Money, Jeremy Tauri: Your home is not always your best investment

Speaker Jeremy Tauri, Plus Chartered Accountants. Innovate Northland Awards at the NorthTec Apprentice Restaurant. 17 September 2015 Northern Advocate Photograph by John Stone. NAG 23Sep15 - CHILD

Too many homeowners are expecting a bit too much from the houses they live in.
This was made clear by a recent investment survey, which asked people how they were feeling about their various investments.

When asked to name the investment class they expect to deliver the best returns over the next year, the majority of respondents to the recent ASB investor confidence survey said it was their own house.

Across the country, respondents' views of their own homes as providing the best investment return rose from 19 per cent to 22 per cent in the December quarter.

This rise was driven by improved confidence in Auckland, where the property market seems to be strengthening fast.

It's understandable that people want to feel good about the value of their houses.

After all, when you're paying off a large mortgage, you don't want to think that your property is declining in value.

But a house you live in isn't really an investment as such.

On the plus side, it gives you something to live in and stops you paying rent. It gives you more control over the cost of your housing.

Over time, you should pay off the debt so that you're left with a place you can live without any accommodation costs. In that sense, it's an investment.

But, on the flipside, it's not an investment in the true sense of the word because it's hard to really get any additional value out of the house you live in.

Prices might rise and you might become better off on paper because of the value of your house.

You might rent out a room or Airbnb it. But as long as you need somewhere to live, a house that's worth more money this year than it was last is not a big benefit. If you were to move, you'd have to buy another.

You could downsize, but you might find it's harder and more expensive than you expect.

Interest rates could rise and make the cost of holding the property more difficult.

Homeownership is an important plank in many people's financial lives because of the security it gives and the enforced savings aspect of paying a home loan.

Having a freehold house at retirement is a big factor in how comfortable your post-work years will be. But if you want to invest for returns, think about KiwiSaver or another investment vehicle.

The NZX50 racked up a 30 per cent return last year.

Don't feel rich just because you've got a more expensive roof over your head — unless you're willing to cash in and trade it for a tent.

Jeremy Tauri is an associate at Plus Chartered Accountants.