Every bit helps but even with lower rates the best of the property boom is probably behind us.

I’m not saying it’ll fizzle out, just that it’s not likely to do as well as the relatively cheaper sharemarket with its better tax breaks.

The fact is the sagging global economy and collapse in commodity prices are delivering what amounts to a national pay cut.

Hard as it is comparing stocks with bricks and mortar you can take a stab at it, using the same principle as the price earnings ratio. This shows how long it will take before an investment is paid off; typically it’s applied to shares and shows how many years of profits before payback.

But you can adjust it for houses too by substituting net rents to show either the annual income for an investment property, or how much an owner occupier is saving.

For the sharemarket the ratio is just over 15 but for property, using net rental yields, it’s about 28 for Sydney and 30 for Melbourne.

There’s no rule about what the gap should be, but that sure looks a lot.

My bet is it will be narrowed, not that there’s a deadline or anything, by property price rises continuing to slow while shares accelerate.

That’s because global deflation and demographics favour shares over property.

The natural growth rate of property values is the rise in national income, probably around 4 per cent this year and for some time to come in a deflationary global economy.

Demographics are also changing. The labour force is growing more slowly, if not shrinking, as baby boomers retire – not to mention downsize – while young buyers if they’re not forced out of the market altogether increasingly prefer apartments. In any case, unemployment is forecast to rise this year.

A slow but sure upward climb in values is supposed to be property’s virtue over shares. In truth home values are rarely tested and so remain hidden for much of the time, revealed perhaps when a place down the road is sold, and fortunately most owner occupiers never become forced sellers.

Still, property is no longer the one-way street it was for baby boomers such as yours truly who thrived on years of inflation. Rates were much higher but they were negative in real terms making borrowing a breeze, not that I thought so at the time.

Buying a median-priced house in Sydney or Melbourne gives you a million-dollar asset for sure but not quite the way you’d like. I’m sure that one day it will indeed be worth $1 million but in the meantime that’s what you’ll have paid after interest.

Take the Melbourne median of $633,000 and paying a 20 per cent deposit. After 24 years it will have cost you just over $1 million based on an average variable rate over the loan term of 5.5 per cent, according to

But interest isn’t the end of it. Apart from the usual running costs such as insurance and rates, there’s always something or other that needs fixing.

Somewhere along the way you’ll probably be throwing in a renovation of some sort too – as a guide and the Australian Institute of Architects estimate the average new kitchen costs $42,017 and bathroom $38,696.

But won’t your home be worth far more than $1 million eventually, so you’ll be ahead?

Yes, but it’s a question of how long it’s going to take, and relative to what.

Median property prices are rising at an annual rate of 13 per cent in Sydney, where there’s a temporary supply shortage, and 7 per cent in Melbourne, according to Corelogic RP Data.

Let’s overlook the fact that the median price can be swayed by a rise in just a few top-end values or that every house is different.

But there’s no escaping that building starts, which will mean more houses and especially apartments adding to supply this year, are running at record levels.

And while Sydney prices were rising by almost 20 per cent not so long ago, did you know that over the past 10 years they rose less than 0.5 per cent a year taking inflation into account?

Compare that with the sharemarket. Including dividends, many of which come with a no-questions-asked 30 per cent tax break as well, it rose 6 per cent a year.

Global financial crisis and all.

Posted by David Potts – Money Manager (Fairfax) on 11th February, 2015