The answer is NO!
There is one thing that is always true in financing. You must always pay every loan you take. That's certain.
Now, what you are about to do is to take loan (that you must always pay) and use the financing to purchase a risky asset.
What are the risks in buying a flat?
- Market risk. Sometimes, all of the houses in the entire world may decrease in value. The Economist has called the high house prices the biggest bubble in history.
- Building risk. What if there is water damage in the entire apartment building or a single flat? There may be toxic mold, thus leading to high tenant turnover and possibly legal costs for you if you knowingly rent out a mold-damaged flat.
- Energy usage risk. What if all of the countries in the world start to really combat climate change, thus increasing heating and/or air conditioning costs to levels you can't afford. Of course, this means new buildings will be built according to strict energy standards but that's no consolation if you have a flat in an old building.
- Area risk. The area you buy the flat from can go out of fashion.
- Size risk. Sometimes, some size of flat goes out of fashion and people will want a bigger or a smaller flat.
Some of these can be eliminated away by diversifying, by purchasing let's say 100 flats. But no bank will give you a loan for 100 flats. So the only option to diversify is to buy shares of a real estate fund.
In the country where I live, the biggest drop of house prices in recent history is 50%.
The biggest drop of a well-diversified stock portfolio (worldwide diversification, company size diversification, sector diversification) is also about 50% (ok, the Great Depression had a larger drop, but then again that isn't recent history, it's ancient history).
So, according to the recent history, houses are approximately as risky investment as stocks, if both investments are well-diversified.
A single flat? Much more risky than a well-diversified stock portfolio.
My advice would be to not limit yourself to one type of economic activity (housing), but rather invest money into various different companies in different sectors.
It's easy to buy let's say only $10000 of stocks. I don't think you can find a flat for $10000 in any decent area (except perhaps in very poor countries).
So, by investing in stocks you don't actually need the loan anymore. You can start with small sums and accumulate your investments to larger sums. If you really want to, you can select one of your investments to be a real estate fund.
Edit: calculation of house discount yield in Greater Helsinki region:
- 2500 EUR / m2: cost to construct an apartment building
- 2000 EUR / m2: cost of bureaucracy and the land to build the house on
- 4500 EUR / m2: cost of a newly built house to the buyer (newly built so that there is no renovation debt)
- 50 EUR / m2 / year: larger renovations, to keep the building up-to-date (increases with inflation)
- 42 EUR / m2 / year: property tax, heating, administration, etc. (increases with inflation)
- 200 EUR / m2 / year: rental yield (increases with inflation)
Over an extremely long timeframe, building prices, rents and costs rise
according to inflation which is 2% per year in Eurozone. I have seen a
long-term statistic of house prices in a single area in Netherlands I think (yes it was Netherlands),
and over about 400 years the house prices have risen exactly according to
inflation (plus or minus 0.1% per year or so). Sometimes house prices were
high, other times they were low, but there was no other general rising trend
Paying the costs from the rental yield leaves 108 EUR / m2 / year (which rises
2% per year). Investment required is 4500 EUR / m2. This makes the real yield
2.4%. Nominal yield is real yield plus inflation which is 4.4%. Taxes not
subtracted from the yields.
Compared to stocks, real yield consists of economic growth (2.5%) and dividend
yield (3.5%) which is 6% and nominal yield is real yield plus inflation, i.e.
8%, taxes not subtracted from the yields.
A single flat is of course more risky than a well-diversified flat portfolio.
If you buy a single flat, I would demand 9% real yield to take into account the
greater risk of a single investment compared to a well-diversified flat
portfolio. You can't do that, as you obtain only 2.4% real yield.
If you can diversify by buying let's say 100 flats (like you can buy stocks of
100 companies), 6% real yield is okay. But I calculated only 2.4% real yield in
YMMV. In some areas, you can obtain 6% real yield. That makes investing
into a well-diversified flat portfolio or into a real estate fund a good idea.
In other areas, you can obtain 9% real yield. That makes investing into a
single flat a good idea.
In my case? I live in a state-subsidized housing, which costs 133 EUR / m2 /
year (far from the 200 EUR / m2 / year rents typical of the area), and invest
in stocks, yielding 6% really or 8% nominally per year. I'm never going to buy
a house, even for living in it myself.