Why buy property at all?

The honest case for owning, including the parts of it that get oversold.

You are reading this, so buying is already on your list. Before anything practical, it's worth being clear about why, because the reason shapes every decision that follows: what you buy, where, when, and how much you are willing to stretch.

Property is the largest store of household wealth in Australia by a wide margin. It dwarfs superannuation. That fact alone doesn't make it a good purchase for you this year, but it does explain why so much of the country's financial life is organised around it.

What owning actually gives you

A forced savings plan

Each principal repayment moves money from your income into an asset you own. It is not free money, and in the early years most of the repayment is interest. But it happens whether or not you feel like saving that month, which is more than most savings plans manage.

Security of tenure

No rent increases you didn't choose and no lease that ends because the owner is selling. For people with children in a school, a pet, or a job they want to stay near, this is often the whole reason.

Leverage

A deposit of 10% buys an asset worth ten times it, and any growth accrues on the whole value, not just your share. Leverage magnifies falls in exactly the same way, which is the half nobody mentions.

Schemes aimed at you

Grants, duty concessions and deposit guarantees are almost all restricted to first home buyers. They are worth tens of thousands and you get one shot at them.

A goal money can attach to

Saving in the abstract is hard. Saving for a specific deposit by a specific date changes how people spend, and most buyers say the habit outlasted the purchase.

Optionality later

Equity in a home can become a deposit on the next one, a buffer in a bad year, or something to pass on. It is illiquid, but it is yours.

The parts that get oversold

"Rent money is dead money" is the line you will hear most, and it is only half right. Rent buys you somewhere to live with no maintenance bill, no council rates, no stamp duty, and the freedom to move for a job. Interest on a mortgage is dead in exactly the same way rent is. What builds your wealth is the principal you repay and any growth in the property's value, not the act of owning as such.

In the first few years, stamp duty, transaction costs and front-loaded interest mean buying can leave you behind renting and investing the difference. The gap usually closes with time. That is an argument for buying when you intend to stay put, not an argument against buying.

Prices can fall, and they have. Leverage means a 10% fall against a 10% deposit wipes out your equity. This matters most if you have to sell in that window, which is why a buffer and a reason to stay are worth as much as a low rate.

Buying to live in, or buying to rent out

Most first home buyers want somewhere to live, and this guide is written for that. But a growing number buy an investment property first and keep renting where they want to live, sometimes called rentvesting. It has real advantages: the property only has to work financially rather than emotionally, rent covers part of the loan, and you can buy in a cheaper market than the one you live in.

It also has real costs. You give up most first home buyer concessions in many states, you take on a landlord's obligations, and capital gains tax applies when you sell, where it generally doesn't on the home you live in. Neither route is obviously right. Decide which one you are doing before you start looking, because the two lead to very different properties.

Do this in HomePlannerYour finances See what a purchase does to your actual numbers, not a generic example, once you've connected or entered your income and spending.Free account required

Before you move on

You can say in one sentence why you want to buy
You know whether you're buying somewhere to live or something to rent out
You've thought about what happens if rates rise or prices stall