Searching for your first home: Rent or buy?

MANILA - Choosing your first home is likely to be one of the biggest financial decisions that you will make. As with all purchases, you can either feel you made the right choice, or regret the investment.

This is why some prefer to initially rent or lease, and then decide whether the neighborhood is right for them. But they could also miss out on the opportunity to buy when the price is more affordable.

So should you rent or buy your first home? The quick answer to this question is it depends. The decision to buy or rent depends on so many factors that varies per individual: your lifestyle, finances, future plans, and even the current real estate market.

What is right for one person may not be suitable for another. For instance, a newly married couple whose career plans include moving abroad would be in a totally different position from a large family with an entrenched business in a specific location.

There are pros and cons for each option. Here’s a run-down of the upsides and downside of buying and renting.

Buying a house means being able to hold on to a hard asset that almost always appreciates in value.

It also lets you and your family establish roots in the community.

Plus it allows you to plan out your life--where your kids will study, where you will work--for the long term.

But expect this to put a dent on your cash flow, since you will need to put in equity, which could go anywhere from 20-60% of the property value.

It also means paying real estate taxes and maintenance costs.

Should you need to dispose of it at some point, you will find this may not always be easy, and you could be at the mercy of market conditions.

Renting is easier on the pocket--you only need to worry about a downpayment and security deposit.

It also gives you a measure of flexibility. If you’re unhappy with the place or your landlord, you can simply end your contract.

 It also means not having to worry about taxes and maintenance costs, which are the landlord’s concerns.

However, property rentals rise, and it means you have to be ready to deal with increasing rental fees, depending on market conditions.

Rent is an outright monthly expense, and does not enhance your asset base.

You have to live with the terms set by the landlord. For instance, the landlord may prohibit you from keeping pets, or may not allow you to drill holes for your pictures on walls.

Still not decided? Look at each of these five factors for more help:

1. Your current life stage and lifestyle. How old are you? The younger you are, it’s more likely that your options are wide open. Career-wise, there’s a possibility of finding a new job, within or outside the city you are now in, which means renting might be better for you. Are you single or do you have a growing family that needs more space? If it’s the latter, consider how owning or renting a home affects their lifestyle.

2. Your future plans. Do you have any plans of moving abroad? If so, then you might be better off renting a starter home. Otherwise, you will have to deal with selling off your home when you leave the country. This may not come easy when you’re about to migrate, and this may not even be at a price acceptable to you. Don’t forget your significant other, if you have one. If you purchase that starter home, do you think your prospective spouse, whose parents live far away, would be happy to move there?

3. Your financial status. Can you afford to pay the down payment for the starter home that you want? If you are thinking of taking out a loan for this home, do you have enough income to support the monthly payments? Note that your expenses as a homeowner will not be limited to just the mortgage payments, but will also include maintenance costs, real estate taxes, and in some cases, condominium dues and homeowner’s fees.

4. The neighborhood where the property is located. It’s been said that there are three things to consider when you buy property, that’s location, location and location. Let’s say you have identified the neighborhood where you intend to stay for the medium term. Evaluate the neighborhood and determine if it has good potential to become a growth center. What are planned developments being undertaken by the government and other private companies in the area? If the area’s potentials look promising, and if your finances permit, then it may be worth purchasing your starter home here. On the other hand, if the neighborhood is riddled with problems such as flooding, security issues, and urban blight, you may wish to simply rent a place for the time being.

5. The current real estate market. Don’t forget to consider the current real estate market before deciding if you would purchase or just rent a property. It is always better to buy when it is a buyer’s market than a seller’s market. Plus, look at interest rates if you intend to take out a loan for this purpose. The lower the rates, the cheaper it is to buy a starter home.

source: www.abs-cbnnews.com

Things to think about before Buying and Selling Property

From a property market perspective, we live in strangely contradictory times. While the level of growth in the market has risen at an exponential rate over the course of the last 18 months, for example, it remains extremely difficult for buyers (particularly first-timers) to invest in real estate while achieving value for money. The market also seems to be undermined by fragility, despite its continued growth and pivotal role as an economic engine in Great Britain.

3 Financial things to consider when buying or selling Property

This myriad of factors provides challenges to both buyers and sellers, especially in terms of optimising value and making the most of their money. With this in mind, here are three factors that potential buyer and sellers must consider when looking benefiting their finances: –

The Misleading Nature of Value

The surge is UK housing prices has been well-documented, but a rise in the nationwide average is encouraging some home-owners to inflate prices beyond what the market can bear. While the average cost of a UK home now stands at £224,242, for example, it is important to note that inflated prices in London continue to distort the national figures. Additionally, a lack of housing supply is enabling vendors to drive bidding wars, artificially increasing house prices and forcing buyers to pay over the odds. Both buyers and sellers need to be wary of this, especially if they hope to complete a quick and mutually beneficial deal.

The Importance of Location

Location is also an important consideration, especially for home-owners or buyers who wish to resell their property for a profit in the near-term. The region in which your home resides will have a huge impact on its initial value, while it will also influence its resale value both in the short and long-term future. It is therefore crucial that vendors establish a fair and well-researched price point that strikes the balance between profitability and incentive, for example, while buyers with an investment mind-set must look to purchase homes in areas that are likely to increase in value over a specified period of time. To understand this further, take a look at this article on detailing the worst places to live in the UK.


The Cost of Buying and Selling Property

Whether buying or selling a home, you will have to consider a number of financial costs and charges before completing a transaction. From surveying fees to conveyancing charges, these costs can quickly accumulate alongside the fee that is being paid to an individual estate agent. This is why those keen on improving their financial circumstances continue to partner with online estate agents and quick house sale firms, as these entities usually charge a one-off fee and maintain a simplified and transparent operation.

source: 20smoney.com

Property hot spots renew bubble fears

LONDON/LOS ANGELES - From China to Canada and London, fast-rising property markets are haunting the global economy again, five years after the U.S. subprime mortgage bubble burst and triggered the worst financial crisis since the 1930s.

For now, house price inflation is neither as high nor as widespread as it was in the middle of last decade. Except in a few cases, the warning signals are flashing amber, not red, and several countries have acted to cool overheating markets.

But the confidence of policy makers that they can avoid another generalized boom and bust could be tested if central banks keep pumping out nearly free money to support economic growth by encouraging investment in riskier assets such as equities and property.

Plentiful cheap credit is just one more inducement to home buyers who, in many countries, can deduct mortgage interest from their taxable income or are exempted from capital gains tax when they sell their house, said Andrew Oswald, a professor of economics at Warwick University in Britain.

"We're stoking up a huge bubble. It's quite extraordinary. We virtually ruined the Western world by having high house price inflation and now we're determined to do it again," he said.

AMERICAN RENAISSANCE

On the face of it, the reacceleration in U.S. house prices spells trouble.

According to the National Association of Realtors (NAR), the national median home value at the height of the bubble, in July 2006, was $230,400. In July 2011, the median price was 25.7 percent below that peak. By July this year, it had climbed back to within 7.3 percent of the high water mark.

Yet some of the engines of the price recovery are spluttering. Most importantly, mortgage rates have risen as markets anticipate an end to the Federal Reserve's bond buying.

Robert Shiller, the co-creator of the S&P/Case-Shiller Home Price Index, said higher borrowing costs could limit U.S. house price gains in 2014 to roughly 6 percent. The index rose 12.8 percent in the 12 months to August.

"The U.S. market might be cooling," Shiller told Reuters. "I think prices will keep going up for a while. There is still momentum, but it may fade and turn down in the next year or two."

Higher interest rates are also causing cash buyers to pull back. According to Goldman Sachs, in 2012 and the first half of 2013 fully 60 percent of home purchases were all-cash transactions - double the pre-crash figure - as Wall Street and foreign investors swooped in on distressed markets.

Family buyers are taking up some of the slack. But the speculative frenzy that marked the go-go years of the mid-2000s is missing. Banks have tightened mortgage standards, while the jobless rate is a lofty 7.2 percent and wages are stagnant.

In Las Vegas, prices have rebounded 29.2 percent in the past year, but Gregory Smith, a local real-estate agent, said the market was now cooling off.

"More families are starting to get their offers accepted, as the investors retreat. These are real buyers who intend to stay in the homes long-term. We are in a flattening-out phase," he said.

ALL ABOUT INCOMES

To assess property market risk, house prices need to be gauged in relation to income.

Whereas the U.S. price-to-income ratio at the end of 2012 stood at 84.3, measured against a rolling long-run average of 100, the ratio in Canada was at a 10-year high of 131.7, according to the Organisation for Economic Cooperation and Development.

Moreover, Canada's debt-to-income ratio reached a record high of 163.4 percent in the second quarter.

"Debt is at record levels, and we know consumers are biting off more than they can chew financially, so does this lead to more problems down the road?" asked Laurie Campbell, chief executive at Credit Canada, a credit counselling agency.

The same question is being asked across Asia. As mortgage rates return to pre-crisis averages, monthly housing payments in most Asian countries will rise by 15-25 percent, according to David Carbon, an analyst with DBS, a Singaporean bank.

But he said Asia's housing debt as a percentage of GDP remains much lower than in America. And home prices in Asia are now 22 percent lower, relative to incomes, than in 2000.

"By this gauge, Asia has little to fear on the property front - homes are become more affordable, not more expensive," Carbon wrote in recent report.

CHINA SYNDROME

Even in China, prices are 40 percent more affordable on average than in 2000, according to DBS.

But the average masks vast discrepancies in China, where the government is concerned about a bubble and the potential for social unrest as inequality over access to housing grows.

Prices nationwide rose on average by 9.1 percent in the year to September but surged 16 percent in Beijing and 17 percent in Shanghai.

"There are overheating signs in Tier 1 cities. The central government should take some measures, at least including stricter implementation of existing measures," said Wang Juelin, a former senior housing ministry researcher.

Demand by Chinese buyers has helped boost Hong Kong prices by 120 percent since 2008.

Hong Kong responded last October with a 15 percent tax on overseas buyers and in February imposed higher stamp duties and home loan curbs.

As a result, the premiums for new homes over existing homes that developers seek has shrunk to about 20 percent from 50-80 percent, according to Thomas Lam, head of research for Greater China at real estate firm Knight Frank.

PRE-EMPTIVE STRIKES AND BOTTLENECKS

Singapore has also increased stamp duties and capped how much people can borrow relative to their income. New Zealand has clamped down on mortgage lending.

In Australia, house prices rose 5.8 per cent in the year to mid-September, but Phil Chronican, ANZ Bank's local chief executive, said concern about a bubble was overstated, partly because the market had been subdued for so long.

"To stop this demand exacerbating the rising price trends, though, we need to see a supply response," he said. "We need more houses and apartments."

Supply constraints, notably strict planning rules, are also contributing to surging prices in London, where high-end property has been in demand from well-heeled foreign investors.

Richard Donnell, research director at property analysts Hometrack, said it was tough to set a rational price benchmark for London given the differing motives of foreign buyers.

Prices in the capital rose 9.4 percent in the year to September, according to Land Registry data.

"At the moment it looks like prices are going to keep on going up. But it's impossible to know what will change sentiment," Donnell said.

WARMING UP, BUT NOT RED HOT

The British government has launched subsidised mortgage schemes to galvanise housing ahead of an election in 2015 but Donnell said there was no nationwide bubble.

Prices rose 3.4 percent on average in the year to September, government figures show, though mortgage lender Nationwide said property inflation hit a three-year high of 5.8 percent this month.

The picture in Europe is one of stark divergences.

The International Monetary Fund has expressed concern about high prices in Norway and the Bundesbank grabbed headlines by warning that apartments in Germany's biggest cities could be overvalued by as much as 20 percent.

In countries such as Ireland, Spain and Denmark, by contrast, price-to-income ratios have slumped since the peak in 2006/2007. Prices have also been tumbling in the Netherlands because of uncertainty over the future of generous tax breaks.

Generalising about a global asset class when conditions vary from country to country is treacherous.

In Japan, the cost of residential land - a proxy for property prices - is still 50 percent below its 1991 peak but new condominiums in Tokyo are selling briskly.

At Skyz Tower & Garden, an apartment building near the site of the athletes' village for the 2020 summer Olympics, the first 820 units went on sale in August and are almost sold out.

Buyers probably expect Prime Minister Shinzo Abe's economic policies, which include a doubling of Japan's monetary base, to push up prices and lead to higher interest rates, said Ryo Hashimoto, head of the condominium's sales team.

For advanced countries as a group, house prices were now 'appropriate' considering historically low mortgage rates, according to ABN Amro, a Dutch bank.

"We are getting to a new phase where regular, middle-class families can purchase again," said Madeline Schnapp, an economist with PropertyRadar.com, a California firm. "But unless jobs get moving and incomes begin to rise I don't think we are in danger of any sort of bubble."

source: www.abs-cbnnews.com