Before I tackle this question you need to know I'm not a financial advisor and the following are simply my own comments and feelings on the subject of buying verse renting a home.
It's the Kiwi dream
Owning a home is something that everyone strives for – right? Not necessarily true. It all rests on your values and dreams and the assumptions you make about a whole host of things so numerous I'd have to write a book just to cover them off. In general terms, however, the answer to this question depends upon personality, psychology and numerical factors. So in an effort to light the way, here is a list of pros and cons about climbing on board the property ladder.
Pros for owing a home
Cons for owing a home
Pros for renting a home
Cons for renting a home
Where's the property market now?
I won't go into too much detail here. Suffice it to say that we have a shortage of houses which will ultimately push prices up. But there's a caveat. House prices can only increase so much. In order for them to move up, the population have to have money in their pockets to pay for those increased prices. To put a person in this position they generally have to have a job. So only buy a home in an area where there is an undersupply of housing and employment. Cities clearly fall into this category. This is why houses in certain parts of Auckland have increased their prices over and above that which they would have fetched in 2007, which was the height of the property market, whilst other houses in New Zealand are still suffering below 2007 prices.
What else is on offer?
On the basis that you don't put your moo la into property, how exactly do you grow your wealth? Good question. In general, you could try shares, bonds, managed funds or commodities such as coffee, gold, or silver to name but a few of the main categories of investments. Actually, even if you do get into property, I still think you should look at putting your gold coins into these categories because diversification is one very important factor of wealth creation. Be careful in this area though, as there are lots of sharks out there.
Summary
No one has all the answers. We can only make a judgement call and often we either under call or over call our hands. To assist, we can look at historical data and carry out some forecasting.
If I was trying to decide whether to buy or rent, I'd probably buy. I'd do some solid research on the suburb I was looking at and really get to grips with the market in that suburb, including prices. But I wouldn't just buy because of the numbers. I'd buy because I like certainty and enjoy homeownership. I like being able to swing half a cat around my Parnell chicken hutch.
I'd also keep in mind they aren't making any more land darlin' so in the long run (10 years or more), I'd expect to make a capital gain on my home. But my wealth plan wouldn't stop there. Additionally, I'd put some money into KiwiSaver and shares and cash so I'd have most bases covered. Buying Lotto tickets would also be a regular investment feature as well!
The dominant feature I'd put into practice is getting a money plan. Checking where I am now and where I want to go. We're pretty good at that here at Gilligan Rowe & Associates. Money is our business after all. If you need help with this, please let us know - phone +64 9 522 7955, [email protected] or via our website. Happy to help.
In the interim, spend short and invest long as the Russian Money Barons say.
I attended the GRA function last night - it was excellent, and goodness your knowledge is like an encyclopaedia! Phenomenal. We have already had an initial free consult with John Rowe, have attended one of Matthew's info evenings, and are already booked for Property School. I've read Tax Structures and am reading Property 101. We are very interested in moving to you for accounting also - our current accountant is lovely, and his fees are very low, but the more I'm learning, the more I'm realising this sweet man has oftentimes not steered us in the best directions, and definitely never asset structured us properly - and that is all in the plans to get sorted thx to getting to know GRA. - Tat & Trip - June 2016
Investing in residential property?
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Matthew Gilligan provides a fresh look at residential property investment from an experienced investor’s viewpoint. Written in easy to understand language and including many case studies, Matthew explains the ins and outs of successful property investment.