OZ property - rent, lease of buy

Is it worth buying an OZ property?


*1. People say rental money is dead money.

Look at the housing interest rates in OZ, if you can translate that to savings interest rates (and remove the tax component) double the money every decade based on the compounded interest.

I can say, paying interests on the homeloan is dead money too. Some smart people are renting and they are getting much better returns on their money compared to their landlord.

Consider this. is your interest payment higher than rent? I have not factor in council rates, etc.


*2. Rental is too unstable.

People who lived in Germany before know this thing called a long-term lease. It takes away the instability of renting. You may be able to do that in Australia.

Basically, you sign a 3, 5 or 10-year lease with rental amount indexed to inflation. You get to negotiate renovations and the property agent will take care of repairs/maintenance.

In Australia, long term leasing is possible if you have excellent records as a tenant and opting for >$450/week property.
That may also means you live closer to the CBD! win-win


*3. Invest your savings from buying a property.

Some people put the money in Super (15% tax) so that they can buy a retirement home.
Others may put into their business or shares. win-win-win

When Buy is Better compared to Rent

If both rent money and home loan interests are considered dead money


A house cost $530k or rent at $370 per week

Dead money:

BUYING
Home loan interest over 15 years repayment: $280k
Ownership* cost: $150k
(* transfer taxes/fees, solicitor fees, maintenance & insurance)

RENTING
$19,240 per annum with 3% inflation over 15 years

Savings are invested.

RESULT
$170k-285k better off BUYING after considering varying taxes (incl. 15% tax on super)


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TIP on buying Melbourne/Sydney properties : See where the fitness centres are located. These suburbs are safer & wealthier.

Sydney prices is still ridiculous. Average property price is close to 600K for a house. Basically, most fell for the two income trap. 60K * 2 *5. I have a kid coming along. Need the extra room. Average 3 room, 20-30 yo unit gonna cost me at least $450/week. Which translate to $1800 a month. Buy a 4 bedder, double storey out west and mortgage payment is aroun $2300 a month. I'll rather pay that extra cash to secure a home eventually.

Ash007 said:

Sydney prices is still ridiculous. Average property price is close to 600K for a house. Basically, most fell for the two income trap. 60K * 2 *5. I have a kid coming along. Need the extra room. Average 3 room, 20-30 yo unit gonna cost me at least $450/week. Which translate to $1800 a month. Buy a 4 bedder, double storey out west and mortgage payment is aroun $2300 a month. I'll rather pay that extra cash to secure a home eventually.

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WE have been thought not to make emotional investment decision but that is why OZ property prices stays subbornly high. Aussies are obsessed with properties.

Remember Prof Keen from Sydney Uni, he lost his 40% fall in Sydney property prices bet and had to walk up a mountain as punishment. But he still insist that property prices will fall.

But at the rate in which Labor is promoting unionised jobs (eg car manufacturing) to compete with other low-income economies, and not putting more money into jobs that support a high-income economy, I actually expect property prices will fall a bit more. Maybe Sydney will not suffer as much, myPR-Data Rismark graph shows that Sydney prices will not fall as much.

Again, it really depends on how many Aussie jobs will be lost, esp over the high AUD.

Some analysts predict the AUD falling to 80cents USD. But I doubt so because AUD is a kind of safe haven for its AAA ratings.

What Australia need is HDB style housing without using the CPF money to pay for it.

Hong Kong is similar to Australia when it comes to property. But they did over there is to create bed cages or tiny airless cubicles for poor people, and high-rise in New Territories for middle class.

I am sure you have done the maths

Indeed, the problem is there is too many red tapes in this country, Federal, State, Local all has its own rules and regulations!

neddy said:

WE have been thought not to make emotional investment decision but that is why OZ property prices stays subbornly high. Aussies are obsessed with properties.

Remember Prof Keen from Sydney Uni, he lost his 40% fall in Sydney property prices bet and had to walk up a mountain as punishment. But he still insist that property prices will fall.

But at the rate in which Labor is promoting unionised jobs (eg car manufacturing) to compete with other low-income economies, and not putting more money into jobs that support a high-income economy, I actually expect property prices will fall a bit more. Maybe Sydney will not suffer as much, myPR-Data Rismark graph shows that Sydney prices will not fall as much.

Again, it really depends on how many Aussie jobs will be lost, esp over the high AUD.

Some analysts predict the AUD falling to 80cents USD. But I doubt so because AUD is a kind of safe haven for its AAA ratings.

What Australia need is HDB style housing without using the CPF money to pay for it.

Hong Kong is similar to Australia when it comes to property. But they did over there is to create bed cages or tiny airless cubicles for poor people, and high-rise in New Territories for middle class.

I am sure you have done the maths

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Congrats for ya new born ! I have my 2nd baby for 1.4mths liao - currently enjoying the parenting period.

Dude, a ridiculous price @ locked-in price is always better than a cheap price with inflated sum over time.

Worst of all, you never get to enjoy the capital growth.

I always have a problem when I buy new property, due to my inability to adjust to a leaner lifestyle.

After weeks & months... it starts to get better, and soon ya be enjoying the capital growth in no time !

Property prices will never come down, if there is limited supply.

The heat will turn into hot fire, if economy is back on track.. Gd luck !

Ash007 said:

Sydney prices is still ridiculous. Average property price is close to 600K for a house. Basically, most fell for the two income trap. 60K * 2 *5. I have a kid coming along. Need the extra room. Average 3 room, 20-30 yo unit gonna cost me at least $450/week. Which translate to $1800 a month. Buy a 4 bedder, double storey out west and mortgage payment is aroun $2300 a month. I'll rather pay that extra cash to secure a home eventually.

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Not new born lah, coming soon, akang datang, in a few months time, now week 16 lah. Preparing for the future.

http://blog.aussie.com.au/sydney-west-primed/

The western suburbs of Sydney have been predicted as one of the country’s most significant growth corridors, making it prime for property investors.

In the most recent edition of Smart Property Investment magazine, SQM Research’s Louis Christopher said that Blacktown and Penrith were primed for growth.

“Like many of its surrounding suburbs, Penrith has a notably low vacancy rate at just 0.6 per cent,” Mr Christopher said.

“The suburb also has one of Sydney’s best income to house price ratios and, like Blacktown, is on CityRail’s Western and Blue Mountains lines and is close to the M7 and M4 motorways,” he said.

In the latest issue of Smart Property Investment’s magazine’s inaugural Fast 50 Report, 18 New South Wales suburbs were flagged for growth in the state by a panel of experts including Destiny Financial Solutions founder Margaret Lomas, Hotspotting.com.au founder Terry Ryder, SQM Research founder Louis Christopher, wHeregroup director Todd Hunter and NextHotSpot director Luke Berry.

The panel used a range of metrics to identify their hotspots including population growth, demand for housing, income levels, employment, vacancy rates, previous capital growth and current gross rental yields.

Queensland came in second to NSW with 11 hotspots, Western Australia came in close with 10, South Australia received six, Victoria received four and the ACT received one with Canberra.

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axe168 said:

Congrats for ya new born ! I have my 2nd baby for 1.4mths liao - currently enjoying the parenting period.

Dude, a ridiculous price @ locked-in price is always better than a cheap price with inflated sum over time.

Worst of all, you never get to enjoy the capital growth.

I always have a problem when I buy new property, due to my inability to adjust to a leaner lifestyle.

After weeks & months... it starts to get better, and soon ya be enjoying the capital growth in no time !

Property prices will never come down, if there is limited supply.

The heat will turn into hot fire, if economy is back on track.. Gd luck !

Click to expand...

Ash007 said:

Not new born lah, coming soon, akang datang, in a few months time, now week 16 lah. Preparing for the future.

http://blog.aussie.com.au/sydney-west-primed/

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Good for you. Looks like you have enough on your plate with family + house hunting.

Au pairs are also getting popular among 2-income families who have limited access to parents as guardians. Not sure if you need one.


Personally, if the laws are ridiculous, we just have to challenge them. It just annoyed me that I need to spend time dealing with stupid people like local councils.
Even a little girl has to deal with and succeed in doing so.

http://www.news.com.au/national/how-georgia-beat-bunglers/story-e6frfkvr-1226264213811

Council only allow 2 guinea pigs per household. This is the most ridiculous thing I have ever heard. This type of cases, the council will lose, because it will keep them very busy. Ratepayers not happy!

I'm trying to avoid the two income trap. and yes local councils have too much council.

neddy said:

Good for you. Looks like you have enough on your plate with family + house hunting.

Au pairs are also getting popular among 2-income families who have limited access to parents as guardians. Not sure if you need one.


Personally, if the laws are ridiculous, we just have to challenge them. It just annoyed me that I need to spend time dealing with stupid people like local councils.
Even a little girl has to deal with and succeed in doing so.

http://www.news.com.au/national/how-georgia-beat-bunglers/story-e6frfkvr-1226264213811

Council only allow 2 guinea pigs per household. This is the most ridiculous thing I have ever heard. This type of cases, the council will lose, because it will keep them very busy. Ratepayers not happy!

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Ash007 said:

I'm trying to avoid the two income trap. and yes local councils have too much council.

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You are a smart guy.
Do not make the mistakes of those in the mortgage belt.

1. No allowance for interest rates movement up (esp for variable home loan) Smart people factor in up to 200 basis points before they struggle.

2. Having a spouse not working is good financial planning in case she needs to enter the workforce to tide things over. It is quite common in Perth to only have single-income family or the mum working casual hours,leaving work at 3pm to bring the kids home from school. That is one reason why home prices are not going up here. Why play into "high price" bait. Bad for laidback Perth Meanwhile sellers are hoping for some overseas buyers to take their high-price bait ?

3. Take a 30-year loan but repay back faster so that you can build up money for investment & retirement. I paid back my 2 home loans in 3 and 7 years (Thanks to CPF and capital gain in the housing boom GOOD OLD DAYS)

Not sure if you are getting a house or unit, but do watch out for the strata levy for units. That has to be costed into your budget.

I expect a 25 or 50-basis points bank rate cut exactly a month from now. That cut is delayed today while RBA still monitor the results of the last cut. Fixed home loan has lost popularity. Variable rates allow flexibility in the (fortnightly) repayment and I know a lot of people who are paying down their loans over investment in shares and savings (after setting aside for emergency).

House, I'm avoiding the stamp duty, strata. Yes, that is the plan, been reading the two income trap by Elizabeth Warren, its happening in Australia especially in Sydney, most people don't realised this.

neddy said:

You are a smart guy.
Do not make the mistakes of those in the mortgage belt.

1. No allowance for interest rates movement up (esp for variable home loan) Smart people factor in up to 200 basis points before they struggle.

2. Having a spouse not working is good financial planning in case she needs to enter the workforce to tide things over. It is quite common in Perth to only have single-income family or the mum working casual hours,leaving work at 3pm to bring the kids home from school. That is one reason why home prices are not going up here. Why play into "high price" bait. Bad for laidback Perth ?


Not sure if you are getting a house or unit, but do watch out for the strata levy for units. That has to be costed into your budget.

I expect a 25 or 50-basis points bank rate cut exactly a month from now. That cut is delayed today while RBA still monitor the results of the last cut. Fixed home loan has lost popularity. Variable rates allow flexibility in the (fortnightly) repayment and I know a lot of people who are paying down their loans over investment in shares and savings (after setting aside for emergency).

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Ash007 said:

House, I'm avoiding the stamp duty, strata. Yes, that is the plan, been reading the two income trap by Elizabeth Warren, its happening in Australia especially in Sydney, most people don't realised this.

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Dude, don't worry so much of the income trap... I started off with hardly enough 20% deposit when I acquired my 1st apartment. I wasn't aggressive back then, which I regretted for life. Now in Australia I invest my very last cents and get by day-by-day.. Initial mths or years will be tough but soon ya be smiling all the way !

I bought a crappy place @ 7km east of Melbourne. The crappiest hse along my street ! (I reckon neigbhours will get rid of me soon). Ppl laughed at me, some said I am a fool of paying 70-80k stamp duty. Now ppl can hardly get a 4 beds 2 toilets on a 1/4 acre land @ 30km away !

Good stuff don't come cheap, dude.

I know lah, my friends all laugh at me now. Say why I so dumb buy the house can get Townhouse/villas/unit etc etc. I'll just wait and see if they change their mind after 5 years. Yes, initial few years is going to be tough for me.

axe168 said:

Dude, don't worry so much of the income trap... I started off with hardly enough 20% deposit when I acquired my 1st apartment. I wasn't aggressive back then, which I regretted for life. Now in Australia I invest my very last cents and get by day-by-day.. Initial mths or years will be tough but soon ya be smiling all the way !

I bought a crappy place @ 7km east of Melbourne. The crappiest hse along my street ! (I reckon neigbhours will get rid of me soon). Ppl laughed at me, some said I am a fool of paying 70-80k stamp duty. Now ppl can hardly get a 4 beds 2 toilets on a 1/4 acre land @ 30km away !

Good stuff don't come cheap, dude.

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May the force be with us !

Ash007 said:

I know lah, my friends all laugh at me now. Say why I so dumb buy the house can get Townhouse/villas/unit etc etc. I'll just wait and see if they change their mind after 5 years. Yes, initial few years is going to be tough for me.

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I have a frz who reckoned the property prices were too high in 2006.. They are on rental. They claimed the world is coming to an end - the property prices will come down. 6yrs liao, and they are still complaining the high property prices.

I said before if the great financial crisis (GFC) can't cripple us, what else will ? Now we are living with 40-60% capital gain and I can hear them complaining again.. hehe..

Ash007 said:

I know lah, my friends all laugh at me now. Say why I so dumb buy the house can get Townhouse/villas/unit etc etc. I'll just wait and see if they change their mind after 5 years. Yes, initial few years is going to be tough for me.

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The house prices are high. What most people don't understand is that they have always been high. Like what my broker said, it's only a good time to buy when you are ready. Most people are picky, too far, no transport, no good school. They never want to look outside of their perceived comfort zone and look for potential. I'm sure your friends are like some of mine. It's not they can't get a place but they are not willing to look at other more realistic options.

axe168 said:

I have a frz who reckoned the property prices were too high in 2006.. They are on rental. They claimed the world is coming to an end - the property prices will come down. 6yrs liao, and they are still complaining the high property prices.

I said before if the great financial crisis (GFC) can't cripple us, what else will ? Now we are living with 40-60% capital gain and I can hear them complaining again.. hehe..

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Spot on ! If you buy or invest in any area, it beats no investment at all. Once the economy is better, all area will grow at the same time.. although some more gain and other lesser gain.

I regretted my action in SG. I guess the lack of time to read and research resulted my inability to grow my asset. In Australia, I will not let the same mistake happen again. I will borrow to the max during my prime time and convert into hard cash when i reached 50s :-)

Gd luck on ya investment !

Ash007 said:

The house prices are high. What most people don't understand is that they have always been high. Like what my broker said, it's only a good time to buy when you are ready. Most people are picky, too far, no transport, no good school. They never want to look outside of their perceived comfort zone and look for potential. I'm sure your friends are like some of mine. It's not they can't get a place but they are not willing to look at other more realistic options.

Click to expand...

Ash007 said:

The house prices are high. What most people don't understand is that they have always been high. Like what my broker said, it's only a good time to buy when you are ready. Most people are picky, too far, no transport, no good school. They never want to look outside of their perceived comfort zone and look for potential. I'm sure your friends are like some of mine. It's not they can't get a place but they are not willing to look at other more realistic options.

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why not just rent? Are prices rising? We see a slight price decline last year and a slightly bigger one this year. Next year depends on whats happening in China and the EU. We honestly dont know what the long term trend is, just that in the short term expect the correction to continue.

You must be talking about house prices. Yes, they are declining overall here. But, if you look at a region to region basis, some are actually growing. A lot of people are starting to realised that they have to realistic where they are staying. There are no housing shortage crisis as the media plays it out. There is a housing shortage in the perceived "good" area. Its is these areas that are experiencing the decline. Then again, we are talking about $1million properties declining to 800-900K at best. For, the lower, middle price area, there is actually increases like what I've mentioned before about people expectations starting to change. As for rents, they are definitely rising, example, for a 3 bedroom place its around $450 a week at least. There is very little difference between the inner city area and the outer region in terms of price. The only difference is you get a house in the outer areas versus a small unit in the inner city. Surprisingly, rents have gone up while housing prices, depending where you want are stable or falling. Carpe diam, I need a house, family is growing, I can afford it, why even think if the house is going to fall or not? Warren buffet once said, "Be fearful when others are greedy. Be greedy when others are fearful."

Read more: http://www.marketfolly.com/2009/09/top-25-warren-buffett-quotes.html#ixzz1lr1sjIAZ

I think its time to greedy.

Aussie Prick said:

why not just rent? Are prices rising? We see a slight price decline last year and a slightly bigger one this year. Next year depends on whats happening in China and the EU. We honestly dont know what the long term trend is, just that in the short term expect the correction to continue.

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Dude, please thor-long thor-long STOP giving bad advice here..

You were extremely pessimistic from day one.. where is your stats ? I said before if the GFC can't cripple us, what else will ?

You obviously lack of knowledge of stocks charting. The market is rally now, are you seriously thinking the world is coming to an end ?

Try to self-reflect.. look at the fruits you bear, did you get good harvesting ? Of course not ! haha.

Aussie Prick said:

why not just rent? Are prices rising? We see a slight price decline last year and a slightly bigger one this year. Next year depends on whats happening in China and the EU. We honestly dont know what the long term trend is, just that in the short term expect the correction to continue.

Click to expand...