I have given up buying a house

[nizar]

Well the latest stats out on perth market was 45% for the last year so not quite.

Still 42% is fantastic, can't complain with that

WOW.... It was only 5 or 10 years ago when 200k would get you a mansion in Perth...

 

[clowboy]

5 years ago you could have bought a very comfortable house in a very comforatable suburb in perth for 200k. Now you can buy a very uncomfortable box in a crappy suburb and still need more than 200k

 

[Flathead Flick]

I think what people are missing here is that property is just another asset class, an investment no different from shares or managed funds. Sure, it went through a dream run from 99-03, but it has sucked for the last three years. The major difference with property is that you have hundreds of thousands of dollars locked into one 'company' (to compare it to shares), which is illiquid. Would you ever do that with any other investment?

But, it is really no more than an investment. What's happened is that the media and the government in Australia has conned everyone into thinking that they 'have' to buy a home. Why would they do this? Because it locks you into the stability of a long-term contract - your mortgage - which means that you're more likely to stay in your job, pay your taxes and generally be a good citizen.

All good for the economy and the government. But is it good for us? Do we really want to be locked into a contract, pay the bank hundreds of thousands of dollars in interest, shell out tens of thousands of dollars in repairs and pay the government taxes such as stamp duty, property taxes and then CGT (if it's an investment) - only to be stuck in some crappy brick home for the rest of our lives?

I think it's the biggest scam going around and the saddest thing is that the majority of Australians have fallen for it.

 

[nizar]

I think what people are missing here is that property is just another asset class, an investment no different from shares or managed funds. Sure, it went through a dream run from 99-03, but it has sucked for the last three years. The major difference with property is that you have hundreds of thousands of dollars locked into one 'company' (to compare it to shares), which is illiquid. Would you ever do that with any other investment?

But, it is really no more than an investment. What's happened is that the media and the government in Australia has conned everyone into thinking that they 'have' to buy a home. Why would they do this? Because it locks you into the stability of a long-term contract - your mortgage - which means that you're more likely to stay in your job, pay your taxes and generally be a good citizen.

All good for the economy and the government. But is it good for us? Do we really want to be locked into a contract, pay the bank hundreds of thousands of dollars in interest, shell out tens of thousands of dollars in repairs and pay the government taxes such as stamp duty, property taxes and then CGT (if it's an investment) - only to be stuck in some crappy brick home for the rest of our lives?

I think it's the biggest scam going around and the saddest thing is that the majority of Australians have fallen for it.

Great post.

 

[marklar]

All good for the economy and the government. But is it good for us? Do we really want to be locked into a contract, pay the bank hundreds of thousands of dollars in interest, shell out tens of thousands of dollars in repairs and pay the government taxes such as stamp duty, property taxes and then CGT (if it's an investment) - only to be stuck in some crappy brick home for the rest of our lives?

Been there, done that, chipped away at paying back a $300k plus one and gave in when I wasn't getting anywhere. Am now renting, working and trading/investing in much smaller parcels and am much happier

Only thing is with low rental vacancy rates at the moment, renters are treated like third-class citizens. Three weeks to get an answer on a rental application, having to almost jam the Tennants Act up the real-estate agents' clacker to get her to call in a warranty fix for the damn dishwasher, etc.

m.

 

[nioka]

I think what people are missing here is that property is just another asset class, an investment no different from shares or managed funds. Sure, it went through a dream run from 99-03, but it has sucked for the last three years. The major difference with property is that you have hundreds of thousands of dollars locked into one 'company' (to compare it to shares), which is illiquid. Would you ever do that with any other investment?

But, it is really no more than an investment. What's happened is that the media and the government in Australia has conned everyone into thinking that they 'have' to buy a home. Why would they do this? Because it locks you into the stability of a long-term contract - your mortgage - which means that you're more likely to stay in your job, pay your taxes and generally be a good citizen.

All good for the economy and the government. But is it good for us? Do we really want to be locked into a contract, pay the bank hundreds of thousands of dollars in interest, shell out tens of thousands of dollars in repairs and pay the government taxes such as stamp duty, property taxes and then CGT (if it's an investment) - only to be stuck in some crappy brick home for the rest of our lives?

I think it's the biggest scam going around and the saddest thing is that the majority of Australians have fallen for it.

You are so wrong... Print out your post. Look at it each year and see if you end up coming to the same conclusion as I have. It may take 10 years or so but you will get there.

 

[Flathead Flick]

You are so wrong... Print out your post. Look at it each year and see if you end up coming to the same conclusion as I have. It may take 10 years or so but you will get there.

Thanks for the sage advice, o wise one. How about you put $500-$1m in just about any ASX200 share and look at it in 10 years or so. It's amazing what leverage can do...

 

[tech/a]

All good for the economy and the government. But is it good for us? Do we really want to be locked into a contract, pay the bank hundreds of thousands of dollars in interest, shell out tens of thousands of dollars in repairs and pay the government taxes such as stamp duty, property taxes and then CGT (if it's an investment) - only to be stuck in some crappy brick home for the rest of our lives?

There are actually quite a few of us who quite happily live in our crappy properties which we couldnt have afforded FREEHOLD without having invested wisely in realestate.

Frankly I hate Esplanade living,running on the beach in the morning,a quick workout in the gym,a sauna after work.Few friends around for a game of billiards a few beers and a BBQ.

Yeh rental sound great!!

 

[Flathead Flick]

There are actually quite a few of us who quite happily live in our crappy properties which we couldnt have afforded FREEHOLD without having invested wisely in realestate.

Frankly I hate Esplanade living,running on the beach in the morning,a quick workout in the gym,a sauna after work.Few friends around for a game of billiards a few beers and a BBQ.

Yeh rental sound great!!

Another brainwashed one.

Sure, tech/a there's no way you can get that one-of-a-kind lifestyle renting... no rental properties at all on the Esplanade...

 

[tech/a]

Yeh but I own the property your paying me a passive income on!

Have a couple coming up soon at $600 a week, if your in Adelaide you maybe interested.

If this is brainwashed bring on the psychologist!

 

[Casper]

Hi Flathead

I think the Packers, Murdochs, Foxs etc etc etc in this world would have a nice little chuckle if you tried to tell them that they should never have bought their houses.

Imo buying a house can be a pure investment or pure lifestyle decision and I think in the majority of cases it's probably a combination of the 2.

I certainly have no regrets buying my first house nearly 20 years ago now when mortgage rates were in the high teens %.

Sure, housing has generally come off the boil recently but it has also done so occasionally in the past as well. I doubt very much that residential property won't be worth more in 10+ years than it is now and so if you can ride it out in the short term you should be sitting pretty in the long run.

In terms of buying real estate as a pure investment I don't see anything wrong with getting a tennant to pay it off for you. Sounds like a pretty good deal to me

We could could go on for ever talking about housing affordability now, in real terms, compared to 20 years ago and yes it is much lower now but that is a different discussion alltogether imo.

If you can can afford repayments with a buffer of say interest rates rising another 1-2% in the next 12-18 months as the worst case scenario then buying property to widen or enhance your asset base is definitely worth considering, especially as prices are coming down in some parts of the country.

 

[Julia]

Owning my home is much more than an investment decision for me. I simply just love it. I like where it is, I have great neighbours, I've created a beautiful garden from bare dirt, and it's my haven when the world isn't a great place.

But at the same time, it continues to appreciate in value.

Similarly, I would never have had the funds which I presently have in the share market had I not bought investment property many years ago.

Personally, I don't care what you do, Flathead. Just don't be so dismissive of others whose choices have served them well and from whom you just possibly could learn something.

Julia

 

[nioka]

Thanks for the sage advice, o wise one. How about you put $500-$1m in just about any ASX200 share and look at it in 10 years or so. It's amazing what leverage can do...

I always thought a low interest housing loan on practically no deposit was as good a leverage as you can get. and you can borrow against the home again later. I doubt if I have 10 years to look forward to but I have a hell of a lot to look back at.

 

[Flathead Flick]

Been there, done that, chipped away at paying back a $300k plus one and gave in when I wasn't getting anywhere. Am now renting, working and trading/investing in much smaller parcels and am much happier

m.

I hear you marklar. Good to see you've come back from the dark side.

And nizar - great to have a real investor around, who can see through the home ownership propaganda we have in Oz.

The ABS reports that in 2004 35% of the 7.7m households owned their home outright and 35% had mortgages, a total of 70%. This puts at us no.4 in the world for home ownership, just ahead of the US, the UK, almost double Germany (42%) and double Switzerland (35% in 2000). See links below

But the media and the govt will keep hammering away - they've got to keep the 70% tied down and also have the other 30% of us to work on...

http://news.yahoo.com/s/fool/20061025/bs_fool_fool/116179047707
http://www.abs.gov.au/Ausstats/abs@.nsf/e8ae5488b598839cca25682000131612/99e1db0d9f148da0ca256e7c00805a11!OpenDocument

 

[nizar]

In terms of buying real estate as a pure investment I don't see anything wrong with getting a tennant to pay it off for you. Sounds like a pretty good deal to me

The only sort of property worth getting into for pure investment purposes is commercial or even industrial. Residential is only good for capital gains and you get better capital gains from shares in my opinion. And i like shares better because:
(1)more liquid
(2)divisible

In residential property you can have problems with tenants and even if you dont, the yields are so low, because the rental price appreciation wasnt proportionate to the house price appreciation in the last few years. You get maybe 4-5%nett. Thats a joke, and less than the interest you are paying on your loan.

With commercial, you are dealing with professionals, they pay all the outgoings, contracts are much longer, CPI increases, and 8-9%nett is the going rate.

Im talking about melbourne by the way, may be different in other states.

The only way you can really clean up in residential is through development. Definately residential property is the wrong way to go if you are looking for yield.

 

[Flathead Flick]

Owning my home is much more than an investment decision for me. I simply just love it. I like where it is, I have great neighbours, I've created a beautiful garden from bare dirt, and it's my haven when the world isn't a great place.

But at the same time, it continues to appreciate in value.

Similarly, I would never have had the funds which I presently have in the share market had I not bought investment property many years ago.

Personally, I don't care what you do, Flathead. Just don't be so dismissive of others whose choices have served them well and from whom you just possibly could learn something.

Julia

As it happens, I worked as a lending manager for years before becoming a manager of a property division for HNW clients at Macquarie. As much as I may be able to glean from your personal circumstances, I think I'll trust my experience with my ex-clients. Almost without fail, my (mostly male) HNW clients said that their property was the worst investment they ever made, and was usually done simply to please their partner...

BTW, you don't need to buy a house to create a garden.

 

[Flathead Flick]

The only sort of property worth getting into for pure investment purposes is commercial or even industrial. Residential is only good for capital gains and you get better capital gains from shares in my opinion.

Too true, nizar. Right on the money - commercial, retail and industrial are another kettle of fish altogether.

 

[tech/a]

Nizar.

All have their time now is commercial/industrial.

1996-2003 residential.

Now Zinc/Resources
Early 90s .coms

But those who dont understand that there are opportunities in all sectors even in down turns are obviously not our age!

 

[Casper]

I agree in principle with what you say nizar but I think that most people buy their first house as an investment/lifestyle combination and some may even buy purely for the location and lifestyle.

The more your decision to buy a house is based on investment, as opposed to lifestyle, then obviously the more thorough your research and expected nett returns calculations have to be, just like for any investment in any asset class, not just property.

If looking at pure investment criteria for buying a house then yes you should compare the nett returns from the house and compare it to the expected nett returns from other asset classes and see which is greater over the time frame you are looking at holding the asset.

I think you'll find that if looking at say a 5-10 year time frame you could find areas in Australia where property returns should exceed those from shares and vice versa.

Key words: research, research, research and location, location, location

 

[The Mint Man]

I think that most people buy their first house as an investment/lifestyle combination and some may even buy purely for the location and lifestyle.

Hit the nail on the head there casper. I done all in one hit, Ill give a few points.
*For me personally, Im 10 min from work and 10min the other way is the beach. Also fairly close to family etc. so big fat ticks in that area!
*Bought house for $215000, valued at $245000= $30000 equity straight off the bat which, as Julia said, can be used for other investments including shares. I belive the market has reached its bottom (here) so I doubt I'll lose that 30k buffer. up from here!
*Got loan just on the 1st rate rise but its locked in from there. Also got FHOG and Stamp duty concession which saved a heap.
*Good location 100m from lake, close to everything (10min or less!) shops, schools, freeway etc. 1-1/2 hours to sydney Max 45-60min to Newcastle.
*expanding population, Industrial estates going ahead more Jobs being created, huge parcels of land earmarked for development in future, Shopping centers and homemakers type centre being developed as I speak, Train station being built in area, also theres an air strip near freeway which has the potential to become similar to Newcastles airport in the future.
The list goes on....

For someone thats probably half way across the country to come in here and generalise like you have, that being that property is a dud investment everywhere and that its some kind of Government conspiracy, is a joke. There are deals to be had in all asset clases. Full Stop.
As casper said, go tell it to someone like the Packers! they will laugh you out the door. Especially when you tell them that you know better cause you were once a top notch lender.

cheers