Based on just matching inflation. Long term, capital growth has been shown to match wage growth which actually beats inflation. But I used a conservative long term assumption so it would be irrefutable. My properties did 15% last year in Sydney and were cash flow neutral. /QUOTE]
There is also stagflation and deflation. To calculate yield based on macroeconomics is dangerous t best. A better form of analysis would be why you believe a specific property would increase in capital growth, at a certain percentage.
I can't quiet agree with your calculation that for a comparison analysis you should include a 3% capital growth average, as there is clear evidence this is not always the case.
There is even the possibility the capital can go negative.
Gross yield. I'm actually only getting 4.2% on my properties after the capital growth last year, but 4.5% gross is readily achievable in most areas. Mine are top end so yield lower. I am comparing apples with apples as I calculated the Net yield after tax down to 3% and added that to the 3% capital growth to show 6% IRR for the $300K fully paid off IP model I outlined.
On an income vs income analysis, you should use Net income after interest and tax for both the a) interest on term deposit and b) property investment
Again, both will need to be shown at comparative terms. You can not calculate one based on a 1 year term, and the other on indefinite.
Ummmmm, yes? 300% better infact. And conservative at 6%. As I said, I achieved 350% last year on my $100K cash investment. But even so, I'd take 6% over 2% any day.
It's the benefit of gearing. It is a double edged sword. earning 4% is 300% better, correct. But the only way to achieve a substantial income is through gearing of that 4%, gearing has its risks. For a 4% spread, one would definitely want to almost completely de-risk the downside before gearing.