Break all Term Deposits and Invest in Cheap Shares

[Sauce]

Yes paying too much for a home can affect your later wealth in a significant way, no argument there. The problem is a buyers need for housing may not neatly fit within a down cycle in the property market.

Sauce, you provide a good argument against overstretching your financial resources, which I agree with. Save more than the minimum deposit required if you think this will be an issue. IMO you have presented an argument against irrational exuberance and buying property, not a justification to rent instead of buying.

SNOOPY

The real point I was making is that your idea that ENPs goal was "to be able to buy a property in two years time no matter what" rather than his stated goal of "obtaining a house deposit faster" is born of the same kind of emotional thinking that drives the kind of exuberance that causes the financial destruction I outlined.

In your mind you have some view that ENP may have a personal situation that means this is a justifiable idea, but this is a general discussion, on an investment forum. Speculating about possible subjective circumstances so that your goal fits is not the right way to give general advice. Yes, of course some people have genuine lifestyle considerations that make home ownership important for them, but this is general discussion on an investment forum regarding a first home buyer.

You say "the problem is that a buyers need for a property may not fit neatly within a property market down cycle" But then you go on to suggest that if someone is going to stretch their financial resources they should "save a larger deposit". Hmmm.

Hang on a second. Didn't you just advise a first home buyer who wisely said they were looking for a way to achieve a larger deposit, that they should instead forgo a larger deposit to guarantee themselves that they could get into the property market on their desired date no matter what? That way they would hedge themselves if prices were to rise rapidly, and that their goal of home ownership was more important than the negative financial considerations of your strategy?

I believe you understand what I am getting at Snoopy, but you are intentionally steering the conversation to subjective detail and semantics, and not addressing the real point.

It is better advice, generally speaking, for first home buyers on average, to consider the entire situation. They need to consider their deposit size, loan servicing ability, how rising interest rates in the future will affect their loan servicing ability, AND whether the price they are paying is reasonable and if the market is overheated or not. Some judgements about an uncertain future will have to be made but given the information available good decisions are very achievable.

It is way too simplistic to advise someone that to "achieve home ownership in two years" they should link their investment returns with house prices, so they are in no better or worse position in regards to their deposit percentage, and that way if house prices go crazy again, they will still be able to buy the house. This is simply NOT good general advice for the average first home buyer - and it has elements of irrational exuberance to it - even though you may justify it through speculating about unknown lifestyle considerations.

If a first home buyer cares about owning a house so much that they are happy to wear substantial costs and risk much lower future purchasing power to do so, then your advice might suit them - but it will be a minority that it is right for. As general advice, on an investment forum, for the average first home buyer, it not very good advice.

Regards,

Sauce.