Should your home be considered an investment diversification?

Probably gone off topic a bit but owning a home can mean having the potential to downsize, a ppr Is tax efficient if you ever do sell and yes it saves you paying rent but don't forget there are high running costs with owning one

Additionally i know loads of people who have taken out home improvement loans thus saddling themselves with more debt, sure there is the utility value etc but often times the improvements aren't strictly necessary

So I guess owning a home can cause lifestyle creep too which is not good for the balance sheet

Never have and never will consider my home an asset.

1. I need to live some where.
2. Its 2900sq ft on a large site. Way to big and lots of maintenance on garden but I like a big house and love a big garden. Just like I like a fresh car every few years.
3. While I invest in equities and rental property I never take into consideration my home. Comfort to me. Two different worlds.
4. All my investment to some degree have a risk/reward attached. Not my home. Property prices up/down . I dont care.

KOW said:

Property prices up/down . I dont care.

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For one thing, it affects your LPT liability.

Diageo with 6cent on a pint clubman. Same only different.

KOW said:

Diageo with 6cent on a pint clubman. Same only different.

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?

ClubMan said:

For one thing, it affects your LPT liability.

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Property taxes in Ireland are so low as to barely matter.

I’ll probably do a big trade-up this year and have €40 a month extra in LPT.

It only really matters if you’re a single retiree in a €1.5m house on a state pension.

Lucky for such people living in an asset worth €1.5m!

From post #80 above.

Surely you should offset against all of those costs the amount of imputed rental costs that you avoid by owning the property?

I disagree. The only costs are relevant costs that can be measured in the same way by all. The costs of garden maintenance; painting and decoration, etc. will vary between owners. Your house provides (a) shelter and (b) housing services. The value of shelter is the replacement cost of the property as calculated for insurance, less insurance premium less property tax. The initial value is what you paid for it, i.e. deposit plus mortgage payments, i.e. relevant measurable costs of ownership that will not vary significantly between owners. Also as these are knowable costs an efficient market will reflect them in the price of the asset.

The value of housing services and the cost of providing / maintaining them will vary between owners, and are difficult if not impossible to calculate. So the difference in sale prices is primarily due to different values being attributed idiosyncratically to the housing services component. If you regard your house as an illiquid asset for diversification and decision making purposes the only way to value it realistically is on the shelter component. [You could, of course, take an average of the recent prices obtained by equivalent properties in your area and slice off say a 30% premium to account for the illiquidity factor.]

The Central Bank consider houses as part of the stock of personal wealth.

There is the concept of "utility" in economics. Will I go for a 3k holiday this year? I could invest that 3k in the stock exchange and make it grow but not all decisions work that way. Some of the calculations of utility are too transactional. It is in effect the non economic benefit of economic activity. That is a matter of personal choice.

Brendan Burgess said:

These are very odd ways of thinking.

If you have a house worth €500k and no investments and I have €500k cash but no house, we are in exactly the same position. Yet by your reasoning, you have no assets and I have €500k.

If you sell your house and rent, you now have €500k of assets.

If I buy a house I have no assets as my €500k is gone.

Presumably, you see the complete fallacy of these statements.

So you don't actually mean that your house is not an asset.

So I am not sure what you mean by these various statements that your house is not an asset or that it does not contribute to your financial position.

1) You can sell it and convert it to cash - so it meets even Mammyboys' teacher's definition of assets.

2) While you live in it, it saves you rent - so it meets Redzer's implied definition that it contributes to your financial position

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My (very odd?) way of thinking on this issue was accepting that a home is an asset but not viewing it as an investment which would be the action or process of investing money for profit. My preference for a home is to own it so I'm less dependent on external factors (a landlord and the rental market). By owning my home I may (or may not) be contributing to my financial position but that is very secondary to my desire for a home I call my own. I spend my working life primarily ensuring that I'll have a roof over my head ( and food in my belly, etc.) but I'm not doing that to make a profit. If one arises then great but I'm not banking on it.

I'm not saying a home is not an asset. I am saying its not primarily a financial investment.