Why I will never own a house again.

This is now my seventh year of living in Indonesia and somehow I really do think I shall never leave….I do so love it here.

The Indonesian constitution is pretty firm on the issue of foreigners (like myself) NOT owning land. In many ways, this is a pretty good rule overall as this young country with a fledgeling democracy would have sold off their birthright years ago.

                                                                                       Ah, A house in Bali 

The option then for foreigners or ‘bules’ as we are known by, is to lease land and one can lease for up to 99 years and, those self-same leaseholds can be sold or passed on to the next generations with options to renew.

On a recent trip to New Zealand many people I met told me, “I’m going to buy a home.” Or, “What do you think of the idea of me buying a home?” I rather prefer the latter question as it seemed like they were sincerely asking for my advice. And I didn’t hold back with my reply as I was going to give it to them even though perhaps their question was just a throwaway line.

Now, in various countries, I have owned, built and renovated several homes and, looking back, this was a path that led me into utter depravity and insanity.

So, after taking out a long lease here in Bali, I have discovered the joys of renting or leasing which led me to travel back to Australia and the UK to sell every piece of bricks and mortar that we had owned for many, many years.

Why? Well here are my personal reasons for doing so.

Financial:

A)     The disappearing Cash. So, you decide to buy a home and then you have to write a big fat check for a down payment. “But its an investment,” you might say to yourself. Historically this isn’t strictly true. Housing returned 0.4% per year from 1890 to 2011, It neglects all of the other ‘hidden costs’ that are hiding like Ninjas in that lovely shrubbery you saw when you first moved in. When you write that check, you’re never going to see that money again., because when you eventually sell that house you’re going to put any profit you made into another down payment. So, if you buy a $400,000 home, just say goodbye to about $100,000 that you worked hard for as it simply drifts away like dandelions in a stiff breeze.

Closing costs.

Oh yes, never thought about those, did you?.Well, these will mount up to about another 2-3% of the purchase price. Lawyers, land titles, real estate commissions, insurance, moving costs, antidepressant medicine and six months of intense therapy.

Maintenance.

Now, you’re going to have to fix things. Lots of things, as everything in the lifespan of your house, everything and I mean everything is going to break. During the stay in your residence, you will have paid for the plumber’s kid’s education, financed your electricians around the world trip, twice and allowed the roofing guy the opportunity to buy that apartment in Monte Carlo that’s he’s had his eye on.

Taxes.

There’s this myth that you can deduct mortgage payment interest from your taxes. Whatever. That’s a microscopic dot on your tax returns. Those get swallowed up in all the other taxes that are imposed on you for having the audacity of being a homeowner.

You’re trapped.

Let’s spell out very clearly why the myth of homeownership became religion worldwide. You see, corporations don’t want their employees to have many job choices, so they encourage them to own homes. That way, they can’t move away and get new jobs. Job salaries is a function of supply and demand. If you can’t move, then your supply of jobs is limited.

Getting the picture?

Ugly.

Saying “my house is an investment” forgets the fact that a house has all the qualities of the ugliest type of investment:

1. Illiquidity. You can’t cash out whenever you want.

2. High leverage. You have to borrow a lot of money just to say you ‘own’ that said house.

3. No diversification. For most people, a house is by far the largest part of their portfolio and greatly exceeds the 10% of net worth than any other investment should be.

Personal reasons to not own a house.

A)     Trapped, part 2. Some people like to have roots. But personally, I like things to change every once in awhile. When we did own houses and decided to move states or countries it meant getting rid of the house. Refer to the section on financial.

Walls.

You can’t change the walls when you rent which is sometimes a shame as most people seem to want to tear down walls, or paint them, hammer nails into them or create a cute serving hatch between the kitchen and dining room.  Sometimes when you rent you can’t do these things ( one can in Indonesia with a long lease as effectively you own it ) There must be some ancient evolutionary tic that makes us want to tear down walls or put nails in them or paint them, these days I like the walls to stay right where they are.

Psychology.

Look at your personal reasons for wanting to own. Do you feel like you can’t accomplish something in life until you own a house? Do you feel like its part of getting married and “Settling down”, i.e. creating a nest for your future children? For you, is it a part of becoming an adult. Is this what your parents taught you?

Your time. 

Do you really want to spend all that time working on your house? Is this where your time is best spent towards creating a happy and fulfilled life for yourself?

Those words, “let's renovate’ is often a prelude to divorce and then you will really have blown the budget.

Stress.

For me (not for everyone) owning a home equals stress. I saw what my parents went through at their worst moments owning a home. I saw what I and others went through in the Internet bust then the GFC. Unexpected rises in interest rates coupled with homeowners losing their jobs meant many people were killing themselves. I don’t like that very much.

Owning vs renting.

My dishwasher doesn’t work, I call the landlord and he fixes it. Or, I buy a new one and deduct it from my rent. Then, some guy from the store where I bought it comes and installs it. I do nothing. The repairman and my landlord work for me.

Cash is king.

I like cash in the bank. I like having access to it.  I don’t like it all tied up in one illiquid investment.

However, this is going to sound like a contradiction: but I think housing is a great investment right now. House prices in the USA. Europe. Canada and Australia have rallied to the point where buying a house will mean kidnapping say, President Trump and then getting a huge ransom in order to stump up with the down payment. (Risky though, as getting the ransom for POTUS could be difficult as no one would want to pay the said ransom )

Now I know I am going to get a lot of vicious comments about my financial planning but tomorrow I take off to Europe for four months and the landlord maintains the garden, the house in general, checks that everything is working and stresses about his ‘investment.’

Pass the wine will you? Tally Ho.