Buying a House for Living - Melbourne - Advice Needed

I moved to Melbourne couple of years back from India. I am still in two minds about settling here or going back in few years, but at the same time, I am collecting information on investments and properties here in Australia.

I have about $70k in savings here and many of my colleagues here have jumped in to the property bandwagon and have bought land parcels or home somewhere about 1 or 1.5 hr train travel from Melbourne CBD. They are advising me to buy one too.

At the moment I haven’t decided but I thought of simply collecting information. I don’t want to rush and give-in to peer pressure. I see a recommendation that it is best to have 20% down payment for the property. I am looking for house with 3 bedroom and 2 bathroom or a piece of land where I can construct it later.

The property would be used for living if at all I buy it, and I am currently paying rent of about $2k per month. I am not interested in investment property.

I do have some savings and have finished paying mortgage on couple of apartments in India so no debt at the moment. My age is 38.

Any advise is appreciated. I did search this forum and had a look at several threads, but I thought it will be better if I state my case specifically and seek advise. Should I purchase with the $70k now or wait till I accumulate more, say about 150k or 200k?

Thanks in advance!

Comments

  • +4 votes

    My only advice is from your friend's perspective- it's human nature to recommend that people do what you have done as it psychologically validates your actions.

  • +3 votes

    Your deposit is barely 10% on property in the rip off capital of Melbourne.

    •  

      Yes. I know it’s very less. But I’ve been told that a 5% deposit is sufficient for buying a property. I am just starting to gather information so I am not very sure if it makes sense to jump in with what is available in order to not miss any good available property in a reasonable location.

      •  

        Perhaps speak to a broker first. At the end of the day, it's better to be paying off something of your own, than paying someone else's mortgage and getting nothing at the end of it.

        • +1 vote

          True when property values are going up. False when property values are going down.

          •  

            @knasty: Depends how much it goes down I suppose. I'm pretty happy that I won't be using all my money in retirement to pay for someone else's house. Your priorities may vary.

            •  

              @brendanm: I'm not disagreeing but, even in the era of unstoppable property price growth, there are still a lot of stories of people selling properties for a loss, sometimes very significant losses. In those cases you would have been much better off renting that property than owning it. There are many occasions when renting makes a lot of sense. Forever? Maybe not but, especially in cases like OPs where a small negative price drop would wipe out your entire equity, it's worth considering.

              • +3 votes

                @knasty: Apartments, yes, because they are crap.

                House with land that you actually own, in them long term, will not generally lose value, and even if it does, you still own it at the end, and you aren't paying for it after the 25 years or so of mortgage. Rent, you are paying that forever.

                Even if my house ends up being worth $0, I am still better off than someone who must continue paying rent for the rest of their life.

  • +2 votes

    I am changing my name to "Advice".

    In all seriousness, don't do what your mates tell you to do. Do what you want to do.

    •  

      exactly

    • +1 vote

      Haha, I scroll down and the first person to comment on this is you 😆

      •  

        I saw the advise. And I died.
        Then I commented 🤣

  •  

    Want buy don’t scare. Scare don’t buy. None of us here are high-rise Harry to tell you what’s your best decision.

  •  

    Buy in the affordable and rising Brisbane market and rent in Melbourne close to work taking advantage of cheap rentals. Rentvest and hop on the property ladder now while also saving on the travel time to work.

    This is what quite a few people I know in Sydney are doing as they are priced out of the housing market there and do not want to waste their savings on buying units. Cheers.

  •  

    You can buy 500k home in the outer suburbs (south east). Your deposit may be low, but very doable - I am also ethnic and many similar people buy in the other suburbs. I love outer south east Melbourne, but I've lived here my whole life - so I may be biased.

  •  

    Keep saving. Also 2k/month in rent is quite high for a single person.

    •  

      I live with family.

      •  

        What is your rate of savings? Is it a dual income family? Alot of factors to assess whether its better to wait or just enter the market.

  •  

    They are advising me to buy one too.

    Don't take financial advice from family or friends. They just want to pump up the price for their bag.

  •  

    Things to consider:
    - are you looking for the first step on the ladder or something more long term?
    - where do you want to live?
    - how secure do you see your employment?
    - do a lot of background on flood plains, bushfires, previous usage etc.
    - what ammenities like schools, train stations, bus lines, sports facilities, etc are in the areas you are looking at?
    - what are commute times likely to be?

    Personally I would go a house, preferably, detached rather than an apartment. You have a lot more control of your environment.

    Generally, the further put you are from the CBD the less the house price rises. If I was looking that far out I would, also, be seeing what is available in places like Geelong and Ballarat. They are, already, established.

    Best of luck.

  •  

    It mainly depends on your objectives. Do you want to own a piece of land that you can call home and get emotionally attach to it? OR do you want to get advantage of rising housing market?

    I will firstly speak purely from financial aspect. Owning a house is not just one time cost. There will be continuing irrecoverable costs incurred in taxes, insurance and maintenance/interest expenses. A popular consensus is 5% of the house price will be your annual irrecoverable expense. Based on this:

    1. Owning a house with a price-tag of 480k means an irrecoverable monthly cost of 2000 per month.

    2. Owning a house with a price-tag of 600k means an irrecoverable monthly cost of 2500 per month.

    You can change this number (5%) to suit your conditions. But keep in mind that as your house grows old, interest will go down but maintenance/renovation costs will increase.

    But if you really want to be able to settle long term and be able to make changes to your abode, none of the financial aspects mean anything. Also Australian tax system is skewed to advantage home ownership. Unlike any other type of investment, your primary place of residence is not counted in wealth-test for centerlink benefits. You also do not pay Capital Gains Tax on sale of your PPOR.

    You did not mention if you are a resident/citizen and that if you have children. Those aspects might require other considerations as well.