Owning a home or to use one of the most common cliché “to have a roof over one’s head” goes back to the notion of fulfilling the most basic of one’s need and livelihood. To most families, working towards eventual home ownership provides a sense of purpose, belonging, physical security and well-being. To others, getting into the property market is the very first step towards wealth creation in the long term. I am a strong believer that once you have asked yourself this question, you are creating the motion for self-growth and building a secure future for yourself and your family.
On the other hand, there are also individuals and families who may be long time renters, either by choice or otherwise. Given the complexity of today’s financial and equity markets, it is important to appreciate there are a multitude of investment and wealth creation options available to the investor and property investment is merely one of many.
There are also investors who may alternate between owning and renting over a period of time in an attempt to maximise their wealth and return on investment. The choice between paying mortgage and paying rent may be dictated by a number of factors such as property market trends, interest rates, personal circumstances and preferences, risk aversion and government policy.
By far the majority of people who get into the property market buy their first home which they intend to live in. Rather than living with family or paying rent, they see that paying down a mortgage to own a home will provide the long term financial and physical security.
Beyond this first home ownership, investors who buy a second property do it for a variety of reasons. Some investors take a long term view of property and see capital growth as being wealth creation and a good return on their investment. Yet some others may be in steady and high paying jobs and use negative gearing as an avenue to minimise their tax liability. There are business people who buy commercial or retail property to assist in growing their businesses where expenses incurred from owing the property are tax deductible against their business income.
Therefore, the would-be property investor needs to be clear of his or her financial and investment goals and the reason for getting into the property market.