Australia is among the world’s wealthiest countries. Our total wealth is about $15tn, or nearly $575,000 per person, well above the OECD average. But much of this wealth is not really accessible – around $9tn is tied up in residential property, primarily in the family home.
Calculating the “real” value of a home is far from simple. Say, for example, you are lucky enough to buy a house for $1m with a mortgage of $800,000. The property’s value may increase to $5m over 30 years (a presumed rate of 5.5% growth per annum), during which you pay off the mortgage. You may believe you have a $4.8m gain ($5m minus your deposit of $200,000), available to fund consumption, retirement and anything else you like.
