Put together, the double bonus is a good deal: a roof over your head plus a nest egg accumulating in value as the years tick by.

Rising property values are something we’ve come to expect as normal. The lure of easy gains in wealth helps us endure periods of higher interest rates with the expectation that all will be fine in the long run.

Rising prices are gold for first home buyers who know they’ll get easy increases in equity as the value of their house rapidly overtakes the value of their mortgage even on a minimum repayment schedule.

Which was the experience for home buyers in Sydney in the late 1990s and the first few years of this decade.

But the story for the past few years is not rosy at all, especially for Sydney’s middle and outer rings.

The latest Real Estate Industry of Australia figures show real estate in these parts of Sydney is stuck in a stretch of price stagnation with real values actually falling.

I adjusted the REIA’s figures for inflation in order to reveal how well real estate in Sydney’s middle and outer rings has been performing as a wealth generator. The results are worrying.

The numbers show that if you bought a standard middle ring house in September 1998 it would have increased in real value – i.e. adjusted for inflation – by 70% by December 2004. But since then its real value would have fallen by 19%.

The standard outer ring Sydney house shows a similar pattern rising 90% in real value from September 1998 to the housing price peak in December 2004 but then falling also by 19%.

Those who bought their houses at the height of the boom, then, have probably lost the value of their deposits.

Some would be experiencing negative equity as the value of their houses falls below what they owe on their mortgages. Perhaps this is a major contributor to the high rates of mortgage defaults in Sydney’s west.

Falling house prices are not in the script for the Australian Dream. Rather, some nightmarish stories are being told.

Sadly, politicians and public policy makers seem, as yet, unaware of the issues. More on this next week.

*Phillip O'Neill is Professor and Director of the Urban Research Centre for the University of Western Sydney. He regularly comments on matters affecting Sydney.