Confidence in Australian Housing Market

[wylie]

Lots of people at work, some earning lots more money than me are so surprised that we've managed to buy two properties and they are still renting. The difference is that they've just sat back and dismissed property as too expensive now, whereas we've spent every moment of our time doing research/DD and have actually taken active steps to get into property.

Fantastic post. Well done to you and your girlfriend. My son has just bought his first place, on a low salary. Apparently he and you and your girlfriend will not be able to manage the payments .

It is a shame that some of the D&G brigade are so entrenched in their "glass half empty" whining that they fail to see that it CAN be done. And even if the market tanks, my son's mortgage payment is only a little over current market rent, and as rents rise, his payments do not.

I really cannot see how he will ever regret buying now. Beebop and some others do not agree, but that is OK. They will tell you in ten years that you were really, really lucky that you got in when prices were cheap .

Anyway, starter, great post and well done.

 

[Propertunity]

Two words Dual. Income.

Two words:

• Victim mentality
• Poor mindset
• Loser attitude
• I can't
• Do nothing

.....................take your pick

 

[wylie]

Two words:

• Victim mentality
• Poor mindset
• Loser attitude
• I can't
• Do nothing

.....................take your pick

You beat me to it LOL. I have a few others too....

 

[starter]

Two words Dual. Income.

Dual income now, wasn't when we got the first place.

I would have been able to buy the first property by myself btw, just included the GF as well as she was also looking to invest at the time.

 

[Beebop]

Two words:

• Victim mentality
• Poor mindset
• Loser attitude
• I can't
• Do nothing

.....................take your pick

Reality ? i.e cannot afford to borrow 350k ? Not sure what sort of grad program he was on.

Dual income now, wasn't when we got the first place.

I would have been able to buy the first property by myself btw, just included the GF as well as she was also looking to invest at the time.

Coulda, but didn't.

Also 3 bedders in the ACT are not 350k.

 

[starter]

Reality ? i.e cannot afford to borrow 350k ? Not sure what sort of grad program he was on.

You need a better mortgage broker by the sound of things.

Coulda, but didn't.

How is that relevant?
You're arguing that it's impossible to get a property. I told you that my personal experience was that it was entirely possible.

Also 3 bedders in the ACT are not 350k.

Why do you need a 3 bedder? 3 bedders in Melbourne aren't 350k either.

 

[Luv2Travel]

Two words Dual. Income.

I believe Wylie's son is on an average (perhaps even low?) income and just bought his first home. I have just bought my third property and I'm on a single income < $100K.

Propertunity - Great post!

Starter - Congratulations, great story - you'll go far! Unlike some of the other attitudes on this thread.

 

[Ed Barton]

beebop. let it go, it's over.

it's not over till no one answers beebop and he's talking to himself. this thread's got a few more pages in it, so i'm getting the popcorn and deck chair.

 

[.toe]

starter well done and thanks for sharing your story.

Not sure what all the whinging is about, I'm a gen y and have had no problem getting into the market. It's all about taking small steps, you can't jump to your ideal house straight on your grad salarly. Also if you can't afford it, team up with someone, buy it with your significant other, sibling, parents etc.

My story:
Melbournian, started my grad job in March 09 on an average grad wage. Travelled frequently while at uni so my savings weren't huge, about 6k worth of shares and 10k worth of cash. Was living with my parents at the time, and being good with my money/savings was able to put away 70% of my take home wage. My gf was still at uni in her final year, she was lucky enough to be on a scholarship was had a bit of savings.

Did lots of research, was flexible on suburbs as long as they had shown good growth previously. Didn't follow the trend or panicked when prices were skyrocketing. Managed to buy a 2 bedder in Prahran for 350k (by our valuation it was worth 380k, but the place wasn't in pristine condition and advertised poorly). Put some floorboards in, got it revalued early this year at 420k.

Used the equity and then saved some more to buy our first IP (my gf now also working fulltime), a 2 bed house also in Prahran. We also did months of research before we bought. We found this place that seemed to have slipped through the cracks, also advertised poorly and had been on the market for a while (only 1 photo up on Domain and no floorplan, vendor wanted to save costs). From original asking price of 720k in May, we bought it for 660k with 90 days settlement (could have been even cheaper but there was another buyer who stumbled across it at the same time we did). It'll be negatively gear initially (as most Melbourne properties in the inner east/south east are), but we've left a good buffer so servicing is not an issue.

Lots of people at work, some earning lots more money than me are so surprised that we've managed to buy two properties and they are still renting. The difference is that they've just sat back and dismissed property as too expensive now, whereas we've spent every moment of our time doing research/DD and have actually taken active steps to get into property.

 

[Propertunity]

Propertunity - Great post!

It gives me no pleasure.

Reality ? i.e cannot afford to borrow 350k ?

Beebop, you've already been advised by many here that:
1. You don't need to borrow $350K
2. You can start small and work your way up the property ladder
3. You need to sacrifice some of your lifestyle choices to save a deposit
and so on........

Others have demonstrated how they've done it. You can if you choose to.....you just choose not to - fine, that's your choice.

Just don't then say it is not your own fault and attempt to blameshift onto "greedy investors" or what ever other excuse pops into that head of yours.

You must have some stickability in ya. You are still here coping abuse like a trooper. Pity you did not direct your talents to something that actually achieves for your good self.

Cheers for now.

 

[.toe]

BTW Beebop "% of Mortgage Repayments to Total Household Income" in starters chosen suburb of Prahran is just 20%. Just thought you'd like to know.

Oh and Praharan buyers paid 1.45% more this quarter than last, so presumably new buyers can afford to pay extra.

I guess you could argue that the banks may have failed to look at their debt servicing capability. Yeah you might get me on that one.

 

[starter]

Thanks to all for the encouraging words. I'm very happy with me progress so far but having just found this forum I've realised how much I need to learn.

Just wanted to comment on this quickly

Exactly. Baby steps and some flexibility, although you have managed to buy into an oustanding locality. Well done

I find the Melbourne market has some trends that if you can pick up on can be very advantageous. For the apartment, I was looking mostly in Richmond as I thought that it would be more affordable than other inner city suburbs. It seemed like everyone else had that idea though, and the prices at auctions reflected this. As soon as I realised this I switched my attention to other suburbs that I originally thought were pricier than Richmond, to my surprised these suburbs were actually more affordable and I was able to find a good value place to buy.

Likewise when I was looking for a house, the original idea was to get an unrenovated place as that would be cheaper. However, I found that these places were actually quite sought after, and in some instances even paying a premium compared to the renovated places...weird. We ended up buying a place that is good to go without any major works (but not brand spanking new) as it was what was the best value around.

My theory as to why this is the case is that the majority of property buyers don't do thorough research but rely on what they read in the newspapers and hear on the news. If they hear that Richmond is good value then they'll go and bid on places there, never mind that it's actually quite expensive now because everyone is doing the same thing. Likewise it's a good idea to buy a place and fix it up, even if it actually works out more expensive than a place already done up.

 

[BayView]

Negative gearing should be removed and land tax and capital gains tax drastically increased. Property investors have done ENORMOUS damage to this country which could take decades to repair.

This is a worn out statement; no doubt from a younger renter who can't buy, I'd say.

We've all been that person by the way.

You make it sound like it all magically happened just now that investors hit the markets and ruined everything...

People have been owning property and renting it out for centuries.

What you don't seem to understand is that if there was no neg gearing, and if you raised Land Taxes and cap gains tax then investors would leave the property market.

The result would be far less properties for rent available, but the amount of renters doesn't change.

The decrease in supply will force rents up even higher.

The Gubbmint understands this - this is why they introduced all the perks for investors - to encourage them to fill the need for housing.

You are wasting you time bleating at us. I will happily keep on taking my incentives and sleep very well at night.

Go and whine to Julia and see how you go.

The real culprits in the rising cost of housing is the Gubbmint themselves - look at just how much money is part and parcel of every housing and building transaction.

 

[Beebop]

BTW Beebop "% of Mortgage Repayments to Total Household Income" in starters chosen suburb of Prahran is just 20%. Just thought you'd like to know.

Oh and Praharan buyers paid 1.45% more this quarter than last, so presumably new buyers can afford to pay extra.

I guess you could argue that the banks may have failed to look at their debt servicing capability. Yeah you might get me on that one.

They say illogical people have difficulty understanding the concept of time.

What % of his income does he pay on 350k a year mortgage ?

 

[Beebop]

This is a worn out statement; no doubt from a younger renter who can't buy, I'd say.

We've all been that person by the way.

You make it sound like it all magically happened just now that investors hit the markets and ruined everything...

People have been owning property and renting it out for centuries.

What you don't seem to understand is that if there was no neg gearing, and if you raised Land Taxes and cap gains tax then investors would leave the property market.

The result would be far less properties for rent available, but the amount of renters doesn't change.

The decrease in supply will force rents up even higher.

The Gubbmint understands this - this is why they introduced all the perks for investors - to encourage them to fill the need for housing.

You are wasting you time bleating at us. I will happily keep on taking my incentives and sleep very well at night.

Go and whine to Julia and see how you go.

The real culprits in the rising cost of housing is the Gubbmint themselves - look at just how much money is part and parcel of every housing and building transaction.

Tax concessions have little impact on encouraging construction. Most negative geared properties are existing dwellings, not newly built houses. If these concessions were only few newly constructed dwellings I'd agree with you. These facts, make your argument nonsense.

 

[bluestorm]

The majority of negative geared properties are not newly constructed dwellings.

People would still be in strife, only there would be an end of the tunnel as housing without negative gearing would be affordable. As it stands, you buy a house you can't afford and will never pay off because of the promise of capital gains which will be paid by the next sucker in line.

Negative gearing gives investors huge tax breaks so they can continue to pay ridiculous prices.

A house provides a fine return at 5% CGs per year combined with a rent increase offset of 5% per year. People are just being greedy and taking uneccesary risks for short term gains, which always leads to trouble. Negative gearing encourages this behaviour.

I can assure you the without negative gearing your rent would be going up to cover costs. What you don't realise is that negative gearing is effectively a way for the government to subsidise your rent, and make it cheaper, rather than the government having to build more public housing.

If you do not believe me that your rent would rise a lot, then perhaps you can check out rents in other world cities. Australia rents are VERY cheap in comparison.

It also amuses me to hear all the people whinge about negative gearing as "them" having to pay "their" tax to support greedy investors. In our household, we pay a combined tax bill of maybe $60-70K/year. Which is probably more than you earn. So even with negative gearing in place, most investors still help support all the bludgers in society, who pay little, to no tax at all.

So stop your whining about negative gearing. When investors don't pay extra tax on the gains made from property, we'll be happy not to receive tax deductions on the losses made, subsidising your "whow is me" lazy attitude.

So please Beebop, remove negative gearing. The end goal of most property investors is to be positively geared. Removing negative gearing, and the resulting increase in rents would be a god send for investors to achieve this much quicker ;-)). Positively geared property from Day 1. Ain't that a utopia Somersofters. ;-)

 

[.toe]

They say illogical people have difficulty understanding the concept of time.

What % of his income does he pay on 350k a year mortgage ?

I don't know and I fail to see the relevance. The point here is the other people that are buying in that suburb can pay more, and are paying more, so they are not whittling away starter's investment by lowering prices. The average is only paying 20% of income and recent buyers are happily paying more than less recent buyers, with their banks consent no doubt.

Tax concessions have little impact on encouraging construction. Most negative geared properties are existing dwellings, not newly built houses. If these concessions were only few newly constructed dwellings I'd agree with you. These facts, make your argument nonsense.

On the contrary, tax concessions are specifically designed to enchourage construction, how exactly do you think depreciation works? New construction attracts the largest concessions.

 

[BayView]

Tax concessions have little impact on encouraging construction. Most negative geared properties are existing dwellings, not newly built houses. If these concessions were only few newly constructed dwellings I'd agree with you. These facts, make your argument nonsense.

I added building and existing into the one post to illustrate the Gubbmint fees.

Whether they are neg geared or not, the fees are still there for both types of dwellings.

With a newly constructed dwelling, there is stamp duty on the land, and GST on the building and other associated costs of the purchase such as conveyancing etc.

Last year, all State Gubbmints respectively raked in stamp duty in the Billions from property transcactions. I think Vic was something of the order of $14bill? or was it NSW? whatever.

I'd love to know what the GST haul was.

In our current building of our next PPoR we are being slugged almost $100k in GST. Admittedly ours isn't yer AV Jennings "Edward Scissorhands" box out in Whittlesea, but you get my point.

That doesn't include what we've paid in GST for the house plans, engineering plans, soil test, valuation fees, warranty insurance and so on. There is GST on every bloody thing. Even the portable toilet hire for the site.

 

[lizzie]

My theory as to why this is the case is that the majority of property buyers don't do thorough research but rely on what they read in the newspapers and hear on the news.

very astute observation in regards to the direction this thread is taking. and unfortunately true.

 

[Beebop]

I don't know and I fail to see the relevance. The point here is the other people that are buying in that suburb can pay more, and are paying more, so they are not whittling away starter's investment by lowering prices. The average is only paying 20% of income and recent buyers are happily paying more than less recent buyers, with their banks consent no doubt.



On the contrary, tax concessions are specifically designed to enchourage construction, how exactly do you think depreciation works? New construction attracts the largest concessions.

No you misunderstand. For that to be the case their incomes would be too huge to be feasible. For example, a 350k loan will cost you about 1350 per fortnight. For that to be 20% of your income, you must be earning five times that amount after tax. Or an income of $280,000. The point is that to buy a home you are paying much more than the historic figures you quoted.

Existing owners are paying less because they bought in at a cheaper price. Making the figure useless for the purpose of ' can prices rise if people cannot continue to pay them ' because a home owner will always be paying todays asking price, not 10 years ago asking price.

I also seriously question how a grad could service a 350k loan without depending on having a boarder pay $200 per week rent or so, which is a very dangerous assumption. You should make sure you can comfortably afford the payments without one, because I'm not sure how many people would be willing to rent a room in a small 2 bedder with just one other male. Much less an owner.

I