By Adrian Stagg.
Before I start this is not about now being an especially good or bad time to buy and I’m not recommending any particular place to buy over another.
I’m sure that the readers of SCM’s blog don’t need to be given reasons as to why they should be buying a house or a home. You certainly don’t need a university degree to figure it out. Never the less I thought it interesting to relate these 5 reasons that a recent University study came up with, and also show, as you can see in the info graphic accompanying this story, that real estate is considered the best long term investment across all age groups. It ranked first in the study and the info graphic shows what ranked second in that particular age grouping.
1.) Housing is typically the one leveraged investment available.
“Few households are interested in borrowing money to buy stocks and bonds and few lenders are willing to lend them the money. As a result, homeownership allows households to amplify any appreciation on the value of their homes by a leverage factor. Even a hefty 20 percent deposit results in a leverage factor of five so that every percentage point rise in value of the home is a 5 percent return on their equity. With many buyers putting 10 percent or less down, their leverage factor is 10 or more.”
2.) You’re paying for housing whether you own or rent.
“Homeowners pay debt service to pay down their own principal while households that rent pay down the principal of a landlord.”
3.) Owning is usually a form of “forced savings”.
“Since many people have trouble saving and have to make a housing payment one way or the other, owning a home can overcome people’s tendency to defer savings to another day.”
4.) There are substantial tax benefits to owning.
“Homeowners are able to deduct mortgage interest and property taxes from property income..viz: rents.On top of all this, 50% of capital gains are excluded from income for investors, provided they are structured correctly and 100% for owner occupiers of a PPR if they sell their homes for a gain.”
5.) Owning is a hedge against inflation.
“Housing costs and rents have tended over most time periods to go up at or higher than the rate of inflation, making owning an attractive proposition.”
We realise that homeownership makes sense for many Australians for many social and family reasons. It also makes sense financially.
Well no, not totally as here at SCM, we can help you to finesse that investment, sort out the good from the bad, the possible’s from the probable and those downright impossible’s. We’re here to help so give us a call