There are so many opportunities for investment available to us today. You could get into venture capital, you could trade stocks, options and currencies, or could even start a business, however, two assets have consistently stood the test of time: gold and real estate. Both have been revered for their ability to preserve wealth and hedge against inflation. Today we’ll compare the value of gold in Australia in relation to the average price of a house in 1920 versus 2024, illustrating how property remains a safe and reliable investment.
The Value of Gold in Australia
Gold has long been considered a safe-haven for investors, particularly during times of economic uncertainty. During the GFC and COVID, you heard many doomsdayers touting the need to invest in gold., and it did hold some merit. Gold, with its intrinsic value and limited supply make it a reliable store of wealth. In 1920, the price of gold was relatively stable, reflecting its role as a cornerstone of the global monetary system. Fast forward to 2024, and gold continues to hold its allure, with prices reaching new heights.
In 1920, the price of gold was approximately $20.67 USD per ounce, which translates to around $30 AUD at the time, considering the historical exchange rates. By 2024, the average price of gold in Australia had soared to approximately $3,431.06 AUD per ounce1. This dramatic increase underscores gold’s enduring value and its ability to outpace inflation over the long term.
The Average Price of a House in Australia
The Australian real estate market has experienced significant growth over the past century. In 1920, the average price of a house in Australia was around $6,296 AUD2. This figure, while modest by today’s standards, represented a substantial investment at the time, reflecting the economic conditions and purchasing power of the era.
By 2024, the average price of a house in Australia had skyrocketed to approximately $959,300 AUD3. This exponential growth highlights the robust nature of real estate as an investment and its ability to generate substantial returns over the long term.
Real Estate vs. Gold: A Comparative Analysis
When comparing the value of gold and real estate over the past century, several key insights emerge:
Appreciation Over Time: Both gold and real estate have demonstrated significant appreciation over the past century. Gold’s value increased from $30 AUD per ounce in 1920 to $3,431.06 AUD per ounce in 2024, representing a growth of over 11,000%. Similarly, the average price of a house in Australia rose from $6,296 AUD in 1920 to $959,300 AUD in 2024, marking an increase of over 15,000%.
Inflation Hedge: Both assets have proven to be effective hedges against inflation. Gold’s intrinsic value and limited supply make it a reliable store of wealth, particularly during periods of economic instability. Real estate, on the other hand, benefits from its tangible nature and the increasing demand for housing, which drives up property values over time.
Income Generation: While gold is primarily a store of value, real estate offers the added benefit of income generation through rental yields. This makes real estate a more versatile investment, providing both capital appreciation and a steady stream of income.
Tax Benefits: Real estate investments offer various tax benefits, including deductions for mortgage interest, property taxes, and depreciation. These advantages can enhance the overall return on investment and provide additional financial incentives for property owners4.
Real Estate: The Modern-Day Gold Standard
Given the historical performance of both gold and real estate, it is evident that real estate remains a safe and reliable investment. Here are several reasons why real estate is considered the modern-day gold standard for wealth preservation:
Tangible Asset: Real estate is a tangible asset that provides a sense of security and stability. Unlike stocks or bonds, which can be subject to market volatility, real estate offers a physical presence that can be leveraged for various purposes, including residential, commercial, and industrial use.
Appreciation Potential: The long-term appreciation potential of real estate is well-documented. As populations grow and urbanization continues, the demand for housing and commercial spaces will only increase, driving up property values.
Income Generation: Real estate investments can generate consistent income through rental yields. This income can be reinvested or used to cover expenses, providing a reliable source of cash flow.
Diversification: Real estate offers diversification benefits, reducing the overall risk of an investment portfolio. By including real estate in a diversified portfolio, investors can mitigate the impact of market fluctuations and economic downturns.
Tax Advantages: Real estate investments come with various tax benefits, including deductions for mortgage interest, property taxes, and depreciation. These advantages can enhance the overall return on investment and provide additional financial incentives for property owners4.
Final Thoughts
Both gold and real estate have proven to be effective hedges against inflation and reliable stores of wealth. However, real estate offers several unique advantages, including income generation, tax benefits, and diversification opportunities. As the average price of a house in Australia continues to rise, real estate remains a safe and reliable investment, securing the value of your wealth against inflation and economic uncertainty.
Investing in real estate is not just about purchasing a property; it’s about securing a tangible asset that appreciates over time, generates income, and provides financial stability. In the modern era, real estate truly stands as the gold standard for wealth preservation.
