Gearing up works both ways - Mary Holm
Q. I have been following with interest the debate between investment property versus alternative investments, particularly shares.
Thursday, March 25th 2004, 12:40AM
by The Landlord
I borrowed $1 million from the bank to invest in property, by putting up $100,000 of my own money. Over the past five years the property has almost doubled in value, thus returning almost $1 million on paper.
If I had invested my $100,000 in shares the profit would be what? About $100,000 at best, I would guess.
Is it not true that if you can access 10 times as much money via the bank, that over a long period of time, say 20 years, property is always the winner because your gains increase tenfold?
Consumer magazine (March 2004, page 17) says "the average New Zealand house price has grown at over 8 per cent per year over the past 25 years".
Please explain how alternative investments can ever match this return over a long period of time.
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