In the last few years, I’ve entered a the age where is mandatory to think and speak about buying an apartment or an house. Same old questions arises: should I rent?, should I buy? where to buy? rate? interests? fixed rate? variable rate? bla bla bla bla
Everybody knows that Investment on houses is a long but secure investment. Everybody?
This idea has cultural origin, not only in South european countries like Italy, Spain, Greece, but also in middle and North European countries like Netherlands or Germany.
In Italy (but not only) there is a common pattern, called double M: Marriage-Mortgage. Young people, after living with the parents until the end of the University they move in with the partner, get married and buy a house within 1 or 2 years. Don’t forget that cohabiting, in Italy, is still considered blasphemy; imagine having the whole neighborhood looking at you as you were an Alien.
The pattern has a third component called Lavoro (Job) which was one and for the entire life. Today (fortunately?) things are changing, and there is no guarantee that your job will last forever.
In Netherlands, is quite more practical and pragmatic: is cheaper. Young people buy a house in the city thinking already to sell it in 30 years, when they will move out of the city. In Netherlands, young people move to the city much younger, and they start working most of the cases when they are already at the high school or university. Is also more frequent to have partner cohabiting without shame.
Summarizing, in general the main reasons for buying an house I’ve heard so far, are:
1. Houses always gain value
PARTIALLY TRUE. The idea is that the house market should increase at least on the infraction rate, true, but do you really think that the house value is fair? I think the value of houes is basically a fake. If you look at what happened in Spain, is clear that the normal market law is not follow: no matter the availability of the resource, the price is going up and down independently.
2. If you want to move, you can always sell your house
PARTIALLY FALSE. You cannot sell your house in the first 5 years without incur in a relevant loss. Now, think. 5 years, is such a long time, I cannot imagine how my life would be in such a far future.
In theory, you can always sell your house. How long are you willing to wait and how much money do you want to gain or loose. It might be take from 6 months to 2 years to sell it. What happens if you have a great career opportunity in another city? In another country?
3. Paying monthly mortgage is cheaper than a monthly rent (eg. 30 years interests)
TRUE. On the paper. The paper shows only the money part of the mortgage. Unfortunately this is the only part that people sees. The rest of the price you are paying: zero flexibility, additional burden on maintenance, external environment/city. It would be not easy to quantify those information and come out with a price value. Unfortunately those values are taken for granted until they became important. That’s why most people don’t consider them.
4. When you rent, you own nothing
PARTIALLY TRUE. When you rent, you don’t own the premises of course, but you don’t own the problems related to it: maintenance, neighbors, neighborhood, etc.
Summarizing, the points I want to make are:
- price and money are where the world is turning around. Are we sure the price we are paying is only in money?
- flexibility/mobility in jobs, travel and lodging is one of the most forgotten values we should consider in our equation
- young people should spend their energy trying to change the world, not setting down and dying in their habits
- And remember, permanent job positions are dead.