Unit 5 Home Ownership - 1/4/2012 Learning Outcomes...

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1/4/2012 1 Unit 5 Home Ownership Learning Outcomes • Distinguish between different types and forms of property investments • Identify advantages and disadvantages of home ownership and property investment • Discuss determinants of property prices and current macroeconomic conditions • Obtain property prices and interpret property price indices • Discuss historical and recent property investment performance in Australia 2 • Discuss the diversification benefits of property investment • Explain the home buying and selling process, costs and choice considerations • Discuss the key desirable features of a mortgage • Explain first home buyer assistances • Discuss retirement strategies involving the main residence Home Ownership in Australia • Owning one’s home has long been the ‘great Australian dream’ • About 70% of Australian households lived in their own home http://www.abs.gov.au/ausstats/abs@.nsf/Lookup/ by%20Subject/1370.0~2010~Chapter~Levels%20 of%20home%20ownership%20(5.4.3) • The ‘family home’ accounts for two-thirds of private sector wealth in Australia. 4 Types of Property Investments Residential property Owner-occupied homes – Investment houses/units – Holiday houses/units • Small commercial properties (e.g. shops, service stations) • Larger commercial properties (e.g. office buildings, hotels and shopping centres) • Land of various types 5 Forms of Property Investments Direct ownership • Shared direct ownership • Listed property trusts • Listed property companies (e.g. Westfield). • Unlisted property trusts • A superannuation fund – However the use of leverage is limited here 6
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1/4/2012 2 Advantages of Home Ownership • Capital Gains Tax main residence exemption • Possibility of substantial capital growth • A form of disciplined saving • A ‘good address’ can open social doors • High collateral value with low finance costs • A hedge against a major expense • Stability/emotional security • Lifestyle 7 Disadvantages of Home Ownership • Price risk • Interest rate and liquidity/financing risk •C o s t s • Lumpy and illiquid asset 8 To Rent or to Buy? • Some of the reasons that renting may be attractive are: – Can live in a place that one could not afford to buy and maintain – Renters have significantly more freedom of movement – Free up capital to invest in more attractive assets 9 Determinants of Residential Property Prices • Interest rate • Location, location, location – Amenities and convenience – Supply of land • Average income and unemployment • Demographic – age composition of the population – the rate of household formation • Social attitudes 10 Trends in House Prices and Household Wealth RBA Financial Stability Review
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1/4/2012 3 Recent sales of similar property in the same neighborhood .
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This note was uploaded on 01/25/2012 for the course FINS 5510 taught by Professor Kingsleyfong during the Three '11 term at University of New South Wales.

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Unit 5 Home Ownership - 1/4/2012 Learning Outcomes...

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