Is this ignoring the 'rent' on the mortgage capital though? i.e. mortgage interest. I agree that most people don't think of mortgage interest as rent but I'm curious as to which figure you're comparing to.
Thats the point I am making, if you have the capital to buy a home outright buying your PPOR does beat a U bank deposit even if you completely exclude capital gains at all, so I am comparing the opportunity cost between a U bank and buying a PPOR and find that the PPOR wins even with our really low yields! For clarity Ill do the math fully:
$500,000.00 with U bank earning 6.51% p.a. interest $32,550 - 40% tax = $19,530.00 p.a. income. You will be paying rent somewhere lets say it is about 24k you are paying in rent p.a.
Now you in stead buy a PPOR for 500k and you no longer pay 24k of rent anymore, you now pay 2k rates and 2k of repairs p.a.
Its around about exactly the same even completely excluding capital gains.
Add capital gains over 25years and even someone with a short term bearish outlook would be buying a PPOR if he had the capital. Add in a few lost family tax benifits and it is a gimme.
Now I am nowhere near this position but even at lower amounts saved with some mortgage the maths between buying PPOR and U bank are closer than you think. And if you think houses will not move in price over 25years I suspect you will be found to be wrong. 5 years its possible, 10 years unlikely and as the time frame is increased inflation will take its toll and I would say short of a plague or new currency houses will be worth more nominally in 25years than they are now.
You mentioned deflation before, do you think in Australia our government has the restraint to reign over a period of deflation? We would print our way out. Before you mention Japan bear in mind they have a capacity for a larger population in all things not just homes so of course a shrinking population makes it very difficult to avoid deflation. We do not have this in Australia.
All this does not make me optimistic but I am realistic enough to know that when I have saved a few more bucks I would be mad to go on paying tax to the gov giving up FTB's and at the same time watching my deposit get eaten away by inflation.