Data behind old debate
Owning a home might be tough in the first few years, but it does force you to save and hopefully create a stable financial future
TO BUY or not to buy ... Is buying your home really the best financial decision you can make?
The age-old question has been not only asked once again, but apparently answered recently – by some clever types from Melbourne University.
The two economists involved studied the period from 1983 to 2005, taking into account all matter of data in an attempt to address this debate.
As a real estate fan I was delighted, although not altogether surprised, by their findings which indicated most people would have been financially better off over the long-term had they purchased a home to live in rather than permanently renting.
My experience is nothing more than many years in and around the real estate industry, but that would have led me to the same conclusion.
In modern Australia, for any of us to prepare for the future financially most have to invest part of their income for later years, hoping it will grow sufficiently. Real estate is just the most popular way of doing this, it is an investment vehicle where the fundamentals are understood and it feels like the tangible option.
From all the data supplied, the one element I really believe we all need to acknowledge is that to be able to opt out, or if you are forced to due to values in your area being prohibitively high, you have to make as big a decision as if you were actually buying a home.
What owning a home can do is force you to save.
Yes it will often be financially very lean years as a new homeowner, but the hope is that time will make it easier and set you on track.
Owning a property you live in is no guarantee of future profits, if you have bitten off more than you can chew and the market takes a dive. Then you’ll be desperate to start renting and escaping the nightmare.
For most however a few bad years are compensated long term, the trick is to acknowledge the bad times if they occur, not bury your head in the sand.