Owning a property has greater long term benefits than Renting
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Owning a property has greater long term benefits than Renting
Are you interested in building wealth in the long term or giving it away?
The overwhelming evidence is that home ownership gives you benefits and advantages that and renting does not.
For example, in its most recent survey of Household Income and Wealth, the Bureau of Statistics says this:
"Average household wealth for those households who were renting was about 21% of the average wealth of owner occupied households with a mortgage, and 13% of owner occupiers who owned their home outright."
In other words, renters have about one-eighth to one-fifth of the wealth of home owners.
69% of renters are in the "low net worth" category, it speaks for itself, and it's not just an Australian phenomenon.
According to the US Federal Reserve's "Survey of Consumer Finances," the average net worth of an American homeowner is 36 times greater than a renter.
It was a finding which prompted the New York Times newspaper to editorialise:
"Even with the substantial decline in wealth after the housing bust, the net worth of homeowners over time has significantly outpaced that of renters, who tend, as a group to accumulate little if any wealth."
And that is very significant in the Australian context where housing is a solid long term investment even in case of bust
Many people believe the soaring house prices in Sydney and Melbourne in particular, are in bubble territory, a bubble that's ready to burst at any time.
But as the US experience during the global financial crisis shows, even if house prices plummet by up to 40%, home owners are still far better off than renters.
And, yes, if you've just bought your house when the bubble bursts you may owe more on it than it's worth for a while but that situation won't last forever.
No-one is making you sell and crystallise that loss.
Should Gen Y buy?
Buying a house forces you to be disciplined in your saving because you have to keep up with the repayments.
Owning a house will provide somewhere for you to live in retirement and the opportunity, if needed, to downsize and use capital from your house to boost your retirement income.
Despite the bloated house prices in Sydney and Melbourne there are still affordable and liveable suburbs.
They're not by the water, but it will be yours and buying your own home will start you on the road to long term prosperity.
This article was written by business reporter Andrew Robertson, http://www.abc.net.au/news/2016-11-01/why-gen-y-should-buy-a-house-from-a-baby-boomer-parent/7983592
