wayneL
VIVA LA LIBERTAD, CARAJO!
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Despite the best efforts of central banks, consider deflation?
When will huge inflation in Australia occur to wipe down the debts?
- Thread starter Ald123
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Won't happen in a capitalist system, just think how do you run a business, you buy the product in at $1 and have to sell it at $0.90c every business goes broke.
Deflation kills the capitalist system, it can't operate, that's why we will end up back in equilibrium. The long term norms will return, it is just a matter of when.IMO
The datum line may be rest, but the long term average will return.
Ok so assuming I have the following scenario what is the smart thing to do?
We own a house worth $830k and owe $500k on it.
The house is on a very quiet street on 721sqm block near the beach in Perth in karrinyup/ Trigg
I stupidly fixed the interest rate 1 year ago at 5.69% for 5 years with NAB. Break costs are $28k
My repayment is $3200 a month, it's killing me.
It has been rented out for two years already and I need to be careful not to attract capital gains tax on it, there is a 5 year waiving period?
The house was vacant for 3 months as no tenants around.
Am considering refinancing and therefore having the tenant pay a greater amount of the mortgage repayment.
It's rented out at $450 a week as the rentals have dropped from $600 a week in the last two years.
I am going to be earning $6400 per month after tax but living in NSW Newcastle in one or two months time.
Currently in NZ, company is paying my rent here.
Returning to Australia ASAP
3 small kids, 6; 4 and 2 years old.
Wife won't work until 6 months time.
She has no job yet in NSW yet but realistically can't see how she can work full time.
If she did work full time she would probably get a similar salary.
I have no car yet.
I have $20k cash
I have no credit card debt or any other debt except my wife has some Hecs debt of 30k
Knowing what you know about Australia and what is coming in terms of the economic cris, recession depression.
What would you do?
We own a house worth $830k and owe $500k on it.
The house is on a very quiet street on 721sqm block near the beach in Perth in karrinyup/ Trigg
I stupidly fixed the interest rate 1 year ago at 5.69% for 5 years with NAB. Break costs are $28k
My repayment is $3200 a month, it's killing me.
It has been rented out for two years already and I need to be careful not to attract capital gains tax on it, there is a 5 year waiving period?
The house was vacant for 3 months as no tenants around.
Am considering refinancing and therefore having the tenant pay a greater amount of the mortgage repayment.
It's rented out at $450 a week as the rentals have dropped from $600 a week in the last two years.
I am going to be earning $6400 per month after tax but living in NSW Newcastle in one or two months time.
Currently in NZ, company is paying my rent here.
Returning to Australia ASAP
3 small kids, 6; 4 and 2 years old.
Wife won't work until 6 months time.
She has no job yet in NSW yet but realistically can't see how she can work full time.
If she did work full time she would probably get a similar salary.
I have no car yet.
I have $20k cash
I have no credit card debt or any other debt except my wife has some Hecs debt of 30k
Knowing what you know about Australia and what is coming in terms of the economic cris, recession depression.
What would you do?
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may be of interest
http://www.morningstar.com/cover/videocenter.aspx?id=557925
over an hour video there as well
http://www.morningstar.com/cover/videocenter.aspx?id=557925
over an hour video there as well
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I think there are a lot of variables and it is a very personal investment, regards risk/ return, expected capital gain. There is no way I would comment on it.
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You're already seeing what the property market is like in WA, and it's not going to get any better as people migrate to other states and those left don't have the incomes they used to.
The exit is going to get very very crowded when the forced bankruptcy sales start to come. You're house value may not have taken into account the downturn in WA over the last 6-12 months. RP data shows Perth down 0.9% over the last 12 months. There's a huge surge in apartments in Perth, just as population growth is reversing. i wont be surprised if WA has negative population growth soon. Vacancy rate in perth is now 4.9% and rising. Definitely a renters market. over 14000 blocks of land and properties for sale in perth. Buyers market, though you'd be best off waiting for the market to bottom in a few years.
Rents are down over 14% for house and 12% for apartments on a 3 year basis.
before the boom mining capex was somethign like 6-8% of state final demand. It's fallen from a peak of 30% but still around 24-25%. Imagine what $10-12B of demand removed from the WA economy is going to do to employment.
The Roy Hill iron ore project will see 8,000 construction workers turn into 2,000 miners, and one wonders how long those numbers will hold up with the margin squeeze that’s coming. You can double the attrition when the iron ore juniors go under.
Then there’s the giant LNG projects, Gorgon and Wheatstone. At Gorgon, 9,000 construction workers will turn into 400 gaseous technicians, whereas at Wheatstone, 6,500 workers will shrink to around 400 (if not less).
Add in multipliers, and Western Australia could easily see 50,000 jobs lost as mining capex returns to pre-boom levels (or below).
Factor is an end to the construction boom and you can kiss good bye to thousands of construction jobs and i doubt many will have the moeny to higher them for renovations.
With both mining capex and housing construction facing sharp downturns over the next two years, the Western Australian construction industry could shed up to 80,000 jobs, with cascading impacts on other sectors. that in a population of just 1.4M, we could see WA unemployment over 10% quite quickly, unless the east coast gets some economic refugees. What a shame they didn't seceed. Stp the sangroppers has a nice ring to it /sarc
In the 1970s Perth house prices fell by 30% over an 8 year period in real terms. Nominal values would have made it seem not so bad. I'd think things will be worse this time simply because debt levels are so much higher.
There is no contemporary Australian experience to match the developing economic situation in WA. It has been in effective recession for two years already (excepting exports which do little for local activity). That domestic recession is set to deepen meaningfully in the next year and, with next to zero prospect of counter-cyclical spending coming from a broken state Budget, holding a negatively geared property would be folly.
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Jeez Syd, show some compassion.
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Jeez Syd, show some compassion.
I didn't think compassion was in the Australian lexicon anymore.
Thank you for that. So in your opinion it's not even worth getting the property refinance and having the renter pay for it, because the bank loan could hinder buying the new family home in Newcastle?
Have there ever been forced bankruptcy sales in Australia on a massive scale? Have there ever been forced bankruptcy sales in Australia where people lost the value of their house? What is the biggest drop in value in house sales that people have endured in the Aussies State capital cities. It seems to me that property prices would need to drop to the expensive one being about $800k and those are properties that cost about $20000000 today. The median to about $300k and the cheap ones to about $150k before things can become affordable.
Mass scale bankruptcy is that a reality that possible?
Mass scale bankruptcy is that a reality that possible?
Another question why did government allow the private and household debt to become so large that it's heading towards 4 trillion?
Surely they are now in the zone of hating the people and getting paid off by banks to do that to turn the people into debt slaves.
Are we happy to be debt slaves?
Surely they are now in the zone of hating the people and getting paid off by banks to do that to turn the people into debt slaves.
Are we happy to be debt slaves?
What do you mean refinance and have the renter pay for it? Your current mortgage payments are fixed for another 4 years at $3200 a month. Your rental income is $450/mth gross, so after property management fees, maintenance, rates, landlord's insurance, building insurance..You're probably getting less than $375/mth, easily. So you have a shortfall of approx $1700+ per month. If you refinanced, assuming your are able, you might save 1% p.a. or so, or $5,000/yr in interest, freeing up around a little over $400/month, still leaving you at $1300 a month or more short. Would you pay $28,000 today to save $20,000 over the next 4 years? I probably wouldn't, especially if I really needed that $28,000.
That appears to be what you are suggesting, and it doesn't seem to be an economic win. It's concerning that you fixed a payment at 5 years that you could hardly afford a year later. Are you paying interest only or principal & interest? Payments of $38k a year suggest principal and interest, which is going to hurt your bottom line in this situation, especially as you need the money elsewhere.
I'd forget buying another property at the moment if you can hardly afford the one in Perth. I'd consider renting for a few years - you're not going to sleep better at night with another half million dollar mortgage, especially if you're of the opinion the whole economy is going to ****. Take advantage of the fact that there are plenty of people out there that are just like you that you can rent from in the meantime.
If you're of the opinion that the property is going to fall in value over the next few years and you don't want to pay another $100,000 in interest for the ride, then you also have the option of selling the property (challenging with a tenant in there at 450 a week I would imagine), paying out the break costs and agents fees and walking away with a bit less than $300k in the bank and no mortgage of $3200 a month anymore. That might be a tough pill to swallow, but at least once it's done it's done.
I don't know what I would do in your situation as I don't know the rest of the situation, but it may help to look at what your assets and liabilities, income and expenses would look like after taking whatever action you're considering, and looking at how you'd feel with that as a blank slate. The rest of it is just noise.
tech/a
No Ordinary Duck
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Sell it
Knobby22
Mmmmmm 2nd breakfast
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Yep, sell it and clear your mind. Hopefully its gone up enough to get your money back.
Sure prices could rise but if the opposite happens what will that do to you?
Sure prices could rise but if the opposite happens what will that do to you?
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+1 concentrate on the ppr, while rates are low.
Perth house prices are going nowhere, but down for the next 5 years, until underlying population grows.IMO
Thanks for the reply I appreciate it. My rental income was weekly though, not monthly
Think of inflation as a measurement of the difference of the cost of what we want and what we are prepared to actually earn.
Debt has a way of coming home to haunt sooner or later. Australia is a mini Greece financially. Gradually selling of the country to pay interest. without even taking into account the income from the sale of assets this is the position for the government financially;
Interest per Year
A$17,656,551,987 Interest per Second A$560
Debt per Citizen A$23,230
Debt as % of GDP 25.62%
GDP A$2,129,801,184,250
Population 23,490,349
National Debt $545,678,000 plus and rising by around $560 per second.
Debt has a way of coming home to haunt sooner or later. Australia is a mini Greece financially. Gradually selling of the country to pay interest. without even taking into account the income from the sale of assets this is the position for the government financially;
Interest per Year
A$17,656,551,987 Interest per Second A$560
Debt per Citizen A$23,230
Debt as % of GDP 25.62%
GDP A$2,129,801,184,250
Population 23,490,349
National Debt $545,678,000 plus and rising by around $560 per second.
tech/a
No Ordinary Duck
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Hi,
My 2c is that if hyperinflation is your major hope then you are in way over your head.
At a cost of $830,000 with weekly rental return of $600 you are talking about a gross yield of ~3.7% pa.
The outstanding balance of $500,000 with weekly rental return of $450 you are talking about a gross yield of ~4.68% pa.
This is not including the >5% pa in interest payments.
Ignore the yield. Ignore what other people are saying (it's not legal for people on ASF to give financial advice anyway!).
If you bought the property under the assumption that it was a good investment, you can clearly see from the gross yield that is not much better than a bank account and you should decide if all the extra hassles and risks make it a more worthwhile than parking your cash in a Government bond or bank account.
If you brought property under a speculative assumption that you would be able to sell the same property to someone else for a greater price, then you should decide whether you think the probability of the price rising from here is greater than the probability of it falling.
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