Buy vs. Rent

I have a story fellow Ozbargainers.
A bit of disclaimer - I like Australian beaches, safety and lifestyle, having a full-time job and paying taxes, and not abusing centrelink or medicare sorting all my medical things overseas including eye surgery that I paid $450 this January vs. $2500 in Australia.

I came to Australia from the eastern european country back in 2010 with $10,000 aud in my pocket - spend them all in 3 months on rent, first car, groceries and basic furniture. Than I managed to find a job in engineering consultancy. So for the first 5 years I was thinking and dreaming about getting the house. Thinking of that, dreaming of my own place, backyard and barbecue on Saturdays. Now I can afford 20% deposit for some early's 7 digit property.

So I have a good question - shall I buy at all? The rent I have in inner city for 2bdrm apt with a swimming pool is only early $300's p/week. It takes me not more than 15 minutes to get to work by bicycle, have a good shower (not counting 5 minutes to save on bills). I don't spend 1.5-2.5 hours on commute and don't believe I really would like to buy a house in suburbia and have to wake up at 6-6.30 am to be on time at 8.30 in the office (now I wake up at 7.30 am while my partner makes me a breakfast).

The deposit that I have I would consider to split into more profitable higher yield investment (say about $50k), and other part into savers account with ubank or cua (2.7-2.8%) and that will help me to make more of a passive income.

The reasons I stopped looking at the buying of the property (inner city units if it is important) are:

  1. High maintenance i.e. city council fees, body corp, sinking fund that all add up to about $7000-8000 p/a, which is sad to see going in nowhere.
  2. Real estate agents and all the industry which seem to profit on hard working australians taking money as commissions, loan establishment fees and so on. All those shiny posters with smiling agents who come driving luxury bmw's and mercedeces to inspections… hate that… All the industry and those property seminars, everything…
  3. There is no guarantee that the unit I'm looking at (say it's early 2000s unit without lift and pool) will not go down in price and I won't be able to get my money back.Plus that buy will convert my asset into liability putting me in uncomfortable feel if I loose a job or become terminally ill.
  4. I think I should just rent and save money for another 15 years until I hit 50 than revoke my citizenship and take my deposit and super back home, where I can get really good apartment of 100-150m2 for cash for less than $275,000 and have leftover in cash to be able to invest overseas and have a passive income enough to support my simple lifestyle. And in case of not revoking the australian citizenship to return to Australia one day in late 60s to settle in abandoned village on seaside and live on the aged pension (just a highly unlikely option)?
  5. Final question - why is Australia called a lucky country? I think it is to high a price to be here. Car Rego for my Nissan is $720 p/a against an equivalent of $180 back home, internet is crappy adsl 2+ for $59.99 vs. $15 for 100mbit ethernet with optics, really cheap and fast phone plan with 4G (now 5G is coming) for $10 30gb allowance, 2% salary medicare of thousands dollars a year vs no payments at all - you just spend money on every visit when it is necessary for you and still it is cheap. Than the cost of home utilities, petrol which are much more higher.. And I'm not saying how expensive it is to go to Symphonic Orchestra performance here. So at the end of the day not much is left in a pocket in a lucky country.

Sorry if offending - it is just my thoughts and an attempt of comparison. AI think it is a good option that I have a backup plan to get to my home anytime and not to get into the hands of banksters and that thing of 2/7 capital growth dreamers. My close friends who are in a good job position also share similar point of view on how expensive everything in Australia and at the end of the day not much is left, especially in emergency cases like dental surgery or similar.
So is my situation and I would be happy to hear your thoughts, guys.

Comments

  • you already answered your own questions

    situation & math all checks out , your decision is a good one

    just keep renting but invest more to beat inflation (3% is not enough after tax)

  • Can’t advise about your real estate/ financial plan question.

    Just letting you know that the original connotation of “The Lucky Country” was in fact suggesting that it is not a lucky place to be at all! The book which bears the name was written in 1964 and it certainly wasn’t the paradise that was portrayed by the title for many social groups - indigenous Australians, migrants, refugees, women, the poor - and that was the point of the book. Australia is not the utopian socialist workers paradise that was envisioned at the turn of the 19th century. It never has been. “The Lucky Country” was appropriated and used to persuade us we had it good. Sure, indeed we do have it good, much better than good, for some. But ask those same groups and I’d suggest that not a great deal has changed, to a large extent.

    • history aside, being 27 yrs of recession free is lucky

      but i have a feeling the luck is about to run out very soon and the music already stopped

    • Just letting you know that the original connotation of “The Lucky Country” was in fact suggesting that it is not a lucky place to be at all!

      That's actually incorrect. The author at the time was more criticizing the laziness and complacence of the Australian population, and that the country was surviving on being "lucky" as opposed to being hardworking or intelligent. Still negative, but utterly divorced from what you're saying it meant.

      And honestly, this is the same old spiel every. single. time. Don't you get tired?

      indigenous Australians, migrants, refugees, women, the poor

      Yeah - ask how these groups would do in any third-world country, or even a country like the US. Then come back and tell me they're not lucky to be in Australia.

  • My god…why did you leave Eastern Europe?

    I would give anything to live there.

    The women are amongst the best looking in the world, Czech, Hungarian, Polish, Austrian, Slovakian, all incredible.

    I almost cried when I had to come back to Perth.

  • Welcome to Australia.

    Tl,Dr?

  • Seems like you have it all worked out. I dare say - you probably have your life more sorted than most people here, so we should probably be asking you for advice instead of the other way around. Already saved 20% down on a $1+mil ppty in 5 years? Partner that gets up and makes you breakfast? 15 minute to work by bike? You're living the life.

    • It was honestly TLDR for me but your summary paints a idyllic life.

      Financial progress, close proximity to work and clearly defined domestic roles.

      • It's because of his work.
        He has access to steady income, and income that is high. Just do the math:

        His rent costs $300 weekly (which probably hasn't changed over the 5 years).
        Other expenses would at least come to $50 a week, and say $100 for food.
        So if he lived frugal and was "slaving" it for 5 years, his expenses would still be $450 wk.
        Or $22,000 - $25,000 a year.
        And say he has saved up $260,000 in cash. That means $50,000 - $55,000 savings a year.
        In total, his yearly salary comes to $75,000 - $85,000 a year…. or possibly more!

        That puts him central to the "Average" Australian worker.
        But that's a horribly skewed figure/representation, as the actual Median Australian worker brings home around $50,000.
        So he's making really good money, and this opens new doors and opportunities for him.
        He's "lucky" because of his career, and the land to seize the opportunity for it.
        I'm sure they're looking for Engineering Consultants in Egypt where they're offering $20,000 a year salary.

        OP just has the wisdom/brains to not go buying High Yield Investments to show off to his InstaFriends, and for that, he has my respect.

  • Eastern Europe is so beautiful.

    I struggle with language, though. I'd probably settle down in Greece or Macedonia. I live in Sydney but it feels like just another Asian city (Mumbai, HK, Singapore, Jakarta etc.). I only live here because of family.

  • I think the fact you are here in Australia rather than your home country says a lot about why this is a 'lucky country' despite all your listed shortcomings

  • Why not go back to your home country now if it is so good? Oh thats right you wouldn't earn nearly as much money there plus miss out on the age pension. No wonder things are so much cheaper than here. Sounds like you want the best of both worlds.

  •  

    Ok. Well I can speak from the point of view of someone who did exactly that.

    1. No reason this might not go up, but at the moment the max of water+rates+body corp is ~5700 / year. Not $7,000 - $8,000 (for a place without a pool / lift etc). Though it's good to take this into account since not many people do.
    2. Yeah, you'll deal a lot less with real estate agents if you buy than if you rent, typically. I don't think this is relevant. If you do buy it pays to know all about how a body corporate works etc and checkout your potential one carefully.
    3. Absolutely, I bought in 2009, and if anything my unit value has decreased at least slightly.
    4. 15 years is a long horizon, if you actually knew you were going to stay in a property for that long, the tax advantages would probably become worth it.

    Plus that buy will convert my asset into liability putting me in uncomfortable feel if I loose a job or become terminally ill.

    Yeah, no. If you do this right this is actually an advantage if you lose your job. You'll find it much harder to get any benefits if you have savings and you lose your job, meanwhile if you have equity instead, you could obtain benefits, while keeping your savings. And then if you need the money and you have a heap of equity banks will be all too happy to give it to you at a low interest rate. The real thing that buys security is keeping your expenses / loan low. Eg, rent somewhere cheap, buy only the bare minimum sized place you can etc. Renting somewhere expensive or buying a luxury home when you're stretching to do it puts you in a vulnerable position.

    Here are the reasons I wouldn't buy a home:
    - If you aren't very sure you're going to live in it for AT LEAST 5 years, realistically 10 years is the approx break even. 15 Years is where it becomes a bigger advantage. Buying and selling houses in Australia is expensive (stamp duty / real estate agent fees) And the tax system favours holding for the long long term.
    - If you want to live somewhere that is realistically beyond your budget (you probably shouldn't but if you do you're better off not carrying the extra debt for it, since it's easier to move somewhere cheaper later).

    And here is why I would:
    - There is no guarantee that your property price will not go down, but the intrinsic value of a place to live for you, will always exist. Extra money you put into an offset has an 'effective' rate of return of whatever you mortgage rate is. TAX FREE.
    - You will be losing money to inflation if you put it in the bank and then you pay more in tax.
    - Returns over 15+ years in the stock market will probably be higher, but there is short term risk in exchange. There's also capital gains tax which you don't pay on your home.
    - It's excluded wholly or partially from most assets tests.
    - Pretty much no one can make you move, if you've paid down a fair % of it, your living costs end up being a lot lower than someone renting, you can sustain yourself on a lower income if required.

    But myself, honestly for the close to work lifestyle, I'll take the property that hasn't risen in value vs one an hour or more's drive from work that has.

    If you spend a lot less than you earn, you can be financially secure no matter what you choose.

  • You can't expect to get the wage of a high living expense country while having the expenses of a low living expense country. How much would you earn back in your home country? Probably like $10,000?

  • For a long time I thought it would be nice to find a place that is as cheap to live as parts of Eastern Europe or Asia but with a comparable income to Australia. Realistically, the only way to achieve this right now is to work remotely in more affordable countries but charge the same rates.

    But every time I travel to one of these countries I'm reminded why it's not for me. I hate homogeneous countries. I hate standing out in a crowd. I hate being treated differently because of it. I don't want to look different to everyone else and I don't want everyone else to look like me. I don't want to be hassled. I don't want to realise I'm actually unwelcome and I'll never truly be one of "them".

    But despite all of my demands for a culture without a dominant look or identity, I'm still a bit intolerant myself. As bad as it sounds, I want to joke around in English at my natural pace since I get bored explaining my jokes and being polite. I don't remember where I was going with this but all I'll say is we're lucky to be born at the right place at the right time. In 100 years maybe people we'll reminisce of the days you could loaf around on OzBargain, talking about the strange concepts of "owning property", buying batteries and scoring free Cheeseburgers on National Cheeseburger day ("What was beef?").

  • one reason it's the lucky country is the earning potential here.

  • I bought my first house at 27; having rented from the age of 19 - 27. Personally, getting into the property ladder was the best thing I ever did. But then house properties were lower and inflation was high so, even though interest rates were roughly 20%, inflation and the subsequent wage increases allowed me to knock off my house loan in a short time - similar when we sold/bought to a better place. We now live in inner Fitzroy and love it, and our mortgage was paid off in 2001.

    The current situation is a bit different - housing prices are high and interest rates are low. Financially, I'm not sure what makes the most sense.

    When we rented we didn't have control over the property we lived in, we couldn't do renovations, we had to get out of one place when the landlord wanted the property back, etc. That said, I have no complaints about the landlords per se, they were generally good. Particularly, we had no trouble with being allowed to keep our cats.

    To me, the issue comes down to whether you are comfortable with the uncertainty of how your landlord(s) will treat you with renting or the uncertainty of housing prices with owning.