Instead of being priced out of the market, first home buyers should look at negative gearing to become landlords before becoming owner occupiers, a leading economist has said.
Recent speculation from various media stakeholders has suggested negative gearing hinders first home buyers from entering the property market by inflating home prices.
However, AMP chief economist Shane Oliver said the tax policy could help new buyers make their first purchase as investors rather than owner occupiers.
“If first home buyers think about it, it’s quite easy to get into property by just negatively gearing their first property,” he said.
According to Mr Oliver, he and his wife used negative gearing to buy their first home.
“The way I got into property was through negative gearing. I was a first home buyer and became an investor in the process,” he said.
He and his wife bought a negatively geared house while continuing to live in a cheaper, rented apartment.
They spent several years paying off the mortgage on their property with the assistance of rental income and negative gearing write-offs.
When the mortgage payments had decreased to a more financially manageable level, he and his wife moved in.
“You think to yourself, I can’t buy this property and live in it at the same time, but I can buy it, live somewhere else and negatively gear the property,” he said.
He encouraged first home buyers to consider this option for buying their ideal home.
“You can still get married or live with your partner in a low-cost rental property and find a home of your dreams and negatively gear it, then mortgage down until you can afford to get into the property market as an owner occupier as opposed to an investor,” he said.
Source: Residential Property Manager