Is buying a home still the best investment an Australian can make?

When I was growing up as a first-generation immigrant to this country, my parents drilled into me the importance of two things: responsibility and independence. A responsibility to take control of my own situation, and in turn, instilled into me the importance of being an independent person. They said that the best (or certainly, the most efficient) way to do this is to work towards buying your own home. 

Get on the property ladder, go to house inspections and auctions, observe the suburbs where you want to be, and work towards living in those places. I can't tell you the number of Saturdays I spent tailing my parents at these riveting and very child-friendly activities (I'm being sarcastic here, clearly.)

The point of this introduction is that having your own home is often perceived as the gateway to financial independence. But is that still the case? Indeed, is buying a home still the best investment an Australian can make? Is that situation different for younger people compared to older people?

To find out, I spoke with Ben Nash, Adviser and Founder of Pivot Wealth, and author of the new book Virgin Millionaire: The Step-by-Step Guide to Your First Million.

Is a first home still the wisest investment a young person can make today?

Believe it or not, because of the tax benefits offered to investors, it’s actually cheaper to buy property as an investment rather than your own home. In fact, Nash says that buying a home as an owner-occupier "can actually put yourself further behind when you go down this path."

The numbers speak for themselves.

Source: Pivot Wealth. This table is a paraphrasing of quotes that Nash provided to us. You should absolutely seek your own financial advice before making any investment decisions - especially for one as large as buying a house.

Nash adds:

"In my opinion, particularly given the cost-of-living crisis today where most people aren’t making as much progress as they want, buying your first property as an investment is seriously worth considering."

"That being said, I fully recognise the emotional and security benefits that come with buying a property as your own home, so I think if this is important to you, and you have enough money to comfortably afford your own home, you should absolutely consider it."

Is there any reason to believe Australia's housing crisis will get better?

Nash believes that while there are serious problems in Australia's housing market, the crisis also presents opportunities.

"Over the last four decades, we have seen a significant increase in the price-to-income ratio*. This means that it’s harder for people today to buy their first property, but on the flip side, it means that once into the property market, there is potential for outsized returns," Nash says.

"In my opinion, it’s worth people doing everything that they can to build momentum around property so that ultimately, they can benefit from the growth that is to come," he adds.

*The home price-to-income ratio is the second chart in our first piece in this series. You can access that piece here:

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The intergenerational wealth transfer

My colleague Sara Allen has written extensively on this major economic change coming for many Australians. AMP data suggests that $3.5 trillion worth of assets will be transferred from baby boomers to their offspring in the next 20 years with young women especially tipped to be among the biggest winners. Needless to say, this figure is not distributed equally and while some people will receive a life-changing amount of money in the coming period, others will see very little. 

So for those who are lucky enough to be expecting a chunky inheritance, Nash says communication and research are the keys.

"Think about what’s truly important to them here as a first step. Once clear on what you want to happen, from a financial perspective, it’s worth taking the time to understand the financial considerations and consequences of such a transfer. 

There are a number of strategies, tactics, and structures that can be used as part of a wealth transfer which can provide benefits like tax efficiency, asset protection, and blood lining of assets among others."

"It’s worth also considering, taking the time to communicate and plan with your intended beneficiaries, so they can structure their own planning with that in mind."

And if you are not as lucky, then it's all about the planning, and in particular, making sure your money travels as far as possible in as efficient a way as possible.

"There are five key stages - foundations, focus, optimise, accelerate, and impact - that people move through on the journey from just getting started with their money up to full financial freedom. 'Impact' is the destination, where you're completely financially free and have enough money in investments to live your ideal lifestyle - but everyone starts at the start, the 'foundations' stage, where you set the platform for your future success."

"Depending on which stage you’re at will dictate what tactics, strategies, or investments make the most sense, and which will move the dial the most when it comes to your money."

"The common trap that many people fall into is either trying to do too many things at once or listening to some of the conventional wisdom that talks about financial decisions or investments as either good or bad in absolute terms as opposed to relative to the stage with your money."

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This concludes our housing series. We hope you've enjoyed our different approach to covering Australia's housing crisis. If you have any feedback for future angles on this topic, leave a comment below. If you've missed any of the wires from the series, you can click here:

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