Every young family around the world dreams of getting a house and land package to settle in. Condominium units may be cheaper, but these are easily outgrown when a family has children. Also, houses are better investments because they appreciate more compared to condominium units.
Affordability is a major stumbling block to homeownership, though. In 2021, housing prices worldwide increased by double digits, according to Kalkine Media, due to inflation, record-low mortgage interest rates, and a shortage in inventory brought about by pandemic supply chain issues.
Housing Affordability in 2022
This year, those factors are still in play. Hence, data from FitchRatings show that global housing prices will continue to increase. The rate of increase will be slower than last year’s in most countries, though, because mortgage interest rates will be increasing.
Kalkine Media noted that interest rates in New Zealand have already risen by 0.5 percent to 0.75 percent. This is the first time in seven years that it has done so. The United Kingdom has also begun increasing its mortgage interest rates. In the United States, the average 30-year fixed mortgage rate is predicted to grow from the current 3.3 percent to 3.6 percent by the end of 2022.
The Sydney Morning Herald reports that analysts expect housing prices in Australia, which increased by about 22.2 percent in 2021, to also continue growing but at a slower rate this year. A Westpac bank economist predicts an eight percent increase in home prices. In comparison, a Commonwealth Bank economist predicts a seven percent increase, and an Australia and New Zealand (ANZ) bank economist predicts a six percent increase. Mortgage Business reports that National Australia Bank (NAB) predicts a five percent price increase.
They all expect housing prices to stabilize by the second part of 2022, though, before starting to fall in 2023. ABC News reports, however, that some analysts caution that home prices in Australia could still return to double-digit heights if a worse Covid-19 variant appears. SQM Research states that this will deter interest rate hikes by the Reserve Bank of Australia and credit interventions from the Australian Prudential Regulation Authority (APRA).
Buying an Existing House
The quickest way to move into a house of your own is to buy a house already built, along with the land it stands on. You can already see everything you will get, and you already know upfront how much the entire package will cost. However, it is imperative to first have a professional house inspection to ensure that the property does not have anything that needs serious fixing. If it is an old house, the electrical system may be outdated, the plumbing may have leaks, and the insulation and paint may have toxic emissions. It is also crucial to have the foundation, and the home’s structural integrity checked. Without the inspection, you can end up not having a livable house and having renovation costs that are beyond your budget.
If you decide on a fixer-upper that is already livable, you can do the optional improvements one at a time, depending on your budget. By moving in at once, you save on having to continue to pay rent.
Buying a Packaged House and Land
With the packaged house and land, you already know the total price for both, but the house is not built until you sign on. You will be shown the house plans of the unit you will pay for. Scrutinize it well and ask questions. Make sure you know what is and is not included in the unit that will be turned over to you. For instance, will the house already have connections to the electrical grid and water system? If not, find out how much it will cost you to have these connections. Also, find out what the flooring will be made of and what the bathroom features are. Ask if you have options to customize some parts of the house without affecting the price. It is best if the builder has an existing unit model you are considering that you can inspect. All these will help you assess whether the price is fair.
Buying Land and Building a House
The third option is to purchase a lot separately and hire a contractor to build your house. Some families do this if all they can afford at the beginning is a lot. They then save up for building a house or a mortgage down payment.
The main problem with this is that construction costs continue to increase, and there is no definite way of knowing how much house construction will cost. Even professional builders are currently at a loss because global shortages push up the prices of construction materials due to the pandemic. Covid-19 affects the supply of raw materials, manufactured materials, and delivery of materials. Furthermore, there is a labor shortage.
What You Can Afford
In the end, the bottom line is to purchase what you can afford. If you have previously purchased a lot, find out how much you can sell it for and if that is enough for a down payment on a house you can already move into.