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I have given up buying a house

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krisbarry

krisbarry

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This will be a hot topic....

I have been living at parents place - free rent, or my mates place free rent!

I have decided to give up on the Great Australian Dream, turn my back on it and deposit extra money into my superannuation.

Housing is the most un-affordable it has been in 20 years according to many experts.

The government gives first home buyers $7,000, but is very happy to take back up to 25% of total monies deposited into housing as taxes.

House prices are now stable, or going down, expect for a very small amount of suburbs in a few cities. So it does make for a bad investment in the short to mid term.

I am able to gain access to the free $1,500 super co-contribution, each year, and every year, so this will be over-time a better investment than the poxy one off payment of $7,000 for the first home buyers grant.

I have also decided on gearing my superannaution, which is exactly the same as buying an investment property.

and here are the returns...
1 Year % 58.66%p.a.

2 Years % 55.76%p.a.

3 Years % 55.76%p.a.

5 Years % 48.14%p.a.

7 Years % 21.07%p.a.

care to discuss?
 
Whats the point of putting so much towards super when you are so young (it seems) ?
 
I agree with Nizar.

You can't touch the money prob. till your 65.(if you are under 45).
Also if your super is not with an industry fund, someone is making a big commission out of it and your returns will be poor.

Invest your money is assets you can get to. You may not live to 65 and anyway what's the point in being poor till then.

Don't do it!
 
What do you mean when you say that you have also decided on gearing your superannaution.
Do you have a self managed fund?
If yes, then gearing , that is borrowing money is illegal.
SMSF are not allowed to borrow money.
 
Well I think you have a good point about Super over investment properties at the moment.

The beauty of Super is it comes out of your gross salary - you pay yourself before you pay the govt tax.

However, it is ridiculous at your age to "give up" on buying a house. Especially if you live in such a cheap city like Adelaide.

Houses are mostly overpriced, that does not mean you just "give up" though. It means you save and invest so that when they become fairly valued or even possibly undervalued which they will eventually. You can buy 1 or even 2 with leverage.

I agree wtih putting money in Super - not too much though you need to save to buy a house, but be patient.
 
Colonial First State offers a geared share fund, in Australian shares.

Nil % entry fee

It is legal and is offered to all superannuation rollovers, look at the returns above, much higher returns than the housing markert has delivered.

Whats the point of owing your own home and being poor too, there is plenty of stressed people who are morgagted to the max, even with investment properties.

Then once you have finally paid off the home its so out of date, you have to take out a 2nd loan to update it.

Anway in the long run, they will change the super laws, to allow people to use their super funds to buy housing, its just a matter of time.

here is the link to prove my returns:

http://www.colonialfirststate.com.a...dName=CFSI&MainGroup=SF&Month=5&Year=2006#a60
 
I am a firm believer in starting superannuation asap. I see it as a form of 'forced' long term saving since you can't essentially get at it until much later in life.

Sure, in the long term all you can expect is a general average return of ~10%pa but if you then add up all the contributions you make over your working life your super should add up to a very nice nest egg, bonus, call it what you like on retirement.

I started my super when I was 27 and although not wishing my life away any faster than it passes by nowadays, I am looking forward to my 55th birthday in a few years when I will have total access to my super :) but with the new tax treatment of super in this year's federal budget I might have to reasses when I take out my super.....but that's another issue.

But imo you also have to keep contributions into your super in perspective. The younger you are and if raising a family, paying off a house etc then obviously those expenses should have a higher priority but they shouldn't exclude super as a long term 'forced savings plan'.

Regarding buying a house: for me it boils down to lifestyle and objectives for creating wealth. However, if choosing to rent imo since the rent basically replaces mortgage repayments it is very important to use borrowed funds that would have been used to buy a house in other investments instead and not simply blow the borrowed funds on holidays, luxuries, fast cars and/or fast women ;)

If choosing to buy a house with a mortgage, my best advice would be to put all 'spare' disposable income into reducing the principle on the home loan. All interest saved by reducing the principle is essentially AFTER TAX and so you would be hard pressed in most cases to find an investment with similar or better pre-tax returns elsewhere to make them worthwhile investing in.

Once you have reduced your principle you can then use that increased equity in your home to help fund other investments to build wealth.

cheers

bullmarket :)
 
under the FHBG you'll get $7000 plus you won't pay stamp duty on a purchase under $250000. If you lock your money up in super will you be able to use that as equity in future?


cheersd,
 
Stop_the_clock said:
Colonial First State offers a geared share fund, in Australian shares.

Nil % entry fee

It is legal and is offered to all superannuation rollovers, look at the returns above, much higher returns than the housing markert has delivered.

Whats the point of owing your own home and being poor too, there is plenty of stressed people who are morgagted to the max, even with investment properties.

Then once you have finally paid off the home its so out of date, you have to take out a 2nd loan to update it.

Anway in the long run, they will change the super laws, to allow people to use their super funds to buy housing, its just a matter of time.

here is the link to prove my returns:

http://www.colonialfirststate.com.a...dName=CFSI&MainGroup=SF&Month=5&Year=2006#a60
Click to expand...

stc,
Thanks for the link, I'm intrigued by the easy access to overseas markets and resources stocks via super, will check out the pds, I bet the fees are high!
 
Whats the point of owing your own home and being poor too, there is plenty of stressed people who are morgagted to the max, even with investment properties.
Click to expand...

I agree. A house can be a great investment, but it can also be a bad investment. At the moment I believe they are a overvalued.

A great house, or a great company is not a good purchase if you pay too much for it.

Wait and be patient, be prepared to buy but not yet. And do your research
 
:rolleyes:

Stan 101 said:
under the FHBG you'll get $7000 plus you won't pay stamp duty on a purchase under $250000. If you lock your money up in super will you be able to use that as equity in future?cheersd,
Click to expand...
exactly!
Whats the point of putting so much towards super when you are so young (it seems) ?
Click to expand...
ditto!

When that buy of a lifetime comes up all your money will be tied up.
 
a tip is to go through....

www.investsmart.com.au

do a search for the most popular super fund, then follow the links

this will allow you to waive your 4% entry fee

In the past year while housing has returned between -2% to 20% this super fund has returned over 58%
 
I would rather live in the back shed at my mums house and bring an annual return of 58% than to break even or lose money buying property at such a peak of the market.
 
I also have it on good authority, from a real estate agent (owns his own business) ,saying that it will be a very long time before new home buyers are going to break even or make a profit on a house in the current market, up to 4-5 years at least. So it really does make to returns out of super a much better investment
 
Hello Stop the Clock

Others have made good points.

It sounds as though you are young and unattached. As such, it probably works quite well for you living either at home or at a mate's place.
But how will it be when you meet someone you want to have a live-in relationship with, even children, some day? Then you will want a place of your own.

I am absolutely in favour of home ownership, however modest the home to begin with. I haven't minded being a landlord but I would not want to be a tenant on any long term basis. If investors decide rental returns don't make it worth their while, the rental market will diminish and rents will increase exponentially. Tenants have no control over rising rents. If you buy a simple home, even just a small unit at first, you can decide what type of mortgage repayments you can afford.

If you are able to borrow against your super equity than I guess it's not such a bad idea and I can understand why it looks so appealing. But, as others have said, tying your funds up in super while you are still young could be something you will later regret.

One other note of caution regarding the rate of return on the fund you are considering : the oft quoted phrase "past performance is no guarantee of future returns" etc. Remember that return has been achieved in a rampant bull market. We now seem to be in different times.

Good luck with whatever you decide to do.

Julia
 
Hi Mint Man

=The Mint Man
When that buy of a lifetime comes up all your money will be tied up.
Click to expand...

I certainly wouldn't advise anyone to put all their money into super but to use super as a 'forced' savings plan as I described earlier is a very valid option to consider imo.

I certainly have no regrets at all for starting my super back when I was 27 :)

My only regret is that I didn't start it a few years earlier when I could have.

cheers

bullmarket :)
 
Hi stop_the_clock

Stop_the_clock said:
I also have it on good authority, from a real estate agent (owns his own business) ,saying that it will be a very long time before new home buyers are going to break even or make a profit on a house in the current market, up to 4-5 years at least. So it really does make to returns out of super a much better investment
Click to expand...

I'm not convinced it will that long overall in general.......but then the affect of property values on owners will imo also depend on if they were originally buying a home/lifestyle as opposed to an investment property.

cheers

bullmarket :)
 
I have decided on not having children, as I do not want to have children, I have no need, no yearning, and not interested. So there is one equation to be factored out of my life
 
I would not want to be a tenant on any long term basis.
Click to expand...

Why not? :confused:

I rent, I love renting. Why would I buy a house?

If anything breaks I get the landlord in to fix it. I have no body corporate fees, no water bills, no rates, no taxes, no repairs, no rennovations, no lawns. NO STRESS.

AND NO MORTGAGE. I am completley debt free. I could lose my job tomorrow, and not have a care in the world.

I pay a small weekly fee to rid myself of all these problems.

If I get annoying neighbours or a great job interstate or overseas, I just find another place and move - I'm free, I can do whatever I want - move overseas, move down the street whenever I want!!

I pay under $10,000 a year to share with a girl a place worth about $650,000.

Hence why I can afford to buy shares. If I had a mortgage I couldn't.

I'm still entiteld to stamp duty excemptions and first home owners grant when I want to buy as well.

RENT!! (it is great :D )
 
Remember that return has been achieved in a rampant bull market
Click to expand...
lucky I read your post.. was going to say the same thing :)

Anyway, it dosnt worry me. The more of you out there with those views the more there is for me :D
 
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