Everyone has different circumstances i agree with that.
But I have several workmates who still rent their housing and they are in their 40's and one in his 50's
I got talking about this to one of them during lunch break who told me him and his wife still rent as they preferred to go on holidays.
I often wonder what went wrong ..isnt first priority to pay off a house rather than go overseas?
Some people, myself included, have family overseas and those visits are far more important than bricks and mortar.
Some rent, some buy.
Life is like a box of chocolate's.
When in Rome…
Rent as the Romans do?
Run as Forrest Runs?
potato
Do the Romans!
Draw Romanian forests
Roamin' beats rentin' as the gypsy do. Actually quite a few in Oz have wheels on their primary home.
Boobs !!
Buy the colloseum
Well given the cost of the average home today. I'm 50 and I rent and invest. Index funds give me a good return and I can keep topping it up as money comes in.
Long term it'll out perform property and if I need the money, I can sell some or all of it on short notice.
I spent my productive years running my own business with little to show at the end, so never had the opportunity to buy a house.
May look at an apartment in a few years when prices settle down.
outperform … sigh.
Up until 2011, you could have bought a small and insignificant house around parramatta (sydney) for no more than 500k. Considering the city suburbs were always running hot and the price hadn't changed since 2003, it was a bargain. Obviously these same houses are now upwards of 900k. Happened in only 3 years.
Have a look at 410 Marrickville Road Marrickville. Sold in 2012 for $1.3. Sold 23/05/2015 for $2.850. You might think that it was bought as a dump and done up but no. At most they may have repainted a room.
A three year gain of 120% for an initial $320k outlay and payments of approx $5264 a month, and that minus rent so payments approx $1664, or less, a month. Profit around 900k. Would have liked to be on that horse.
My friend is 53yro and rents with his family of wife and 3 kids (10yro - 16yro).
He works in a factory, producing pharmaceuticals. His wife is studying at uni, but she spent the last 15 years as a stay at home mum with some part time work.
They have never earned more than $70k a year (which is not particularly a low income!).
They are good people, they help do soccer coaching, help out at school events and volunteer days. If you are in a jam they will be there to help you out.
But even where I live, where they could potentially buy a house for $400k, it is a big ask. Especially because saving a 10% deposit means drastically limiting their lives and denying their kids stuff, on top of the stuff they are already denying their kids.
They obviously send their kids to public schools, but some are at selective schools, and all are at good schools. So they work effectively to give their kids a good life, allowing them to be in the school band, but probably not the trip to Japan, for example.
One daughter has been picked for a trip to play soccer in Greece. Its a big deal for everyone. Maybe they can work out how to pay for it, but it looks really tight.
Literally, the furthest thing from his mind is what about property prices. He is trying to keep his and his kids dignity amongst their peers. They aren't flaunting possessions, or trying to keep up with iPhones, they are buying $40 supermarket phones and trying to get them unlocked so they can go on $5 ALDI plans.
I'm a bit ranty on this, but please understand, something like a 3rd of the population is living in a situation where they have little option but to just pay the bills, because the bills they need to pay are already more than they get paid. It is really hard to go from a place where you are continually disappointing your kids to a place where you are saving for some future impossible house deposit.
What is this $5 aldi plan you speak of? Might warrant an OzBargain post if it so good.
https://www.aldimobile.com.au/
pay-as-you-go on telstra 3G network or monthly caps - NO CONTRACT
use any 850mhz 3G handset or telstra prepaid (woolworths have had smartphones for as little as $40)
Coles pretty much always have a $10 phone or 2 at the service desk!
Great rant about a family that are living and being happy. Davo93 asks about the Aldi plan haha.
Thank mskeggs for sharing the story. Sometimes I feel confused about what is happiness.
In this case, I'm not sure about the family Kegg mentioned are happy, especially they can't afford the Japanese and the Greek trip. As YTW said below, if they had bought a property 20 years ago, they probably would have been able to send their kids to the overseas trips.
Then the other scenario could be like this. They bought a house or 2 over 20 years ago, then they wouldn't be able to enjoy their life, as it is restricted by the mortgage. When they are over 60's, they decide to start selling the houses and enjoy life. Would 60 years old be too late to enjoy the life? Will they feel happy when they have to live conservatively during the mortgage period?
@acmilan:
True happiness should be found outside of possessions, however living in the big smoke part of us has a continual need to aquire things for the future. Once kids are in the mix if anything like me we spend most of our time thinking about financial security and spending as much time together as possible. Enjoying the moments
Example of alternate strategy:
my broker owned 10 investment properties before he bought a house for himself to live in.
Another alternate strategy:
Buy a place to live that also generates income I.e. rent a room or a tent on airbnb.
The perfect strategy:
Live in a tent in the bush and have no bills at all. Could you be happy if money had no relevance?
I saw the irony too … but then, because of the Ozbargainer in me, I was irresistably drawn to srhardy's Aldi Mobile link like a moth to a flame.
I agree that it wouldn't be in their best interest as a family to try for home ownership at the moment. Maybe once the kids have left home they could look into buying a small retirement unit or something, but to sacrifice family life for years for a house for a family of 5 makes little sense when they are happy as they are.
That said, the 20+ years in the workforce he had BEFORE kids was the time to think about saving and establishing himself/themselves. He'd be in a lot better position to provide for his kids on his wage if he just had the tail end of a 25 year old mortgage to pay rather than current rents. But then hindsight is a luxury and not much help unless you own a time machine.
Wow!!You nailed it!!!
+1. I actually felt awful for the guy, even if he is probably made up, along with his 5 illustrative kids!
3 kids. Yrs 11, 9 and 5 at school, so at least one will likely move out in a couple of years time.
And he has worked for the same place for 20 years, but it is due to cease operations at the end of 2016 (Pfizer moving production to Thailand I think).
@jackary:
I reckon he'll be fine. His partner will finish her degree in 2 1/2 years and be in a better earning position than him. He is entitled to substantial redundancy, and if he can find even low skill work locally he will avoid an hour+ commute for similar earnings.
He is the kind of guy who is a bit daunted by this change, but I suspect it will turn out better than if he hadn't been pushed to make a change.
@mskeggs: another consideration. Ifcontinued to rent. When kids move on, the parents then could travel to, the various locations the kids have moved to. This way they could see them all and not be tied down by freehold.
But it would seem that they, the parents, are doing the best they can. That all I have asked of my parents.
And the best i can do for my kids are good jeans and good education - formal and otherwise.
Yes I want to see them surpass me and my achievements (for what they are).
Even if they're heavily discounted, I insist on paying the cashier full price. That's a matter of dignity.
@tooblue: Fair call on my their/they're typo. I'm the first to assume someone is a bit thick when they don't get it right, but I guess this is a case of my fingers being on a different track to my brain this time. I'll take this also as a lesson to be more forgiving of others who make this common error.
Is there anyway we can donate for the soccer trip? I'd like to help. Opportunities like that don't come knocking often.
I think the question is more about what happened before children and why they didn't buy way back when.
This 53 year old was 37 when he had the first child.
When that 53 year old was 27, existing houses in Sydney were 70-90k, brand new houses in the sticks with 4 beds/2 baths same price. Inner city terraces were 90-100k.
I know this because I am the same age and bought a house. I saved 15k in my first year out of my apprenticeship, living at home, and borrowed 75K. We just had trades and it was paid for in about 5 years. It was a bit of a struggle i remember because interest rates were through the roof in the late 80s, but being childless at the time meant is was doable.
My mistake was stopping at the first one so early in the game.
Some people save the money, buy a house and keep saving to provide for their retirement.
Other people rent and spend all the rest of the money on holidays, cars and other "nice things". When they retire they do not have much money aside or a house to live in. So then they expect the government to support them (pension and other hand outs) provided for with the taxes paid from all the other people that have been saving all their life…
They are not that silly,are they?
And some people are simply not able to afford to buy. Not everyone is fortunate enough to have a job that pays well enough to rent and save a deposit at the same time.
A significant point that no one here seems to have considered is that people in the age bracket we're talking didn't have the 'luxury' of being able to stay at home with their parents to avoid paying high rent and be able to save. The value of wages and other forms of for young people has also increased significantly since their time.
Further to that, the majority would not have considered having their parents become daycare providers for their children, so would have had no choice but to pay the costs.
And interest rates were at incredibly high levels when people of that age were younger. My husband bought our house 22 years ago when rates were 18%.
Yeah and how much was the house? And what's it worth now?
Relevance? If interest rates were still anywhere near that level, I'd bet the vast majority here who are talking down renters would be amongst them themselves.
If you bought in 1993, then the avg home loan rate was 10% at its highest.
http://www.loansense.com.au/historical-rates.html
From that page, 17% interest rates were late 80's to around 1990-1991.
http://www.econ.mq.edu.au/Econ_docs/research_papers2/2004_re…
If you did own a home around that era, you would be making bank as your house price jumped by a third during that period of high interest rates.
Consider the biggest winners were the home buyers of that period of high Keating rates. Because their properties have compounded many fold, and at the same time, they were the ones who managed to negative gear on investment properties. Mostly the baby boomers, but not all chose to go down that path.
"My husband bought our house 22 years ago when rates were 18%."
I reckon you (or hubby?) are out by a full decade here. Those kinds of interest rates were only ever presided over by the LABOUR government, in the 1980s.
What rubbish? Under the Fraser government, with John Howard as Treasurer, official interest rates peaked at 21% in 1982. All you had to do was google it.
@artfuldodger:
That's absolute BS "artful". Which does make you an "artist" of a certain type, I guess…
http://www.loansense.com.au/historical-rates.html
All you had to do was a bit of actual research/fact-finding, instead of latching onto the first silly thing you found via "Google".
I need a laugh though, so do please tell me; what is your source?
I bet you've "Googled up" a graph showing US interest rates! LOL. I shudder to think what you base your actual voting in federal elections on… random stuff you've "Googled", that you mistakenly believe pertains to Australian? Sheesh.
@artfuldodger:
Still no response fartfulodger…
Cat-got-yer-tongue?
You didn't hesitate to publicly declare my assertions "rubbish", so why so hesitant to explain your own?
"The 1982 wages explosion—wages rose 16 per cent across the country—resulted in stagflation; unemployment touched double-digits and inflation peaked at 12.5% (official interest rates peaked at 21%). The Fraser Government with Howard as Treasurer lost the 1983 election to the Labor Party led by Bob Hawke." http://en.wikipedia.org/wiki/John_Howard
http://www.smh.com.au/news/letters/the-inconvenient-truth-ab…
Ignorance and arrogance is a losing combination.
@artfuldodger:
Sweet Jesus ‘artful’, I call shenanigans on your “Google-based” BS claim that official RBA interest rates peaked at 22% under the Libs in 1982, and your response is to call me arrogant and ignorant, and cite a Wikipaedia page as your source? Chuckle. Anyways, that wiki page in turn cites as its source an odd little excel file, showing a different interest rate every month in 1982. In January, while the Libs were in power, it shows 16.21%. Labour was subsequently voted in in March, and one month later, in April, it reports a rate of 21.39%; the highest rate for the year of 1982. So the graph cited in the wiki 'article' actually contradicts the claims made in the article itself. Tellingly, the original data/document that that little excel file is supposedly compiled based on, no longer exists! So frankly, I take all of it with a grain of salt, as should you.
Obviously the genuine information I linked to above was a little too complex for you to digest (or perhaps you only trust ‘Wikipaedia?’) so how about you check this relatively simple graph out:
http://lh5.ggpht.com/-jRDFvpnaRDU/T82en1OAqYI/AAAAAAAAEg8/9O…
In answer to your assertion that I am ignorant and arrogant, my “counter-suggestion” is that stubbornness combined with a lack of base-intelligence is an unfortunate pair of traits to have; because it results in an almost fanatical inability to ever admit fault/ that you were incorrect. Sadly, this ultimately functions to severely impede intellectual growth and development into the future; if not negate it entirely. It’s not too late for you though hombre… you could still do some real research into the facts; i.e. via genuine sources, not Wikipaedia.
Let me know what you discover…
@artfuldodger:
Evidently you find the truth and reality 'tiresome', so I'll give up trying to convince you of their superiority over the populist BS you have been taken in by. You can lead a horse to water, etc.…
Let's change topics… how good was that NSW election result, aye?
Awesome.
@Sirocco: capital gain is only worth something if you sell and most people didn't sell, nor did they continue to buy houses. The culture back then was to buy and stay until retirement and then move to a beach. Very unlike today where everyone wants to trade up and no one can get near a beach.
How about not having children if you can't fiscally plan for them?
When did fiscal planning for a family mandate ownership of a home? He is renting and getting by, they are surviving and that is okay.
yeah Ops asking for opinion about those who can afford but chose not to but spent on luxury holidays and items, and ask for government support (maybe) at later stage.
they didn't also pay tax??
They did, hopefully. But the ones that saved all their life have money to fund their retirement (because they saved it when they could) and as a reward for their thriftiness they will not get a pension or any other welfare.
The other ones that spent it all will be rewarded with a pension and other welfare partly funded with money from the thrifty ones as well.
I think you'll find the people who have saved enough to retire without the need for the age pension have received significant financial benefits courtesy of the government - not usually in the form of welfare payments but the concessional taxation on salary sacrificing, capital gains, negative gearing, trusts all far outweigh the age pension.
And that is before we get to the housing market which has seen what i am pretty sure is the biggest redistribution of wealth from the poorer to the richer in this country's history.
@asseenontv:
Read this "story about tax"
Suppose that every day, ten men go out for beer and the bill for all ten comes to $100. If they paid their bill the way we pay our taxes, it would go something like this…
The first four men (the poorest) would pay nothing
The fifth would pay $1
The sixth would pay $3
The seventh would pay $7
The eighth would pay $12
The ninth would pay $18
The tenth man (the richest) would pay $59
So, that’s what they decided to do.
The ten men drank in the bar every day and seemed quite happy with the arrangement, until one day, the owner threw them a curve ball.
“Since you are all such good customers,” he said, “I’m going to reduce the cost of your daily beer by $20″. Drinks for the ten men would now cost just $80.
The group still wanted to pay their bill the way we pay our taxes. So the first four men were unaffected. They would still drink for free. But what about the other six men ? How could they divide the $20 windfall so that everyone would get his fair share?
The bar owner suggested that it would be fair to reduce each man’s bill by a higher percentage the poorer he was, to follow the principle of the tax system they had been using, and he proceeded to work out the amounts he suggested that each should now pay.
And so the fifth man, like the first four, now paid nothing (100% saving).
The sixth now paid $2 instead of $3 (33% saving).
The seventh now paid $5 instead of $7 (28% saving).
The eighth now paid $9 instead of $12 (25% saving).
The ninth now paid $14 instead of $18 (22% saving).
The tenth now paid $49 instead of $59 (16% saving).
Each of the six was better off than before. And the first four continued to drink for free. But, once outside the bar, the men began to compare their savings.
“I only got a dollar out of the $20 saving,” declared the sixth man. He pointed to the tenth man,”but he got $10!”
“Yeah, that’s right,” exclaimed the fifth man. “I only saved a dollar too. It’s unfair that he got ten times more benefit than me!”
“That’s true!” shouted the seventh man. “Why should he get $10 back, when I got only $2? The wealthy get all the breaks!”
“Wait a minute,” yelled the first four men in unison, “we didn’t get anything at all. This new tax system exploits the poor!”
The nine men surrounded the tenth and beat him up.
The next night the tenth man didn’t show up for drinks so the nine sat down and had their beers without him. But when it came time to pay the bill, they discovered something important. They didn’t have enough money between all of them for even half of the bill!
And that, boys and girls, journalists and government ministers, is how our tax system works. The people who already pay the highest taxes will naturally get the most benefit from a tax reduction. Tax them too much, attack them for being wealthy, and they just may not show up anymore. In fact, they might start drinking overseas, where the atmosphere is somewhat friendlier
That's a crap analogy. That's how the tax system should work. But it does not.
Why do you think there's such an uproar regarding the complex system, high tax earners and companies dodge tax. This has been going on for a long time.
Let them go and drink overseas where they don't use our resources. That is what paying tax is all about. If you're getting a benefit from using a common resource you should put something back in. The more benefit the more you put back in.
Should we tax at 60% rate? No. Should we tax them nothing? HELL NO! But that is what a lot of companies pay. Literally nothing!
http://www.taxjustice.net/2014/09/29/third-australias-big-co…
@maxi: Your hypothetical story missed the point.
High income people get significant tax reductions though trusts, superannuation tax concessions, companies, leasing, capital gains, negative gearing etc, which i would argue would far outweigh any welfare paid to lower income people.
The Australia Institute published a report that showed that the government spends a just under the same amount on super tax concessions (which almost all flow to the rich) than they do on the age pension.
To put this in perspective, if you cut the super tax concessions, you could give the pension to everyone , with a $5k+ per year increase and still be 30% (~$20b/Yr)better off, so before believing all the bleating from those who believe they are paying too much tax and not getting enough in return, it is good to check the actual figures.
@asseenontv:
"the government spends a just under the same amount on super tax concessions (which almost all flow to the rich)"
this is not an actual spend…the government is just taking less away from them, not spending on them
"than they do on the age pension"
now this is a spend…the government is giving away money taken from someone else
May be we should all spend all we earn, not salary sacrifice or save for when we retire and then retire penniless and wait for the government to "give the pension to everyone , with a $5k+ per year increase"
And while we are at it, if you don't like your job, quit. The government will give you the dole so you can go and enjoy your life…
@maxi:You are correct, i should have used accurate language. Instead of saying the government spends $xxx, i should have said it costs the government $xxxx. I don't really think this point changes the debate in any way though do you?
I don't disagree with you that it would be ideal for everyone to save enough for retirement. I would ask you: do you think it is fair that the government gives super tax concessions (primarily to the rich) which cost the taxpayers almost as much as the age pension? And then do you think it is fair that the former can retire at 60 and access their super but those needing the pension have to work to 67?
For the record (it shouldn't make any difference to the discussion)i earn ~$130k (salary + super) and with my wife's income we are close to $200k, which you may not consider rich but i don't consider poor.
Savers and buyers, both are losers, it is the banks that are the ultimate winners. One one hand they suck the blood from the buyer like and vampire and shun the other to homelessness because they could not afford it or did not comply with their requirement considering the same banks supply money to construction companies and limiting the supply of houses artificially and creating a debt driven rise in prices.
And how many kids did you bring up during that time, starvid?
Always wanted a hit rod :P
why would you want a shopping trolley handle?
Who is Rod, and why do you want to hit him? Have you tried talking with him to resolve your differences?
Why? "Sailing".
And I've tried talking to him, can't understand a bloody word he says!
But at what cost? You just traded your youth. Yes, you can still go on holidays but the experience will be different.
Some people just have different priorities in life. Most have families to support. Some have unforeseen expenses like health care costs etc.
But congrats on paying off your apartment
There's a difference between having a lifestyle and saving, there are plenty of people out there not making any effort to save.
I have friends and a relative who are doing exactly that, 100-150k, no savings. Whinging about no money, then claiming they want to keep their lifestyle.
Youth is wasted on the young. Nothing wrong with being responsible and working towards something at a young age. You could also say, what is the cost of not working hard when you're young. The answer is invariably that you have to work harder when you're older.
I never said anything about spending all of your savings on holidays. There's a difference between staying in budget hotels vs 5-star resorts. But there's nothing wrong with working an extra month to pay off the apartment it means having a holiday
@starofdavid isn't it just nice to feel more superior than other people in low income suburbs with your paid city apartment?
Such hubris!
"low income suburbs you will see them with hit rod cars with mag wheels"
I hate to break it to you, but most of those people have a good job and a mortgage with low repayments. Houses in low income suburbs are cheaper.
"have to have iphones"
That's only because evil bastards like me upsell people more than they need or can afford (No, I don't sell phones). Most people from low income suburbs will keep using them even after the screen breaks.
"$200 t shirts"
Women in expensive clothes look really, really good. A $200 tee can be worn multiple times to attract multiple new friends. Expensive fun times are charged per event and cost significantly more than $200. If you're 'poor' and have charisma and want a certain lifestyle then a $200 tee could be a good investment.
Women who wear expensive clothes can often attract men who earn higher salaries. I know a lady that spent more than $20k on clothes but now has a partner earning 2 to 3 times more than her friends. Again, not a bad investment.
I am only looking at it from a poor person's perspective. You rich cityite’s probably have a different perspective.
Geez, well I rented until I saved up every dime for my house and land. I simply did not want to be owned by the banks. However, being a property owner does NOT give anyone room to judge how everyone else leads their lives! I used to have one of those hot rods also when I was younger BTW.
What does make me sad though, is to see the youth squander their best years as debt slaves, which is something the boomer generation would be delighted to see for purely selfish reasons.
Starvid is sorry for not being sorry for you.
How long did it take to save every dime? The interest I'm paying on my mortgage is exactly the same as the rent I used to pay, except when my offset account increases which lowers my repayment. When I was younger I thought the best way would be to save it all before buying but now I know different.
It took me about 10 years. However during that time I had the freedom to live in 3 different countries. When I decided where I wanted to live permanently, I then bought a house.
I'm just making a point that homeowners extending pity to the renting class might have misplaced emotions. Quite often the renting is providing the renter with exactly what they currently want out of life at that time.
Had I bought too early in life I know most certainly I would not have taken the chances I did in life that led me to establish myself overseas and I would know a lot less about the world than I do now. I believe I have renting to thank for that.
In your case, it seems that the flexibility was worth far more than getting a house at a young age. I've never understood why home owners pity or look down on renters. There are many different reasons why owning/renting is better and as long as people choose what's right for them, who's to judge?
Well done on buying outright,
There is nothing wrong with renting. In the current market with the property market continuing to boom, its only a matter of time before it slumps and the loans on the McMansions are worth more than the houses.
The Aussie dream has always been to 'own your own home' but for more people these days, its either not an option or they would rather be investing the money elsewhere earning a higher return. An investment property used to be a licence to print cash but with the current market, its hard to gauge.
Yep, agreed 100%. Australians are in general quite ignorant, and have been fed this property marketing campaign all their lives. The tired old slogans have been endless "Rent money is dead money", "Prices only ever go up", "It's never been a better time to buy". The masses here have heard it so many times to a backdrop of government meddling in the market to keep the price inflation going with "'buyer' grants" ad nauseum and now the highest immigration rate in the developed world.
Eventually the 'luck' (if calling the price of shelter - a basic human need - being beyond the reach of growing numbers is luck) will run out and there will be a correction, like every other asset class. The usual retort to this from the market apologists is "but people have said this forever and they were wrong", but they were wrong about only one thing: the ability for the govt to keep the debt machine churning far longer than could have been predicted, but it will correct sooner or later. Until then, nothing at all about people renting, much like there's nothing inherently wrong with wanting to buy one's own shelter, it's all a personal decision.
I have heard that prices will drop 40% 7-8 ago and I am yet to see it. Infact if it drops to 40% it will be still higher than 2009 levels.
I have worked on average pay throughout my life but have still managed to buy 3 houses. How? I dont want to be boosting I am very smart and this and that. My formula has been very simple. Getting the priorities right and rest of the things will automatically follow.
While spending money on good food and overseas holidays to see my parents every year, I have been careful with where my money is coming and going. Always had excel spreadsheet to see if I could be saving more. I dont drink alcohol, dont smoke and i am vegetarian. I have never stood in the queue for the latest gadget and always looked for bargains no matter if I have to wait for few months to buy a T.V.
By regular saving on a average pay and keeping my eye on the goals, I have paid off my residence in 8 years (Loan was $220K,$100K deposit and property price in 2007 was $300k). During all these years, had 1 child and wife moved from full time to part time to take better care of family.
I would not suggest anybody to wait for property prices to fall else you could be waiting your lifetime. Get in when you can. You may have to compromise on your lavish lifestyle/international trips for may be 3-5 years but then rest of the life will be easy.
Well done on your achievements.
"I have heard that prices will drop 40% 7-8 ago and I am yet to see it."
More of this "it hasn't happened, so never will".
"Infact if it drops to 40% it will be still higher than 2009 levels."
Which would leave many thousands of investors and other debt holders who bought since 2009 massively in negative equity… not everyone bought 20 years ago for example.
"You may have to compromise on your lavish lifestyle/international trips for may be 3-5 years but then rest of the life will be easy."
Given that you entered the market when prices were significantly lower, I would seriously question this last statement. Specifically, which region are you talking about? For example, with Sydney median house prices approaching 1 million dollars, it's more a case of "You may have to compromise on your lavish lifestyle/international trips for the rest of your life."
Like any sensible financial adviser will say "past performance does not indicate future performance". Save some money first people if you intend on diving into debt.
"I would not suggest anybody to wait for property prices to fall else you could be waiting your lifetime. Get in when you can."
So it still wouldn't be a problem for prices to fall 40% for these people following your suggestion of 'just getting in now' because, hey, that's only 2009 prices, right?
@wasabinator: Townsville like job market house price have come down i know people now own house not worth what they payed for them. it will happen. lots of people have no room to move if rate go up. they will go up at some point.
property did drop 40% 7-8 years ago, mining town
25% beach front house.
Average standard house drop max at 10-15%
"More of this "it hasn't happened, so never will"."
-Everybody should take some risk in their life if you want to be ahead of the game. If crash happens in 10-20 years who cares. Either we sit tight and think world is going to die or take control of our life.
"Which would leave many thousands of investors and other debt holders who bought since 2009 massively in negative equity… not everyone bought 20 years ago for example."
-I didn't buy 20 years ago just 8 years ago in 2007 for $295K currently valued around $520k. 40% drop will be still more than 2007 cost. Actually all these years I have paid off this apartment. My 2nd and 3rd house were bought in 2010 and 2013 and are currently valued $200k more than their purchase cost.
"Given that you entered the market when prices were significantly lower, I would seriously question this last statement. Specifically, which region are you talking about? For example, with Sydney median house prices approaching 1 million dollars, it's more a case of "You may have to compromise on your lavish lifestyle/international trips for the rest of your life.""
-Westmead NSW. What you said is the same thing people were saying in 2007 and will continue to say every year. We need to understand that Sydney has shortage of properties and Australia has high migration rate. This keeps the buffer for price crash. Prices in Sydney may stagnate for 5-7 years which will give time for rent to catch up. I used to pay $260 rent in 2007 and now it is $400 while I have paid off my mortgage and hence I live free now. Yes true, people buying now may have to wait for longer. But I seriously think people who have been waiting for crash in last 10 years have made mistake.
Rather than buying $1 Million house as first home owner, I would always suggest to start small so that you always feel comfortable. Not that everyone would prefer to live in apartment or in Blacktown NSW area but you may still get something for 500-600K to start.
I would definately agree with saving some money, atleast 10-15%. Rather than moving in yourself, put it on rent and use negative gearing. You wont feel pressure of mortgage as out of pocket cost will reduce.
40% crash is just a factitious number we have created only. Ok if prices come down 10%-20%, it will still not make any difference to investors in sydney. They are seeing 10% increase every year since 2012.
Not saying crash can never happen but think about how many financial crashes has happened in australia in how many years? Should we be living in fear for something which has happened 1-2 times in lifetime or take control of our destiny?
Thats just my 2cents.
Buying a house when values are so far above the historical trend is not taking control of your own destiny. It is relinquishing control to the whim of external factors which are overdue to correct. It just takes time for corrections to occur and they rarely do when they are expected to.
"which are overdue to correct" - I have been hearing that since 2008. If correction happens in 2050, I will be fine. Even if 20% correction happens when it has appreciated 40% since I bought, I am still ahead. Small correction is never a problem. 50% correction is just imagination.
At the same time, some have been saying there is housing shortage and high migration rate.
I done mean to say buy it even you cant afford it. But have goals, plan for it, buy when you are somewhat confortable. Dont just wait on the side for a crash. Crash will be bad for everybody including you and me and we could be still standing on the side for the fear of procies going down further.
@amsaini15:
Wise words. I reckon it might be time to admit to yourself artful, that actually you know nothing about real-estate in Australia.
Nevermind.
Peace-out.
Admit it Gnarly, you don't actually understand investing but are drawn to real estate because you figure it always goes up. Markets rise above trend but they don't stay there indefinitely. The Smart money are concerned, the RBA is concerned but you are not. Why?
They rent because with you can't buy a house with a credit card or personal loan. People fear genuine responsibility of a self sufficient mortgage as it may make them seem boring (gasp!).
Some people even shirk responsibility with mortgages by getting their parents involved in the contracts for extra security.
I think you'd find half the first home owners wouldn't exist without their parents going guarantor.
Not as common with people that age as houses used to only be around 3 times the average salary but it's something which is going to become rather common.
Are they able to afford rent? If so then that is at least one positive.
Life is for living and holidays are hardly the worst thing to spend your money on.