Innerwest Sydney

[Cooper]

Hi everyone,

long time lurker, first time poster.

I'm finally in a position where I can buy my first place (PPOR) in the innerwest of Sydney (well someone does). I have a few reservations, but my girlfriend is really putting on the pressure. I only have a 30% deposit (maybe a little more depending on how things pan out), which I still don't think is enough in case things turn nasty.

I'm keen to have 45% and my gut feeling says that is very possible soon (if prices come down) however I'm feeling the pressure from the missus. What are peoples views on the Newtown, Glebe market?

 

[Glebe]

PPOR or IP?

In my opinion you should only be buying a PPOR in the current climate if you can afford to meet the mortgage repayments with one income earner. There's always a chance over the next 18 months that you or your girl could lose your jobs..

 

[Cooper]

Glebe I'm talking PPOR I would never ever buy an IP in Aust simply because prices are way too high and have been for far too long. In fact I'm going to convince my girlfriend that even if we could buy a PPOR outright it's a bad investment decision.

I found the following link last night which explains things better than I can!

http://au.youtube.com/watch?v=mtL_plJXv3c&feature=PlayList&p=0B4D70C2ABA97AE3&index=0

Cheers

 

[troyhunt]

I would never ever buy an IP in Aust simply because prices are way too high and have been for far too long. In fact I'm going to convince my girlfriend that even if we could buy a PPOR outright it's a bad investment decision.

Perhaps if you were as adamant with your girlfriend as you are about the state of the Australian property market you wouldn’t have a problem!

 

[BV]

Cooper

Whether it's a good idea depends on many factors such as
what the property markets will do,
what the rental market will do
what you do with your 30% if you don't buy a PPOR,
where you buy and the % of deposit you have for a particular property or an area.
your savings pattern
your eligibility to the FHOG
etc etc

I've had a look at the spreadsheet.
I've seen a couple of different versions before and they can be useful but what these spreadsheets don't cover is the home factor, the feel and security you get when you are in your own home and your ability to change it to suit your lifestyle.

For many people buying a home is also like enforced savings because otherwise they would be out spending their money on other things.
Finally, don't forget that your PPOR is a tax free investment.

Cheers

 

[evand]

If he's looking to buy a property in the inner west with 30% - 45% deposit, doesn't sound like he has much of a problem.

Perhaps if you were as adamant with your girlfriend as you are about the state of the Australian property market you wouldn’t have a problem!

 

[troyhunt]

If he's looking to buy a property in the inner west with 30% - 45% deposit, doesn't sound like he has much of a problem.

The problem he has is that on the one hand he believes prices are way too high yet on the other hand he is going to buy. Personally, I'd find it difficult to commit hard earned cash to a property I strongly believed was about to fall in value but maybe that's just me!

 

[hobo-jo]

The problem he has is that on the one hand he believes prices are way too high yet on the other hand he is going to buy. Personally, I'd find it difficult to commit hard earned cash to a property I strongly believed was about to fall in value but maybe that's just me!

Some people might not worry so much about the short term value of their property, especially if a PPOR. If everyone thought like you do, who would buy brand new cars?

 

[Cooper]

The problem he has is that on the one hand he believes prices are way too high yet on the other hand he is going to buy. Personally, I'd find it difficult to commit hard earned cash to a property I strongly believed was about to fall in value but maybe that's just me!

Yes, that is in essence the dilemma. It is hard earned cash and at the moment I only pay 590pw rent and even with a 45% deposit my repayments will be ~5.5k/m (well of course depending on the property! Could make it <3k if I wanted to live in a dump) . But the bigger the loan, the more I'm handing overseas (leaving my beloved country) only to make OS bond holders richer. I have no problems paying the mortgage, it's ideology that holds my back. I really do try to keep things in perspective, and in my opinion I think housing isn't a wealth creating asset, for me, or the country. As a rental stream, agreed it is, capital gain no. I'm known to be wrong though.

There definitely is something to be had for owning your place though. I've obviously never owned one, but I like the idea if knocking down a wall, cutting a tree, or whatever. Family reasons too, of course.

I guess the other problem is, I would really only live in the inner west (at a push, in the east) and we all know that we're talking astronimical prices!

So that is the conundrum, for me anyway.

Thanks for the responses.

 

[Cooper]

Some people might not worry so much about the short term value of their property, especially if a PPOR. If everyone thought like you do, who would buy brand new cars?

Yes, it's the idea of locking away 350k that's I've saved, invested for the last 7 years and that is producing an ok income stream (until the rba **** up again and cut interest rates), and locking it into a 25 year mortgage. I know, it wont take that long to pay it off, but that's not the point. It's important to realise ( in my opinion anyway) that if I do lock into a mortgage, I'm commiting to an interest bill, and therefore my productive australian capital, to pay someone overseas. If the money was coming from Australia I wouldnt' give a ****.

 

[troyhunt]

Some people might not worry so much about the short term value of their property, especially if a PPOR. If everyone thought like you do, who would buy brand new cars?

If someone was convinced they could buy the same brand new car for significantly less in the near future, they would wait. I'm sure the same rules would apply to the majority of people buying the majority of assets. My point is simply that if Cooper feels prices will drop, then what's the rush?

Cooper, have a read of the threads about renting versus buying (there are a few of them I think). Put a value on knocking down walls and cutting trees; is it worth the financial difference over renting? It may well be worth it for you but at least you're making the decision with full cognisance of the financial impact.