Ask Paul: Should we sell shares to buy our first home?

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Q. My wife and I want to buy our first house. We plan to spend about $450,000 and put down a 20% deposit to avoid lenders mortgage insurance and we will also be exempt from stamp duty as first home buyers (Newcastle, NSW).

Currently we both work and earn a combined income of $140,000pa.

We have been saving for the past seven years and have built a stock portfolio worth about $150,000.

paul clitheroe ask paul advice guaranteed

Currently our overall portfolio is 3% in the red. Some of the shares in my portfolio, I believe, have exciting potential to rise in the next two to three years.

My question is, should I sell about $100,000 worth of stock to put down as a deposit and buy a house now or should I wait for two to three years for my portfolio to grow before buying a property? - Jason

A. Crikey Jason, you are really challenging my crystal ball with your question.

Sadly, I have to tell you that my crystal ball is very flawed and I cannot give you any certainty about shares versus property over the next two to three years.

Peering through the flaws, my best guess is that property is likely to be pretty flat. Shares are not cheap but with a strong local and global economy I expect to see reasonable returns over the next few years.

Then we have specific factors.

As I have been arguing for some years, Newcastle is an excellent area for people to live, work and retire. So I have positive views on the property market there. I also do not know which shares you own.

So this is going to be a personal call for you to make. Owning a home is an important step and one I encourage you to take.

While the sharemarket is highly unpredictable in the short to medium term, it seems reasonable to assume that the property boom of the past few years is unlikely to continue.

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Paul Clitheroe AM is founder and editorial adviser of Money magazine. He is one of Australia's leading financial voices, responsible for bringing financial insight to Australians through personal finance books, the television show Money, radio, and most notably this publication, which he established in 1999. Paul is the chair of the Australian Government Financial Literacy Board and is Chairman of InvestSMART Financial Services. He is the chair of Financial Literacy at Macquarie University where he is also a Professor with the School of Business and Economics. Click here to email Paul your money question. Unfortunately Paul cannot respond to questions posted in the comments section. Please view our disclaimer here.