OK.
Say you and I are the same age.
We have the same income.
We are both single.
We live next door in similar value houses.
I own my house worth €500k with no mortgage.
You are renting for €30,000 a year
And you tell me that my house is not an asset?
It's the biggest mistake people make in financial planning. Not including their house in their overall picture.
Renting privately is a huge liability in Ireland, because it's expenditure without an end date. A mortgage is a liability, but it's a reducing liability which does have an end-date. But a liability being reduced or eliminated isn't on its own equivalent to the creation of an asset.
Say in your example above, instead of renting privately I'm in social housing paying 16% of my income in rent. I have equivalent security to you. My indefinite expenditure, and therefore the liability, is far less than renting privately; but I still don't have an asset, just a much much smaller liability.
As long as it's your home it's not an asset. It could potentially become an asset when you vacate BUT if you move elsewhere you're going to have to either buy (which will require either incurring a liability by getting a loan or reducing your assets by using them to buy your new home) or rent (which is indefinite expenditure and therefore a huge liability). For most people their home is only even a potential asset to their kids when they vacate it by dying.
- I'm not against estate planning/providing a decent inheritance for your kids. But I'm much more in favour of providing a decent life for oneself before that. I can't take it with me when I die, and adult offspring should really be able to take care of themselves financially and not be there with their tongues hanging out for their inheritance.
I absolutely take my home into account in my financial planning. The (somewhat smaller & definitely colder) house next door is rented at twice what I'm paying on my mortgage, and not having that financial burden/liability makes a huge difference to my family's quality of life. When it's paid off completely I'll be in a position to semi-retire if I choose, or dump a lot more money into my pension or other (currently very meagre) investments.
What I don't do is consider the equity in my home as anything other than a potential part-payment for another home. Rather, if we traded up it would reduce the loan we'd need to do the deal. Trading down (ie realising part of the potential of my home as an asset) is very unlikely in the next 20 years.
it might make sense for the OP to trade up. There may be an area where they prefer to live (that's not what they say) or they may (hope to or actually do so) partner up with someone and/or become a parent (but that's also not something they mention). Or they may simply want to have more space and/or live in a house with a garden instead of an apartment (but again they're not not talking about this). Any of those would be perfectly reasonable grounds to trade up to a more expensive home.
But getting a massive mortgage just so they live in a more valuable property proportionate to their income (which is the only reason they actually cite in their post) is in my opinion a ridiculous reason to trade up.
