The Great Divide
The media focus the past two weeks has been the growing 'great divide' between those who own property and those who don't.
Two articles in The New Daily caught my eye (quoted below).
This week"s HILDA report showed that home ownership among18 to 39-year-oldshas fallenfrom 36 per cent in 2002 to a new low of25 per cent. On top of that, between 2002 to 2014, the average mortgage debt of young homeowners increased by 99 per cent in real terms, from $169,000 to $337,000. (The Overlooked Victims of Australia's Runaway Property Market)
The deterioration in wealth equality revealed in Tuesday"sHousehold, Income and Labour Dynamics in Australia (HILDA) survey should be seen as a crossroads in Australian history ‰ÛÒ either we continue down the road to inequality, or we fix the problem at its heart. The highly respected surveyshowed a property-based class divide emergingdue to plummeting home ownership rates in the under-40s. That means a generation of renters will not accumulate wealth through thefamily homeas their parents did. That"s a hugeproblem, because on present settings, couples or individuals who have not paid off homes by retirement will be much worse off than those who have. (Retirement Black Hole Awaits Generation Rent)
While the second article insists the only way to solve the problem is to remove negative gearing and capital tax gains breaks, there are other options. There are several issues compounding the situation, not the least of which is supply and demand. Almost everyone of working age wants to be in the major cities where the work and income is. But it doesn't mean that's where you have to buy property too.
- If you are lucky enough to have parents who can afford to help with a deposit at the very least, this is a highly recommended course of action for parents to take. If you can see your kids get a leg up before you die, all the better.
- But I do not advocate buying in Sydney or Melbourne or even Brisbane CBDs. Property prices are way too high for most, the burden of debt too great. Your money will go a great deal further in regional centres showing strong signs of growth. Yes, that means Noosa and Sunshine Coast, but it also means Gold Coast and Ipswich too. These are high growth areas.
- It is a given the younger generation cannot afford to buy in the areas in which they live in the city centres, where they often have high paid (or higher at least than regional employment) jobs. But it is not just young people caught in the rental trap where they live and work.
- You can't buy a 3-4 bedroom home for under $500,000 in the heart of Sydney, but you can in one of these regional centres. It doesn't matter if it is not going to be your home; it will be someone else's. it gets your foot in the door to start building wealth through property.
- And what if you could buy a new home for this? House and land packages are seriously worth looking at for investment purposes. They offer a lower cost of entry, staged payments, long periods of builder guarantees, and significant potential for capital gain.
- New properties are much better rental investments than old because they don't attract the maintenance issues and costs associated with older homes, they have a much better depreciation schedule as an investment, they rent for more than older homes in the same area, and hold their value better over time.
- Add payments to your mortgage above and beyond the rental income received, put your pay into an offset account and pay the mortgage off as soon as you can and you will have the security of somewhere to live when you retire, an ongoing stream of rental income or an asset to sell. Options you or your children don't have at the moment maybe.
For all the above reasons, Noosa4Sale has partnered with leading developers to offer house and land packages across regional centres in Queensland. We have houses and units at all stages of construction from off the plan through nearly complete and ready to start generating income, in Gold Coast, Ipswich, Logan and Noosa markets. Do not miss this opportunity to get yourself or your children into property market. It may be your last. They are selling quickly so please call or email me for more information today.