Getting a Foot on the Property Ladder
A property is sure to be a safe and solid investment that will appreciate in time. According to the UK Office for National Statistics and the mortgage lender Halifax, average UK property prices rose from GBP 27,000 in 1983 to GBP 225,000 in 2017. At face value, it looks like a great return, but think again. It works out at around six percent annually, about half of which is accounted for by inflation. Also, over the same period in the UK, wages only rose by four percent. Factor in mortgage interest, which means that over the lifetime of a mortgage you will pay back 50 percent more than the loan taken out, maintenance and selling costs, and you might be struggling to turn a profit. In the longer run, many analysts believe that the property boom years are long past and that homeowners can expect a flatmarket for years to come. Online financial advisers UK Value Investor believe that they are likely to remain modest for 20 years as prices return to their ‘fair value.’ The common-sense advice that you can’t go wrong with your own property and that renting is ‘money down the drain,’ might not be the case.
Furthermore, in extreme cases, people may find themselves with negative equity during an economic downturn, or unable to sell a property when they want to move area or country. Finally, a lot of financial advisers and gurus, such as Robert Kiyosaki (author of Rich Dad,Poor Dad), say you shouldn’t count your primary home as an asset – it is just the place that you live and need. With that in mind, you should buy somewhere because you want to live there, perhaps start a family, put your own mark on a home (without seeking a landlord’s say-so), and maybe downsize in retirement when the children have flown the nest.
Buying a property for most people is the most expensive purchase they will ever make, and while it is likely to require a significant proportion of your income, it is best not to get overstretched.
It can be a good idea to draw up a checklist of important factors. These may concern home-related aspects such as the number of bedrooms, whether the property has a bath or shower, garden or terrace and parking and so on, but also location aspects, such as proximity to shops, local amenities, schools and public transport.
Another consideration is whether you are looking for a renovation project or a turnkey property. If you are a dab hand at DIY and want to spend your weekends doing a place up, you won’t mind somewhere that requires some attention. If, on the other hand, you are a busy executive who spends a lot of time working away, you will probably prefer something modern, low maintenance and ready to walk into.
One thing that is very much specified is the number of bedrooms and, unlike Central or Eastern Europe, the living room will not be classed as, or very often used as another sleeping area. The more bedrooms, the higher the value, and for this reason, some people divide a large bedroom into two with a partition wall or stretch the definitione of a tiny room barely big enough for a single bed, into a ‘box room,’ ‘infant’s bedroom’ or ‘possible study-cum-office.’
One way or another, getting into the homeownership market is likely to cost you an arm and a leg, but hopefully it will bring you many years of joy. When’s the house-warming party?
Tekst pochodzi ze specjalnego wydania Business English Magazine Finance nr 12/2020.