Dealing with the fear of missing out - housing market

[aldrimer]

Hi guys. Long time no see.
I've been struggling with the fear of missing out of the housing market lately. Since everyone around me (I live in Norway where 93% of all people above 60 own their own housing!) are of the mentality that buying a house/condo = the best investment in the world (and everything else is a scam!), I thought I could ask you guys for more balanced advice on what to do moving forward.

Some information about my situation:
- I live in Norway. I like my current location and plan on staying here for the foreseeable future
- I have never had a job that I've liked 1 year into the job. I'm only 29, so hopefully this is just bad beginner's luck, but this experience has made me veeeery cautious about taking up a mortgage / debt in general. Having a bad boss is painful enough without the debt. Not having debt in my 20s has enabled me to stay cool / not get too depressed in toxic work environments while planning my escape (and this has been priceless!)
- We have a (fucked) wealth tax system in Norway - if you have more than 230k US$ (ish) invested in equities you will be taxed 0.85% each year for the amount above the 230k
- Capital gains tax of around 32% on equities
- The value of a house/condo is for some reason only valued at 1/4 of the market value. Meaning that if you own a 800k house, it will be valued by the government at 200k - and voila - no wealth tax!

I think my obvious bias is already showing, but I hate the fact that the government favours housing so much compared to saving money and investing. But, since I don't control the government I'll stop my whining here.

Ideally I'd love to keep on renting, saving and investing. Mainly because I hate debt and never want to be someone's (read: my boss') bitch ever again. However, lately I've been thinking more in lines of "If you can't beat them, join them". I really want to stay in my current location for several years as my family and friends all live here. I also fear "missing out" on the housing market, but I suspect this fear to be irrational and more just an emotional reaction based on comments from friends/family/media etc.
I know saving and investing will also provide a great financial future if I stay disciplined, but I find it difficult to stay motivated due to the tax environment + the above mentioned fear of missing out of the housing market.

What would you guys recommend me to do?
Not in terms of renting vs. buying, but how could I run the numbers on this decision in the best way possible without my emotions getting in the way? And how have you personally dealt with the fear of missing out? (from both the stock market and the housing market)

I'm sorry for the wall of text, but I'd really appreciate some advice here.
Thank you so much,
aldrimer

[former player]

This is just my own feeling, not a statistical analysis, but I do rather think that by the stage I'm thinking "am I missing out on this" I've already missed out.  Which is to say: that feeling of missing out is based on the past not the future.  Nothing you can do about the past - and 29 and single is hardly the place to start thinking you've missed out anyway.  So when running your analysis look to the future and forget the past, if you can.

As to the rest, I agree that the advice on this site is very USA-centric, where the tax situation is very different, where the investing situation can be very different, and where in most of the country building houses is a lot easier - more land availability and looser planning regulations - than in Europe, which can have a significant effect on future value.


I think you've done a good job of setting out the general conditions for investing and buying houses in Norway.  What you haven't done is set out some crucial issues as to how they apply to you in particular -

1.  Financial - how much of a deposit do you have, how big a mortgage are you thinking of getting, what is the interest rate and is it fixed, how big are the payments in relation to your income?  If you run these figures at a level you are comfortable with, can you buy a house/condo that you would be happy to own for the rest of your life?  (My experience is that selling a house is a stressful and uncertain activity, to be avoided if at all possible).

2.  Employment.  How secure is your current job, and is there a good selection of other desirable jobs in the same location should you want or need to move on?  Or if you have to move for job reasons, would the house you buy rent out at a price that covers your costs on it?

3.  Investing.  How close are you to that $230k level at which the extra tax kicks in?   Even if you are below that level, how many years before reinvesting dividends and compounding gets you there?  (Also, I'm not quite clear whether the investment and house values are aggregated for tax purposes - if you have a $200k value house, do the extra taxes kick in with only $30k in investments or do you still get the whole $230k?)  One thing I would say about the extra tax is that at 0.85% it's rather like having an expensive fund manager - not ideal, and preferably avoided, but not completely disastrous either.

Not to say that you need to give any of those answers here, just that they need to be added in to the decision-making process.

[aldrimer]

This is just my own feeling, not a statistical analysis, but I do rather think that by the stage I'm thinking "am I missing out on this" I've already missed out.  Which is to say: that feeling of missing out is based on the past not the future.  Nothing you can do about the past - and 29 and single is hardly the place to start thinking you've missed out anyway.  So when running your analysis look to the future and forget the past, if you can.

As to the rest, I agree that the advice on this site is very USA-centric, where the tax situation is very different, where the investing situation can be very different, and where in most of the country building houses is a lot easier - more land availability and looser planning regulations - than in Europe, which can have a significant effect on future value.


I think you've done a good job of setting out the general conditions for investing and buying houses in Norway.  What you haven't done is set out some crucial issues as to how they apply to you in particular -

1.  Financial - how much of a deposit do you have, how big a mortgage are you thinking of getting, what is the interest rate and is it fixed, how big are the payments in relation to your income?  If you run these figures at a level you are comfortable with, can you buy a house/condo that you would be happy to own for the rest of your life?  (My experience is that selling a house is a stressful and uncertain activity, to be avoided if at all possible).

2.  Employment.  How secure is your current job, and is there a good selection of other desirable jobs in the same location should you want or need to move on?  Or if you have to move for job reasons, would the house you buy rent out at a price that covers your costs on it?

3.  Investing.  How close are you to that $230k level at which the extra tax kicks in?   Even if you are below that level, how many years before reinvesting dividends and compounding gets you there?  (Also, I'm not quite clear whether the investment and house values are aggregated for tax purposes - if you have a $200k value house, do the extra taxes kick in with only $30k in investments or do you still get the whole $230k?)  One thing I would say about the extra tax is that at 0.85% it's rather like having an expensive fund manager - not ideal, and preferably avoided, but not completely disastrous either.

Not to say that you need to give any of those answers here, just that they need to be added in to the decision-making process.

Thank you so much for your valuable advice, former player. While I don't have answers to all these questions at the moment, I will do the research needed in order to be able to answer them clearly for myself before making any decisions.

My current answers:
1) Condos around here go for $235k give or take. I currently have $70k invested with zero debt. Based on some quick research the maximum fixed-rate mortgages available are 10-year ones @ 3,55%. Current non-fixed mortgages are around 2,7%
Based on my current monthly income ($3400 after tax) I should be able to easily pay off a condo within 10 years with a fixed interest mortgage. However, I'm just wondering what will happen to my quality of life during those 10 years. I have never had this amount of debt before and to be honest - I just don't know how I would react if I were to get into a bad job situation again with a mortgage around my neck to boot. Maybe I'm worrying too much here, but since I haven't experienced having that amount of debt before I'm worried how much stress it would cause and whether or not it would be worth it.

2) My employment is currently very safe (government job) and very boring. But it is safe. New jobs are available as well in my field, so I'm not too worried about that.

3) I currently have around $70k invested. At my current savings-rate (60%-ish) I should reach the $230 threshold within 5-6 years.
"If you have a $200k value house, do the extra taxes kick in with only $30k in investments or do you still get the whole $230k?" - Yes, they kick in with only $30k in investments, unfortunately.

Again, thank you so much for your helpful questions for me to think about. I definitely have some reflection and calculations to do! :)

[Spruit]

Sounds like there is a lot of similarity between Dutch and Norwegian housing markets. If you feel screwed by wealth tax, keep in mind it's between 0.89% and 1.67% here, for all capital above 30k. House value excluded. Still, it's not the end of the world and some folks wind up FI anyway because there's a lot that's covered for us already (education, health care)

I've been pondering the rent vs buy as well for my situation, and calculated the difference including all costs associated with buying and selling a home + maintenance costs + average appreciation vs rent increases based on inflation, rent never being paid off etc etc. Turns out it takes a loooong time before buying would be better financially speaking. Even with evil wealth tax! Calculate it for yourself, but don't forget to add in the costs associated with buying or selling.  They are around 15% of home value where I live, so pretty significant for the outcome.
Still looking for a home to buy, but I'm not kidding myself that it's the best to do from a purely financial standpoint.

In this country the 60+ folks also preach buy buy buy and investing is gambling etc. Apparently it's a European thing. Trust your own deliberations, times have changed.

[aldrimer]

Thank you lhamo and Spruit! I really appreciate the valuable feedback.
And interesting to hear about the similarities between the Netherlands and Norway, Spruit. I didn't know that.
Yes, we have health care and education taken care of here as well, so at least I don't have to care about health insurance anytime soon. The price for buying/selling a house in Norway is around 11-12% of the house value, so definitely high here as well.

When I come to think of it, I think one of the main reasons why I've been having this fear of missing out on the Norwegian property market is because I still don't have a lot of money invested in the stock market - only around $70k. When housing prices rise e.g. 10% in a year, that $250k condo now suddenly costs $275k, which to me is a huge price difference at the moment - even if I got lucky and got a 10% return on my current investments of my $70k, that would still only amount to $7k compared to the $25k increase on the condo. This in turn creates the fear of missing out effect.
However, I have a suspicion that I would have had a different and more cool outlook on the same situation if I had $250k invested. Primarily because I wouldn't feel "behind" in the same sense...
That being said, I will try my best to get a more cool outlook on this situation way before I hit $250k in investments. Starting with doing more calculations :)
Again, thank you guys!