The real cost of houses: Part 1

The real cost of houses: Part 1

How big is your house? Mine’s 85 square meters. It houses 3.  There’s 6 rooms. Four rooms are used frequently, the other two mostly collect dust. And junk.

When we announced we were expecting, friends asked wide eyed, “Where are you going to put the baby?”

“In the sock drawer,” I responded, “and when the baby outgrows that, in the linen cupboard.” Actually, I wish I’d said it, but couldn’t have. We don’t have a linen cupboard. To be clear, I was told by my midwife that in the olden days people used to put their babies to sleep in dresser drawers. In Finland, it’s a cardboard box!

How things have changed. Our house was built by our 70 year old neighbour’s family in the 50’s. A solid, postwar home, it initially housed 2 adults and 4 children. Our neighbour also brought up her 4 children in the house before moving next door. In this generation, it’s housed just 2 and is by today’s standards considered a very small house.

This is the story of houses across Australia. They’re getting bigger even while household size has been on the decline for many decades. Despite housing affordability levels being at their lowest, big homes are still the Australian dream. Anecdotally, home buyers desire the biggest house their budget can buy.

In my professional life I’ve been involved in many new home designs, both as a designer and energy efficiency assessor. I know about the hopes and dreams that are tied up in the idea of ‘home’. After all home is where the heart is. Home is a refuge, a place you bring up your children. A reflection of you; your personality, tastes and status.

Home is a special place and a national obsession. A glance at the TV guide will tell you that. As will Bunnings’ revenue of $9.5 billion in the 2015 financial year. Yes, billion. We’re a nation of builders and renovators.

I take great pride in my home and all the improvements we’ve made to it. I’ve also watched my fair share of Grand Designs and marvelled at beautiful dreams being turned into reality. But there’s a point where our national obsession goes too far.

Flipping through magazines or watching renovating shows it’s easy to forget that houses are to be lived in, not looked at. When our identities are tied up in our homes we can end up in serious financial stress.

While your home is generally your biggest asset, it shouldn’t sink you financially. It shouldn’t tie you to a job you don’t like for 30 years, or take you away from spending time with your children or be a source of constant stress and worry.

Financial stress is a major plot point in almost every Grand Designs episode as well as in the narrative of many people’s lives. As a nation, we’re building, renovating and extending with ‘bigger and better’ as the motto, leaving us with serious debt. And that’s before even considering that our houses are already some of the least affordable in the world. The question of whether to buy or not buy is a good starting point.

If you do decide to buy, then what?

Floor space is expensive. Back when I started in architecture, a project home cost around $500m2 while a once of design was $2000m2. Extensions generally fit into the latter category, while renovations also come with a decent price tag due to the uncertainty of what you might find in an older house. Why size matters when buying a house

Despite the cost, many of our friends and acquaintances have bought big four bedroom houses for the family that they were yet to have and then moved shortly after their first child was born, sometimes even before. Or worse, they got divorced. Others are renovating and extending using a second mortgage they’ve admitted to barely being able to afford.

One of the best pieces of financial advice we received from the bank (of all places!) was to renovate project by project once we had the cash, instead of getting additional loans. When we decided to renovate, we steadfastly refused to give into the extension trend estimating we would need at least an extra $100,000 for a modest addition. Our families thought we were crazy, but for over a decade our house has been the perfect size for just the two of us.

Living in a small house is okay. Really it is. Buying something that suits your current needs makes good financial sense. Would you buy clothes one size up or one size down for when you gain or lose weight? Probably not, because clothes are considered disposable. Yet, I’ve got several pairs of pants that I adore and I’ve had them longer than I’ve lived in my house. I bet you do too.

Just like with saving money, making a decision to do anything that goes against the trend feels uncomfortable. But your home should be your place to relax and feel secure. Will buying someone else’s dream offer you that? Consider your options and make a choice based on what is right for you.

Houses cost a lot to buy, but what comes next? Let’s talk about running costs next.

Is your house a perfect fit for you?

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