Let's get it straight - your home is not an investment. While property appreciates in value over time, the best property to own from an investment point of view is a property that produces rental income as well as capital gain. Investment is something that should be done with objectivity and a focus purely on investment return and risk.
Buying a home to live in is a process clouded with emotion and consideration of comfort and lifestyle.
The best property to buy as an investment is unlikely to be the one you would choose to make your home.
From a strictly investment point of view, the home you live in should be the kind of house that would make a good rental property; that is, at the lower end of the market in a handy location.
Instead of investing a large amount of money in one property to provide a lavish lifestyle, buy two cheaper properties; one to live in and one to rent.
Those who choose to live in expensive properties often argue that the money invested in their home is in effect their superannuation plan.
The idea is that on retirement the property will be sold, a smaller property purchased and funds released for retirement. Such plans seldom succeed. Retirees generally desire a small, relatively new, low maintenance property.
These are often close in value to a large home that has been lived in for some years. Living in a high value home creates an expectation of a certain standard of living which is hard to forgo.
Committed renters who argue that it is cheaper to rent a home than buy one will find that paying rent in retirement can cause huge financial stress.
Invest in at least one house in your lifetime but don't make it your only investment.
Liz Koh is an authorised financial adviser. The advice given here is general and does not constitute specific advice to any person. A disclosure statement can be obtained free of charge by calling 0800 273 847. For free ebooks, see www.moneymax.co.nz and www.moneymaxcoach.com.