$143,000 p.a. to service sydney mortgage

[Waverlybay]

Hi

Sydney morning herald ran an article recently (last couple of months) that said that a sydney family needs to gross around $143,000 p.a to service a mortgage (assuming property purchased at median). Adelaide was around $78,000 p.a ..cant remember the other states...

Does anyone have a link to this article? much appreciated

thanks

WB

 

[Dazz]

a sydney family needs to gross around $143,000 p.a to service a mortgage (assuming property purchased at median).

There is a mass of assumptions surrounding that statement....including tax rates, other activities the taxpayer has going on in the background, and also their level of discretionary private spending.....do they eat out every night in fancy restaurants or do they eat baked beans every night....what type of cars and other hire purchase straws do they have on their camel's back ?? Way too many variables to be meaningful and specific.

What I do know is that figure you quoted of 143K p.a. could service a hell of a lot more than that. If you bought a $ 20mm office block renting for $ 1.46mm net p.a, and the bank charged you 8% for borrowing all of the funds to buy it, then that 143K p.a. would also service that debt. That's what was running through my mind when I read the above. Different frame of reference I suppose. Anyway....

Dunno about finding a link to the article - I'm absolutely hopeless at doing that sort of thing.

 

[jrc]

http://www.theaustralian.news.com.au/story/0,20867,20883344-25658,00.html

http://www.theage.com.au/news/business/the-great-australian-struggle/2007/03/08/1173166895673.html

http://www.bestbrokers.com.au/news/117/

A few related links

 

[Waverlybay]

Hi - thanks for the articles JRC..

The report was commissioned by the labor party so some biased expected.. Yet, servicing a 400k plus mortgage to buy a PPOR on pre tax income of $143,000 is not as straightforward as it looks. The aussie dream can very quickly become an aussie nightmare !

WB

 

[The Y-man]

The caculcation involves p&i for starters, so some of that "cost" is actually part of your retained capital. If you borrowed $400k on interest only (on on longer terms), it'd be $28,000 or thereabouts? Would have thought a pretax combined income of $100k would get you through pretty comfortably......

At the end of the day though, are people living beyond their means?

Cheers,

The Y-man

 

[alexlee]

The stats can be massaged to do whatever you want. e.g. calculate it with P&I, use the standard variable rate of 8% (which no one pays), do it based on an average HOUSE (since they're talking a family) which would mean a more expensive property compared to if you included units. Inflate living expenses with lots of petrol, etc.
Alex

 

[Waverlybay]

I gave those stats are very good oily backrub ...

and i reckon the reality is very simple in sydney:

A 400k loan to purchase a house at the median of $500k ish - - -- is damn hard to service...

irrespective of whether the loan is interest only...
irrespective of whether the loan is LESS than a cracker variable rate of 7.47% ...
irrespective of whether offsets are used ..
irrespective of what the prices are doing at the petrol stations

A household raking in pretax 100k (let alone $143k) combined will struggle in sydney. The tax alone on a single earner on 143k is around 51k. So that 30k interest only bill doesnt look that cheap on an after tax basis (and its all dead money !!)

The other option is to buy below median - hmmm - but what does that get you? Small little houses in the inner west like croydon park start at 600k. i guess there is always the outer west ... or an apartment .. but these are not always feasible options.

With sydney flat/falling -- better to bite the bullet and rent in sydney = and borrow the 400k for some good QLD investement property. The cap gain plus rising rents in the next few years on those qld ips will then give you enough capital to plough into a sydney house - maybe even above the median

Cheers
WB

 

[alexlee]

Yeah, but it's reality. If they can't afford, they don't live in it. SOMEONE will be able to afford. Or the price falls. Just the market working.
Alex