Confidence in Australian Housing Market

[wylie]

what idiot lender would give someone $292k on a wage of $38k............

We have a choice of one of the big 4 and one smaller bank.

whats the kid gunna eat, rice??

Please refer to Lizzie's excellent post. She has the figures pretty spot on. Anyway, he doesn't much care for rice .

no wonder people are in mortgage stress in some areas...

i wouldnt sleep at night knowing my child was in this situation, seriously...

Seriously? I am very happy that he has made the decision to pay a mortgage instead of paying rent, or stay at home. He was most welcome here but he wants his own place. I sleep very well, thank you.

the idea of buying is great but the finance amount is ridiculous especially when he has zero sayings..

i must be old....

I guess you must be old, because you didn't read my initial post. He has been paying more than triple the repayments for his car loan, instead of saving.

what ever happened to proving he can save?

Paying three times the car loan repayments is a form of savings, or at least it is in my eyes.

who was the bank/outlet?

Two offers of finance. As mentioned above.

if you'd read wylie's posts on her sons' purchase, you'd know that he is renting out the spare room to a friend and is paying interest only on his loan

at the going room rental rate of $150/wk, and interest only repayments of around $395/wk ... and on a wage of $38,000/yr ... he'd have around $350/wk spare.

i wouldn't call that living on rice. he will have to budget and be reasonably frugal, but wouldn't say $350/wk after mortgage is poverty level.

say/wk
- petrol $20 as he lives 5mins from work
- body coporate $30
- utilities $30
- food $100
- play money $50

still leaves $120 over for his car payment or whatever. food and play money are adjustable ... sure it will be tight-ish as he adjusts, but it is doable.

those who whinge that they can't are only creating excuses for their choices. get rid of can't from your vocabulary and replace it with "how can i?"

Absolutely spot on Lizzie.

He got a free fridge from the footpath last weekend from a neighbour who was putting it out for council pick up . He has a bed, tv, couches and only needs to buy kettle, cutlery, plates, basic kitchen things and a washing machine.

He gets a $8000 transfer duty concession and $7K FHOG. I am very proud of him. He is "doing it" instead of whining about "not being able to do it".

Edit: Forgot to add that we are guaranteeing 20% of his loan until such time as the value rises enough to release us. Without this guarantee he would be up for $6K LMI, which we are happy to save him by going guarantor. We were lucky to have parents who were always there as moral support and, even though we didn't need the help, it was always a great comfort to know that our parents were there. Our sons will have the same backup.

 

[Beebop]

hang on ... above is your quote. you were having a mutter about not being able to afford to buy in the outer suburbs for less than $300k on (your term) mcwages.

i just pointed out 89 3 bedroom houses in an outer suburb for less than $300,000.

so, what's your problem? i can be done. it is doable.

the outer suburbs of 40 years ago are no longer the outer suburbs due to growth, but they would have had the same vibe as today's "outer" suburbs - lack of infrastructure, lack of public transport, long commute (comparatively). also, many investors on this forum have properties in campbelltown with no problems with tenants.

wow why not just sell me a caravan for 250k and tell me to be grateful ?
I'm simply making the point that something which is cheap and crap value for money does not lend strength to your argument that housing is as affordable now as it has ever been.

 

[wylie]

wow why not just sell me a caravan for 250k and tell me to be grateful ?
I'm simply making the point that something which is cheap and crap value for money does not lend strength to your argument that housing is as affordable now as it has ever been.

Lizzie didn't say that the places she was talking about were cheap and crap value for money. Are we reading the same post?

Going out a little (for example) from the centre of Brisbane gives fantastic value for money. The trade off is that you travel for longer. My son could have bought a three or four bedroom, two bathroom place further out for the same money. He made his choice, and wants to live close in.

I have a caravan you can have for $200K.
Lots of people who don't work in the city don't have to travel every day and would be more than happy with what is on offer further out.

 

[Beebop]

Weekly take home on 38 is 647 per week. Repayment on 292 is 1053 per fortnight, 526 repayments per week minus 150 for a room rental 376 per week, plus about 40 a week for BC and rates, so 416 a week in payments total, 231 a week spare.

 

[wylie]

Lizzie's figures were spot on. Repayments are just short of $400 per week, interest only.

He may be promoted in a few months and if he does, his pay will increase to about $50K but he is not counting his chickens yet. If things get tight, he can rent his huge garage to someone wanting to store a boat or furniture and park on the street.

He can pick up Saturday work if he needs to.

It's all good .

He's finding a way to DO IT.

 

[Beebop]

say/wk
- petrol $20 as he lives 5mins from work
- body coporate $30
- utilities $30
- food $100
- play money $50

still leaves $120 over for his car payment or whatever. food and play money are adjustable ... sure it will be tight-ish as he adjusts, but it is doable.

those who whinge that they can't are only creating excuses for their choices. get rid of can't from your vocabulary and replace it with "how can i?"

Your math is wrong, repayments on 290k are about 550 per week, on 330 its about 600.

Also I seriously wonder if you could rent out a room in a 2 bedder that is that cheap, looking at the ones around that price range in the ACT, I'm not sure that anyone would take the room... and what would they be like if they did...

 

[wylie]

Your math is wrong, repayments on 290k are about 550 per week, on 330 its about 600.

Also I seriously wonder if you could rent out a room in a 2 bedder that is that cheap, looking at the ones around that price range in the ACT, I'm not sure that anyone would take the room... and what would they be like if they did...

No.... your math is wrong. Repayments on $292K is just under $400 per week interest only.

Friend already lined up for $150. Unit is a cracker and he got a good buy. Better than some we looked at for $320K. Standard two bed unit, huge main bedroom with big built-ins. He takes the smaller room.

He will replace the little bath with a shower tray, spend another $1K on new vanity and loo to improve the bathroom aesthetics. Broker, solicitor have all expressed their amazement at how cheap he got this for.

He just needs to thank his Mum for her negotiating tips.

 

[lizzie]

Also I seriously wonder if you could rent out a room in a 2 bedder that is that cheap,

you need to open your eyes and expand your mind past the ACT and realise there is a whole lot more to australia.

$150/wk is pretty standard for a single bedroom in a student shared accomodation (read: converted house) in newcastle, that includes shared living/fridge/kitchen/bathrooms laundry, so i thought that would be a pretty reasonable price for a bedroom in the unit. wylie has confirmed this.

this one doesn't look "crap" for the money:

http://www.realestate.com.au/property-house-nsw-campbelltown-106904867

doesn't look to shabby for a first home:

http://www.realestate.com.au/property-house-nsw-campbelltown-106648019

certainly not a caravan:

http://www.realestate.com.au/property-house-nsw-campbelltown-106648019

and i didn't even get off the first page of 5 pages.

if you are in canberra, i can understand your concern because there is nothing under $300,000 for 3 beds ... but that is more a reflection of lack of supply. again i point to people camping out in the middle of winter, as reported by other ss investors, to purchase land releases.

personally, i just bought two 2bed units for $225,000 that will rent for $300/wk and $235,000 that rents for $310. all within 5mins drive of cbd, beaches, major shopping centres and 5mins walk from local shops and railway station. all this in the 6th largest city in australia (apparently we've moved up in size).

you can't lump all of australia into your perception of the ACT.

 

[csc2]

still leaves $120 over for his car payment or whatever. food and play money are adjustable ... sure it will be tight-ish as he adjusts, but it is doable.

those who whinge that they can't are only creating excuses for their choices. get rid of can't from your vocabulary and replace it with "how can i?"

yeap thats a nice leftover amount isnt it...not!

i would touch that with a barge pole...

so what happens if rates head to double digits down the track??

the kid will be back home in a heartbeat and the place will be sold off at a fire sale..

i honestly would not feel comfortable with this deal

 

[csc2]

Two offers of finance. As mentioned above.




Edit: Forgot to add that we are guaranteeing 20% of his loan until such time as the value rises enough to release us. Without this guarantee he would be up for $6K LMI, which we are happy to save him by going guarantor. We were lucky to have parents who were always there as moral support and, even though we didn't need the help, it was always a great comfort to know that our parents were there. Our sons will have the same backup.

now the full story is told..that makes a difference..

im not knocking the effort but i was concerned about the payment and living costs...still are.

if he does get a wage increase that would be nice but im still of the opinion someone borrowing nearly $400 a week on such a low salary would struggle.

there is little room for rate increases which who knows if this will happen or not..chances are 80% within 6 months in my opinion easily..

 

[lizzie]

i've had enough of debating this back and forth.

it comes down to your comfort levels, risk levels, beliefs ... there are options available for those on a low income, they just can't have champange tastes on beer budgets (actually, some champanges are cheaper than beer - you just need to know what you are looking for).

personally i think wylie's son has made a good choice. personally i'm not fearful of interest rates rising astronomically (after being around last time they hit near 20%). if absolute worst comes to worst, he can move home and rent the unit out - no need for a firesale - but i can't see that happening, especially if he's prepared to pick up extra work or apply for position that will increase his income.

get rid of the can't folks and introduce the "how can i?"

 

[wylie]

yeap thats a nice leftover amount isnt it...not!

i would touch that with a barge pole...

You are entitled to your opinion.

so what happens if rates head to double digits down the track??

He has locked his rate for three years, so nothing will happen in that time.

the kid will be back home in a heartbeat and the place will be sold off at a fire sale..

i honestly would not feel comfortable with this deal

He is not a "kid" and he is welcome to come home in a heartbeat if things turn sour and he has to rent out the whole unit until he gets on his feet. The only thing that could happen is if he lost his job. Seeing as it is not a high paying job, he could get another job quickly, I imagine.

You may not feel comfortable with this deal, but he does, and we do. He is a bit nervous about having a mortgage, but my first mortgage was scary too.

 

[wylie]

now the full story is told..that makes a difference..

Of course it makes a difference, just like not having to pay transfer duty and getting the FHOG. Without those two helping hands from the government, he could not do this. Our guaranteeing one fifth of his loan will not cost us anything, not even a wink of sleep. Wouldn't you do that for your children to save them $6K in LMI that doesn't protect them, but protects the bank? Of course you would.

im not knocking the effort but i was concerned about the payment and living costs...still are.

if he does get a wage increase that would be nice but im still of the opinion someone borrowing nearly $400 a week on such a low salary would struggle.

He has been paying so much extra on his car loan, that he will now pour into his mortgage. He knows he can do it, because with the extra car loan payments, he has done it for months already.

there is little room for rate increases which who knows if this will happen or not..chances are 80% within 6 months in my opinion easily..

Locked in for three years, so no issues if rates rise. Things were tight with my first home, and for my parents etc etc.

I don't know anybody who didn't live tight with their first mortgage, but it pays off in the end. For $100 per week more more than he would pay renting and paying off someone's mortgage, he is paying off his own.

 

[lizzie]

was just putting my 7yr old to bed, and thinking about the day, and this thread ... and i realised what the closed mindedness remind me of.

every tuesday i take reading groups in my daughters' primary class. there is one boy in the class who, no matter what task he is set, sits there the entire lesson whinging that he "can't do it" "can't do it" regardless of what assistance, encouragement or punishment he receives.

i know full well he "can" do it because he has a brain, he can write (spelling is not very good) and he is fully capable ... but today i realised ... he "can't do it" because he believes that he "can't do it", so he just refuses to try to do it.

he can do it, but his internal limitations are preventing him from even giving anything ago. i feel sorry for him. because of his attitude he has no friends. he will never feel the fear and thrill of success. i sat him down today and explained to him that his choices of not attempting to do is costing him happiness, friends and success (i know, heavy for an 8yr old), and can he imagine what his life would be like if he got rid of "can't" from his vocabulary, and instead replaced it with "how do i do it"?

he then turned around and said that if he can't use the word can't then how can he "can't use can't". i knew then not to waste any more effort. i feel a bit that way about this thread.

i am thrilled for wylie's son - he used the "how can i?".

 

[Riasta]

Just wanted to say - WELL DONE to your son Wylie... You must be so proud.

 

[wylie]

Thanks Lizzie and Riasta. I am proud of him. He was a bit of a "I'll never be able to afford a place of my own" type of chap until recently.

I think what changed his mind totally was my asking our broker how much he could borrow. He had been putting his income into one of those on-line calculators without telling me he was even interested in his own place. Our broker said those calculators are as "good as useless" in finding out what you really can afford with the right loan.

Once Matt found out from the broker just how much he could borrow, his whole attitude changed. I've done most of the looking because I have plenty of time, and I sifted through hundreds of possibles, houses and units and only sent him the ones that were "do-able".

I am so glad that he has grabbed the bull by the horns and is no longer saying "I cannot afford anything that is not out in the sticks" to "what can we find for the money I can borrow?".

For around $300K to $320K we were seeing teeny, tiny "renovated" units that just looked a bit "slapped together" and were too small to swing a cat or blocks of 1960s style flats where everyone walks past your living room and front door to get to their own flat. These were also "renovated" but just felt like they were "papered over" and under the cheap makeover was a 1960s flat.

The unit he bought is a solid built one, with a private entry, living room bigger, than many of the others we saw, but still not huge. Three people would be too many. Two is about right. Lick o' paint, lick o' paint, half an hour to freshen it up, small bathroom reno, kitchen reno can wait a few years. Laundry room off the kitchen is an added bonus, plus a huge garage. I think he has done very well for his money.

If things get tight he can work a few hours opening houses on Saturdays (has already been offered this) and/or rent out the garage to someone needing to house a boat or for short term furniture storage and park on the street for a while. He's pretty much got everything covered, is excited, but understandably nervous about such a big debt.

It settles on his 22nd birthday, which I think is pretty cool .

 

[knn]

Somewhat related to this topic:

Australia has Highest Household Debt to Disposable Income Ratio in the World

Aussies lead world in personal debt

 

[Beebop]

b.c every % of capital growth is a % debt of for someone else..

 

[Ben P]

that was a pretty "non event" article.

however, you miss the point. there is an under supply in "some" area. that is why there a people camping out in the middle of winter to score themselves a block of land in canberra - that is why there at 30 groups thru open homes for units in sydney, that is why my last sale didn't even make it to market before being fought over by two cashed up buyers and sold for top dollar ... but that is also why properties can sit on the market for months without a nibble in areas of the gold coast.

I know this article is a month old but here's the Gold Coast Bulletin's report on the Gold Coast property market.

 

[Amadio]

I'd like to add my congrats to Wylie's son, and you too, Wylie, for all your negotiating which no doubt will influence his next property purchase.

The negativity of some of the posters on this thread is astonishing. It's very obvious who in this world gets ahead on the smell of an oily rag and who just whines about the smell.