Historically property has doubled every 7 - 10 years over the past 140 years. This is a growth rate of approximately 8% per annum.

As an example, and taking into account the historical property growth average of 8% per annum, a property valued at $300,000 today should be worth approximately $2.05 million in 25 years time.

Another reason to invest in property is that the Government provides a number of attractive tax benefits for property investors. In addition to this, banks will more often provide a higher level of borrowing for property rarely seen in other investments like shares and managed funds. This gives you the potential to achieve greater returns, because of the increased leverage. This means that you may require a smaller amount of funds to put into the property upfront.

A simplified example of this is illustrated here (excluding transaction costs, capital gains tax and other fees and charges):

If you purchased a $100,000 cashflow neutral property and only put 5% (or $5,000) into the investment and the property grew by 5% p.a. for 2 years, it would be worth $110,000. This is a 100% p.a. growth on your $5000. If, on the other hand, lets say you purchased $100,000 in shares and were able to borrow an exceptionally high 80% to the value of the shares (which means you put 20% or $20,000 into the deal). If they grew by 10% p.a. for 2 years, the portfolio would be worth $120,000. This is a 50% p.a. growth on your $20,000.

This illustrates that even in a slow market, if you purchase wisely and utilise leverage, you can still achieve a better return on investment with property in a market where shares may be outperforming property. Further to this, it should be considered that the property market has outperformed shares over the last 10 and 20-year periods, with a lower risk rating than shares.

Property it just makes sense…!