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And loses them 6.5% in interest from the bank....
Also need to consider everything extra they put into the loan now pretty much earns them 7% on that money.
haha Think I said this a while ago but I have friends that bought a good 5 - 8 yrs ago and only manged to pay off something like 20k from the loan and the rest is all interest payments. Needless to say they have no savings because everything goes off to pay the bank....
They got suckered in by exactly the same pitch that Tyson is spinning up
And loses them 6.5% in interest from the bank....
In 10 years time they will probably pay off another 30 - 50k max so maybye by the time they are 60 more disposable income will come for the pokies
After 8 years you would already be seeing the compounded increase in the alternative rent they would have to pay for a similar property, and you would be seeing the exponetial decay of the loan, for example each payment they make this year has much less interest than it did in year 1.
Look, I am not trying to spruik property or sucker any body in,
which is taxable and offers no hedge against inflation.
So yes, I aggree in a world with,
Zero inflation,
Zero population growth,
where you can only pay interest only on loans,
It makes sense to rent,
However I live in the real world where their is inflation, capital cities do have incremental population growth, owner occupier loans are p+I,
No, it would be more than that,
But consider this,
In ten years what would be the median rent compared to the weekly interest bill.
.
1, How can an interest cost of $675 (anz standard variable), and P&I over 25y of $785 per week
be compared to $400 per week for a rental.
2,AT WHAT POINT DOES RENTING BECOME MORE ATTRACTIVE THAN PURCHASING?
AT WHAT POINT DOES RENTING BECOME MORE ATTRACTIVE THAN PURCHASING?
1, because as I said I am looking at the cost over your life, I know I will need somewhere to live until the day I die and that will cost money, I am interested in sourcing this accomadation as cheaply as possible, and by purchasing a home the cost of accomadation is closer to wholesale rates than retail.
Yes , I would rather start paying $785 perweek that decreases over time to a nominal amount that is roughly 20% of the weekly rent, than start paying $400 a week that will increase forever with inflation and population growth.
2, In my experiance it is around the 8year mark that the interest payments and other costs end up below the weekly rent.
1, where the person can AFFORD to pay more than interest only OR has not the capacity to invest in other areas... do you think everyone is clueless?
2,How about $450k invested into a McDonalds franchise? or a pharmacy, or any other business that weathers storms quite easily..
1, AT WHAT POINT DOES IT BECOME MORE ATTRACTIVE TO RENT THAN TO PURCHASE A HOUSE
Or do you think this is impossible?
2, How did you come to the nominal 20% figure? Are you saying that paying $400 per week on a homeloan will be better than paying $400 on rent?
1, Have I ever suggested that broke people should leverage into property, No.
2, Or Abc learning, babcock brown etc.etc. Not everyone has the skill of will to invest in some of the riskier asset classes. But most people can own their own home and it can add to their long term financel plans.
1, when the answer to A is less than the answer to B
A : 40 years of inflation adjusted rental payments = (blank)
B :Cost of home + 25years interest + 25 years rates maintaince - sale price of home inflation adjusted = (blank)
2, the 20% figure comes from the cost of home ownership with out debt, is generally in most areas about 20% of the rent that a land lord would charge for that property.
So after you have paid off your home, your cost of accomadation is 80% less than a renter renting the same property.
Sure, I guess from your posts that you assume that housing will, for 25 years more, continue to defy trends, and the world......
Nope, just that inflation and incremental population growth exist.
Notice none of my posts have made reference to large cap gains, or all the normal property bull(shet) sayings like housing doubles every 10 years etc.etc.
My calcs just rely on inflation of say 3% and to an extent nominal population growth.
I am a value investor, and I aggree property is not as cheap as it was in the late 90's. but it's not bubble time, there is some froth, and that with settle, but your not looking at longterm 40% falls.
ONCE AGAIN, I will fix your biased equation
1, when the answer to A is less than the answer to B
A : 40 years of inflation adjusted rental payments = (blank) - return generated by investing savings in alternate investments.B :Cost of home (including legals and stamp duty) + 25years interest + 25 years rates maintaince - sale price of home +fees = (blank)
Define bubble
An economic development in which the price of a class of physical or financial assets (such as houses or securities) rises to a level that appears to be unsustainable and well above the assets' value as determined by economic fundamentals.
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