To jump or not to jump

[Jeter]

Hi all
First let me say I am or hope to be a FHB =)
N I know most likely many will say .. just shut up and buy already ..

But I was wondering with all that is going on ..
If I may pick at your brains as to what a young green and hopeful first home buyer should do in times like these.. especially when we have never know anything like the great depression.

Yes, the FHB grant is a great - potentially 24K free money and reduce interest rate is a plus
- But should I just wait and see and forget that boost altogether and buy the market has reached the bottom? When will that be ????
- However, if and when that happens (2-3 years or more from now) will there be banks willing to lend?
- Yes, 300K homes now would cost like 150K.. but how much will my savings now be worth then? The value most likely will drop too wont it?
- N what will happen to rent? Will it continue to climb because more and more people will default on their homes (those that are may lose their jobs in the coming year)
- Or should I just jump anyway, because I have the boost, the reduced interest rate and a 20% for the property? N keep the "Its better to have a home than none" mentality???? Or would that be stupid and naive?

=S

Sorry for the long post, been reading too many D&G articles and now its scaring me a bit to step out and get a dream place that is oh so close...
Thank you for letting me pick at your brains =)

 

[depreciator]

The bottom (or the top) of a market are only able to be identified once they have passed, so you won't pick them.
Anybody who reckons they know what is going to happen six months from now, let alone 2-3 years from now is kidding themselves.
In a way, the bottom will be reached when there is a groundswell of people, investors and home owners, who jump in and increase demand. This point will happen at different times in different sub markets e.g. the western suburbs of Sydney might take off as other places fall, just as the west fell while other places were going up.
If I were you, I would sit tight for a while and keep watching the market you are interested in. Just keep going to inspections and watching prices.
Scott

 

[want2bewealthy]

Id be getting in as soon as you can, have you thought about renting the property out so you can save more in the meantime and still claim the FHOG when you move in?

You will be negatively gearing the property also and thus receive a good tax refund too.

Dont fix rates just yet, thats no issue and theyre already very good.
I personally cant see there being a great drop in market prices,
In 10 years who really cares anyway, you can always bargain the purchase price down anyway in times like these with alot of properties.

 

[BayView]

Sorry for the long post, been reading too many D&G articles and now its scaring me a bit to step out and get a dream place that is oh so close...
Thank you for letting me pick at your brains =)

If you are buying a PPoR, then there is no time like the present if you can afford it.

We have had 4 PPoRs, and will building no.5 next year. We've never tried to time any of them; it was just right at the time.

Having said that, we have done well price-wise with each one when we've sold, which was a fluke. Maybe not though, because we were buying with the conscious attempt to buy good value at that time.

But if you are "investment conscious" as well, then timing the market is of some importance.

Now is a good climate to be buying - and it may not be the bottom of the market yet, but it won't be too far off.

I don't think you will go too far wrong if it is a longer term purchase.

 

[GreatPig]

My opinion is that for a PPoR, you buy one when you need it, can afford it, and find a place you're happy to live. Provided you're not already intending to sell it in the near future, then the market doesn't matter to a great extent, and you can't know what it will do in the future anyway.

An IP is totally different (again in my opinion). This is purely a financial investment and thus should be subject to risk analysis. While you can't know what the market will do in the future, you can assess the possibilities, the impact each of those possibilities would have on you, the actions you could take in each case, and form your own opinion of the chances of each possibility occurring (know what you would do in each case before it happens - ie. have a plan, preferably in writing). Based on that analysis, you can then decide if you think the risks and their possible mitigations are acceptable for you. And this is not necessarily a simple yes/no situation. For example, you could potentially lower the risk by looking at a cheaper property.

And most importantly, never assume anyone on a property forum knows any more about what the future holds than you do - unless they happen to go by the name of The Doctor!

GP

 

[see_change]

We've just exchanged on our first buy in around five years today.

Sydney , good central area .

We think we've made a very good buy ( 29 % under asking value ) , but this purchase was made with a long term view , so even if prices go down in the next couple of years , because we've bought well , in a good area and in an affordable price bracket I think we are well insulated from short term price falls. ( not that it's relevant anyway ).

If you want to buy at this stage , I'd be getting to know the area you are interested in and then when you see a bargain , be ready to move quickly. We had two other people interested in our property , one couldn't get the finance and one who was prepared to exchange this afternoon without having done any searches ....

I'd only look at real bargains at the moment. 5-10 % off doesn't count in my books.

Cliff

 

[Jeter]

Thank you all for the great advice =)

@depreciator
I know what you mean when you say that we will never know what happen in 6 months let alone 2-3 years =)

@want2bewealthy
You mean, I should but it.. live in it for a bit and rent it out?
N have an IP but still renting?
Wouldn't that cost me more?
Sorry.. still green in the negative gearing part.. still got tons to learn on that topic

@Bayview
Yes, we are planning to but for a PPoR and not really thinking of buying and selling for profit anytime soon.

@GreatPig
Do you know anyone by the name of The Doctor? =PPPPP
Maybe he can tell me what I should do ..
But I know what you mean, after reading all the D&G one part of me was scared off.. but the other was also thinking.. how long will I have to put the family's and my life on hold..

@see_change
29% under the asking price
Maybe I should get you to do the offers for me =)

Again, thank you all for the great advice..
Have a great Sunday! =)

 

[RumpledElf]

Don't just leap in and buy something unless its exactly where you want to live, you really like the house, and you can comfortably afford it. If it goes down, it goes down, and you can still make the payments and shrug it off - if you're mortgaged to the hilt and prices drop you'll get bitter when similar houses are cheaper and you wouldn't need to eat baked beans every day if you'd heeded the D&G bought later.

Buy something too crappy and not quite right and you have the next umpteen years of expense with the wife redoing the bathroom, repainting, grumbling about the layout and extending when you go to have kids etc Ignore the grant, save your money, do what others say and just keep looking around until you see something you like.

 

[Aaron Sice]

it's a PPOR - but remember, it's still an investment.

make sure it's within 5 mins walk of some sort of public transport (actually get out and walk it) and close to infrastructure, both public and private (schools, shops etc).

when oil nudges $100 a barrell by 2010's end the issue of public transport will rise again.

by something you can afford with min 2 beds and off stret parking.

that's my 2c. take it on face value or with a grain of salt.

 

[Sheryn]

Dear Jeter

I have altered your post.....

Hi all, first let me say I will be a FHB.

The Australian tax payer is giving me a grant of up to 24K and reduced interest rates, aren't I lucky = YES.

Should I just jump anyway, because I have the boost, the reduced interest rate and a 20% (deposit) for the property?

YES - I will jump in because of above

OR

NO - I will wait until no boost, increasing interest rate and less that 20% deposit as property prices are going up.

Its better to have a home than none? YES

Thank you for letting me pick at your brains

Jeter - I do not know what tomorrow will bring...and neither do you!

 

[FHB]

Hi Jeter, I'm a potential FHB too, and have been looking to buy for the past 3 years. The main thing I've kept in mind is that you won't 'miss out' by waiting. This is what many people I know were telling me last year, but prices will always only be what people can afford to pay.

Prices may fall as the economy goes into, or skirts with recession, but as others have said, it can be difficult to pick the bottom, and we may find the effects are greater on property in some areas more than others. Will prices fall in your area? Don't know.

The value of you savings won't drop, $50k will still be $50k. The buying power of your $50k will be less, if the things you want to buy with it increase in price.

One good argument for buying now that I can see is to get a mortgage and lock in a low interest rate. It could give you a big advantage if interest rates were to shoot up again. That's a big IF though.

Otherwise, what Rumpled Elf said. Most important is not to stretch yourself, make sure you have a buffer for unforeseen costs or job loss.

 

[turk]

Hi FHB

"One good argument for buying now that I can see is to get a mortgage and lock in a low interest rate. It could give you a big advantage if interest rates were to shoot up again. That's a big IF though."

It's not a big IF it's an absolute certainty, the question is when and what will happen to rates in between.

Only a few months ago most of the talk was of inflation and increases in interest rates,
with some people locking in rates at 8-9%.

Circumstances change, sometimes quickly, sometimes slowly.

Regards

Peter

 

[FHB]

Sure, they will go up eventually. If they go up sooner, you will still have a large principle that it applies to. If they stay low for 10 years then shoot up, then you will most likely have paid down a large amount of that principle. The ability to lock in isn't as much of an advantage over others in this case.

The other point is that if house prices remain static for a long period, like 5-10 years, and you are saving well, then holding out and saving will get you into a better house than buying now. There's a risk that prices may shoot up before you get into your better house though.

 

[want2bewealthy]

The best time to buy is always yesterday, I wont change my mind on this as I sat there 'saving' for 3 freakin years!

while I buily up my first deposit, I lost alot of money. . thinking back, I lost around 100k in capital gains. .

Interest rates are very low, Id be locking that in for sure, well I just did again actually so I practice what I preach, ultimately its your decision though and it doesnt matter to anyone which way you decide to go but yourself.

Time in the market, not timing.
If you want to stop paying rent and purchase, whats stopping you?
if rents are as expensive as locking in a price on a purchase and seeing capital gains, again, whats stopping you?

 

[Jimmy255]

I have just purchased and couldn't be happier. My finance was approved about a month ago so I've seen two rate drops, and from what I read more to come.

Anyone who can't get a property for much less than the asking price is not doing it right. Even then, and even is prices drop a bit, my feeling is they won't be significant in the right areas.

That's the important part, and it's as important as anything else. Research. As people have mentioned, check your suburb, check your banks, read up on economic PREDICTIONS (not gospel!) and make a decision. I used this forum as an excellent resource but ultimately made my decision after utilising this as one of many information resources. I am happy with my decision because I researched it enough to be happy. No one can give you that contentment.

My recommendation though is that if you can get in now, do it. It's not going to get much better imo and so you get the best of both worlds, timing the market AND time IN the market.

win-win :smileyfase:

 

[VYBerlinaV8]

Jeter - the trick with the first home is to buy something that you can comfortably afford. It doesn't have to be your dream home yet, just a property that you are happy to live in for the medium term. You can always upgrade later.

Re-read the bits above about having 2 beds min, off street parking, location, etc.

Now is a great time to buy property, provided you are careful with the purchase. Look for properties that are likely to have good future demand due to location and layout. I wouldn't be locking in interest rates until early-mid next year.

I settled a new property last month and am very happy. I'll be looking for another next year. I'm not sure if we've hit the bottom of the market yet in nominal terms, but we won't be far off. Don't get too worried about short term value gains, either, as time will take care of that for you.

 

[kanad]

I have just made an offer for my PPOR. I am an immigrant who have spent over $100000 in renting over 8 years that I have been living in Australia. Most of my investment was in stocks and my portfolio is down by 40%. So with some decent savings and FHOG + 1% stamp duty discount in Vic and a trend from auctions to private sales, I thought it was good time to buy my PPOR. Interest rates are low and if they stay low for even an year it would help me a lot.
As a FHB I cannot demand a lot, so I have to make some compromises (like buying 30k from city) but then such is life.

 

[yieldmatters]

Sorry for the long post, been reading too many D&G articles and now its scaring me a bit to step out and get a dream place that is oh so close...
Thank you for letting me pick at your brains =)

I reckon unemployment peaking and starting to drop back down again is a good sign for the bottom in the property market.

 

[Oynas]

Yes, the FHB grant is a great - potentially 24K free money and reduce interest rate is a plus

A lot, if not all of that free money will go to the guy selling the home since he or she normally puts prices up. If FHBG goes away, house prices go down. I doubt government will want house prices to go down, so FHBG will be here to stay for a while, so there is no rush to buy a house.

Yes, 300K homes now would cost like 150K.. but how much will my savings now be worth then? The value most likely will drop too wont it?

Depends how you invest your savings. If you had put your savings in Lehman Brothers shares, things aren't looking good for you. If you put your savings in gold, you'd be much better off.

I personally cant see there being a great drop in market prices,
In 10 years who really cares anyway, you can always bargain the purchase price down anyway in times like these with alot of properties.

If you're able to bargain down prices, that means property prices have gone down.