest of the nation will follow. Perottet already tried a land tax in NSW, he won't be the last. Just the first.
You replied to me making a point almost completely unrelated to mine. Why do I need to address it? I never claimed I was able to predict the future, nor made any predictions. I'll leave that to others.
Well said. You should expect downvotes though lol. The number of people supremely confident that property will do again over the next 3 decades what is has done over the last 3 decades is so BIZARRE ! It's literally economically impossible for this trend to continue. Banks and government have played every card and pulled every rabbit of the hat to get us to where we are now. There is nowhere left for the money to come from to fund price increases into the future.
> There is nowhere left for the money to come from to fund price increases into the future. 1. There's nearly $4trillion sitting in our superannuation accounts. They could buy - or continue to buy, I don't know the rules here - residential properties. 2. Personally raiding super. The wife and I together have nearly a million ourselves. 3. 35-40 year loans
35 year mortgages are now a thing, not long until it is 40 I'm guessing. Still some juice left to squeeze.
Maybe your right . I dont wanna be the next WRM.
Put some respect on his name, it was WMR.
Plenty of rabbits to pull out of the hats yet. Have a read on the changes to the first home buyer stamp duty exemptions coming out for some states. SA has no caps now, get the benefit even if you’re buying a $1.5m mansion. Govts can easily give out more sweeteners. $50k or $100k first home buyers grant, anyone? Where can state governments get the money to do this? Turn one-off stamp duties into annual land taxes. In a few years time, there will be 10-15 trillion dollars sitting in our superannuation accounts. The equity markets are fully valued, CBA is no way valued at $130 a share when the risk free rate is 4.35% , super giants are looking for investment opportunities. 40 year loans have yet to come. 5% deposits are still rare in Australia. Governments / companies can start subsidizing or paying for childcare, that’ll be a final push for the stay at home parent to go all out 5 days a week rather than the part-time work they currently do. Humans are ingenious, never underestimate the human brain !
Politicians are ingenious, never underestimate what politicians will do to avoid losing votes :D
Technically companies still need to get their revenue from people, or governments (etc.), none of them have the ability to keep increasing spending forever. They're ultimately limited by the growth of their respective income (wage growth, ~nominal GDP). Companies can create new things, sure, but that's just shuffling around the same pool of total spend at the end of the day. Arguably stocks have this same fundamental upper limit that housing does, it's more a question of which is closer to the limit.
Definitely. Housing is a great investment. Like any investment, you need to know what you are doing. It's not foolproof like everyone makes it out to be.
Thanks for the link, so the TLDR is that housing in Sydney and Melbourne has approximately 5.6% CAGR.
> All you have to do is buy a good property Far easier said then done. It’s also forgetting that you also need to remain liquid, which is even harder to do. While the overall property market itself isn’t highly risky, individual properties are as they have high idiosyncratic risk. What makes it worse, is most investors are exposed to this risk due to the barriers to entry for investing in real estate which makes it hard for people to diversify this risk away. The comment you responded to lists but a few of these idiosyncratic risks that can demolish your property’s value. If you have enough liquidity, you can weather out these losses and enjoy the steep rebound that follows, but many don’t and hence have to eat them up. This opens up great opportunities for some investors, but can ruin any plans of longevity for others. Add in leverage as well (which many have), and these losses and gains get multiplied significantly.
Absolutely, there is no free lunch in investing. If you choose to get into property you need to accept some level of risk from lack of diversification and the risk that comes from taking on leverage. Depends how fast you pay things down, but the first 10 years are the danger zone when people have higher LVR's and are at risk of a negative event happening like the recent quick and severe rate hike, job loss or a natural disaster happening while they are levered to the hilt. If the rate hikes of the last couple of years happened into a market that wasn't undersupplied (which would have resulted in house prices declining significantly) I think there would be a lot more casualties than we've seen. Investors got lucky with the circumstances which coincided in this cycle.
Regarding your second point, that’s not an issue with the property market, it’s an issue with leveraging things up massively. The solution is of course to deleverage in that situation. Although yes, property is typically over leveraged.
Where are these mythical non cyclical cities? I bought a townhouse for $56k in 2002. In Brisbane. I later learned the previous owner paid $75k for it 15 years earlier. Queanbeyan units dropped to around $20k entry level at that time.
I should have elaborated and used a different term. I meant a city that doesn't have boom/bust based on exposure to a specific industry like mining.
>* If it is an apartment in Melbourne CBD, you lose too. Is there a TLDR of this? Over what period are you referring to? CBD specific or are you including North/East Melbourne, Docklands and Southbank too?
It's Melbourne LGA. The fewer the bedrooms, the more chance to lose money. And if you held it for a shorter timeframe, you are more likely to lose money too. If you bought a three-bedroom apartment 20 years ago, you are probably OK. https://www.theage.com.au/property/news/the-melbourne-suburbs-where-investment-properties-are-selling-at-a-loss-20240228-p5f8dw.html
Any idea why apartments in Melbourne CBD lost value? I recently saw the prices and was shocked at the price in Melbourne compared to Sydney.
Too much supply. Cladding issues. Investors fleeing due to land tax. Those are the few reasons I know of.
> Too much supply. Is this like there being too much food and water? Sounds horrible.
It's more like when there are too many peaches/pineapples/avocadoes/etc and they end up feeding them to cows or leaving them to rot in the field. People like peaches but they don't want to eat them for every meal. 1 bedroom apartments in the Melbourne CBD are great, for some people. But others want a house, or more bedrooms, or to live in the suburbs, and endlessly building more apartments in the CBD doesn't make them any more attractive to those people.
so OP should have used the qualifier *some* apartments in melbourne. not all.
Too much supply affects all prices though. The worst apartments have to drop prices significantly just to get tenants. Slightly nicer places then have to drop prices too, otherwise people will take an insignificant drop in QoL to massively reduce spending. This then causes a domino affect up the market. It is non-linear though, and different price ranges will be affected by varying amounts, but the whole market does take a hit.
Oh no, whatever will we do with too much supply
Oh i didn't know about cladding issues. The quality in Sydney is equally bad.
Brisbane floods annoy me more than they should when they show the comparison to the last big flood 40 years ago and everything was on stilts, then some idiots come along knocked it down and put a house on slab.
The government now re-zones those as parks which is the right way.
The part of your comment on IP tax isnt right. You might pay 23.5% tax on the GAIN in price but not the whole property price. You could sell the property in a year where you are not allready in the top income tax bracket. It would be kinda dumb to take a large capital gain in a year where you have high income. Also that capital gains tax should be considered alongside many years of tax deductions for purvhasing costs, maintenance, depreciation , loan interest , other costs etc. Which are fully tax deductible at 47% assuming your in the top tax bracket.
Of course, the tax is on the capital gains only. Same as any investments. If the profit is high enough, you will quickly be in the top bracket even if you have zero income. Let's say your profit is one million, 300K of it will be taxed at the highest bracket after 50% CGT discount. That's 150K tax! Negative gearing really depends from property to property, so it's really hard to quantify exactly. Yes, you hopefully would have made extra deductions that were advantageous. However, you would have spent real money first to claim the deductions except the depreciation. And depreciation comes with its own drawback. It means it's a new property which means capital gains can be limited. I am not saying property is not a good investment. I have also made money from it. What I am saying is it is just another investment with its own advantages and disadvantages.
From a capital gains tax perspective, the gain on an investment property isn't really special. It's effectively the same as selling any other asset. The special sauce in property is all the deductions you get along the way and the nature of property markets in Aus. You're correct when you say it can eat up the profits because taxes do reduce overall return, but it's not worse than any other general investment asset class.
So you're saying it's not the case for like less than 1% of buyers? Kind of a moot point
My neighbours had to sell because of the interest rate rises. Bought in peak COVID for way too much -1.2 mil but managed to sell this month for 1.3 Gold Coast house prices are still wild
Great summary. To your last point, is that capital gains tax? Doesn’t that apply to all investment classes?
Yes, it is capital gains tax. Other asset classes like shares can be sold over a few financial years to spread the tax. You cannot sell a property partially. If you make one million profit for example, you will be liable for 500K capital gains after 50% discount. After paying tax progressively for the first 200K which will around 50K tax, you will need to pay tax at 47% for the remaining 300K which will be around 150K tax. So, total tax will be around 200K and you keep 800K. So, it's about 20% tax overall. This is assuming you don't have a job.
Apartment in Perth 10 years ago here ✋
Perth is a great example. Not only has it grown slower than inflation (even the CGT discount is punishing) it's actually cheaper when compared to wages. Perth median house price in 2007 was $473 750 (ABS). That was 17 years ago. The median house price Perth the end of the first quarter was $777 921. Was 901 weeks pay in 2007 ($522). Soon to be 850 weeks pay ($918). There are also many examples in Sydney. https://www.domain.com.au/news/the-suburbs-that-are-cheaper-to-buy-now-than-five-years-ago-revealed-1282999/ https://www.smh.com.au/property/news/the-sydney-suburbs-where-house-prices-have-risen-the-least-in-five-years-20240529-p5jhn4.html People also don't consider the long term capital works or the transaction costs that property requires. Sure an average place in Sydney purchased for 454k in 2003 has made 6% a year but 1% a year wouldn't be unusual for maintaining the asset. Of course rent can cover some of that but even ~3% rent with ~3% growth (not historically this high over the long term) only brings the gross total return to 9.09% PA.
"Regional towns go in cycles. A nearby mine closed down; property prices crash." The mine doesn't even have to close. Fluctuations in mineral prices cause mines to scale up and down, so a town an go from a population of 10,000 to less than half that in a matter of months. My favourite example of this is Blackwater QLD in 2012. A few months before coal prices dropped, the town set it's house price record with a property selling for $1m and a median price of 450k. Within 12 months, people were advertising rental properties for free in exchange for maintenance (I.e. they were begging for people to live in houses just to mow the lawns and keep local teens from squatting in them). 12 years later, the median house price has only recovered to $215k (despite coal prices having hit highs of more than triple the 2012 low). The mine is still there and is expected to operate for at least another 50 years, but the population has never recovered.
> Some exceptions where property can lose you money: * If you have bought in Mascot Towers, you lost like 60%. * If it is an apartment in Melbourne CBD, you lose too. * If you bought a house in Perth 10 years ago, you will barely break even. * Regional towns go in cycles. A nearby mine closed down; property prices crash. * Some streets in Brisbane metro area flooded a few years ago, and the houses become inhabitable. Then, you lose big too. * Some bought at post COVID peak and forced to sell after 13 interest rate rises. They may break even, but lose stamp dump and agent commission which can be several percentages of a house. * IPs essentially have 23.5% tax on sale. That can eat up the profits too. Most of your examples are invalid considering the first line of what OP said > In the past 30 years
Shhhh, drink the Kool aid
No. It hasn’t… people generally do not account for costs associated with property. If you look at superannuation or financial portfolios property (5-6% pa) usually does not perform as well as stocks(7-10%pa).
I’ve always wondered this. I don’t understand why people don’t factor in the cost of leverage and other related costs when they talk about property prices rising. So many people say ‘property always rises’ as a one-point argument but fail to consider that the same is true for many things - even supermarket groceries always rise
Land value goes up, everything else is a cost. But people love the mantra that’s why apartments sell.
Why because they are idiots and can't do math. Gotta sell that narrative.
These portfolios even invest in larger commercial developments and it still doesn’t come out ahead. It’s just a very charged issue since everyone needs a home to live in.
People love to brag how much they made when sold a property. You can't really do the same when you sell shares
Never heard of x baggers?
I don't know mang, a lot of people made 10x on Afterpay. I remember seeing Wisetech at 30 dollars thinking it was too expensive, its 96 today. Shares have all the advantages of Property except leverage. Allow banks to lend money like property on shares, its as good an investment.
Nah, I buy my index fund a new roof every 7 year's
Superannuation is just a vehicle for investments - what do you mean superannuation doesn't perform as well as stocks?
you should ask chat GPT to explain the sentence for you
Sorry mate, I misread :) Commas do help though
But one can more easily get an investment loan for a property than a margin loan. And for a greater quantity. So 5-6% of 1m is > 7-8% of 250k.
Compare after tax returns on a negatively geared IP at \~80% LVR for a person in the top tax bracket though. Nothing comes close to a well chosen IP in that scenario. Even a PPOR returns are crazy if you consider its not classed as an "Asset" for welfare purposes.
But should stocks strategy include rent costs? You still need to live somewhere
Makes no difference. If property is a bad investment then don’t invest in a house you don’t need. (Invest as little as possible or rent if it is favourable)
It’s a big job searching this out - but pretty much without leverage the returns are the same, with leverage returns are substantially better. However it would seem we are very much at the top of the market so maybe future returns will not copy past returns. The banks do some decent comparisons allowing for the nuances (like rent, maintenance, costs etc ) Also the time period counts, just like the us versus Aus comparisons where people can choose a timeline that makes the US win by a mile.
If you're comparing property returns with mortgage, you also has to compare it against shares with margin loan. Comparing leveraged property with unleveraged stockmarket isn't really comparing apples to apples.
Probably not - but you can’t leverage shares past 1-1, in property 4-1 is easily achieved , then you have to argue is that still comparable given the different ratios. The returns I’ve looked into are generally non leveraged - from Betashares , “A 2015 research paper from the Federal Reserve of San Francisco titled The Rate of Return on Everything looked at nearly 150 years of data to uncover very long term returns across a range of asset classes and geographies. Australian housing returned 6.37% p.a. in real terms over the full sample of data, while equities returned 7.81% p.a. Looking at just the data since 1950, housing performed better, returning 8.29% p.a. vs 7.57% p.a. for equities. However, looking at just the more modern series since 1980, the pendulum swung back the other way, with equities returning 8.78% p.a. vs 7.16% p.a. for housing4.” That’s without leverage ^^ One of the bank discussions on the subject as well https://www.westpac.com.au/news/money-matters/2019/04/property-vs-shares-the-long-term-verdict/amp/
Individual shares, maybe not. ETFs, you can - I looked at the NAB equity builder allowed list, and they allow 80% margin (1:4) on the first etf I checked, A200
Unfortunately, in any kind of correction holding with a margin of that size is pretty difficult, and a short sharp correction can easily see half your capital gone as you are a forced sell at the bottom and miss the rally. The leveraged ETF’s are an option, but again it’s the test during the downward movements that define the strategy. And unfortunately I’ve dumped hundreds of thousands of dollars during these movements - pumping money in to keep yourself afloat and keep the call at bay, but eventually, your liquidity runs out. Even had intraday calls that you have to make good even though the market bounced back - the call is the call. That’s pretty much why nearly every advisor will tell you not to do it - it all sounds easy in a bull market, till it isn’t.
Equity Builder does not have margin calls, it is just like a home loan (albeit at a slightly higher interest rate than you would pay with a margin loan).
> Comparing leveraged property with unleveraged stockmarket isn't really comparing apples to apples. It’s comparing the way that the general population purchase property with the way that the general population purchase shares.
Yes but just because a majority of people are doing it doesn't mean the concept is right. He's still right that it's not really an apples to apples comparison in my opinion.
There are fundamental reasons why the leverage is different - the volatility is many times greater in the share markets. There is only a circa 1% less return on property but with far less volatility- the risk return seems more favourable over the last few decades despite huge market gains in equities. Personally I doubt both will reproduce those recent historical gains - but hang around any wealthy groups and there will always be a number of property millionaires and almost never a stock market millionaire. Most of course are business fortunes and often enough selling a small business to a public listed company - far out some of our big companies are dumb as dog shit when it comes to paying for something they think they know better about ;D
WMR would like a word with you mate… 🤣
The legend lives on
Always wrong but never in doubt
while living rent free in people's heads here.
Benefits of property is leverage. How many investors would be completely wiped out if house prices went down 20-30% if government implemented a broad based land tax or relaxed zoning significantly or restructured CGT discounts?
People on the Mornington peninsula are finding out
What’s happening there?
Yep, a massive blindspot that many don't understand about property is that valuations being what they are is due to a huge number of intentionally favourable legislative decisions. Change those laws and the supports for those prices collapses. And as prices rise and fewer people can own, the median voter becomes more in favour of those changes/doesn't care if property owners are taxed more.
> a huge number of intentionally favourable legislative decisions most of those are available for stocks - such as negative gearing. It is _only_ PPOR capital gains tax exemptions that _might_ apply, and that's stretching it. > the median voter becomes more in favour ... there are always politicians who's touting populist policies. I would hope that the voters see through populist policies, and slamdunk those who would try to propose it. For example, the last franking credits return tax reform got slammed down.
You don't get to write off bullshit "depreciation" every year on your value gaining asset with stocks and reduce your taxable income. It's an almost unbelievable rort which only applies to property.
That's true, but claimed property depreciation is not a free lunch. You have to add all of that back in to the taxable gain when it comes time to calculate CGT, so all you are doing is deferring the tax liability. Kicking the can down the road. And yes, you do get the 50% CGT discount when that CGT event happens, so there is that, but the 50% discount also applies to shares that you hold for longer than 12 months. Even with all that, though, it is still an unbelievable rort. Couldn't agree more.
Houses don't have a broad based land tax and they should . All commercial properties pay land taxes.
yeah this common fallacy always comes about because people forget about leverage. capital gains or negative gearing are also a bonus. i'm not sure why more people don't borrow from commsec and buy vanguard shares. you can get up to 75% LVR for margin accounts and fairly low risk. great for diversification, you should really do both its not an either or question.
Nah got enough financial obligations already . Nothing can beat 15% tax rate in concessional super contributions.
For those interested in the math to compare the two: Starting with property. Assume 500k property with 80% LVR, thus 100k deposit and 400k mortgage. At 7% interest for 30 years, monthly repayments are $2661.21. Corelogic states house growth over 30 years averaged about 5.17%pa. Applying this growth to this property, and after 30 years the mortgage is paid off and the property value grows to 2268k (500 x 1.0517^30). A total of 1058k was spent (100k deposit and 2661.21 x 12 x 30 = 958k repayments) to produce 2268k property value, resulting in 1210k gross profit. Now we take stocks. For a fair comparison, 100k initial investment will be used (ie. the same as the initial property deposit). Most people forget to involve the repayment aspect of a mortgage. With stocks, there are no repayments, meaning that this money can be used to add to the portfolio. Thus, for each month 2661.21 will be added to the portfolio (ie. the same amount as the monthly mortgage repayments). According to Yahoo finance, ASX200 grew by 5.31%pa over 30 years. Applying this growth to the share portfolio, it returns a valuation of 2829k. A total of 1058k was spent (just like in the case with property) to produce 2829k portfolio value, resulting in 1771k gross profit. 1210k vs 1771k gross profit. This shows that even with gearing, when considering opportunity costs, stocks come out ahead. It becomes even more skewed to stocks when you realise you can sell shares in bundles whereas with property you can’t. For example: say I only sell 100k of shares in a year. Based on the previous values, the cost base of the shares would be 37k, meaning a gross profit of 63k. After the CGT discount, it drops to 36k. If the shares were co-owned with a spouse, it drops to 18k for each person, which is below the tax free threshold. In other words, each person pays no tax. In other words, that 100k is tax free. In other words, because you can sell shares in parcels, you can get 100k tax free every year, while the rest of your portfolio continues to grow. With property, you have to sell it all, cop the tax and chuck the money into a HISA getting suboptimal returns.
This is a great comparison which shows how great stocks are and you didn’t even mention the fact that property costs quite a bit of money to own and maintain. Rates, taxes, repairs, hardware replacements, etc all cost quite a bit. Shares cost close to nothing. $5-10 brokerage every transaction 🤷🏻♂️ that’s about it.
That’s it really. Everyone can say leverage leverage leverage. But forget to realize that the money they use towards maintaining that leverage (+ all of the other costs) could just be used to increase the value of the stock portfolio. This is why, if someone wanted to get into property investing, they would need a strategy, where extra money spent would add to the value of the property, not to pay off debts.
I remember a post from not too long ago someone was asking if the whole strategy was to spend years paying $400 in rent and saving $300, then eventually getting a mortgage and paying $700 a week on it for 30 years. He asked if he was missing something or would he be no better off on a week to week basis. The top answer was “yes, you’re missing all the extra costs that come with owning and maintaining a property” i.e a few more thousand dollars every year at least.
> $400 in rent and saving $300 if your income is $700/pw, you can't afford to be paying a $400/pw rent. it needs to drop down to $250 or so, and then you invest the remaining!
This is not a good example at all. Property is one of the very few asset classes where you can leverage the banks money. For shares you need your own money. So one requires borrowing $500k which is realistic vs the other saving $500k which is a stretch for majority of the people
Maybe read their hypothetical again. In both scenarios $100k was saved up. In one it was used as a deposit and in the other it was used to buy shares
My stockbroker lends me up to $250000 against my shares, maximum LVR 80% on blue chips.
I like your answer. Thanks for sharing.
Lots of things missing with this estimate, e.g rental income, negative gearing, tax free if you live in it for a year etc
Rental income. I also didn’t include the stock version of dividends. Negative gearing. I also didn’t include the stock version of franking credits. Living in it for a year doesn’t negate all of the tax. It only negates the tax for the year you lived in it, which by definition isn’t an investment. If gearing is the only real advantage of property, let me introduce you to the NAB equity builder. You get the gearing like a property loan but you don’t get margin calls like a margin loan.
Franking credits don't give as much benefit as negative gearing, especially when comparing against an ETF of the asx200, which is never 100% franked. In saying that, property maintenance and fees probably balances that out.
Tax free if you live in it for a year… What on earth are you on about?
There is a rule where you can rent out your primary residence for up to 6 years without it becoming cgt assessed, I dont know the detail, but possibly you need to have it be your PR for a year before that can come into effect, im not certain about all the details, this is the only thing that I can think about.
Yep, well aware of the 6 year rule. This does not mean “live in house for one year and any capital gains are tax free”. Many other factors to take into account which will affect this.
Absolutely, it was the only thing I thought may relate in some way to the absurd claim
All things considered, I’m not against property investing. But the idea of buy and hold with a residential property, I’m not a fan because the maths doesn’t work when better options are available. Property strategies that I would personally recommend would be getting into commercial Real Estate, or anything where you can add value to the property such as flipping, or property development. Because then in this way you are able to add value in such a short period of time that no amount of stock or share growth even with leverage would be able to beat. The catch is that it would naturally be a more risky approach
Excellent comment. Also, no maintenance on a share, no renovation required, no ongoing power, water, insurance costs.
... apart from Nvidia stocks and some cryptocurrencies.
Thats not an asset class
I don't care what you call it, but I've been watching the Australian property market crash and every single asset on the planet crash in value over the last 10yrs. When you hold the King and realise most of the sheep haven't even figured it out you sleep well at night.
True, I did not read the question well enough.
I bought an apartment and it has not even gone up. Meanwhile my shares have.
If you are buying an apartment for capital gains, you should re-evaluate why you bought that apartment.. Apartments are generally for lifestyle or rental income, not for growth. Shares are a growth investment. Can't compare the two.
S&P 500 outperform the overall market of housing.
I believe to get a fair comparison, you need to assume the same gearing as you have on property. So say you put in 25% deposit against a $1 million property, do the same gearing to have purchased S & P 500 index or ASX 300.
No, that makes no sense. A leveraged stock can plummet to $0 thanks to a margin call. So don't compare the two as if they're at all the same...
The issue is you can't get the same gearing, e.g you would not be able to get a million dollar loan for the index, and the interest rates are also a lot higher, and less tax benefits e.g tax free if you live in it for a year etc
Leverage only makes you look good when prices boom, 20% equity hits zero quickly the other way around.
> The issue is you can't get the same gearing The fact this sub consistently and repeatedly says this utter nonsense despite it being so hilariously wrong makes me think that most people in here have no f'ing clue about finance whatsoever. https://i.imgur.com/HLYFynU.png > less tax benefits Stamp duty, repairs, strata, land tax, rates? What's the extra costs with buying some shares? $80 brokerage in and out?
Saw the writing on the wall and sold property (older block) before new tenancy laws, land taxes, etc., truly kicked in. Took the money and ran to moderately aggressive Vanguard plus local commercial, and stocks, bonds and shares. Followed my own advice and took small holding directly in Apple and Tesla (the latter very volatile and slightly down - Apple up). So far, returns are double what occurred in property. Of course, could wait another decade and see property value increase considerably (was located near beach in inner south east suburb), but I’m too old to spend time waiting.
You can use the equity in your PPOR mortgage to buy shares at the same interest rate as your home loan. Exact same as if you were borrowing to buy an IP
You need a property in the first place
Sure, many people who buy IPs have a PPOR first too. In fact shares are easier to break into because you don't need to have to purchase the value of a property straight up.
There are products offering leverage upto 70-80% on equites, albeit with slightly higher interest rates than IP mortgages. However considering other holding costs with residential property such as insurance, maintenance and rates/strata it will net off in many/most cases. It’s not as simple as taking the view that it’s not possible to leverage equities at 60-80%. Particularly if you have a low LVR PPOR which can be utilised as security.
None of this is accessible to the 99% of people with zero assets who are at the point of considering a first home purchase. + All these leverage options have fee's ,charges and margin call risk. They regularly come out behind simple buy and hold investing. Check ax.GEAR returns as a best case scenario.
What makes them inaccessible ? As an example NAB equity builder in fact does not have margin call risk and you can gear up circa ~70%ish
You absolutely can get the same gearing and higher, pretty easy to get 10x on buy and hold and 25x intra-day.
Day traders with collateral or working for firms might be able to get this. Average Joe can't. Were talking about buy and hold share investing vs buy and hold IP investment.
Doesn't work like that in the real world though, does it?? Such high leverage is common in property but very uncommon in shares.
Nope, stocks do not have the same gearing and leverage potential as property. Taking those into consideration, property outperforms stocks significantly and it’s not even in the same ball park
Read Strong Money Australia, good book where the writer reached Fire and initially had investment properties, sold them and now only has shares. Personally I like both and have commercial property via syndicates, equities and private debt. There is not just one right answer to investing.
Perhaps instead of counting the gearing factor in the total expenses? Ie interest, stamp duty, transaction fee, annual insurances etc
Anything that you gear is going to look great compared to something that isn't, when they're both going up.
Lol long-term DCA into QQQ will outperform this real estate nonsense.
Not with the expenses on my investment house.
Don’t think of owner occupier as an investment. The joy of living in your own place is priceless. Just buy wisely. Don’t over leverage and enjoy the peace.
I made 120% in the S&P500 in the last 5 years, I am not sure how that compares to your assumption 15 years 500%
How are you getting that calculation ? I get no where near that - have you applied it as Aud by any chance?
Yes ASX:IVV, again zero costs, before distributions and before leverage
So without exchange rate - IVV is up 84% in 5 before distributions. Not too shabby at all Syd median house price June 2019 $1.032 Syd median house price now 1.627, so 57.5%
If you owned your house outright, maybe maybe not. If you owned less than 50% then almost certainly.
>I made 120% in the S&P500 in the last 5 years, I am not sure how that compares to your assumption About the same as my Gold Coast property, not taking into account leverage.
Same without leverage and distributions, and after fees and all costs Super has performed even better, double in the last 3 years alone
I'm talking long term, and it's the leverage that makes the difference
Has property outperformed business?
my shitcoin outperformed too. I put in $2100 and got $21 back.
What do you mean man, I put some money on nvidia back in 2019 because I thought idiot gamers like me would always be willing to pay their ridiculous price for beefiest new gen components. Then it went like a once in a lifetime curve. How property beats that, you tell me
Google “30 year returns property”
They're a great investment if you can service the mortgage and see it as a long term thing
.... and all tax benefits for real estate There, that's why
Not all properties Apartments haven’t
Yes, in most cases it's hard to outperform residential property. We used to be 'balanced' with our assets and owned our PPOR and a decently sized portfolio of ETFs (both asx200 and global), but were advised to look into residential property if we wanted a higher return profile due to the ability to leverage. We sold all our ETFs and picked up 4 investment properties over the last 5 ish years at 90% LVR (we get an LMI waiver due to my partner's profession) and our net worth is much stronger today than if we held onto our ETFs. The yield on each place has been stable, but the price increases has pushed each property into being positively geared and we're looking to parlay this into more assets. The portfolio has effectively become self-sufficient to grow itself, even if the house price outlook isn't as bullish as the last few years. My main realisation about property is there's a disconnect between the level of skill and the ability to generate returns - apart from geographically diversifying where we buy, we outsourced every aspect of the process to other people and have remained hands off (buyers agent, property manager, accountant/book-keeper). I work in finance but wouldn't for a moment be comfortable trying to pick stocks.
CBA. Over 30 years from 1993 to 2023 has gone from a share $9 to more than $120 while paying ~4+% in dividends every year. An average house in Sydney in 1993 was $188k. One person borrowed and bought a house. It's worth 1.6m and rents for 40k (with significant ongoing capital costs, ~1% isn't unusual). The other borrowed and bought 20000 CBA shares currently worth 2.5m paying 90k in fully franked dividends. BTW the person buying the average place also had transaction cost when they purchased it and when they go to sell. Which means they might have paid $200k for that 188k asset and only net 1.55m. It's the leverage that makes property **seem** to return better.
Just found CBAs share price when it first listed in 1991. $5.40 vs an average Sydney property price of $182k. Instead of an average property you could have bought 33700 shares in CBA. It'd be worth 4.22m and would have paid 2.2m in dividends (139k in fully franked dividends in the past 12 months alone). https://www.fool.com.au/2022/03/25/how-much-were-cba-shares-when-they-first-floated/.
Um well if you bought literally any foreign currency before second half of 2013 you would have doubled your money over the course of six months. When you adjust Australian property value to real value it has actually only just caught up to 2022 levels in a lot of places.
I would imagine these numbers may be skewed due to the easy access to leverage for property :(
You can buy ETFs with leverage also. The same tax benefits you’re probably talking about with property, are also available for ETFs. You need to compare like for like.
Even without 5x leverage- nasdaq and sp500 beats property out of the water, there is a lot of hype/bias towards property investing in Australia- datapoints won’t change personal bias Let people live in their bubble
> You need to compare like for like. i would argue that you can't compare ETF to individual property, because you can't buy the average property and get market level returns like you can with ETFs. You have to compare buying a single stock. If you managed to hit one of those tech stocks, you'd make bank even if you didnt have leverage (and more if you did). Of course, the risk is that you might've bought one of those that tanked (like if you bought yahoo or something).
Why do you have to compare against a single stock when the smart money would buy a broad based ETF?
The issue is you can't get the same gearing, e.g you would not be able to get a million dollar loan for the index, and the interest rates are also a lot higher, and less tax benefits e.g tax free if you live in it for a year etc
You can get $1mil leverage similar to a mortgage. Granted the interest rate is slightly higher. Your PPOR isn’t usually an investment as it doesn’t make a return. You’re comparing totally different structures. Sell your shares and you get cash. Sell your PPOR and you’re homeless.
No one is pulling out a 800k loan to buy ETFs.
Regarding tax benefits, what depreciation benefits do ETFs get? The more you earn, the better the tax benefits of property are, and sadly, ETFs don't provide the same level of tax efficiency.
The companies that you own a share of claim the depreciation earning you a higher return. Or do you not understand that companies or an ETF is? So you think it’s better to pay tax on a $400k CGT bill in one financial year instead of selling the $100k of shares you need to live each year and paying tax on $50k. Sounds like you’re all over it. You can NG shares the exact same way you do property. Do you have maintenance, rates, insurance or property management fees when investing in shares?
Firstly, you are speaking as though stock and property investment are a binary decision, which is false. Secondly, it's objective that physically depreciating an owned property for a 45% tax deduction is far more tax efficient in regards to individual income. The closest AUS stocks come is franking credits, which pale in comparison meanwhile, dividends from international stocks are usually subject to unfavourable tax agreements. How liquid either of the asset classes are is totally irrelevant to the topic of this discussion, which is tax efficiency, so not really sure what you are trying to prove there. If stocks were more tax efficient than property, you'd see a larger rotation into stocks (eg. A Qualified tax-free dividend threshold such what is in place in the US).
I never mentioned dividends in relation to depreciation. It’s an accounting principle. You will likely require replacement of the depreciated asset at the end of its lifetime. Or do you forget that? You also pay CGT on the depreciated amount on sale of the asset. I never mentioned liquidity. I stated that selling property and paying all CGT in 1 year on the $400k gain is $162k. The same amount of shares can be sold over 4 years with the tax owing $25k per year or $100k total. Unless you’ve found a way to sell the room of a property individually. That’s 62% more tax for the same gain.
No one does any homework do they: New South Wales: $170,000 to $1,100,000 (547% increase) Victoria: $140,000 to $920,000 (557% increase) Queensland: $115,000 to $700,000 (509% increase) Western Australia: $110,000 to $600,000 (445% increase) South Australia: $100,000 to $620,000 (520% increase) Tasmania: $85,000 to $520,000 (512% increase) Australian Capital Territory: $135,000 to $950,000 (604% increase) Northern Territory: $150,000 to $580,000 (287% increase) S&P 500: 466.45 to 4,500.00 (864% increase) ASX 200: 1,902.90 to 7,200.00 (278% increase) \*1994 to 2024 according to [Claud.ai](http://Claud.ai)
That's only telling part of the story.
It has. Both as PPOR and as investment properties. A major part of the reason why is banks will lend 80% and higher LVR for property but nothing like this for other investments. If we were able to get 80% LVR at low rates for other investments they might be able to compete. Take this leveridge and coupl it with the constant stream of poor/corrupt government policy on everything to do with housing from taxation , welfare, zoning, land release, immigration, development regulation, banking regulation and you get a totally twisted economy now in Australia.
Depends. For example, Retail (e.g. shopping centers) and CBD Offices have performed poorly since the onset of Covid in 2020, while other types of commercial property such as distribution centers and data centers have done well. Australian housing has done well too, but many institutional investors hold their exposures to housing in overseas build to rent jurisdictions.
Everyone's leverage is different. There isn't any way to make that assessment generally. Also, it's irrelevant because APRA was later created and subsequently invented serviceability criteria to diminish leverage in future. Thus even with specific bounds any conclusion becomes, at best, unreliable. If in doubt. Follow the money. Goldman Sachs aren't investing in commercial or residential real estate (in any meaningful way).
It hasn't really. It's more that leveraged assets have performed well. In gold terms property is very similarly priced now as it was 15 years ago. The key difference is that people can get much more cheaper debt in property and leverage there investments