Home Ownership a Sinking Ship? - McCarthy Group Home Ownership a Sinking Ship? - McCarthy Group

Are you in the minority by owning a property? Domain seems to think so, and sadly, the data would suggest that they are correct! Is this right? Why are so few Australians owning their own properties? Is this really a question of affordability, or does it come down to a lack of knowledge?

The HILDA (Household, Income and Labour Dynamics in Australia) report, released just a couple of months ago outlined the changing dynamics of home ownership from the 2001 to 2014 period, with some disturbing results. From that 2001 period, home ownership rates per household have reduced by around 5 percentage points, from 68.8% to 64.9%.

While this might not seem like such a drop, when you look at the historic graphs of home ownership over time, you notice that the rate has been sitting consistently around 70% since the late 60’s. So why the sudden shrink?

Professor Roger Wilkins from the University of Melbourne suggests that affordability is the key to the issue. A lack of supply means that property prices are driven up, and perhaps being driven by FOMO, many are buying without taking into account the long term consequences of doing so. Owner occupied dwellings don’t make cash flow, so paying off a loan becomes a real long term burden when considering the cost of living and any unexpected bumps like income changes, or starting families.

The University of Melbourne

The University of Melbourne

On top of all this, Business Insider gives a couple more reasons why affordability is the culprit to our housing problems. High deposit requirements and lifting property prices mean that hungry investors keep waiting on the perfect home, struggling to find the extra little bit of money needed to put a deposit down. Adding to this, younger aged investors are still paying off a higher education loan by the time they start looking for a property, putting them behind the pack before they’ve even started!

But with all this doom and gloom there is always a silver lining.

But the facts and figures mentioned above are really only relevant to those investing in real estate the ‘traditional’ way. With affordability as it is, buying the home you live in might not actually be the best way to spend your money. We’ve talked at length about Rentvesting as being one strategy around this issue.

The government benefits those who invest in real estate, but don’t offer those same benefits to owner occupied homes. It may be a worthwhile strategy to switch the traditional view for something that may actually work better for you. For instance, you could invest in a home you don’t live in, rent it out and also benefit from the tax incentives that come with investing. From there you can use the leftover cash to rent yourself, benefiting from both tax savings and home ownership.

This process is ultimately much cheaper than purchasing a home that you live in, and could be a perfect work around for the poor affordability of a local market. For those who are looking to buy their first home, you might want to reconsider your long term strategy, as it might not be the one which will have you on top in the end.

If you’d like to learn more about Rentvesting and how it can work for you, just get in touch below!

Start here!