At the end of 2018 the average Australian household had gross wealth of a little over $1m.
Just over 50% of this wealth was invested in the home. Almost a quarter was in superannuation accounts and just under 10% in property investments other than the home.
Often we spend significant time and effort and engage professional assistance to choose, acquire, manage and account for our household investments. In our experience, we almost never spend the same amount of time thinking about what makes our home a great financial investment as we do thinking about what makes it a great lifestyle investment (North facing garden, etc).
We’re not suggesting that home buyers should ignore those things that make a home a great place to live – these are and should be central to any home buying decision. What we are suggesting is that you should put as much thought into what makes it a good financial investment as you would any other large-scale asset – after all, it’s the largest investment most of us will ever have.
Not all homes are created equally when it comes to being a financial investment, and it can have serious consequences down the road when and if you decide to sell/downsize/upsize etc. If we “compare the pair” for two housing assets of $500,000 (approximately the average for an Australian household) over a 20 year time frame one with 2% per annum average capital growth increases in value by 48% to $743,000 while one with 8% per annum capital growth increases in value by 366% to $2,330,000. The difference in wealth accumulation between these two is stark.
This is one of the reasons we aim to understand the financial investment attributes of all properties we advise upon in addition to the factors which make them desirable to live in. So whenever you are thinking of moving or renovating we urge you to seek professional assistance to ensure that all aspects are carefully thought through before you embark on such a crucial and financially important decision.