Hello everyone
Just wanting some opinions.
I am in the process of submitting my home loan application (first home buyer) and had a decent look around looking for a property that I like within my budget.
Do you think it's the right time to buy? All the banks have predicted continuous decline for another 2 years and our Government is changing soon….
Cheers
What he said.
It's not just the Aussie housing market that's in trouble. There are lots of global indicators predicting trouble ahead. So if you don't 'have' to buy a house then hold off until this time next year and see how things are going. Still a lot of fongo to come and the price of gold is still rising.
Renting at the moment and parents are back home in NZ sigh. Splashing money for rent each month is the main reason why I decided to look around for property but it does make me nervous…
Is rent more or less than interest would be?
Renting is actually viable option right now.
Let's think of it this way.
To rent $1,000,000 property costs about $650 per week.
If you have $200,000 deposit, this can be earning $100 per week in interest.
You use deposit and take up the loan for $800,000. Interest on such a loan would be $550 per week. Yeah, it's lower than rent but you are missing out on interest income from your deposit which has been used to purchase house.
As you can see, either way you will be splashing the same amount of money either on rent or interest.
Yup. Also owning a property is not free - costs of ownership are more than just interest: council rates, water rates, body corp (if you own a unit), and general maintenance which adds up.
I've no idea where the notion that owning always > renting, but investments other than property exist too.
The interest income on $200,000 would be taxable.
You seem to have ignored the value of the asset-the property.
Property nearly always increases in value over time.
@[Deactivated]: Except if the value drops as mine's been doing for well over a decade.
The financial world seems shaky longterm. Maybe it's the constant, seemingly fabricated turmoil.
have a read of this thread
https://www.reddit.com/r/AusFinance/
very helpful
My personal opinion is it will slide until 2020
Crystal ball crystal ball
Mirror mirror on the wall
Will I be rich, will I be tall?
Has the housing market more to fall?
Wait 12 months and you shall know it all
Should I wait or should I buy?
No one knows, so why try?
Buy now for buyer's remorse
Buy later, remorse is still yours
Weighing up the same tbh, in a 2br unit we own but need to go somewhere bigger and wondering if we sell and buy bigger or simply rent for a while
That's a different situation. Movements in housing prices affect those outside the market a lot more than those already in it.
If prices fall, they will fall for your existing property as well as the one you want to buy.
But the factors for deciding whether:
or simply rent for a while
Would be the same. Buy a second property, or rent a second property? Same balancing of "costs of ownership vs costs of renting".
Already owning a property can hedge some of the risk, but not entirely.
Also depends on where you wanna buy, and how much your rent is currently worth. eg. $2000 in rent per month is equivalent to repayments of almost $400k home loan.
To be fair, $2,000 a month will in a lot of places get you a much nicer place than you can buy for $400k.
~$500k even…!
(Assuming 20% deposit of $100k, with $400k mortgage, also not taking into account stamp duty or any other costs)
Thank you for outlining your assumptions, I have built them into my model.
Thanks for the replies everyone. I did place an offer for a property that I liked. 5% below the lower margin of the price range. The vendor denied it. But anyways after reading the comments I decided to save up a bit more anyway.
Renting is always cheaper and when your needs change, its much cheaper to move - maybe a thousand dollars of overlapping rent vs around $50k of stamp duty and marketing costs. I assume you are young and have yet to go through getting together with a partner, having a kid, then another, then the dog, and now the kids want their own room, and then whoops its divorce time and then the kids need more space as they grow and then less space as they are now never home and finally they move on. Its much more efficient to grow and reduce your home as your needs change. No point buying a 2 bedder now or a 4 bedder in 10 years time. You will find in 5 years its not really suiting your needs anymore.
Invest your money so you can buy one day and enjoy the flexibility and cost savings from renting. As your investment grows, it pays interest/dividends that will offset and rent plus enjoy capital gains not dissimilar to property over time.
I liked as whoops it's divorce time.
I'm definitely renting until my divorce is settled - now to find a woman to be my wife who will tolerate my strategy.
Just get over FOMO……..
Anyone who can predict the future is already a multi-millionaire.
Given nobody here is a multi its the wrong place to be asking this question.
Even the so called expert economists get it wrong 80% of the time.
What should happen and what does happen doesnt make sense.
This is because emotional factors come into play as well and economists dont have an equation that factors in emotions.
However i can offer the following guidelines to allow you to decide if the property market or indeed any property is good buying.
With all investments there is always a FAIR VALUE equation.
With property the FAIR VALUE EQUATION is as follows:
When the price of property is the same as the weekly rent (after adding the 000s) its FAIR VALUE.
This co-incidentally equates to a 5% gross return.
By example a property renting for $500 per week is fair value at $500,000
(NB: The long term average gross return in Sydney is actually closer to 6%)
If the rent is MORE than the price then its undervalued.
If the rent is LESS than the price then its overvalued.
So instead of focusing on what the future might bring (which is impossible) focus on where the market sits in terms of fair value.
Generally markets that are either over or under valued eventually return to fair value over time.
Just remember there are two variables in this equation - RENT and PRICE.
Both move independently of each other.
So in an overvalued market such as we have today it may be a combination of rising rents AND falling prices that achieve the fair value equalibrium.
Unfortunately with property approaching oversupply in Sydney and Melbourne and possibly Brisbane its unlilely we will see rents rise in the immediate future. So watch what house prices do.
The banks' prediction could be right.
Do you think it's the right time to buy?
IMO, its certainly the right time to be seriously looking in the market for the type of property that fits your needs for the medium term (of 5+ years). If you find one that suits and has potential to holds its value well compared to the overall market then make a low offer (like you did) and be prepared to walk away if the offer is not accepted. Eventually, one of your offers will be accepted.
Its the right time because it is a buyers market - you have more choice of property, time to look, select what is best for you and some capacity to negotiate. The reality is there are properties which are not selling so there is no better time. Previously, this type of period lasts 6 to 12 months. This time, it may last longer but it does not stay that way forever. By the time prices rise, competition has already increased.
Buy versus Rent
For me & almost everyone I know, buying your own home is the way to go. The security of having that into the future is a great comfort & financial benefit.
Yes, we are in low inflation, low interest low growth environment but if you buy well over a medium period - you should be OK. If you're not, then the whole country will be having much greater problems.
Yes, a home loan involves large leverage and you need to be pretty sure you will have income to repay into the future and you are happy to live in it. You have to be prepared to live with much less disposable income.
Compared to other investments for Australian tax residents, its the most tax protected investment and its a way of committing to a investment/saving approach for the future.
Buying tips:
Financing: Make sure you have financing sorted out before you proceed. Make any offer conditional on financing (& any other factors such as condition report or anything really - I imagine today you could make an offer with its own cooling off period included of say 5 days attached - an agent may not like it but they are likely to accept it. ). Budget for all the running costs (council rates, electricity, water, general maintenance etc).
Know the market: You have to spend time and see lots of property so you build your own knowledge and opinion of the good & bad features, what sells and doesn't (this is what other buyers think) and what the market pricing is.
Choose Well: Your PPPs. Look at a place several times, visit the location at different times of the day, know the locality and facilities, dont buy new (new depreciates like new cars), dont buy too old (unless you intend to renovate), make sure you can resell it when you want (ie. it will attract other buyers), dont overpay. I won't say don't buy an apartment/unit but do know that a landed property holds better value than other types.
Negotiate: In every property purchase I have been involved in, the first offer has not been successful and we have had to move up. Sometimes not by much, on occasion until its at the limit or above a touch what I think is reasonable. In the end, to make the deal both the buyer and seller have to agree. Expect you may need to make a second offer, but its good practice to make sure its your last.
The big question: Down or Up?
My humble opinion is prices are still going to trend down and we will probably not see rising prices for Melbourne in the next 12 months. After that - maybe flat or minor increases. However, while prices are likely to dip further, I think a purchase now would have a similar value or have increased a little in 3 years or so.
However, for a first home owner that is not the overall factor to consider. You cant pick the absolute market bottom. You are looking for an entry and to buy a suitable property for the medium term.
Solid post - cheers for some insights Timmo
For living in ? The general consensus is that any time is the right time for buying a home to live in long term.
However, if you're currently rent free / staying with parents and saving for a bigger deposit of 20% or more the better, then there is no need to rush.
We are just slipping off the tits of mountain in denial stage. Worst is still to come.