Articles by The Professional Trustee Team
Should I rent or Buy?
One of our client recently asked me if they should be renting or striving to buy a home. They weren't too sure if buying a house was such a smart way of increasing their wealth given the recent state of the property market and the way property had decreased in areas such as Christchurch. They also wanted to know what other options of investing they had if they weren't going down the property route. Very clever questions I thought and definitely topics that made me use my little grey cells.
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 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
wheres the property market now
I've given a full answer to this question in my blog at www.gra.co.nz so 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 eles 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 and if you go to my blog you will see a full answer. In general however you could try shares, bonds, managed funds or commodities such as coffee, gold, 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.
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 dominate 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 just let me know. Happy to help. Also come along to our fabulous Womens Seminar where I'm going to explain all of the above in much more detail. Details are on our site.
In the interim, spend short and invest long as the Russian Money Barons say.
The seminar last night was the best I have attended. Your speech was inspiring, professional and interesting. I have followed GRA for a very long time and really love your books Property 101 and Tax Structures 101. I didn't find them in the library of Victoria University and managed to ask the uni to purchase some copies so that students won't miss out these amazing books. - Kardy - December 2017
Gilligan Rowe and Associates is a chartered accounting firm specialising in property, asset planning, legal structures, taxation and compliance.
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