The ANZ review has found the family home has been the highest returning asset over the past 24 years, taking costs, taxes and gearing into account.
Owner-occupied housing outperformed investment property (which still beat shares) largely because of its exemption from capital gains tax.
The findings follow a study by RMIT, which also found property has generated better returns than the sharemarket over the past 20 years.
Before property spruikers get too excited, however, ANZ predicts the stockmarket will outperform bricks and mortar over the next decade.
Even here, though, the bank points out that when the risks associated with each investment are taken into account, the difference between shares and property is likely to be small.
The report, Australian Property Research Asset Returns: Past, Present and Future, looked at a range of data from 1987 – the earliest date when all the required information was available – to 2011. It also factored in a range of costs.
For homeowners this included assuming maintenance costs – rates, insurance and general repairs – were 1.2 per cent of the property’s value.
Maintenance costs for investment property were calculated at 1.8 per cent of the dwelling’s value, covering advertising and property management fees.
Stamp duty was applied across the board at 5 per cent. To keep the analysis consistent, cash flow such as rent from investment property or dividends from shares was placed in a term deposit account.
When all the numbers were crunched, owner-occupied housing was found to have generated an annual return of 12 per cent. Investment property 9.6 per cent, stocks 8.9 per cent, government bonds 4.8 per cent, commercial property 4.2 per cent and term deposits 3.7 per cent.
“Owning your own home has been the best investment you could have made by a mile,” ANZ property research head Paul Braddick said.
“Even when costs and taxes were factored in, owner-occupied housing generated higher returns at a lower risk than equities.”
Mr Braddick says that a $100,000 investment in your home in 1987 would be worth $1.428 million today.
A similar sum sunk into an investment property would be worth $810,000. Past performance, however, is no guide to future returns.
Looking forward, the ANZ expects the ASX 200 to outperform all property over the next 10 years.
Equities are forecast to return an average of 7.8 per cent a year, commercial property 5.6 per cent, owner-occupied property 5.2 per cent, investment property 4.5 per cent, term deposits 2.8 per cent and government bonds 2.6 per cent.
The report assumes capital growth in housing will be 5 per cent over the decade, rental yields will average 3 per cent and there will be no major shifts in interest rates.
The good news for property owners is that when the ANZ factored in the risk associated with each investment, they all came out roughly on par.
“Looking over the next decade we are basically saying that risk-adjusted, these assets are pretty much in the same band,” Mr Braddick said. “Without risk both commercial property and equities are expected to have higher nominal returns over owner-occupied or investor property. Take risk into account and there is very little difference.”