Rate Rises and Home Ownership

[Wysiwyg]

Talk about numbers that look ridiculous,

I just did some rough sums of how much rent a person would pay over their life time once rental increases are factored in.

A property that starts at a weekly rent of $300/week will cost you $5,702,320 over your life once you factor in rental increases.

Suddenly paying a bit of interest doesn't look so bad.

Depends whether you like to give or receive.

Unfortunately this calculator only goes to 30 years and I assume you used 40 years as a working life so it will be substantially more. The princely sum of $3,651,804.20 is the end result of depositing $5000 per month for 30 years.

 

[Tysonboss1]

Depends whether you like to give or receive.

Unfortunately this calculator only goes to 30 years and I assume you used 40 years as a working life so it will be substantially more. The princely sum of $3,651,804.20 is the end result of depositing $5000 per month for 30 years.

I worked it out over 50 years as I thought 25yrs old to 75yrs old was a reasonable amount of time some one who chose to rent for life would have to rent.

My numbers would also be quite conservative because I added the rent increase for each 10year period at the end off the ten years, where it would normally compound over the 10 years.

A renter would also most likely have to trade down over their life as certain property types will out pace their wage growth,.. for example an average worker renting a large three bedroom home at bondi beach in the 60's would certainly have found the rental increases over the years growth much faster than his or her wage to the point it became unaffordable,

 

[Beej]

Depends whether you like to give or receive.

Unfortunately this calculator only goes to 30 years and I assume you used 40 years as a working life so it will be substantially more. The princely sum of $3,651,804.20 is the end result of depositing $5000 per month for 30 years.

I don't really see the relevance of this to the cost of renting vs owning argument????

Cheers,

Beej

 

[TOBAB]

I think rent or buy is up to an individual decision and I'm not sure which is better purely based on some number crunching and depend on individual skills at investing surplus capital.

For me it's a no brainer to buy if it cost me a bit more ...because I don't like renting due to the fact you cant do anything to a place you call home

You get to go and leave when ever it suit you and stay in one place as long as you like..Rent you face the possibility someone selling under you and off you go finding another place at time it may not suit you.

Every Aussie should own their own place if they can, at the right price at the right time of course.

the rewarding is more than just financial.

I do own my own place debt free but I dis-like property investment doesn't matter how good it get for similar reasons with owning my own home..

1. Tenants and Real Estate agents are just people I don't want to deal with... phone calls when doors are broken, or heater doesn't work or some other annoying stuff

2. some fundamentals reasons but I will open up another can of worms
so better leave it alone

Bravo. Currently have an investment property and just no worth the hassle. It's a great place recently renovated in an excellent location. Problem is the tenants. We've made a tidy paper profit over the past 12 mths but would be happy to sell tomorrow.

As for own place - avoid renting if able. Surely everyone wants to be in control of their own destiny. Moving house has to be one of the most painful excersises around.

 

[basilio]

IMV the BIG concern for peoples personal security and in particular survival after retirement is owning their own home outright. No debts. No mortgage.

In the last 30 years the change in the situation for Australians with regard to home ownership has been momentous. Check out the analysis in Greg Jerichos story.

A shrinking tax base is a recipe for disaster for Australia's ageing population
Greg Jericho
The worry is not how those currently retired are coping, but what is in store for those hoping to do so in the next 20 years
https://www.theguardian.com/busines...recipe-for-disaster-for-our-ageing-population

 

[sptrawler]

How I bought my first house, was buy a block in a country town where I found work, then I bought a house like this and had it transported.

https://www.gumtree.com.au/s-ad/glenroy/property-for-sale/relocatable-house/1222665915

Spent two years fixing it up, then sold it and made 300% profit, then chased a job in the City and bought a house in the suburbs with a small loan.
If someone wants to start at the bottom and work up, it can still be done, but now I know with my kids and their friends, they want to start at step 2 or step 3.
Also they want to take their kids on holidays to Legoland, the Gold Coast theme parks etc, then complain how hard it is.
Luckily we do have a pension scheme, which with super should provide them a reasonable retirement, because there is no way they are going to save anything themselves.

 

[basilio]

In my view the fundamentals of any average worker buying a house are now totally out of the window.

When we (most posters on ASF) were young in the 60's and 70's it was straightforward for a person on a wage to save 5-10k for a deposit and then buy a house with mortgage payments capable of being serviced by one persons wage. Repayments were 33% of gross wages or 25% of net. If you were on the assembly line you got a poorer house in a poorer suburb. If you had a better job the house was 20% more expensive. Probably 60% of housing stock in Melbourne was accessible to these tiers of workers

It was that simple.

In 2019 it is just madness. The fact that buying houses has become an investment game for many people who have negatively geared their properties and bought them with little deposit has turbo charged prices.

 

[Smurf1976]

How I bought my first house, was buy a block in a country town where I found work, then I bought a house like this and had it transported.

I did it the other hard way.

Worked 7 days a week, mostly 12 hour days but some went a few hours longer. Did that for a few years.

Couldn't do it these days - health and safety etc would make it illegal.

 

[sptrawler]

In my view the fundamentals of any average worker buying a house are now totally out of the window.

When we (most posters on ASF) were young in the 60's and 70's it was straightforward for a person on a wage to save 5-10k for a deposit and then buy a house with mortgage payments capable of being serviced by one persons wage. Repayments were 33% of gross wages or 25% of net. If you were on the assembly line you got a poorer house in a poorer suburb. If you had a better job the house was 20% more expensive. Probably 60% of housing stock in Melbourne was accessible to these tiers of workers

It was that simple.

In 2019 it is just madness. The fact that buying houses has become an investment game for many people who have negatively geared their properties and bought them with little deposit has turbo charged prices.

What are the house prices out of Melbourne, somewhere like Sunbury like, 40minute train ride?

 

[basilio]

What are the house prices out of Melbourne, somewhere like Sunbury like, 40minute train ride?

https://www.realestateview.com.au/real-estate/melbourne/outer-north/sunbury/houses-for-sale/

Median price is $540k . Some (older , tired) around mid -high 400's .
Sunbury suffered badly after the pilots strike.

 

[Value Collector]

https://www.realestateview.com.au/real-estate/melbourne/outer-north/sunbury/houses-for-sale/

Median price is $540k . Some (older , tired) around mid -high 400's .
Sunbury suffered badly after the pilots strike.

Looking at median figures is misleading.

There are lots of cheaper properties well below the median, In the major cities.

https://m.realestate.com.au/property-unit-nsw-liverpool-131359386

 

[Klogg]

Looking at median figures is misleading.

There are lots of cheaper properties well below the median, In the major cities.

https://m.realestate.com.au/property-unit-nsw-liverpool-131359386

Two big problems with this debate.

1) Most people look at median prices and think it's not possible - your point exactly
2) And the other -tThere's no thought about the alternative to property

As it stands, renting is the logical option. A very simple DCF type approach tells you this is the case, without considering the risks behind a massive mortgage.

I can quite easily buy the townhouse (Ashburton, VIC) I'm renting by selling about 40% of my portfolio. That's beside the point. My opportunity cost for doing so is way too high. If you invest in productive assets that can return more than 3% per annum (above gross rental yield in my suburb), you're already ahead.

Personally, first home buyers are lucky to be rejected by banks. If they can't afford a mortgage by a bank's standard (Royal Commission findings anyone?), then they'd most definitely be tight on cash for many years.

If someone wants to start at the bottom and work up, it can still be done, but now I know with my kids and their friends, they want to start at step 2 or step 3.

Difference is it takes much longer. They no longer have the tailwind of falling interest rates and de-regulation of financial services. In fact, they'll reach retirement age and likely still have a small mortgage.

At 32, there's no chance in hell I'd be trying to 'start at the bottom', commute for over an hour either way to service a loan. Then start again once I move to step 2... It's basically voluntary slavery.

 

[Smurf1976]

Looking at median figures is misleading.

There are lots of cheaper properties well below the median, In the major cities.

Agreed that is true but then the vast majority of first home buyers will also be on a below median income given that, broadly speaking, income tends to rise in real terms with age and career progression.

 

[Smurf1976]

At 32, there's no chance in hell I'd be trying to 'start at the bottom', commute for over an hour either way to service a loan. Then start again once I move to step 2... It's basically voluntary slavery.

Frequently buying and selling houses is a dud idea yes unless you're doing something which adds value to them.

Every move costs serious $ with stamp duties, agents fees, removal costs, the huge amount of time it all takes up which could otherwise be used more productively, etc.