In the UK, much like New Zealand and Australia, young people are eager—almost obsessed—with purchasing their first home. Home ownership is more than a financial investment, it’s a source of stability, it’s a status symbol, and it’s an expected milestone.
However, buying a house is what personal finance expert, Ramit Sethi, calls following the script. That’s because people often don’t question if buying a house is the right thing for them to do, they do it because it is what you do.
Maru and I have chosen to ignore the script and not purchase a property; at least for the moment. We’ve chosen to do so for numerous reasons. We like the flexibility of renting—if we want to move country, we don’t have to sell an expensive asset. We like predictable bills—rent is the maximum we pay, whereas as a mortgage would be the minimum we’d pay. We don’t like the idea of all our savings being tied up in a singular asset in a single geography that could be subject to the swings of a singular market. We also are comfortable investing in low-cost index funds where the long run rate of return is generally higher than home ownership in return for more short term volatility. Finally, paying interest on a mortgage is expensive, and I like not having to do that!
That being said, there may come a time when it may make sense for us to buy a home. But if we do, it won’t be a financial decision (e.g., buying in the hope that house prices will increase) but rather an emotional one (e.g., providing a stable location for a family).
This is in no way criticising those who have purchased a home. I’m thrilled for my friends who have done so, and they’re all very happy with their homes. It’s just not for us… yet.
Ramit Sethi has a great 1-min clip online that’s about as accurate an articulation of my rationale as it gets. If you’re interested in understanding more check it out here.