Australia housing markets unaffordable

uglyjohn

not to spam this thread but personally, working fly in fly out it bothers me that whle im at work my only expense is rent on a bed i dont sleep in for weeks at a time. over christmas i worked three weeks( mid nov - early dec) - had one day off - flew home for a month - had one day in perth - flew back to work. i will be back in perth next week and it will be my third night in my bed since the middle of november.

that really bothers me.

ballooba

uglyjohn wrote: »

you might save more money in the short term but you and your housemates are literally paying someone elses morgage for them.

No you are not. Are you familiar with negative gearing? Rent does not cover mortgage interest for the vast majority of properties in places where the vast majority of people want to live. Renters are not, no question about it, paying landlords mortgages. If anyone is, it's the taxpayer which includes home owners and landlords.

uglyjohn wrote: »

If you think of it long term your rent is going to go up while morgage payments wont (im not going to get into the whole interest rate issue here).

It exists, whether you wish to get into it or not. Rents can also go down. Unless you have a crystal ball you do not know how either of these commitments are going to change.

uglyjohn wrote: »

ten years from now mandrake04 will be paying less to repay his morgage than his nextdoor neighbour is paying in rent. He also has capital tied up in the property that could be performing better elsewhere.

Again, unless you have a crystal ball you have no idea. Mandrake's interest may go up, rent may go down.

uglyjohn wrote: »

maybe i am a bit "ireland before the crash" but it just seems so stupid to me to spend years paying so much money and at the end have nothing to show for it. over 5 years myself and my flatmate will pay 100k + to our landloard for a unit that you could probably buy for about 450k. even if i bought the place and in 5 years its worth 20% less than i pay for it i break even against renting.
its like everything in life, you have to put a price on the risk and the various costs of being an owner and see if it makes sense to you.

What about all the mortgage interest you have paid? And the interest you have foregone on the capital you have tied up?

uglyjohn wrote: »

not to spam this thread but personally, working fly in fly out it bothers me that whle im at work my only expense is rent on a bed i dont sleep in for weeks at a time. over christmas i worked three weeks( mid nov - early dec) - had one day off - flew home for a month - had one day in perth - flew back to work. i will be back in perth next week and it will be my third night in my bed since the middle of november.

that really bothers me.

I was in a similar situation and used hotels / hostels / serviced apartments which worked out cheaper but you don't have a home then.

Zambia

Dont get me wrong the 2 are not meant to be taken as like for like. The overall idea is still the same if you are only prepared to buy when financially viable you may never buy.

Granted never buying is an option. For me personnally I would prefer to own my own home.

uglyjohn

Negative gearing as a strategy revolves around the idea that if you reduce your income you pay less tax. every time i've been given and example it has been on a interest only morgage with the assumption that you'll make money reselling it.

as far as im concerned negative gearing is a complete fasle economy. ive run the numbers for different scenarios or income and rental return and capital growth and negative gearing is not something i would go for. i know guys who harp on about it but long term it costs you more. im a firm believer in paying principal and interest and paying it down quickly.

Im not happy with the assumptions it makes, the long term cost of an interest only morgage and the idea that you'd take a pay cut to reduce your tax bill. if my boss offered me lower tax by paying me less i'd tell him where to go.

im aware that interest rates can go up and rents can go down but there is always an elemnt of risk each person has to price into any large purchase like this to find fair value in their mind.

interest on the capital tied up is tiny. 5% per year and then you pay tax on that.

oh and i know people with rental properties in perth who top up morgages by less than $100 a month. i cant generalise about the rest of australia but when i say i am paying someones morgage for him, i mean it!

ballooba

I think you may be missing the point, negative gearing is so prevalent because rent does not cover mortgage interest. It is very rare to find a property that is positively geared. Usually they will have other costs or risks associated that make them unattractive. Demand deposit yields better on a cash basis than property by a serious margin. You're paying to have positive/negative risk of capital appreciation/depreciation.

mandrake04

Not all investment properties are negative from being rented out, plenty have seen successive booms since the late 80's and have plenty of equity in them compared to the loan against them. There's a lot of old Aussie money out there.... we as immigrants are thinking like immigrants and assuming everyone is else is in the same boat. Not the case.

ballooba

mandrake04 wrote: »

Not all investment properties are negative from being rented out, plenty have seen successive booms since the late 80's and have plenty of equity in them compared to the loan against them. There's a lot of old Aussie money out there.... we as immigrants are thinking like immigrants and assuming everyone is else is in the same boat. Not the case.

We're talking about the decision to buy/rent now though. Not the case for someone who has already seen a considerable degree of capital appreciation.

If we were talking about that though, they would be better off on a cash basis to sell and invest elsewhere or put the money on demand deposit. This is a similar situation to businesses who execute sale and leaseback transactions. They however won't do that because they want the positive risk of further capital appreciation in the future, they may or may not recognise the negative risk of capital depreciation.

myhorse

Was going to write an epic on my two experiences buying and selling in Sydneys eastern suburbs but am too tired.
One thing I will say, and my reason to post on this thread, is if buying a strata unit - remember the water and strata fee's involved when doing your calculations. Believe me they bite BIG time.

ballooba

myhorse wrote: »

Was going to write an epic on my two experiences buying and selling in Sydneys eastern suburbs but am too tired.
One thing I will say, and my reason to post on this thread, is if buying a strata unit - remember the water and strata fee's involved when doing your calculations. Believe me they bite BIG time.

Strata companies can be a nightmare, management by committee is always going to be stressful. I'd avoid buying a unit/townhouse like the plague for that reason.