Gains warning

Press, 16 September 1987, Page 53

Gains warning

New Zealanders could be paying as much as $5OOO a week in rent for a small house before the end of the century, claims an Australian real estate expert. Mr Graham White, commentator and lecturer in real estate in New South Wales, believes if inflationary trends since the depression continued rental accommodation would cost more than 2000 per cent of present rates. This, he asserted, was a good reason to buy homes now. Mr White recently visited New Zealand. The rumours created by the election scare of a “secret agenda” containing a proposed capital gains tax prompted him to speak out against its introduction.

He believed it would drive investors out of the accommodation market thereby pushing the cost of rental houses and flats up and reducing their availability. He used the example of the Australian capital gains tax introduced nearly two years ago to illustrate his message. Nevertheless, he believed if people avoided renting now they could escape the constraints of those extraordinary costs. “If you were to buy a house now for, say $lOO,OOO, in 25 years it would be worth more than $1 million.

“Now, if you were to rent to be equal to the person that bought a property because of the capital gain he would make you would have to save $l5OO each week for 25 years,” he added. “And that’s not taking into consideration that your rent would have increased to more than $5OOO a week by then —

almost an impossible task.” Anyone that did not buy real estate was out of their head, he believed.

“Everyone that owns a home has had to go through — as I did — a time when they can only afford to eat one sausage for dinner. I can remember the time in about 1972 when I bought my first house.

“I can remember about six months down the track after buying it how thrilled I was that I was able to afford to buy a bit of bacon for breakfast.

“You’ve got to get in on the first step of the ladder. And if anyone ever says I can’t afford $lOO,OOO ~ they just can’t afford not to.

“Because they, certainly can’t afford $l5OO a week just to keep track . with people who have bought a house. - - “The first house people buy they might even hate it It doesn’t matter., Your ' first property is not going to be a rose covered cottage. It’s got to be anything you can afford even if it’s a little weatherboard hovel.”

If you can afford to buy it, says Mr White, you will not have to pay rent and it will be getting captial gain through the first two or three years. “Now a young couple just married shouldn’t try to buy a house like their parents. They might want a house with a pool and a tennis court and the whole bit but a young couple can’t afford it. They forget that their parents went through several properties to get their home. In their first year of marriage they should remember, that they want to live together and not mow lawns.

“So it’s much better to go and get a little flat — it’s much better to enjoy the first few years. The only reason you buy a house is for the back yard for the kids.

“Old people don’t run round in back yards, do they. “Even before you get married; why not buy a block of land — have something appreciating. Just make sure it’s a bit that you can sell again. “When you get married one of two things can be done with it — you can build a house on it or you can sell it and use the. equity to buv another home.”