Responding to the RBA’s research discussion paper that looked at whether housing is overvalued, Chan & Naylor say that owning makes more financial sense than renting.
The Reserve Bank of Australia research, which suggested that house prices would have to continue to rise at the same rate as that seen over the past six decades to justify buying a property, may set a dangerous precedent, according to Chan & Naylor managing director Ken Raiss.
For housing to be financially viable, they would need to exceed 2.4% growth per annum on the long-term trajectory to beat renting.
“On paper these figures may seem to make stark economic sense, but the property market, like any other, is cyclical and therefore undergoes peaks and troughs,” said Raiss.
“The other significant factor is that not all properties are created equal. The purchase of a property, whether it is for owner occupation or investment, must be a business rather than emotional process.”
He does, however, say that buyers must be looking to purchase properties that out-do averages and that are below intrinsic value in higher capital growth locations, rather than relying on average national growth.
While those who do not expect a higher than 2.4% growth per annum statistic to continue should turn to renting, the fundamentals of buying early, buying right and holding on long-term still apply, he says.
It is forced savings
Australians are some of the worst savers in the world, therefore being forced to put your money in a long-term asset is a highly prudent exercise that offers reassurance in later life. There is truth in the old adage that ‘I might retire broke, but at least I have my house’.
It can cover your retirement costs
The majority of us are living longer however as was evident from the recent budget it is clear that the government can no longer afford to pay for the growing number of pensioners. Having an asset like a house will actually help pay for your long term stay in a retirement or care facility, something that potentially awaits many of us at some point.
Not owning means that you are subject to rental market forces
As a middle aged unemployed tenant you will be subject to the market forces of the rental market as dictated by your landlord who can throw you out as soon as you fail to meet your rental obligations. Conversely as a home owner it is more likely that you can come to an arrangement with your bank should circumstances require it.
Home ownership gives your financial certainty
If you have purchased the right property, it will increase in value above the average, but the amount you have borrowed will remain relatively fixed. Rental income however increases with the value of the property market, so do you really know what you will be paying for your two bedder in 30 years’ time?
Home ownership gives you personal certainty
Buy what you can afford now rather than what you necessarily want and you will be in front as you enter the second half of your life rather than waiting for a late win.
You can leave your grandkids something
Most people aim to leave their legacy to the next generation and a home is a fantastic asset to pass on.
Bricks and mortar are less volatile than the share market
If the value of the housing market looks like it is on a downward cycle for now, it is nothing compared to the wild swings of the stock market over the last decade. Where would you rather put your hard earned money?
There is only a finite amount of rental property to choose from
At end of day everyone needs somewhere to live, and as only 30% of the Australian housing market is owned by investors, limited choice means taking matters into your own hands.
Australians are some of the worst savers in the world, therefore being forced to put your money in a long-term asset is a highly prudent exercise that offers reassurance in later life. There is truth in the old adage that ‘I might retire broke, but at least I have my house’.
It can cover your retirement costs
The majority of us are living longer however as was evident from the recent budget it is clear that the government can no longer afford to pay for the growing number of pensioners. Having an asset like a house will actually help pay for your long term stay in a retirement or care facility, something that potentially awaits many of us at some point.
Except, I have seen LOADS complaining about needing to do this...
What a shit article!!! These authors should be ashamed.
Quote:
There is only a finite amount of rental property to choose from
At end of day everyone needs somewhere to live, and as only 30% of the Australian housing market is owned by investors, limited choice means taking matters into your own hands.
"It were not best that we should all think alike; it is difference of opinion that makes horse races." - Mark Twain on why he avoids discussing house prices over at MacroBusiness. "Buy land, they're not making any more of it." - Georgist Land Tax proponent Mark Twain laughing in his grave at humourless idiots like skamy that continually use this quip to justify housing bubbles.
There is plenty of land and there is also cheap housing, just not where people want it. I spoke to a lady buying a house for $30,000 recently in country Victoria.
Financing a couple of homes right now being purchased for around $130,000 but those homes are not in cool suburbs of Melbourne or Sydney, but they are still homes for someone.
Maybe it's partly a social issue.
Any expressed market opinion is my own and is not to be taken as financial advice
There is plenty of land and there is also cheap housing, just not where people want it. I spoke to a lady buying a house for $30,000 recently in country Victoria.
Financing a couple of homes right now being purchased for around $130,000 but those homes are not in cool suburbs of Melbourne or Sydney, but they are still homes for someone.
Maybe it's partly a social issue.
So tell me this then - if our teflon coated economy is doing so well, why don't we build more cities that people want to live in? Where's the instructure spend?
It's not because it's too complicated - politically or logistically we have conquered far greater problems as a nation.
It's not because it's too expensive, we have the money currently.
It's not because we're scared of building into a downturn in the global economy - most commentators think it's improving modestly.
And it's definitely not because we're running out of nice land.
No, it's really because we don't have the will. We will only wish to do this when we no longer have the means to do so.
That time is approaching.
"It were not best that we should all think alike; it is difference of opinion that makes horse races." - Mark Twain on why he avoids discussing house prices over at MacroBusiness. "Buy land, they're not making any more of it." - Georgist Land Tax proponent Mark Twain laughing in his grave at humourless idiots like skamy that continually use this quip to justify housing bubbles.
So tell me this then - if our teflon coated economy is doing so well, why don't we build more cities that people want to live in? Where's the instructure spend?
We already have more cities. Major regionals, heard of them?
Generally as people move to an area, infrastructure is improved As that area is deemed better more people move to it Then people open better restaurants and cafes and it is deemed more desirable again Now that this area is deemed "the spot to be" people squabble over the property scraps that remain like seagulls on hot chips
But first, people need to get off their arse and move.
Quote:
No, it's really because we don't have the will. We will only wish to do this when we no longer have the means to do so.
I notice the whiners on here refuse to move and instead expect everyone else to instead They expect everyone else to do everything for them - it seems a common problem with the youf of today.
Ignore posts by The Whole Truth · View Post · End Ignoring The forum fuckwit goes RRRAAARRRGGHHhhh - But not a fuck was given..................by anyone.
I don't think the buying is necessarily the problem, it's the price paid and the ability to pay it off that really count.
one thing about the property market is that it is very forgiving on your purchase price over time. If you overpay say 10% of whta you should have paid then in time this initial over payment will be negligible.
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