Is Now the Right Time to Buy a Home?

Your mother was right! Mothers like stability, and nothing says it more than owning your own home – it’s the ticket to sitting at the big people’s table and being treated as an adult. Talk to anyone over the age of forty – or most people in a suit – and they’ll no doubt advise you: ‘Buy a house as soon as you can, start paying it off, it’s the best investment you can make.’While it’s true that if you plan on living under a roof for the next fifty or so years, it’s probably a good idea to eventually buy a house, but the notion of ‘buy a house as quickly as you can’ is based more on emotion than logic. This is a weird aspect of the financial world – there seems to be an undertone of largely condescending advice that presupposes there is just one correct path, one correct action for everyone to follow.Hey I’m not dissin’ the great Australian dream, just merely highlighting that home ownership isn’t solely a financial decision – it’s an emotional one as well. Far better for me to discuss both sides of the home ownership coin and let you reach your own conclusion. Let’s take a look at some of the advantages of owning your own home, followed by some of the disadvantages.The up sideForced savings – Owning your home forces you to get serious about reining in your spending and start sorting out your money situation – nothing beats regular mortgage repayments to make you save. The forced discipline of regularly paying off an asset over many years is the reason most people make money out of property over the long term.Taxation – If you purchase a home and live there before (hopefully) selling it at a profit, no capital gains tax is paid, unlike investing in shares (or property in which you don’t live), where a proportion of the profit you make is taxed at your marginal tax rate. Huh? Look, tax is boring, tax costs you money – tax sucks. Just remember this – if you sell the house you live in and make a zillion bucks profit out of it, you don’t have to share it with the Government, and these days pretty much everything is taxed to some degree, so it’s a sweet deal.Originality – Owning your own home allows you to add your own personal touch to the place where you live. Take the ‘hit’ of home renovation and you can spend cosy weekends at Bunnings, wild nights at Ikea – even use your hydroponics skills to grow a real vegie garden. If you rent there’s not much point in repainting your bathroom, because (a) it’s not your house and (b) you’re probably going to move on in twelve months or so.King of your castle – Being the king (or queen) of your castle means you’re not at the mercy of a landlord or real estate agent. If you rent, your house can be sold, or your lease may not be renewed, which means that you may be forced to move every couple of years. There’s also what I call the ‘aggro effect’ of renting – applying for properties, surprise inspections, snooty property managers and crazy landlords. Lassie also gets a rough deal here. He may be able to save drowning kids from lakes and faithfully deliver your paper each morning, but that doesn’t usually cut it with landlords, many of whom stipulate a no pet policy. Then again, I’ve lived in plenty of places that were home to a colony of cockroaches, as well as a family of mice, and that didn’t seem to bother them.Emotions – While it’s different for everyone, most people would agree that owning a home packs an emotional punch. It’s stability in your life. There’s a certain sense of pride in actually owning a little chunk of Australia. It’s the warm fuzzy feeling you get when you stand by the fireplace and admire the fact that you’ve now got something behind you that is uniquely yours.The down sideCosts – You’d have had to be living under a rock for the past ten years if you didn’t realise that property prices have skyrocketed. In order to get a foothold in the property maker, purchasing a home in any of our major cities (and increasingly in the regional towns) involves taking out mortgages for seriously big bucks – and a huge mortgage equals huge repayments. I’ve got friends who’ve purchased homes, and the repayments have significantly changed their lives. I’m not talking about delaying that trip to the Bahamas; they feel it in the small ways, like fretting over going out for Sunday brunch.Yet more costs – When you purchase a home there are significant upfront costs involved, such as stamp duty, conveyancing, fees associated with getting a mortgage, and ongoing costs (that renters don’t pay) such as council and water rates. When you rent you don’t pay any upkeep, which means for any repairs all you have to do is ring up your real estate agent, who’ll arrange for a handyman to fix them, and the landlord gets lumped with the bill.Freedom – The freedom of renting enables you to pretty much pick up, pack up and go. You’re not constrained by mortgage repayments, and that allows you to stay somewhere for a week, six months, a year or five years, and always have the choice of packing up and going should you seek greener pastures, get the travel bug, or move for a job opportunity somewhere else.Putting it all togetherYou may be starting to think that I’m anti-property. That couldn’t be further from the truth. In my heart of hearts I’m a contrarian. Pretty simple really: sell when people are buying and buy when people are selling. Sounds logical on paper wouldn’t you agree? I want a home. I have a deposit. I’m sick of renting. I can’t stand my landlord. I’m waiting. Patiently.Riddle me this, BarefootHave you ever noticed that most of the people telling us to buy property are the people who are selling it?