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The next 10 years: Prediction of the market
- Thread starter TMNT
- Start date
Trey. Sounds like you are scared of a little dept.. My parents tried to teach me similar values "buy a house, pay it off as quickly as possible & borrow as little as possible". Do some more reading as everyone has said and you may change your mind.. As you know, your money is doing very little sitting there in your bank account.
I am Gen-Y also (just turned 25). Throughout my apprenticeship I worked often 18+ hour days saving up $90k before I turned 21. At which point I bought my first home. That home is now worth roughly $50k more than what I paid. I now have 2 properties and a total dept of around $720k.. Sounds like alot of money.. But then again the total value is around $950,000 & both properties have good, reliable tenants that pay for the majority of monthly repayments so i'm far from worried
Do your research, invest within your comfort zone and don't be frightened of a little dept! Well done on the savings though, use it wisely!
Trey. Sounds like you are scared of a little dept.. My parents tried to teach me similar values "buy a house, pay it off as quickly as possible & borrow as little as possible". Do some more reading as everyone has said and you may change your mind.. As you know, your money is doing very little sitting there in your bank account.
I am Gen-Y also (just turned 25). Throughout my apprenticeship I worked often 18+ hour days saving up $90k before I turned 21. At which point I bought my first home. That home is now worth roughly $50k more than what I paid. I now have 2 properties and a total dept of around $720k.. Sounds like alot of money.. But then again the total value is around $950,000 & both properties have good, reliable tenants that pay for the majority of monthly repayments so i'm far from worried
Do your research, invest within your comfort zone and don't be frightened of a little dept! Well done on the savings though, use it wisely!
im going to be a bit controversial, but the general consensus is that good debt is good,
that being said its not for everyone
what if property drops by say 20%, yes its highly unlikely, but do you think all those people in the US were thinking that they would have negative equity???? Im sure the americans were also promoting good debt as a way to get financially ahead.
Sometimes I look at my debt and think, omg, what happens if hte market goes down 20% or I have rotten luck and 30% of my tenants decide to leave and its a tough market to rent??? ie 2 months to find a tenant!
just because the real estate market is fairly safe, it still has its risks, imagine if it was early 90s and market sentiment was good where everyone would be feeling pretty invincible.
if property dropped 20% and you had to sell your properties, and you were in negative equity, your friend who didnt buy a house and kept it in his term deposit might have $300k cash, while the $200k you put in now might be worth $120k
then he would be saying "I told you so"
just throwing in a different viewpoint
It is for this reason I think your plan of saving for now is good. You aren't committing to a debt you may not be able to service in a few years, since I am assuming your trade is related to the construction phase?
At least in a few years you can buy outright, no FIFO, and work as a home based trade and live easy.
90% of my friends are FIFO, bouncing contract to contract, in debt to their eyeballs, and its all gonna come crashing down one day.
Well that hardly needs to be said.. I'm not exactly going to be advocating personal loans or pushing ripper finace deals on a new HSV in a property investment forum..
In regards to potential market crash or loss of tenants, I'm happy to take that risk as I'm sure you are also.. I can bet Joe Blow wishes he overcome those fears of investing his hard earned cash into numerous properties 20 years ago rather than sit on a pile of cash or the outright owned PPOR..
Anyway, I'm not one to give advice just yet. I have next to no knowledge or experience in comparison to majority here so prefer to take note of all the valuable info/posts instead
Well that hardly needs to be said.. I'm not exactly going to be advocating personal loans or pushing ripper finace deals on a new HSV in a property investment forum..
In regards to potential market crash or loss of tenants, I'm happy to take that risk as I'm sure you are also.. I can bet Joe Blow wishes he overcome those fears of investing his hard earned cash into numerous properties 20 years ago rather than sit on a pile of cash or the outright owned PPOR..
Anyway, I'm not one to give advice just yet. I have next to no knowledge or experience in comparison to majority here so prefer to take note of all the valuable info/posts instead
I see your point, but I think its a bit irresponsible and dangerous anyone saying leverage leverage leverage as if the market will never crash. no matter how unlikely
Respect! I just turned 24. Only gotten my first IP, also my first property, few days ago (like, literally signed on the dotted lines). Even that I had to ask for some funds from parents to cover some of the deposit..
It amazes me that seasoned property investors (of which I am one) will gladly accept that we have seen tremendous growth over the last decade but then try and deny that this growth has created affordability issues for those starting out.
When I bought my first house in 2000 it cost 3 times my salary at the time.
The same house sold recently for 6 times the salary of the same job that I was doing when I bought it.
This house is now less affordable to a first home buyer.
Some young people were too lazy to buy a house back then just the same as some are now. That's irrelevant.
The underlying factor that cant be disputed is that house price growth has outpaced wages growth considerably so there is obviously a valid argument in regards to housing being less affordable.
RC
When I bought my first house in 2000 it cost 3 times my salary at the time.
The same house sold recently for 6 times the salary of the same job that I was doing when I bought it.
This house is now less affordable to a first home buyer.
Some young people were too lazy to buy a house back then just the same as some are now. That's irrelevant.
The underlying factor that cant be disputed is that house price growth has outpaced wages growth considerably so there is obviously a valid argument in regards to housing being less affordable.
RC
Well, no.
The same house may well have jumped up into a higher desirable bracket due to population growth/demand/supply deficit.
Ever so slowly the FHB's have to start a little further out as a city grows.
Can't expect to pick up first home in the same place a decade and half later.
That's the whole point see.
The same house may well have jumped up into a higher desirable bracket due to population growth/demand/supply deficit.
Ever so slowly the FHB's have to start a little further out as a city grows.
Can't expect to pick up first home in the same place a decade and half later.
That's the whole point see.
it doesnt work like that, even in 2000s, the affordability according to your argument wasnt great at all,
as population gets bigger, people have to move further and further out, also we need to spend more then 20 years ago, eg tablets, phones, foxtel,
also the mentatlity of keeping up with the jones, with a backyard, 3 bdr for a 3 member family, and within 25 km from the city
its only less affordable if your expectations are too high, people can still get a house in melton for $250k in melbournes west or even or $400k in boronia, at $80k income for example, thats 3-5 years salary before tax, and combine that with double income no kids, you could afford some of these houses in 2 years! (wouldnt that be good converstaions with friends over dinner, "hey we bought our first freestanding PPOR house in 2012, and we've paid it off already, when he earns $80k, and I earn $65k)
btw. what sort of a property could you have boguht for 3 times your salary in 2000, unless you were getting paid very well or if you werent a FHOB
Since I've been involved in buying houses (1985 was the first one), there have been a few spikes and lulls...but always steadily going up over time.
Some areas have gone backwards a little bit too, but mostly not much - the ACA type stories are the anomaly.
My observation is that the cost of the FHB style house has always been hard to afford.
It was then, it is now.
The difference for me back then was there was very little option on loans you could get - it was either 80% borrow using P&I, with 20% savings plus purchase costs for the remainder - or keep renting, buddy.
There were credit cards, but it was early days and not the same use as today's world, and none of these 5 year interest free deals...save and buy, and usually second hand furniture or cheap crap unless you had rich parents.
But what has changed is the expectation of what is a FHB house, and the options for borrowing.
The other thing is that the market will eventually control the price.
If the FHB's can't get loans to buy, then the prices of those style houses/properties will simply stop going up until the market catches up.
The other thing is the type of places FHB's want to buy - and the locations - a lot of 2nd time buyers want them too, and can afford them, so pay a bit more.
That's life.
Some areas have gone backwards a little bit too, but mostly not much - the ACA type stories are the anomaly.
My observation is that the cost of the FHB style house has always been hard to afford.
It was then, it is now.
The difference for me back then was there was very little option on loans you could get - it was either 80% borrow using P&I, with 20% savings plus purchase costs for the remainder - or keep renting, buddy.
There were credit cards, but it was early days and not the same use as today's world, and none of these 5 year interest free deals...save and buy, and usually second hand furniture or cheap crap unless you had rich parents.
But what has changed is the expectation of what is a FHB house, and the options for borrowing.
The other thing is that the market will eventually control the price.
If the FHB's can't get loans to buy, then the prices of those style houses/properties will simply stop going up until the market catches up.
The other thing is the type of places FHB's want to buy - and the locations - a lot of 2nd time buyers want them too, and can afford them, so pay a bit more.
That's life.
So by your reasoning you should still be able to buy a house for 3 times the salary provided you lower your expectations?
3 times the current salary would only buy the land in an outlying area now.
RC
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Ahh so property is still affordable as long as you send your wife to work, have no kids, live in a less desirable area and cut back to two meals a day.
You've just proven that property is less affordable and these are the symptoms.
RC
are you serious?!?!?!
where did I say any of that garbage?
it may come as a surprise to you, but people have kids these days as well, and maternity and parental leave is more available today which makes your point even more moot
Youve just proven that your argument was flawed, and now you are exaggerating to try and cover your tracks,
congratulations
Let me put it another way.
Say 10 years ago x% of my salary in a particular occupation would buy me a new Holden Commodore.
Same occupation today x% of my salary only buys me a secondhand Datsun 180B.
So I can either buy a Datsun 180B or I can send my Wife to work and between us we can get a new Holden Commodore.
Just because we are still able to buy a car (house) today doesn't mean it's as affordable as it was 10 years ago.
RC
BTW this has nothing to do with cars.
Yay! It's been an entire 2 weeks since this has been discussed, perhaps the 100th time around the debate will be settled.
Property is undoubtedly more expensive than it used to be but a lot of other things in our lives are cheaper. Ultimately it is what it is, no one can control it so just get on it with imo.
I do find the way people try to justify it not being cheaper quite funny though.
Even in the mid 2000s you could buy a 1 bedder 5km from the city in Perth for 100k, the same thing wouldn't sell for less than 250k today and there's no way the average income has gone up that much.
This if course isn't ro rake anything away from people who did hold property during the 17% interest days but ultimately that was an anomaly and a fairly short period when looked at over the last few decades
Property is undoubtedly more expensive than it used to be but a lot of other things in our lives are cheaper. Ultimately it is what it is, no one can control it so just get on it with imo.
I do find the way people try to justify it not being cheaper quite funny though.
Even in the mid 2000s you could buy a 1 bedder 5km from the city in Perth for 100k, the same thing wouldn't sell for less than 250k today and there's no way the average income has gone up that much.
This if course isn't ro rake anything away from people who did hold property during the 17% interest days but ultimately that was an anomaly and a fairly short period when looked at over the last few decades
I was a first home buyer on a low income and the house that cost 3 times my salary was a small but comfortable three bedroom house in a reasonable area.
What does 3 times the median wage get you now in any given area ?
A block of land maybe.
But...but.. they could still afford a tent!
RC
When I bought my first ppor in 2004 it was 7.5 times my gross salary.
When i bought my 2nd ppor in 2012 it was 4.7 times my gross salary and is less km from the cbd.
So by your definition, houses in Perth are getting cheaper?
and what happens if you industry has gone up in average wages due to demand, or has stayed stagnant, then your comparison once again becomes moot,
your example with the holden commodore,
when I first moved out of home, I bought the cheapest blender at kmart or target for around $60, I was getting paid $15 per hour,
now I can go to kmart and the cheapest blender is $8-$12, where the average wage for an 18 year old may be $20
so according to your theory, unless property prices have dropped by 40-60%, then its overpriced?
I was a first home buyer on a low income and the house that cost 3 times my salary was a small but comfortable three bedroom house in a reasonable area.
What does 3 times the median wage get you now in any given area ?
A block of land maybe.
But...but.. they could still afford a tent!
RC
and what about my example of an existing melton house for $220k, or a brand new house for $290k
http://www.realestate.com.au/property-house-vic-melton-117193447?listingType=buy
sure its no toorak, but melton for a first home owners, if I was 20 years younger, id probably buy,
dont ask me how they build and include the land for $238k!
Yeah I suppose a doctor in Sydney could afford a fibro hut in Brewarrina.
On average though, house price growth has outstripped wages.
RC
