Sizing a Home for a Growing Household: A Worked Example

Buying for today means moving sooner; buying for the future means paying now for space you do not use. A calculation.

Households buying a first family home face a genuine dilemma: buy what fits now and move again in a few years, or buy larger and carry the cost meanwhile. The arithmetic helps more than intuition does.

The situation

A family of four expects to grow and is choosing between a three bedroom unit at SAR 750,000 and a four bedroom unit at SAR 920,000 in the same area.

Assumptions (illustrative)

• Three bedroom option: SAR 750,000.
• Four bedroom option: SAR 920,000.
• Transaction costs: assumed 3 per cent of price.
• Assumed additional annual running cost of the larger unit: SAR 6,000.
• Assumed cost of moving again in five years: transaction costs on sale and purchase plus moving.
• Assumed property price movement: 4 per cent per year in both cases.
• All figures are illustrative assumptions used to demonstrate the method.

Step 1: Initial cost difference

SAR 170,000 difference in price, plus about SAR 5,100 in additional transaction costs.

The larger unit costs about SAR 175,000 more to acquire, which must be funded now.

Step 2: Running cost over five years

SAR 6,000 per year for five years equals SAR 30,000.

Space you do not yet use still costs money to cool, clean and maintain.

Step 3: Cost of moving in five years

Selling the smaller unit and buying a larger one incurs transaction costs on both, plus moving, assumed at about SAR 70,000 in total.

This is the cost of the alternative strategy, and it is the figure usually left out of the comparison.

Step 4: Comparing the two strategies

Buying larger now costs about SAR 205,000 more over five years. Buying smaller and moving costs about SAR 70,000 in transaction costs plus the price difference at that time.

The comparison turns on what the larger property costs in five years rather than today.

Step 5: Effect of price movement

At 4 per cent per year, the gap between the two property types widens from SAR 170,000 to about SAR 207,000 over five years.

In a rising market, buying larger earlier captures the movement on the larger asset, which partly offsets the extra cost.

Step 6: The non-financial factors

Moving with children, changing schools and the disruption of a second transaction are real costs that the arithmetic does not capture.

Where the financial comparison is close, these factors usually decide it.

What changes the answer

• In a flat market, buying smaller and moving later is financially more attractive.
• If the household does not grow as expected, the larger purchase was an unnecessary cost.
• Transaction costs are the main penalty for moving, and they vary with the prices involved.
• The ability to extend or reconfigure the smaller property changes the calculation substantially.

What the numbers tell you

• Include the cost of moving again when comparing buying for now against buying for later.
• Count the running cost of unused space, since it recurs every year.
• Consider whether the smaller property could be extended, which is often the cheapest answer.
• Weigh the disruption of a second move, particularly where children and schooling are involved.

Limits of this example

Every figure above is an illustrative assumption used to show the method, not a quote, valuation or market rate. Costs, rates, fees and regulations change and must be confirmed with the relevant authority, lender or supplier before you commit.

If you are buying a finished property, Domira can inspect it, verify the documentation and price the findings with you before you commit.