Welcome to The Money Coach, a Times of Malta column where readers can ask questions about life's money issues. Send your questions about personal finances, inheritance, gifting or other personal finance topics to moneycoach@timesofmalta.com.
Dear Luca,
I am a 25-year-old newly graduated lawyer in Malta, facing a significant life decision that feels overwhelming. For all my life, I've been surrounded by the belief that owning property is a cornerstone of financial stability and success. My parents managed to buy their own home at a relatively young age and encourage me to do likewise.
However, the current real estate market in Malta is making me question this long-held conviction. Property prices have surged to the point where what once seemed like a wise investment now feels like a daunting, almost unreachable goal. For context, back in 2014, a standard two-bedroom apartment was priced at about €130,000. Fast forward to 2023, the same kind of property is selling for no less than €250,000. I find this disheartening.
I’ve always imagined I would follow my parents’ footsteps and become a homeowners. But I’m now starting to reconsider and find myself at a crossroads: should I buy, or rent?
Could you provide me with some advice or insights? Is the dream of home ownership still practical in today's market, or should I be looking at renting as a more viable option for now?
Your guidance would be invaluable.
Warm regards,
Fresh Graduate
Luca responds:
The decision whether to buy or rent in Malta's evolving property market is a daunting one, and there are probably more considerations to make than come to mind at first thought. Here are some things to keep in mind and help guide your decision.
First, it's important to reflect on your current financial situation. As a 25-year-old who has just embarked on a legal career, where do you stand in terms of savings and financial stability? When considering purchasing a property, remember that the cost goes beyond the listing price. Have you factored in the additional expenses like legal fees, stamp duty, and potential renovations? Furthermore, do you have a financial safety net to fall back on? For example, is family support an option for you in case of unforeseen financial strains? Understanding the full spectrum of your financial resources and obligations is crucial in assessing whether you're ready for homeownership.
Next, let's look at the current market trends. How have property and rental prices in your preferred area changed recently? It would be beneficial to compare these trends. If you've noticed that rental prices have increased significantly more than property prices, this might tilt the balance in favour of buying. However, if the rental market is relatively stable, this could provide a more manageable and flexible option for your current financial situation. Have you had a chance to gather this data, and what does it suggest about the most viable option for you?
The decision to buy a home also intersects with lifestyle choices and future aspirations. How do you envision your life in the next five to 10 years? Does homeownership align with your personal and professional goals, or would the flexibility of renting better suit your anticipated career trajectory and lifestyle preferences?
Moreover, if you are considering buying, how familiar are you with the current mortgage market? It's important to explore various mortgage options and understand their long-term implications. Are you comfortable with the idea of committing to a mortgage that could span several decades, and does it align with your career prospects and future income potential?
Finally, as you consider this significant decision, have you sought advice from financial or real estate professionals? They can offer insights tailored to your specific situation, helping you to understand the nuances of the market and how they align with your personal and professional objectives.
In essence, your decision should be a thoughtful blend of your immediate financial reality and your long-term life plans. This is not a decision to be rushed. Reflect on these questions, gather information, and allow yourself the time to make an informed choice that aligns with both your financial capabilities and life goals.
Luca is the founder of the Money Coaching Hub. Email him your financial questions at moneycoach@timesofmalta.com
Disclaimer: This column is intended to provide general information on various topics related to personal finance. The information provided is for educational purposes only and should not be construed as personalised financial advice for your specific situation. Financial decisions are highly individual and can vary greatly based on your unique circumstances, goals, and risk tolerance. The author of this column is not authorised to provide financial advice. Before making any financial decisions, it is recommended to seek professional financial advice from an authorised financial advisor.