But here is the distinction people are not picking up on – the difference between owning a house and owning a home. If you want a home it doesn’t matter if the market goes up or down, When you come to buy your next home you will be buying and selling in the same market.
Buying a home with 10% equity isn’t so much an issue around dropping values – its more about your commitment and ability to service a loan if things go wrong.
If on the other hand you want to buy a house on which to leverage capital gains then that is a totally different argument. This thread was, I thought, about first home buyers, not property investors / speculators.
And we need to get rid of the notion about your home being your biggest investment. It simply isn’t for a variety of reasons. One being there is no liquidity in it. Another being you do nothing to manage it – do home owners look at the return on expenditure each time they head down to Bunnings on their next DYI project – no they don’t. And when the housing market reached it “peak” did everyone sell their home to realise the profit – of course they didn’t. This is because its a home not an investment.
And lets not draw a distinction between investment and speculation.
My home has never been an investment because I have never made a profit on it. Each time I have sold a home I have gotten more than I originally paid for it – but I have always bought another home which is worth more. I have never been able to realise a profit and probably the only person to do so will be my estate when I die. I have however been able to make investments using the equity in my home since the bank is happy to loan on bricks and mortar.