![Sydney titan Nathan Birch has 200 properties at just 31.](http://web.archive.org./web/20161124093830im_/http://static.domain.com.au/domainblog/uploads/2016/11/22045611/2_gsuz04.jpg)
It’s no surprise that Sydney residents are the wealthiest Australians in terms of home equity. The median house price in the harbourside city is now $1,068,303.
Data released in October by the Australian Bureau of Statistics shows Melbourne home owners are the second wealthiest (in home equity), with a median house price of $780,000, followed by Canberra ($661,912), Darwin ($595,466), Perth ($566,609), Brisbane ($521,152), Adelaide ($494,911) and Hobart ($338,703).
Domain chief economist Dr Andrew Wilson says the new statistics are not surprising “as everyone knows Sydney house prices are much higher than any other capital city”.
“Their home loan debt is higher too, but even when that is taken into account they own more equity,” he says.
Wilson says property remains the favoured form of wealth creation in Australia. “We have a strong connection to bricks and mortar investment as well as a cultural attachment to owning our own home.
“The family home is so important in Australia in terms of wealth creation because it is quarantined from any form of wealth tax. It doesn’t incur capital gains tax or land tax.”
Wilson says Australians have “a strong appetite for property investment” because they believe it is safer than other sectors and has more incentives. “There’s negative gearing, capital gains tax discounts and tax depreciation allowances,” he says.
By comparing the latest ABS home loan figures with housing values in each state, Wilson estimates that, on average, Australians own about 50 per cent equity in their property. “Of course this is much higher in older age groups as the longer you’ve been in the market the more home equity you’ll have.”
Wilson’s views are supported by the latest findings of the Productivity Commission that show 45 per cent of Australians aged 55 to 64 own their home outright (have no mortgage). It’s even higher (73 per cent) for those aged 65-74, and an impressive 80 per cent among those aged 75 and older.
ME Bank head of home loans Patrick Nolan says the bank’s analysis of property values shows Australian home owners have “racked up a lot of equity in their properties”.
“Australian home owners with a mortgage, on average, hold a great deal of wealth in their residential property,” he says. “ME’s analysis from a leading property information provider shows Sydney property owners have the most equity in their homes, an average of $443,900 per property, compared to $276,845 in Melbourne and $203,813 in Canberra,” he says.
Asked what home equity is most commonly used for, Nolan says the vast majority of ME customers use it to fund renovations.
“Expanding your home or putting on a new addition is a great way to use equity in your home as it typically adds value to the property,” he says.
“Other common uses of equity include buying a new car, funding a vacation or investments, including property.
“Rather than saving the deposit needed to buy an investment property, which can take years, you can use your home equity to finance the deposit. This means that you can buy sooner and start building your wealth.”
That’s how young Sydney property titan Nathan Birch made his millions.
The 31-year-old has a portfolio of 200 properties worth about $60 million. He earns about $500,000 a year in rental income, after expenses.
As a teenager Birch he worked two jobs to save for a deposit and, at 18, bought his first property for $248,000 in western Sydney. He made sure the rent covered the mortgage repayments and contributed extra to build up enough equity to buy another property.
He made his first million by age 21 and has steadily built his wealth using his “three key principles”.
“Firstly, only buy below market value so you have good equity from day one. Sounds unrealistic in this hot market, but there are always people who want to offload a property quickly. Secondly, make sure the rent covers the mortgage. It should be at least cash flow neutral. And thirdly, buy in an area that has good prospects for capital growth.”
Using some of the equity from his properties, Birch has just bought several sites in Sydney, Brisbane and the Gold Coast on which he plans to build blocks of units. He says he’ll rent them out “in line with my buy and hold strategy”.
“A lot of people are sitting on hundreds of thousands of dollars in equity but don’t realise it. They could be using it to buy another one, two or three properties,” Birch says.