Another thought provoking article from “Topstocks.” I personally own my home but I am not at all interested in owning an investment property. But I would not hesitate to invest in shares in a company who looks after commercial or retirement villages.If and when I find the right one to my liking.

Homeowning ‘just doesn’t make sense’

Renting a home and investing the rest of your money in superannuation makes better financial sense than pursuing the great Australian dream, an industry analyst says.

IBISWorld chairman Phillip Ruthven said that over time, people had been “hoodwinked” into believing that buying a home was the best investment they could make, when this was not true.

“In buying a home, you can expect over a long, long period of time an average capital gain of about eight per cent,” Mr Ruthven said.

“However you have to take off at least four per cent each year to allow for the costs involved in buying and selling the home.”

Costs such as real estate agents’ fees, stamp duties, legal fees and maintenance of the dwelling reduced the capital gain from owning a home to about four per cent a year, he said.

“If you invest in super you’re going to earn about 11 per cent a year, in which case you are better to invest in super and then lease your home,” Mr Ruthven said.

“Because by leasing a home, you can lease for about 3.5 to four per cent of its value.

Trying to own a home just doesn’t make sense.”

Paying rent was not sending money down the drain; paying interest on a mortgage was sending money down the drain, Mr Ruthven said.

Home ownership appealed to people because of the emotional security it offered and because it was a form of forced saving, but it had never been a good investment, he said.

It was not a bad investment but there were far better things to put one’s money in, such as super, he said.

Mr Ruthven said he was impressed by the number of young people who were choosing to rent a home rather than buy one, because they did not want to spend the next 10 years struggling to enjoy life.


OK I realise we are talking about investments, not owning a home.

Now compare the 11 per cent a year this author speaks of from super to the returns of decent blue chip stocks over a couple of years. Buying a home is a good investment IF you intend to live in it, this author doesnt take into consideration the inconveniences associated with renting a property.

However, his comments clearly point out that Buying rental properties is a waste of good money there are better opportunities out there.

Even the tax benefits of owning rental properties do not stack up to those related to owning shares. And number one… LIQUIDITY!!!

I have made more cash shorting blue chips in a market correction (couple of weeks) than a lot of propert markets average in a year. I have had the oppotunity to get in and out of whatever I like quickly. 110% out of THRO in a week… fork!

I suppose the attraction of real estate is it is generally a no brainer. It will go up in value, more than likely higher than inflation (in the long term).

The number one question…..

…. what is the oppotunity cost? Stick PDN (or BHP) on a graph next to your investment property over the past 5 years :). I suppose it all comes down to your propensity to risk, investment plan, research skills, etc, etc, etc.

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