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- 12 November 2007
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1. Not in the context that I believe it relates to longterm property ownership.
2. wayne, I am sure you can find wikipedia site and link.
Right... interesting.
1,So is debt (as an asset class) in a bubble?
2, Also, define unsustainable in this context.
1. Not in the context that I believe it relates to longterm property ownership.
2. wayne, I am sure you can find wikipedia site and link.
Yep, thats the catch though isn't it.
You only have about 8 years of actual savings by renting, and the biggest savings are in the first few years.
Now, I am not silly enough to believe that the average joe lower middle class is such a "cold blooded weigher of the odds" and has the disapline to allocate the savings from those first 8 years into a successful investment operation over the next 40 years where by he ends up better off.
In the great majority of cases if I recommended people took that approach it would end with them not saving the "savings", and therefore end up acustomed to a higher lifestyle than they can afford, little savings and never owning their own home.
However if I recommend that they start a plan to own a modest family home, the forced saving of it all will likly end up better for them.
Now, offcourse this is not true for everybody, there are countless individuals who will save the savings and put them to good use, and if the person is such a good cold blooded weigher of the odds, then eventually they will be so successful that buying a house may work out to be a great lifestyle decision for them.
Boss Tyson, what I have highlighted is exactly what I am pointing to. We are talking about the average family and eventually owning their family home. The cost of living and everyone elses house price has gone up so how can a higher standard of living be realised by selling? The only gain as you note is the building maintenance costs (including rates) will be the continuous outlay.Well in retirement you get to live in it rent free, just paying rates and a bit of maintaince which is a fraction of the rent, and eventually you can sell it for a lump sum tax free and enjoy a higher standard of living in your later years.
Um... no,
The $780ish P&I repayments start to make a larger dent into principal at around 8 years according to your assumptions....
However, even making the assumption that rent will keep pace with inflation over the next 25 years,
the difference between a P&I repayment of $780ish and a rent starting at $400 will still be maintained for much longer
That is, unless, you truly believe that a house worth $450000 will rent out at $780ish per week in 8 years time.
Boss Tyson, what I have highlighted is exactly what I am pointing to. We are talking about the average family and eventually owning their family home. The cost of living and everyone elses house price has gone up so how can a higher standard of living be realised by selling? The only gain as you note is the building maintenance costs (including rates) will be the continuous outlay.
Let me clarify,
At 8years, the Interest on the loan, combined with other costs excluding principle payments, would be about what the inflation adjusted rent will be.
The "P" part of P+I repayments is the forced saving, not a "cost", the P component is not dead money like rent and interest.
You want to count the "P" part for the home owner, and disregard it for the renter. Poor, biased approach, designed to artificially make your position stronger.
?
Not at all,
I am simply saying that the P part is not an expense in a way the I part is, You want to include the P part along with the I when calculating the weekly cost of buying a home this is not correct, the P part is equity, not an expense.
And no I am not disregarding the savings of the renter, as I said before I just question whether average joe uses these "saving" effectively to save for a stable future of just shouts an extra round or two at the pub and buys a better than average car.
Hi,
Interesting read you two debating buying over renting.
Okay, is renting now and for the next five years more beneficial financially over buying residential property?
I believe that buying your PPOR over renting if property price growth is >= inflation.
Yes, been over the fomulas a million times, way to many variables.
But I ask you this, do you see property prices keeping up with inflation over the next five years?
Cheers
Well some people believe currency destroying inflation is at hand, but who knows for sure right.
A better question would be do you think rents will not keep pace with inflation. Because that's what your comparing it with.
A better question would be do you think rents will not keep pace with inflation. Because that's what your comparing it with.
The rent i pay has def not increased with inflation. It has only gone up 6.5% over 5 yrs across 2 different properties in 2 different cities/states.
1, no one lives forever, you goal should not be to die and leave the house to the kids.
So when I said you can sell it and enjoy a higher standard of living in your later years, i meant that eventually you sell the family home, down size or draw equity out of it to fund nicer holidays, more free time, a better retirement villiage or nursing home than a person could afford that didn't have a home to sell because they lived it up when they were younger and were stuck paying high rent their whole lives.
It would be nice if the world worked that way. In Australia it doesn't ,usually what happens here is if you have nothing you get the service for nothing. If you have money or asset you pay for the same service.
Or you lose the tennant and risk having your property on the lease market for weeks or months putting you back in the red on the "under market" rent you could have been collecting, yes there is plenty around where I live that have been on lease for months.
Housing shortage is a myth
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