The beginning of a new year and another perennial article is published in today’s paper asking the age old question “Is property Investment a better investment than shares?”
The answer, of course, is ‘yes’, even when the study methodology makes it as difficult as it possibly can for property to exceed shares!
(Please contact us at info@limepropertysolutions.com.au. for further information or the chance to discuss this and other issues in the comfort of your own home.)
The largest problem in trying to compare growth and return in investment property to the share market is always the methodology used in the study. The article printed in today’s news “Rent or Buy. The evidence is in” (read article here) is at best confusing although the result is perfectly clear – property is the better investment!
The article is not really about investment at all. As the title suggests, it is asking the question “Are you better off renting or better off buying your own home?” Most people would have enough common sense to know that you are actually better off owning your own home (as the study also finds!) but the confusion arises when the comparison is made between investing all the funds you don’t spend on buying your home into the share market thus, in my mind, making the comparison one of investing in property to investing in the share market. This is NOT the case in the methodology scenario described. Why you ask? Because a well set up investment property for someone earning around $100,000 per year would possibly deliver an additional few thousand dollars per year in positive cash flow – it would not be a cost and certainly not a significant cost.
When we examine the idea of ‘rentinvest’ (see earlier blogs for more details) where we continue to rent but also buy a property investment, then the article really makes no sense at all in the real world. We do not think your own owner-occupier home is a real investment – it is just something we must have to live in. The only way to measure share investment against property investment is to compare apples to apples; that is make sure we are comparing an investment property return against a share market return.
However, whichever way we look at it, property investment makes a great deal of sense!
(If you want to know more about property investment that can be cash positive after tax from day one, contact us now at info@limepropertysolutions.com.au.)
