Smart move Fi­nance ex­pert Michael Pas­coe ex­tols the ‘new build’

FI­NANCE EX­PERT MICHAEL PAS­COE RE­VEALS WHY BUILD­ING A FAM­ILY HOME RE­MAINS ONE OF THE BEST DE­CI­SIONS YOU’LL EVER MAKE

Home Beautiful - - CONTENTS -

EV­ERY SEC­OND HEAD­LINE seems to warn of a hous­ing price crash – so why would you go through the fi­nan­cial risk of build­ing your own home? It’s a very fair ques­tion and the an­swer can be dif­fer­ent for peo­ple in dif­fer­ent cir­cum­stances. Here are five rea­sons why build­ing your dream home is still one of the great­est in­vest­ments – not only in the fi­nan­cial but also in the per­sonal and emo­tional sense.

1IT’S YOURS This can pro­vide sat­is­fac­tion be­yond fi­nan­cial mea­sure­ment. The land­lord can’t kick you out at a month’s no­tice. There are im­por­tant wel­fare im­pli­ca­tions of that se­cu­rity of ten­ure, par­tic­u­larly for chil­dren who aren’t faced with the risk of be­ing shunted from one neigh­bour­hood to an­other. Healthy com­mu­ni­ties de­pend on a de­gree of con­ti­nu­ity, of peo­ple putting down roots and com­mit­ting to their area. Home own­er­ship does that.

2HISTORY SAYS IT PAYS OFF A house should be viewed as a long-term com­mit­ment. Sure, ev­ery decade or two a hous­ing mar­ket can go crazy, with rapid price rises mak­ing it prof­itable to flip a prop­erty quickly. That’s the ex­cep­tion to the rule. The “trans­ac­tion costs” of hous­ing – stamp duty, le­gal fees, real es­tate agent com­mis­sion, mov­ing ex­penses, coun­cil fees if build­ing or ren­o­vat­ing – mean it usu­ally takes a year or more just to get to break-even. No­body re­ally knows if the value of an in­di­vid­ual house will rise or fall over the next year, but pop­u­la­tion growth and an ex­pand­ing econ­omy have meant hous­ing over time runs nicely ahead of in­fla­tion, build­ing wealth.

3YOUR OWN HOME FORCES YOU TO SAVE

With­out the dis­ci­pline of pay­ing the mort­gage, it’s all too easy for sav­ings to dis­ap­pear. Along the way, you’ll build up the se­cu­rity of own­ing your home ahead of even­tual re­tire­ment. The biggest sin­gle dif­fer­ence be­tween a com­fort­able or im­pov­er­ished re­tire­ment is whether or not in­di­vid­u­als own their home. And pay­ing off the mort­gage is some­thing we’re good at. Even in truly hard times – the last re­ces­sion back in 1990-91 that fol­lowed sky-high in­ter­est rates – rel­a­tively few of us lost our homes. We tend to be smart about build­ing up eq­uity in our home to pro­vide a buf­fer for emer­gen­cies, and we make all man­ner of other economies to keep our home.

4IT’S A TAX DODGE It’s not just neg­a­tively geared in­vestors who do well out of the way our tax sys­tem treats hous­ing. Un­like just about ev­ery­thing else you can do with your money, the fam­ily home is ex­empt from cap­i­tal gains tax (CGT). Trea­sury es­ti­mates the fam­ily home ex­emp­tion and the CGT dis­count to­gether cost the govern­ment $61.5 bil­lion in fore­gone rev­enue in the 2016-17 year. This ex­emp­tion is one of the Aus­tralian govern­ment’s most sa­cred cows. Even if a po­lit­i­cal party was brave

5“THIS­grow­ing na­tion de­sir­able homes” FOR enough to risk the wrath of the elec­torate – re­mem­ber that most of us, more than 60 per cent, ei­ther own or are pay­ing off our home – odds are any change would be “grand­fa­thered” and not ap­ply to ex­ist­ing homes.

BUILD­ING A HOME IS AN EX­PRES­SION

OF YOUR­SELF Other than hav­ing chil­dren, it’s most peo­ple’s biggest project. Buy­ing an ex­ist­ing prop­erty means liv­ing with oth­ers’ mis­takes and de­sires. Ren­o­va­tions tend to end up be­ing com­pro­mises or so to­tal you may as well start again. Start­ing from scratch means you can make your own mis­takes in­stead – but hope­fully not. It should mean the sat­is­fac­tion of cre­ativ­ity, of build­ing your own dream. I sup­pose Den­nis Denuto, the lawyer char­ac­ter in the movie The Cas­tle, would say, “It’s the vibe”.

michael pas­coe

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