Owning a house is financial suicide...OR is it?

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You may or may not have seen an article doing the rounds recently about ‘why owning a house is financial suicide’ by American blogger and investor James Altucher.

For those of you who haven’t seen it, you can read it here however the point James was trying to communicate was that buying a house is a poor investment and that renting is like ‘making money’.

As this was a trending article on Friday, we thought we should clarify a few points.

  1. The fundamentals of the American property market are considerably different to those of the Australian property market – the outlook here is not nearly as gloomy as the USA’s outlook.
  2. A house should not be viewed primarily as an investment. It is a home for you and your family that must suit your needs and lifestyle. It just so happens that it can double as an investment.
  3. If you want to purchase an investment property, you need to use a completely different set of criteria to find that property.
  4. History has shown that property tends to double in value approximately every 7 – 10 years based on a property returning an average of 10 per cent annually. Therefore most would consider a house a good investment when you take into account that you get to live in it during that time and that the capital growth gains are tax free. It is important to note however that growth is influenced by factors such as supply & demand, consumer and business confidence, interest rates, affordability, availability of finance and government incentives.
  5. The author, James Altucher, has not taken into consideration the emotional needs of humans. We buy a house to provide a home for our family, and to be in control of the roof over our head – in other words – our security, not to make money.
  6. It might be easier to sit back and watch the landlords pay for all the repairs to a property, but keep in mind, those repairs are at the discretion of the landlord and they will ultimately choose when and how much they spend on them which means the tenant has no control over the situation.
  7. In regards to flexibility and being able to move quickly, our listings are on the market for an average of 38 days, not months or years. So if you need to move due to a change in your circumstances, it is very achievable. 
  8. Finally, it is perfectly acceptable to rent, in fact the majority of the population have at some point in their life been a tenant. However it’s worth thinking about how you will pay for rent or where you will live once you retire compared to if you partially own a home that you can sell and downsize. 

So while the article was an interesting read that we're sure some people may agree with, it's important to note that property is not a 'one size fits all'.


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