Why You Need to Own a House

Read More

HOUSE IN THE SUNWhy You Need to Own a House

The percentage of households who own their own home has dropped to the lowest level since 1951 according to figures released this year by the Department of Statistics. At the peak of home ownership in 1991 around 73.5 percent of households owned their own home; now that number is less than 65 percent. What we are seeing is increasing concentration of property ownership in the hands of a smaller number of people who own multiple properties.

Renters make the argument that being a tenant makes good economic sense. Rent is initially less than the cost of mortgage repayments. The landlord takes care of rates, house insurance and repair bills. Renting is more flexible – you can change location without incurring the huge costs of selling a property. It is hard to argue with these points if you take a short term perspective on the issue of renting versus owning.

Now let’s take a long term view. Over the long term, we know property prices increase, and along with that, rents go up. On the other hand, the amount of money borrowed to purchase a house either stays the same in nominal terms or reduces if the principal is repaid. The effect of inflation is to reduce the real value of the mortgage and the principal repayments over time. If house prices rise at higher percentage than the rate of interest on the mortgage, this effect is amplified. The sooner you buy a house, the more wealth you will create. Living in rental accommodation in retirement is not desirable. Rents increase over time and landlords cannot be relied upon to provide long term tenancies. Owning a debt free home leads to a much more comfortable retirement. The sooner you buy, the cheaper it will be and the more wealth you will create.

Related Articles

Economy
Liz Koh

Budget Winners and Losers

The latest Government budget had something for everyone but while most households will be a few dollars a week better off, there are some clear winners and losers. In the winners’ corner are businesses, those on high incomes, and savers. The biggest losers are property investors who have built large portfolios financed partly by tax rebates.

Read More »

Top Up or Miss Out

The end of June is an important date for KiwiSaver members. The financial year for KiwiSaver runs from 1 July 2009 to 30 June 2010 and if you have contributed at least $1,040 to KiwiSaver during that time, you will be eligible for the full amount of Government tax credit to be paid into your KiwiSaver account in July.

Read More »

Responsible Investing

There is a worldwide trend for investors to want to make a positive contribution to the world by investing in companies that are socially and environmentally responsible. If you are passionate about the effects of climate change, the scarcity of food and water, and social or environmental policies in general, then you will no doubt wish to ensure that the companies in which you invest are going about their business in a manner that is consistent with your views.

Read More »

Helping You Live your retirement To the Max

Keep in touch

Fill in your details and we’ll get back to you in no time.