Purchases are never entirely logical decisions. They’re a heady mix of reasoning and emotion – purchasing homes is no different. In our country, home ownership is synonymous with a sense of self-worth and a mark of success. The decision has such a significant emotional aspect to it that a lot of practical factors get left out. The result is that home seekers end up focusing on prices rather than anything else.
But is that really all there is to consider before buying a home? Absolutely not. Low prices are not the only reason for an individual to invest in a home.
Financial assessment
One of the first things to ascertain is if you can really afford a particular house. Although this sounds like a beginner’s class, it is surprising how many individuals over-commit themselves financially just because prices are low. One needs to look at the cost of the house from an affordability perspective. What is the down payment required? How much loan are you eligible to borrow? How many years do you intend to repay the loan over? Ensure that you factor in registration costs, stamp duty, taxes and other charges.
House price inflation
In the last few years, the rate of house price inflation had been on a steady increase until December 2013 when it began to decline. It is currently at a 4-year low of below 4 percent. How does this affect you as an end user? Well, for starters it makes banks more reluctant to approve home loans for buyers. So what
Purpose of purchase
Having a clear reason to purchase a home is extremely important. Property is not a purchase that one should be impulsive about. Is the home meant to be for self-use or is it meant to be rented out? Are you approaching it from an investment perspective or a personal one? Knowing the ‘why’ behind your desire to purchase will help evaluate its feasibility and dictate the approach.
Location, location, location
Analysing the location of the property before purchasing is a must no matter what. It is important to know what kind of potential the location holds and if it’s prudent to purchase a home there. Some common things to consider are legal aspects of the property, potential of increase in value, accessibility and so on.
Builder basics
When property prices being offered are significantly low, one needs to make especially sure that the causes for it are reasonable. Doing some research on the reliability of the builder is always a good idea.
Property purchase needs to be a carefully considered decision rather than a reaction to temporary fall in prices. Remember that it is an illiquid asset and not an object to make an impulsive decision over.