Key Points:

New Zealanders are well known for their love affair with property - but has it really been a romance that has delivered the best results?

As he puts up interest rates to try to control the over-excited property market, Reserve Bank Governor Alan Bollard continues to decry the Kiwi obsession with bricks and mortar and our unwillingness to save. He insists that diversifying our investments is better both for the individual and the country.

So the Herald on Sunday has looked at how the homeowner would have fared had they invested in things other than residential property over the past decade.

We looked at the performance during this period of five residential properties currently on the market - two in Auckland, and one each in Whangarei, Tauranga and Wellington - and compared this to similar-sized investments in shares (New Zealand and international), term deposits, commercial property and managed funds. These are the results.

New Zealand shares

If the owner of a home in Alison Ave, Takapuna on Auckland's North Shore had instead put $200,000 (the property's 1996 CV) into a fund tracking New Zealand's top shares, it would have produced a 214 per cent return by 2007. This means the $200,000 initial investment would have grown to $428,104, according to the NZX. This calculation encompasses the performance of the NZSE40 index from 1996 to 2003, and its successor the NZX50 from 2002 onwards. The return on shares does not meet the current asking price for the house of $569,000.

Term deposits

A home in Mahoe Rd, Eastbourne, near Wellington was worth $324,000 in 1996. If that amount had been put into six-month term deposits with the ASB Bank (assuming 33 per cent tax and compounding interest), by March 2006 this sum would have turned into $498,036. To get access to it today, if it was on call at 7 per cent for another two months (interest credited monthly), the sum would in fact total $501,937. Again, it doesn't better the house's current asking price of $760,000.

Commercial property

If the 1995 CV of $204,000 for a Turanga Rd, Henderson home in Auckland's west had instead been invested in two $100,000 shop-with-flat-above properties in Hall Ave, Otahuhu, that investment would have grown to around $600,000 by 2005. The home's current asking price is in the mid $500,000s.

However, Peter Aranyi, author of The Commercial Real Estate Investor's Guide, noted that commercial property did nothing in terms of rents and value growth for 10 years, but had picked up recently.

International shares

Our sample Kiripaka Rd, Whangarei property had a 1995 CV of $122,000. If the owner had chosen to take that money and instead invest it in a top performing managed fund in international shares, it would have by today returned around 6 per cent compounded over that time, after tax and fees, of $231,592. This compares to the property's current asking price of $390,000.

Liz Koh of Wellington-based financial planning company Moneymax, points out that most property investors obviously grow their portfolios by borrowing funds to invest.

If, for example, an investor had borrowed 100 per cent to buy the Whangarei property, and structured their costs so that they had a neutral cashflow on the property, they would have made the capital gain without actually investing any funds of their own.

While it is possible to borrow funds to invest in shares as well, it's considered a more risky strategy due to the higher volatility of sharemarkets.

Managed funds

The owner of a Devonport Rd, Tauranga, property would be sitting pretty if he/she had instead decided to put $230,000 (the home's 1997 CV) into a managed fund - more than tripling their money. Based on Sovereign NZ Select Equities 10-year average annualised return of 13.59 per cent (after tax and management fees for the whole period), this $230,000 would have compounded to $788,283. This compares to the home's asking price of $455,000.