Ask Paul: I'm 40 and divorced, is it too late to buy a home?
After a challenging divorce at a young age, I am still paying off a mortgage from a sold property.
At 40, it is a reality that home ownership may never happen again. Luckily, my super remained intact and I have worked hard to accumulate $400,000 in savings.
But the unknowns of the Australian economy and potential recession have me nervous about the steady growth of my super fund.
Should I consider buying a property now as an investment, with the end goal to live in it, or wait until I retire (65) and use my super then to purchase?
Appreciate your guidance. - Sam
Sam, I understand your concerns. Paying off a mortgage on a property you no longer own, then pushing hard to build $400,000 in savings and build your super by age 40 is a ripper effort.
But let me tell you the truth about 'forecasters of the future'. They don't have a clue. It is a terrific way to get yourself in the media.
But as we all know, you can pull up an impressive looking forecast, probably from a professor, on pretty much anything you like, from 'the end of the world' to 'boom to come'.
We need to pause and have a good laugh here. Life is hard enough without too many dark thoughts about recessions, depressions, wars, plague and pestilence. One of my favourites is the joke about an economist who predicted '17 of the last three recessions'.
Let's face it. We have no idea about wars, geopolitics, recessions, depressions or whether the Earth will be destroyed by an asteroid, though at least science will give us facts about an asteroid.
Everything else is just a guess.
So, what can we count on? Well, Sam, I reckon it is about 7000 years of human history.
The key thing is population growth. If everyone leaves, Australian property is worth zero. So, what are the chances? I'd argue next to zero. Australia is clearly a very attractive place to live. In your shoes, I'd be buying a well-located property in a population growth area.
Sure, I would be a risk manager. I'd not over-borrow, consider my job security, have income protection insurance in case I got crook or had an accident - all the sensible stuff. History tells me cash is a terrible long-term asset. Inflation destroys it, so I'd want to hold long-term assets for the long term.
Property is a protected species in Australia, with tax-free status on its sale, if it's your main residence. It can be rented and negatively geared, or lived in as your home.
This has to be your decision, not mine, so I can only tell you what I would do. You should seek other opinions, but a well-located property in Australia, with a safe level of debt, sounds like a good idea to me.
Ask Paul: Where are they now?
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