““The great Australian dream of home ownership has become tougher in the past decade, but a house is still one of the best building blocks for financial security. How can your family home be used to grow your wealth”

Australia’s obsession with property clearly has more power and passion (and longevity) than Peter Garrett’s opposition to uranium.

But is it still the “great Australian dream”? That is so ’60s – so Boomers and Retirees! Haven’t Gen Xers moved on from all that?

Absolutely not. And nor should we.

While it became known as Australians’ “dream” about the time Frankie Valli started making hits with the Four Seasons, home ownership is still the cornerstone of wealth creation.

Why? Primarily, it’s about enforced savings. A mortgage is part interest and part equity repayment. Eventually, a mortgage is paid off. However, renting is forever: “If you choose not to buy, you will rent until you die.”

The combination of a reducing mortgage and house price growth creates “equity”. If you borrow $320,000 to buy a $400,000 home, 10 years later your home might be worth $651,000 (assuming 5% growth), while the mortgage should be no more than $250,000. There’s $400,000 that’s yours.

Equity can help create wealth. Banks will lend against this for your investment in more property and/or shares to repeat the equity-building process.

(However, on that point, the Commonwealth Bank genius responsible for the “Equity m-a-a-a-te” campaign of the late 90s should be locked up for promoting using home equity for items like boats and cars.)

Using equity for further investment increases the investment risk being taken. And it’s not for everyone. But Gen Xers have enough time to ride property and share market bumps.

Bruce Brammall is the author of Debt Man Walking (www.debtman.com.au), has co-authored two property books, and is director of Castellan Financial Consulting. Email: bruce@debtman.com.au