eKourier Jan 2011

Nev’s Notes... M any people look upon their home as an “Investment”. It is not. It’s a long-term consumer durable, like your refrigerator or washing machine. House prices generally don’t appreciate, though the land under them, or in the case of home-units, the land component of the value, may appreciate in some circumstances. And there can be circumstances where the property cycle can work in your favour; it can also work against you. If you buy at the bottom and sell at the top, then you look like a genius. But you have probably just been lucky. Mostly we buy, and sell our home, when we want to or need to rather than when it is cheap expensive. And we usually sell one house when we buy another, so the cycle is then neutral to us. A house can be a pretty good inflation- hedge, and it can be a good means of forced savings. Most people stay rather poor most of their lives. They don’t save, they don’t invest, they don’t understand money, wealth-creation, saving, so their home is their nest-egg, able to be sold at some time and realise an apparent “profit”. The house has kept up with inflation and has been paid off over the life of the loan - 20 or so years. If the house is well positioned and there is prosperity and population-growth it, or the land, may increase in value. When compared with the dollar purchase price it can look like a good “investment”. But everything else has gone up (in line with inflation) too. So it can be a paper-profit Your House is Not an Investment

but may not yield a real investable profit. A house costs money to ‘service”. There are rates and taxes, insurance, maintenance and always some costs. It costs money to own a house. “Your house should be comfortable, convenient, safe, affordable and paid off quickly; maintained well but not expensively. Like many things in life, it is best not to be showy or extravagant.” One benefit of one’s “Home” is that the Capital Gain, if there is one, is Tax Free. If you had commercial property or shares and sold for a profit you would pay Capital Gains Tax. In Australia politicians have found it politically expedient to keep our homes CGT-free. To this extent your home can be a tax-shelter. It is best to look on your home as a roof over your head, a long-term consumer- durable with the house itself depreciating in value and the land under it appreciating in line with inflation, with affordability and with population-pressures. To make your house an “investment”, or perhaps more aptly a “speculation”, you need to buy at the right time, in the right place. Look for and be ready for the bottom of the cycle; that is not easy. Look for under-valued, under-appreciated locations, but often that is not where you want to live. It has been said you should buy the worst house in the best street.

Your house should be comfortable, convenient,

safe, affordable and paid off quickly; maintained well but not expensively. Like many things in life, it is best not to be showy or extravagant. Don’t get financially stretched with your home. If you have a windfall and come by some money then by all means buy a ‘Trophy Home’ if you can afford it. But look at the running-costs of this indulgence. Owning our own home is comfortable and convenient and makes us feel secure, even proud. We can make it ‘ours’ paint and decorate and furnish it to our liking. It can be a long term abode and give a sense of ownership and proprietorship. It is a nice thing to do. But it is better not to look on our home as an investment. If it increases in value, look upon this as a bonus. Use it as a means of saving and pay it off quickly. It can then be an asset against which you can borrow to start a business or acquire an asset if you choose. And it saves paying rent to a landlord. Buy a house you can afford, in a location that works, make it up the way you want, enjoy it, but be careful not to over-capitalise, and don’t look upon your house as your main ‘investment’. Nev Kennard

Customer Feedback

“Dear David and Bob (Warriewood KSS),

Thank you for all your time, courtesy, help and assistance over the past two and a half years during the time that we hired storage units, the trailer and the van. You were both very helpful in all aspects of all KSS had to offer us. The equipment and storage premises were at all times in clean and good working order, a credit to you. With staff such as you, Kennards are very well represented to the community and a great asset to the company. We would have no hesitation at all in recommending your storage facilities and the staff at Kennards at Warriewood.

Thank you again and best wishes for the future - Denise and Frank.”

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Kennards Kourier January 2011