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I dont know, I'm old enough to have seen a few cycles, property go back and stagnate and seen people lose property before.
Have you?
House prices to keep rising for years
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I dont know, I'm old enough to have seen a few cycles, property go back and stagnate and seen people lose property before.
Have you?
wayneL
VIVA LA LIBERTAD, CARAJO!
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LOL It's hopeless!
With a decent deposit (say $50k) a single person on one of those average wages (say $60k) should easily afford a $350k place ($2k/month payments). And there are plenty of flats or houses around for that sort of money, even in Sydney, in good areas. If you were smart, as a single person you'd even get a flat mate in who would help you pay that first place off real fast
A couple of course on those combined average wages with a good deposit could easily afford to buy an "average" house, but maybe they would buy something cheaper and pay it off faster, then get a better house down the track without a big mortgage?
Now the real trick if you want to get ahead, is don't aspire to earn the average wage, figure out how to earn a LOT more than that!
I read a couple of books by Noel Whittaker when I was about 20 that helped a lot in figuring all this stuff out. If they are still around they are well worth a read - "Making Money Made Simple" and "More Money" were their titles. I still have them on my book shelf now!
Yes this can work and is not a bad strategy per se, but it requires a lot of discipline, and carries the risk of a stock market crash etc which could really set you back. As you get closer to the time to buy your desired property you would really need to pull everything out of stocks and put it in cash in good time (ie several years earlier) to mitigate those risks. Also gives you no scope for extra income from flat-mates etc etc. What's more, if property prices shoot up again at some point that could hurt the strategy badly, as you wouldn't have anywhere near the same leverage in your shares to counter the house price growth. That is to say, you would need a lot more growth from the other investments to make up for an upwards move in house prices.
So personally, I would still buy as early as I could at a price point that enabled me to pay the mortgage off quickly (< 10 years). You will be surprised how if you did this, and you add some flatmate income here and there into the mix, plus some wages growth, or maybe even a partner comes onto the scene, you might actually have that mortgage gone in 5 years
But if you bought it now, and in 3 years the rent was say 12.5% higher, wouldn't you start to be better off for having bought? Extrapolate that into the future and it only get's better..... And that's without assuming any house price growth even
Cheers,
Beej
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numbercruncher
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numbercruncher
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Reeeeeely ?
Thats easy to say from someone who supposedly lives in a 2 million $ shack .... ( vested interest ? )
Heres the reality ....
Australias median wage is 58k ....
http://www.reiaustralia.com.au/media/releases.asp
Median Houses at 7.5 x Median wages has NEVER been the norm ....
When I purchased my first home there was plenty available for 3x Median wages !
The credit bubble changed this ....
Happy New Year banana republicans
I believe there are plenty of affordable props around Melb suburbs, 15 mins to the CBD..close to public transport....Govt hands over 14,000 for established, or 21.000 for a new home plus the Vic govt gives extra for regional areas...
so instead of aiming for the big grand family home for the future....and instead of paying rent....do your sums and see what you could afford to buy in the next 6 months....how much different is it to the current rent ???
I call buying a home a forced saving plan...for the future...it teaches to you curb your spending....and instead of paying rent...dead money....you are paying off your home....you can even make some changes to suit your lifestyle.....
ask your boomer parents for their ideas...they may even help with the deposit...in the old days the banks required you to prove you could save on a regular basis.....at least 6-12 months proof...as per your savings book or bank statements....
no more spending $100 for a night on the town on a regular basis..
its your disposable income..so its up to you...get rid of the car loans and credit cards for a start....plenty of time later on to party...
so instead of aiming for the big grand family home for the future....and instead of paying rent....do your sums and see what you could afford to buy in the next 6 months....how much different is it to the current rent ???
I call buying a home a forced saving plan...for the future...it teaches to you curb your spending....and instead of paying rent...dead money....you are paying off your home....you can even make some changes to suit your lifestyle.....
ask your boomer parents for their ideas...they may even help with the deposit...in the old days the banks required you to prove you could save on a regular basis.....at least 6-12 months proof...as per your savings book or bank statements....
no more spending $100 for a night on the town on a regular basis..
its your disposable income..so its up to you...get rid of the car loans and credit cards for a start....plenty of time later on to party...
Bill M
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Hello prawn, you are right. I've worked it out myself, if I borrow 200K on a 300K property I would come out square. That is taking loans and expenses into consideration. I can raise 100K if I need too but then that 100K becomes cash flow neutral versus say an ASX 200 ETF which pays 10% partly franked income. This is what I must think long and hard about.
I guess we could use that as a subject of debate, if you had 100K cash would you invest it in the ASX 200 ETF (that pays 10% income) or would you use it as a deposit on a property (that is cost neutral)? Which would win in say 5 years? Anybody?
lol, problem is 75%+ of people don't think like this nowadays, they want the mcmansion and the "lifestyle" to go with it and are willing to take on heaps of debt to achieve it.
Median Houses at 7.5 x Median wages has NEVER been the norm ....
When I purchased my first home there was plenty available for 3x Median wages !
The credit bubble changed this ....
Happy New Year banana republicans
Your problem is you live in Perth - and that has given you a warped perspective. You remember property prices when that city was not really much more than a large country town (which was only a couple of decades ago!). Since then it has grown into much more of a real city, plus the region around it has seen an unprecedented increase in prosperity, investments, higher paying jobs etc etc. That is fundamentally what has driven prices up, not your so-called credit bubble. If the fundamentals remain (which they probably will long term), you will NEVER see property prices at country town levels again - sorry, but that's the way it works. If you want a house at 3 x average wages then you will need to buy in another country town somewhere..... Perth prices may well fall some more, but you can really forget about your fantasy of 3 x average wages!
Houses near the Sydney CBD were relatively cheap once too, but that will never happen again, as Sydney turned from big country town into major national city into mega globalised business and financial hub over the past century, and that clock does not wind back. These type of demographic and socio-economic changes are also the drivers of high capital returns from astute real estate investment: But of course you have to understand what's going on to find and profit from the opportunities!
EDIT: Oh and PS: There are houses and flats around $200k (= just over 3 x average wages) in Sydney, just not in the most salubrious areas. I bet the same goes for Perth still as well....
Cheers,
Beej
where exactly are you going to earn 10% on an asx listed stock ???
lets just compare....a term deposit paying 4% in the future
4% on dividends....say they were paying 5% last year, doubt it in the next year.
or earning 5% on a rental prop, and paying 3% interest
assuming rates will come down to 3% for borrowers and deposits similar
and a 300,000 home/unit earning 15000 rent pa.
if rates come down as I am guessing they will....my idea is to borrow for growth at those low rates.....not interested in earning anything at 3-4% even 5% is neither here nor there...or going to pay for anything...imo
but it will be a time to go on a buying spree at those low rates....just be careful what you are buying....
the old saying...a fool and his money is easily parted....
cheers
lets just compare....a term deposit paying 4% in the future
4% on dividends....say they were paying 5% last year, doubt it in the next year.
or earning 5% on a rental prop, and paying 3% interest
assuming rates will come down to 3% for borrowers and deposits similar
and a 300,000 home/unit earning 15000 rent pa.
if rates come down as I am guessing they will....my idea is to borrow for growth at those low rates.....not interested in earning anything at 3-4% even 5% is neither here nor there...or going to pay for anything...imo
but it will be a time to go on a buying spree at those low rates....just be careful what you are buying....
the old saying...a fool and his money is easily parted....
cheers
Hi all
I have been reading nearly all comments in this thread, one thing I dont understand is when people say that we will not have a property crash.
It happens in USA, Europe ect. What is the reason that it happend in those countries? and why can`t it happen here.
I have been reading nearly all comments in this thread, one thing I dont understand is when people say that we will not have a property crash.
It happens in USA, Europe ect. What is the reason that it happend in those countries? and why can`t it happen here.
numbercruncher
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lol, problem is 75%+ of people don't think like this nowadays, they want the mcmansion and the "lifestyle" to go with it and are willing to take on heaps of debt to achieve it.
Is there a link to back that up ?
Even if it was true it wouldnt happen if banks hadnt dropped there lending standards so far that even a gold fish could access funds ....
numbercruncher
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if you look at average aussie wages then look at house pricing- the most probable situation is that propery will go down in value - especially if unemployment rises- or is this too simplistic?
Bill M
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Look at (STW) SPDR S&P/ASX200 Fund. STW is an Exchange Traded Fund. It invests in the ASX 200 index. So whatever the ASX 200 does this fund follows closely. Look it up on Commsec, it pays 10% partly franked. So back to the question:
"if you had 100K cash would you invest it in the ASX 200 ETF (that pays 10% income) or would you use it as a deposit on a property (that is cost neutral)? Which would win in say 5 years? Anybody?"
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Just as a side comment. I have also heard that banks are not chasing developers with millions worth of loans due to their equity being eaten up- so they are just adding the interest and penalties to the accounts hoping for some type of return- Is this another bubble about to burst also? They cant hang on forever. Has anyone else heard of these types of scenarios?
Plenty of opportunities for stocks that will provide reasonable yield, and should have steady profit during 2009 - just need to spend some time researching, and use some common sense.
I can find plenty that have a fully franked yield around 4% (higher return than TD rates after tax) and are the same price as 6 months ago, in fact I'm starting to collect them as term deposits look decidedly ordinary Things such as utilities don't suffer so much in recessions, in fact price hikes in 09 will ensure higher profits.
AOD ETF also has a yield of 6.8%, mostly franked... they take care of working out a yield strategy for you, and can change their weighting if an individual co drops its div.
History also shows that after a bear market ends, the average gain in the next 12 months can be 20/30/40% - plenty of scope for large capital gains if one gets the timing +- a few months. Leverage up as per property to LVR 70% if you are willing to take the risk.
Sharemarket still provides opportunities, for those that are game.
They may well do for variable rates, but as you would know, these sort of rates do not last long before the cycle changes, 6 months at most. It's more to get borrowers back into the market, so the banks can scoop buyers in to profit as rates return to longer-term averages quite quickly.
I can find plenty that have a fully franked yield around 4% (higher return than TD rates after tax) and are the same price as 6 months ago, in fact I'm starting to collect them as term deposits look decidedly ordinary
Things such as utilities don't suffer so much in recessions, in fact price hikes in 09 will ensure higher profits. AOD ETF also has a yield of 6.8%, mostly franked... they take care of working out a yield strategy for you, and can change their weighting if an individual co drops its div.
History also shows that after a bear market ends, the average gain in the next 12 months can be 20/30/40% - plenty of scope for large capital gains if one gets the timing +- a few months. Leverage up as per property to LVR 70% if you are willing to take the risk.
Sharemarket still provides opportunities, for those that are game.
kincella said:
They may well do for variable rates, but as you would know, these sort of rates do not last long before the cycle changes, 6 months at most. It's more to get borrowers back into the market, so the banks can scoop buyers in to profit as rates return to longer-term averages quite quickly.
prawn_86
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lol, problem is 75%+ of people don't think like this nowadays, they want the mcmansion and the "lifestyle" to go with it and are willing to take on heaps of debt to achieve it.
I just dont see why i should buy a property and put myself deep into debt, when i can live renting in the best suburb in my city and save the difference as to what it would cost to buy the place im renting.
I dont want to live out in the suburbs and have to spend a lot of my time travelling etc. At the moment we (me and my partner) can both walk to work in the CBD within 20min, so we only have 1 car.
Here's a few brief calcs as to what 'intangibles' we are saving on by renting so close to the CBD (and our rent is the same as if we were to live a couple suburbs out, we have a good deal going).
The following is assuming we bought a house that took 30min to drive to work:
Saved time: $60. 20min per day each. So just say 3 hours a week between us as we might walk slower some days etc @ $20 per hr
Saved fuel: $10 I currently spend about $10 pw on fuel (economic car). That would at least double at the very minimum.
Saved car running costs: $5pw. Services, breakdowns etc
Saved parking: $40pw. Walking means we dont have to park in the city.
So by living close and walking to work, as opposed to buying further out and driving to work we 'save' $115pw.
Even if we caught the bus to work from further out:
Saved time: $160. 50min per day each. Buses take longer to get there, but you save on parking, car costs etc.
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1/ - yes we have. The only one's who haven't seen it before are those too young (and this goes for both sides of the argument).
2/ - as said many times, it only becomes a proplem if and only if you are forced to sell, as property prices will rise again over time.
3/ - yes we do. Infact almost everybody on here would agree that property prices have come back (with the exception of St Kilda
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