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“Sharing and caring” is predicted t
o be a trend in the property market
this year, with more parents and their
adult children helping one other out.
Over the past 12 to 18 months,
online real estate agencyPropertyFox
has seen an increase in adult children
renovating their properties to accommodate
their parents and parents
assisting their children to purchase
property.
Nardee Cotterell, chief operations
officer at the agency, says many young
buyers are looking to build a cottage
or convert outbuildings or a room for
their parents.
Many adult children are also
helping their parents with the sale
of homes ahead of downsizing for
retirement.
And many parents are also helping
their grown children to purchase property
, especially when bonds are
involved.
“Parents tend to be able to obtain
a bond more easily or for a higher
amount as they’re often more financially
established or have a better credit
rating.
“The property would then be in the
parents’ name while the children are
the occupants.”
John Birkett, franchisee of Rawson
Properties Claremont, says while parents
can stand surety, banks “seem to
prefer it if the parents are
a co-owner”.
“In cases where the parent can
pay cash for the property, there is no problem
in registering the property in
the child’s name.”
When parents buy properties
for their student children who are
enrolled at colleges for at least three
years, Birkett says it is worth it for
parents to put the property in their
children’s names.
“This gives a child a kickstart into
the property market and if the child
sells one day it would be regarded as
their primary property which means
that no capital gains tax would need
to be paid...”
Parents who are financially able to
assist children with a deposit and
cost requirementsof
buying a property, agrees
Samuel Seeff, chairman
of the Seeff Property Group.
Parents
often feel that, rather than pay rent
to a landlord, there is merit in helping
their children buyproperty
so that monthly
payments are an investment
into bricks and mortar.
“Even during a flat economic phase
– as we are seeing right now – there
is still a measure of capital growth
and property generally also retains its
value.”
Parents generally buy apartments
orentry-level
sectional titles for their
children.
Protect your child's inheritance
SAFE: Property can be a great way to protect a child’s inheritance from reckless spending. Picture: Steve Buissinne
Parents who lend their children money
to buy property should draw up a loan agreement
which allows them to take
over the property should their children fall
into serious arrears on their repayments
“This gives them an opportunity to
rescue the investment in an emergency,
rather than see it repossessed by the
bank,” says Bill Rawson, chairperson of
the Rawson Property Group.
However, he points out property
can be “a great way” to protect a child’s
inheritance from reckless spending.
“Bequeathing a rental property to your
child instead of money and restricting the
sale of that property for a set period of time,
can be an ideal way to supplement
their income without allowing them to
squander the main bulk of capital.
“I’ve seen many cases where this kind
of income has seen a reckless beneficiary
safely through a difficult period when
large amounts of cash wouldhave
fuelled their irresponsible behaviour.”