How to Invest in Building Your Dream Home for the Future

how to invest in building your dream home for the future | The trend of rising benchmark interest rates by the Federal Reserve, implemented as a strategy to combat recent inflation increases, is one of the reasons behind the surge in housing and property prices. As of now, the Federal Reserve is still holding the benchmark interest rates until the end of this year. However, many people remain concerned about the potential increase in interest rates if global inflation continues to rise. This is due to both domestic and international geopolitical turmoil, which is currently quite intense.

How to Invest in Building Your Dream Home for the Future

Residential Property Price Index has increased by 3.87% in the first quarter of 2023. This increase has affected all types of homes. The rise can be attributed to the price adjustments made by developers since early 2023 when the Federal Reserve began a significant interest rate hike.

So, what are the reasons behind the rise in home prices?

1. Inflation

Inflation is a common reason for the increase in property prices. This is primarily due to the rise in raw material costs, especially in the current circumstances where some prices have surged due to a significant increase in energy fuel costs, affecting commodity prices in various sectors, including construction materials.

2. Increasing Life Expectancy

Data shows that the overall well-being of the population is increasing. Therefore, the demand for housing is also on the rise, which drives up housing prices.

3. Insufficient Supply

The high demand for housing is not matched by a corresponding increase in supply. Therefore, it's not surprising that property prices are rising.

4. Massive Infrastructure Growth

The government is committed to providing infrastructure to make daily activities easier for the public, from establishing public facilities, building roads, to developing tourist areas. This growth also leads to an increase in property prices in areas surrounding the infrastructure development.

Five Effective Tips for Buying a Home

Here are some steps you can take to make your dream of owning a home a reality, even if you're young.

1. Assess Your Financial Capability

First, create a financial balance sheet that includes your income and expenses. Remember, you have other needs as well. Determine the priority of your needs and ensure that the desire to buy a house doesn't overshadow your other essential requirements.

2. Create a Budget

Research and explore various home payment methods that you can use besides paying in cash. For example, consider home loans, developer financing, or other methods. Afterward, create a specific budget. Set a clear timeline and target amount so you can create a realistic financial plan to save money.

3. Establish Priorities

From your existing financial plan, establish priorities so you can focus on one thing at a time. For example, if you plan to take out a home loan, your first priority should be meeting the initial down payment. Also, consider your financial ability to cover daily expenses.

4. Invest

Investing can help you grow your assets against inflation. For example, allocate 30% of your income to investment instruments that suit your financial situation. Over time, with consistency, you'll be able to accumulate the funds needed for your home's down payment. Additionally, consider having an emergency fund in low-risk instruments.

Apart from an emergency fund, pay attention to insurance, especially health and life insurance if you're the breadwinner of your family. Ensure your protection is comprehensive before executing your financial plan.

5. Discipline

Discipline in implementing a detailed and comprehensive financial plan is crucial. For instance, keeping your monthly installments under 30% of your regular income is crucial if you choose a home loan scheme. This is a safe percentage to avoid excessive financial burden.

Please note that this 30% includes all debt repayments. If your primary goal is to buy a home, focus on this plan first. Additional debts will only increase your financial burden. Also, lack of consistency in saving or investing can hinder your progress.

Moreover, buying a home requires a long-term commitment to discipline. Therefore, start practicing discipline in executing your financial plan.

With the above tips, you can work towards achieving your dream of buying a home. Stay motivated and keep trying! Good luck!