Why should you buy a property?

House prices are sky-scraping but still you can enter the buying market. There are five good reasons you should think of buying a house.

Do you think property is an asset? It’s simply not true. You buy a house so that you have a roof over your head. Whether the price of the property is going up or down should not affect you. As long as you like the house, you can make repayments and like the area nothing else really matters. The only way of making real money is you decide to sell the house at some stage and keep the profits or downsize and do the same. A growing proportion of people do downsize. According to a research, one in three house sales involve people selling up to move to a smaller property. Nearly 54 % of the people are selling their property because they are not able to pay mortgage amount and not because they want equity from their property as cash in hand. A further 15 % sell the property because they have split up from their partners. Some 20% are retirees over 60. They also plan to sell their property to clear all their debts. Only 12 % buy a smaller property and also have cash in hand which they often recycle it, giving their children a leg up the property ladder instead. Property is not a cash-generative machine. Even if people think it is, it will take nearly 20 years.

A house should be treated as a shelter and not as an investment , no one wants to buy a property whose worth is far less than they paid for it only a couple of years before. While buying a house you put most of the money that you have saved in your lifetime. Facts tell that property does not perform as well as shares over the long term but it does retain its value over the years. But still people purchase a home for their old age or to lead a hassle free life. The average UK property cost was £30,000 in 1983 but now the value has increased to £160,000. Your focus on buying a property should not be for a short period but look ahead at least 25 to 30 years-roughly the amount of time it takes to pay your mortgage amount.

Between 1989 and 1995 millions of people where found paying off mortgages that were greater than the value of the homes they were living in. Many people had their homes repossessed, as they were not able to pay the mortgage amount. Some borrowers would walk into lenders offices and hand over the front door keys and walk out again. It was not negative equity that led to repossessions but due to economic conditions like rise in unemployment rate, high inflation and interest rates went up to 15%. People who were able to pay home loans, negative equity never affected their life. Lenders launched mortgage products on the market that allowed borrowers keen to move to do so. A significant effect of negative equity was that prices were falling fast. The reason could be because people bought starter homes that no-one wanted, or because they lived in parts of the country that were badly affected by worsening economic conditions.

When property prices are rising people buy the property thinking that if they don’t buy now, they have to pay even more in the future. There is residential property shortage in UK, which will be resolved by next decade. Each year the number of homes built is about 20,000 less than what is needed. By 2021 there will be 2.1 million more married people in England, counterbalanced by5 million more single adults and a further 1.5 million divorced. Most of the net increases in household numbers come from one person households. The key driver for household information is the relationship between income and affordability-what a person earns, relative to prices in the market. If the multiples of income to property prices rise from 3.5 to nearer 5 times earnings, many people will not be forming households: they will live at home or in rented accommodation.

If you plan to live in a rented accommodation, you will not be able to take a decision about how the place should look like. You will yearn for something that is uniquely yours, where you can express your own personality. If you buy your own property, you will never have to put up with someone else’s good taste again.