The residential real estate investment boom peaked last June and has been deflating steadily since then. The latest ABS housing finance figures record investor housing finance commitments as being flat in February on January and up 4.1 per cent on a seasonally adjusted basis. The graph tells the story. The Reserve Bank and APRA might like to take the credit for initially calming investors' exuberance, blowing that froth off by forcing banks to wake up to themselves, but now investors should be working it out for themselves. Exceptions aren't the rule Of course there are always exceptions - the occasional bargain buy, the place with unrealised potential - and most of the alleged real estate experts think Brisbane will do better for the next year or so than the rest of the capital cities but, on average, housing prices are expected to gain very little over the vaguely foreseeable future.

A quick sampling of reasonably credible forecasts ranges from AMP's Shane Oliver appearing a relative optimist with a prediction of 3 per cent growth in housing prices this year, while ratings agency Fitch is saying 2 per cent and NAB 1 per cent. BIS Shrapnel, when not caught up in dubious negative gearing modelling, thinks the key markets will gain this year but fall a bit in the next two, leaving house prices up just 2 per cent over three years and units negative. For the sake of the exercise, let's be mildly optimistic and go with 2 per cent annual growth, a little better than the headline inflation rate. With stamp duty of about 5 per cent and other transaction costs of, say, 2 per cent, the average property bought today and sold in three years wouldn't quite break even on a nominal basis and would be down maybe 6 per cent in real terms. Then there's the reality of rent. The March CoreLogic rental review showed combined capital city rents had actually dipped a fraction over the past year. Would-be investors routinely underestimate costs, so that CoreLogic's national average gross rental yield of 3.5 per cent is likely to result in a net yield that may well start with a one rather than a two.

Equities doing nothing now are winning hands down, thanks to the much richer franked dividend yields, no stamp duty and negligible transaction costs. Let's again stray on the side of optimism and say there's a 2 per cent net rental yield. That certainly puts the negative into negative gearing even at the top marginal tax rate when investor interest rates are now in the upper fours, if not five. For Treasurer Scott Morrison's alleged army of housing investors on "average" incomes and, therefore, average income tax rates, the tax deduction still leaves plenty of red ink behind with little prospect of capital gain making up for it if the market goes flat to digest the boom's surge. Housing returns have beaten the sharemarket very handsomely over the boom years while equities have done nothing - but equities doing nothing now are winning hands down thanks to the much richer franked dividend yields, no stamp duty and negligible transaction costs. But don't expect the ever-present housing spruikers to say that.