Owning a home still the best way to generate wealth: John McGrath

Owning your own house, regardless of its location, is still the best way to accumulate wealth over the long term, according to McGrath Real Estate boss John McGrath.

Blogging on switzer.com.au, McGrath points to December 2011 data from the ABS about household wealth, which shows “the rising value of people’s homes, or their net equity in their homes, represents the largest proportion of their household wealth at 41%”.

“Next in line is superannuation, then other property holdings such as residential investments,” he says.

“The ABS figures show that average household net worth in 2009-10 was 14% higher than in 2005-06 and 30% higher than in 2003-04.”

McGrath says another statistic to emerge from the ABS data is that when you look at increased household wealth over the past six years, “the family home accounts for a third of that increased wealth in both metropolitan and regional areas”.

“This is really encouraging especially for young buyers in coastal or country communities where property is far more affordable, yet its importance for growing wealth creation is just as high as it is for city dwellers in more expensive markets,” he says.

According to McGrath there are “exceptional opportunities in the market right now if you’re intending to buy and hold long term”.

McGrath also notes the increasing numbers of investors interested in property at the moment as seen in figures from mortgage broker AFG, which show an average of 36% of all new loans went to investors each month in 2011.

“If you can afford to get involved in property at a young age, I would really encourage it. Over the long term, it is a very safe and stable asset class that will become your most valuable financial investment for the future.

“Yes, it is also the most expensive asset class and does make up the highest proportion of household debt. But we get a lot of help with the capital gains exemption on family homes and negative gearing on investments. Not to mention the availability of finance and the first home owner’s grant for younger buyers,” he says.

Besides good buying opportunities, McGrath says interest rates are heading down and there are also some “attractive fixed loans available right now”.

“Right now, fixed rates are very competitive and this has attracted a surge in fixed rate deals. People have also been concerned about cost-of-living pressures and economic events overseas, so they’ve sought the security of a fully fixed or part-fixed loan,” he says.

Buying activity from McGrath’s mortgage broking arm Oxygen Home Loans reveals that most customers are opting for a split loan with a portion of their loans on the variable rate.

Whether you choose a fixed, variable or part fixed/part variable loan, McGrath says borrowers should seek loans that have the following these features:

  • Your lender must allow you to make repayments at any time without penalty.
  • Your lender should also offer multiple methods of repayment to suit your lifestyle.
  • You should also have the flexibility to make your regular periodic repayments either weekly, fortnightly or monthly.
  • Ensure you have a redraw facility in case something happens and you suddenly need extra cash for an emergency.

McGrath’s faith in the market is reflected in the real estate group’s continued expansion with a new office in Frenchs Forest on Sydney’s Northern Beaches set to open in February following the acquisition of long-established local agency W. E. Jamieson Real Estate. 

The new office will be the group’s seventh in the Northern Beaches, having opened its first office in Manly in 2003. It will service the suburbs of Forestville, Frenchs Forest, Killarney Heights, BELROSE and Davidson.


Larry Schlesinger

Larry Schlesinger

Larry Schlesinger was a property writer at Property Observer


Be the first one to comment on this article
What would you like to say about this project?