Property Market Advice (Western Sydney)

Lsanerr on 13/03/2019 - 21:33
Last edited 13/03/2019 - 21:35 by 1 other user

Looking for advice/opinions..

Looking to get into the (Western Sydney) property market at the end of this year, bit of background info..

I’m 31, Partner 33.
Both First Home buyers.
Have 120k deposit at present.
I run a small sole trader business, turnover around 130k, 110 pre-tax after business expenses.
Partner employed full time around 60k pre-tax income.

Basically wondering if we should just keep working and putting the money into savings account, I currently have 60k sitting in term deposit which is due to come out around May.

Would I be better off investing this money somewhere? Is it too short term to make a big enough difference? Obviously the risk is higher..

Thanks!

Financial

Comments

  • Quantumcat on 13/03/2019 - 21:42
    +5

    If you are buying to live in, don't worry about short term movements. Anything you "lose" if the prices go down after you buy will be offset in saved rent. And in the long term a bit of up and down will mean nothing. Who cares if you could have saved $10k when in 20 years the property is worth $500k more. If you find something you'd love to live in and fits in with your long term plans re: children and job location, take it. You'll regret missing out on an ideal house you would have loved over saving a bit of money.

    • conservative on 13/03/2019 - 22:59
      -2

      20 years the property is worth $500k more

      In western sydney, good joke. lol

      • brad1-8tsi on 14/03/2019 - 09:58
        +1

        Not outside the realms of probability. Look at how much prices have gone up around Blacktown or the Hills district, etc.

        A $500k house only has to go up 4% per year to double over 20 years doesn't it?

      • HighAndDry on 14/03/2019 - 10:10
        +1

        Despite being generally bullish about the property market in general, I agree with you hear. There's a natural limit to how much prices can increase out west, because:

        1. There's no shortage of land, the moment it becomes cheaper to build new than the asking price of the market, people and developers will build new (and the price of that is still sub-$1mil out west); and

        2. Generally as people get richer, they'll move out of the west, so property prices in the west are effectively capped at being below prices closer to the Sydney CBD (though for houses, this is now over $1mil).

        • HighAndDry on 14/03/2019 - 13:01

          I agree with you hear

          Omg. I'm going to go sit in a corner for a bit.

  • jug123 on 13/03/2019 - 22:04
    +1

    The perfect time for real estate is when its best for you. If its PPOR its a great time to buy as first timer. Prices are subdued, FHOG & with a $120k deposit you prob wont need LMI. Only thing that may hold you back is being a sole trader. I live & invest in Western Syd & would do it if I was in ur shoes

  • Edobear on 13/03/2019 - 22:07

    Also depends how much you would want to purchase for. Maximum would be $600k to avoid LMI but you could potentially go higher with LMI.

    Normal prime lenders such as the big four will also want to ensure your business has been running for over 2 years and that you have 2 years of tax returns to show income.

    Given the short period of time from now till the end of the year, term deposits are safer.

    From a loan aspect, banks are generally happy to see statements from a term deposit, savings, managed investment portfolio etc to use for a pre-approval so it shouldnt affect getting one.

    As always, speak with a broker now to ensure you are ready to purchase at the end of the year as there may be something which needs to be addressed from now till then.

    • sanerr on 13/03/2019 - 22:40

      Should’ve mentioned, looking to spend between 650/700.

      Business has been running nearly 3 years now.

      Have actually been to 2 brokers over last 2 years. One was CommBanks internal lender and one external broker later on, obviously timing was pretty bad and it never panned out but am thankful for that now as it’s saved us money and meant our budget now should net a better property.

      Was more thinking would the 120k or perhaps a portion of it be better off invested somewhere for the next 9 months.. have a holiday planned for November so would be December/January before we were looking to actually purchase a property.

      Thanks for the replies so far!

      • Edobear on 14/03/2019 - 01:48
        +1

        To avoid LMI for a $700k purchase you will need $140k (20% deposit) + $10,490 (stamp duty with First Home Buyers Assistance Scheme) + $2-3k (fees, conveyancer and adjustsments (rates, water etc) totaling approximately 153k.

        Point to note, Commbank internal lender is not a broker as they only offer CBA products but its definitely good to speak to more people.

        In my opinion, given the short time period leaving it in a term deposit will be easier and less to worry about.

        Remember to speak to a broker as soon as you come back from the holiday so you have the pre-approval in place to help with negotiations for the property.

        Good luck and keep up the savings!

  • loropy9 on 13/03/2019 - 23:20

    Your investment pool is too tiny to count significantly in the short term. I’d leave it in term deposit.

  • caramellokoala on 13/03/2019 - 23:30
    +9

    Let’s dispel a few myths right off the bat because the thread it full of uninformed poor advice.

    buy now because rent money is dead money

    Wrong! Renting is only a poor choice when a comparable house mortgage interest + expenses is less than rent. Considering the average loan for Sydney of 600k( not that you can get anything for that price anyway) at around 4% plus expenses of around (3k rates repairs etc) you need to be paying more than 520 a week. This of course doesn’t take into account things like LMI etc which further tips the scales.

    who cares if it’s not for investment.

    So they should ignore investing fundementals on the largest single purchase anyone makes in their life because they aren’t buying it as an investment? Overinflated assets should not be purchase regardless of the motivation. You wait till the asset class bottoms out. It could mean the difference between a 30 year or 25 year mortgage.

    buy now or you will regret it.

    I remember this saying, the local car yard salesman use to spruik it. Funny the housing industry is now using it. Anyway back to the cold hard facts. Sales are plunging at record rates and inventories are rising. Chances are that house will still be there or if it isn’t 3 will be there to replace it if the trends hold.

    • HighAndDry on 14/03/2019 - 10:12
      +1

      Let’s dispel a few myths right off the bat because the thread it full of uninformed poor advice.

      buy now because rent money is dead money

      Wrong!

      (profanity) thank you. Can't count the number of arguments I've had with people here (before the royal commission) that renting is a viable economic alternative to owning.

    • Some Guy on 14/03/2019 - 12:03
      -2

      It's not hard to come up with numbers that show renting can be cheaper than a mortgage. The expression is applicable to those not wanting to rent when they're on the pension. Why do so many FHO move back in with their parents if it's not dead money?

      • HighAndDry on 14/03/2019 - 13:02

        Why do so many FHO move back in with their parents if it's not dead money?f

        Because not-paying-rent is cheaper than paying-rent. (Which isn't relevant to the fact that paying-rent can still be cheaper than paying-mortgage-interest-plus-expenses).

        • Some Guy on 14/03/2019 - 14:11

          I didn't suggest that renting is not cheaper than a mortgage, but the OP would need to make enough by investing the difference to ensure that s/he has housing in the future for his/her growing family. It can be done, there are numerous asset classes that outperform property, but they have more risk and would require tremendous discipline over a long period of time.

  • Candour on 14/03/2019 - 07:24

    better to put money in the super account. invest it in reits if you must. the markets may be falling. property does not defy gravity.

    • lolz112 on 14/03/2019 - 16:45

      I'm sorry but property does not defy gravity? This is as dumb as someone saying that the property prices will always rise. At the moment both market and property prices have fallen in the past year. No one knows what will happen in the future, and there a people who a paid a livelihood to predict what will happen.

  • TheMindsetTraveller on 14/03/2019 - 09:29

    What is your home circumstances - Are you renting? Living with parents?

    That might factor into my opinion. Excluding this information, I would suggest you holding off buying property at the moment. The market is pretty weak across all of Sydney, and even more weaker in outer suburbs - that is anything further than 15kms of the CBD.

    Figures show that investors have deserted the market in the last 36 months which means less demand = price drops, however in the next two months before the Federal election - there will be some artificial increase in demand - because some investors are buying in case Labor gets in and discontinues negative gearing for properties acquired in the future. Existing investment properties will be grandfathered.

    That said, good properties in good locations still do well - proximity to public transport, shops, good schools, hospital, services.

    • sanerr on 14/03/2019 - 10:46

      Currently renting, $430/wk all bills included.
      Wanting to get out of the unit hence the plan for a house.

      Also probably looking up start a family in the next few years so hoping to be settled in and used to life with a mortgage by that point

      • TheMindsetTraveller on 14/03/2019 - 11:45
        +2

        Let's say you borrow $500,000 to buy a property at no more than $620,000.

        At $500,000 you will repay approx. $550 per week on principal and interest.

        Home ownership will mean you have other outgoings, such as repairs and maintenance + council rates. You need to budget a few thousand for these easy - say $100 per month for council and $200 per month for repairs and maintenance.

        Loan repayment 52 x $550, + $1,200 council + $2,400 for R&M = $32,200 for 12 months.

        When you own a home, expect repairs and maintenance. We moved into a fully renovated terrace last year thinking we will not need to do anything to it - and then we ended up spending $12,000 unexpectedly on house repairs and upgrades.

        Now, if you rent, $430 per week = $22,360 for 12 months. You do not pay for council or repairs and maintenance.

        Assuming property prices do not grow - which appears unlikely in the next three years, then renting may be the better option at this stage as you are slightly ahead.

        Now, IF you want to enter the market, consider living in the property for the first six months - and then renting it out and become a "rent-vestor" where you rent elsewhere but you are also an investor. Then you can utilise negative gearing to help; some very rough figures as follows:-

        A home worth $620,000 / loan amount $500,000.

        Income: rent $500 pw / $26,000 pa.

        Expenses: Interest on loan $400 pw - $20,800 pa; council rates $1,200, maintenance $2,400, rental management fees $1,500, capital depreciation $15,000* (you'll need a depreciation report)

        That's $43,500 that cost you owning that "investment" property, whilst you have only generated $26,000 in income. Hence you made a $17,500 loss.

        (Accounting is not my strong point OK?) Lets say your business profits of $110,000 is assigned all to you as an individual - you can deduct $17,500 (negative gearing) off the $110,000. Now, if you can legally bring your taxable income below $87,000, you will be in the lower tax bracket.

        At $87,000 you pay $19,822 in tax.

        At $110,000 you pay $28,322 - that is $8,510 more!

        So owning a home to rent out, you will could potentially be $8,510 better off tax wise

        Now keep renting $430 per week, but you are now renting your property out for $500.00

        So from a practically week to week cash flow perspective, you are better of $70.00 each week - and then at tax time, you pay less tax ;) Yet still own "your home" and one day down the track - move into it.

        As I said - these are very loose calculations.

        • Some Guy on 14/03/2019 - 12:08

          Excellent post! Only problem will be the likely change of government in May.

          • TheMindsetTraveller on 14/03/2019 - 12:33
            +1

            @Some Guy: Well Labor could lose the election on negative gearing - it is a big deal given that over a million people, including myself, currently make use of negative gearing.

            To mitigate the problem, they offer to 'grandfather' investments ie if you have it now, it won't be affected by any future changes. That's why I think in the next two months there might be an artificial increase demand from investors.

            That said, those who utilise negative gearing now - might be upset that they can't utilise it for new properties.

            I can see why they would do it - 1. negative gearing cost a lot of money (the above example, the OP would save $8750!!) and 2. house prices were crazy because every Joe and Jane was an investor and thus pushed prices high. If you are positive geared, you buy another house so you can get back into negative territory. Rinse and repeat till you have 15 homes.

  • bargainfinder on 14/03/2019 - 11:59

    i am also planning to buy in a year or so, have a tiny bit more saving than 120k. Just want to jump in when price hit rock bottom but who could tell when that will be? If i can get a decent house out west for 600k, i ll jump in.

    • emboon on 02/04/2019 - 18:07

      there are actually houses in schofields/riverstone for that amount.Have you tried looking there?

      • bargainfinder on 05/04/2019 - 09:33

        Sorry, i meant Liverpool, casula and Lurnea area. Thats South West right?

        • emboon on 06/04/2019 - 11:02

          I think so. There are townhouses in that area available at that price range albeit not new. May I ask why you are not considering north west? Seems there are more options for new builds and developments in the area.

          • bargainfinder on 06/04/2019 - 11:46

            @emboon: Just closer to family and work site

            • MoonlapseVertigo on 10/04/2019 - 18:16

              @bargainfinder: I’m also in the market for a property in the Liverpool area at the moment. The time is now in my opinion.

              As an example, you can grab a quality property in the Green Valley/Hinchinbrook area for $600k: a good buy considering this will be the new mascot as of 2022

              https://www.realestate.com.au/property-duplex+semi-detached-…

              This was a $700k property 2 years ago and I don’t see it falling much lower, if at all, so the time is now imo.

Login or Join to leave a comment
Login Join