Posts Tagged ‘mortgage’

The media is full of commentary by amateur and professional investment advisers applying pure financial measures to property prices.

They are detailing yield levels and return on investment analysis. These financial models are appropriate for pure financial investments such as shares or bonds, where these investments are expected to perform in terms of paying interest or a dividend (income) or providing a profitable return (capital growth).

Whilst valid from an arithmetic point of view the reality is that the most important thing for most purchasers of a property is the pleasure and sense of confidence that comes from owning your own home. This is the emotional connection that is applied to property purchase and it certainly needs to be carefully balanced by financial logic in the buying process.

Clearly the market has a proportion of investment properties which landlords buy with the express intention of renting out for commercial gain through income and ideally capital growth. Whilst their judgment of  property price may be more based on yield, as a home for your family and a long term savings programme a house may well mean more to you and that is what drives the greatest proportion of the property market. As ever it is important not to buy beyond your means and to make sure your capability to pay for the mortgage can be maintained should mortgage rates rise or should your personal circumstances in terms of employment or family considerations change.

Most people buy with an intention to hold on and improve (or at least maintain) a property. In that time they cannot and should not apportion a value to the intangibles of security, social and emotional value a home provides. These are the factors that drive people to move to new streets and seek out new school zones or lifestyle choices. As most people sell their existing home and buy another homes usually within a 3 – 6 month window the factor of price movements are less likely to affect your individual purchase as you are operating in a like-for-like market.

The losers (and likewise sometimes the gainers) in the property markets are those that step off the property market and move to the renting market with all the consequential emotional and financial effects that can have on you and your fmily.