March 3, 2014
When the property market commentators and economic ponderers are busy predicting and interest rates are back on the debating rounds, it’s easy to get caught up with the hype and start making decisions outside of the most important three factors: (1) are you ready (2) can you afford it and (3) is getting on the property ladder what you want now and for your future goals.
The third question is particularly true if you’ve been pondering the rent-or-buy debate. It’s the perennial question and the rent-or-buy debate is supported equally on both sides. Some do the figures and believe that renting while investing in the share market will deliver a better result, while the other camp believes owning your own home is the best course of action.
The rent or buy question is purely personal, but here are some factors you might want to consider:
Renting means you are not responsible for rates, property insurance, body corporate costs, maintenance and repairs etc. It also means if you don’t like the place after a while, you can leave.
Having said that, as a homeowner, you know with certainty no-one is going to send a letter advising they are selling – giving you your marching orders. What’s more, you can do what you want in your own home – redecorate, hang pictures etc.
If you buy a home and it increases in value, any capital gains is tax free (as long as you have lived in the property for at least 12 months). On the other hand, growth above the rate of inflation earned on investments – like the share market for example – is subject to capital gains tax.
Property is definitely not as liquid as other investment types. It is usually fairly straightforward to free funds from share investments and managed funds, but selling property can take considerably more time.
If you’ve pondered the above questions and decided that property is the path for you, the next question is: Are you ready? Exclude all external factors – rate debate, property price predictions and all other distractions – from making this decision. It purely comes down to your personal and financial situation. Your income, deposit, expenses and expectations will determine whether you’re ready to get on the property ladder. You’re in the driver’s seat.