Everyone has different circumstances i agree with that.
But I have several workmates who still rent their housing and they are in their 40's and one in his 50's
I got talking about this to one of them during lunch break who told me him and his wife still rent as they preferred to go on holidays.
I often wonder what went wrong ..isnt first priority to pay off a house rather than go overseas?
Op, You answered your own question; everyone has different circumstances.
To assume everyone has the same priorities and that something went wrong if they didn't have the priorities you think they should have is a bit naive and self centred.
Unfortunately Aussies have had home ownership and property investment drummed into their heads so much now, that it's perceived one must be a failure in some way if you don't have these by 25-30.
So much so that living at home sponging off your mum until your late 30's whilst investing in property and renting it out at a loss is seen as a successful life as oppose to becoming completely independent from your mum at an early age and looking after yourself, which invariably means renting.
Being independent is long gone. Today's generation expects someone else to support them until late in life so they have the funds to invest property, which only serves to increase property prices thus creating a negative spiral. Eventually, kids will never leave their parents, but have several loss making properties, spurred on by government tax incentives and tv and radio propaganda that the housing market can't fail.
BOOM! right on the nail!
Negative gearing and tax breaks that follow, as well as ridiculous surge in property prices has lured many onto the property investment bandwagon. And the vicious circle is that it raises house prices to the point they become unattainable so the ones who miss out have to try and join the property investment bandwagon as well with the hope the asset appreciation will bring their jackpot home 10 years into the future. Then they can buy their home.
Everyone is different, some people have no desire to own a house. Others do not have to choose one or the other, they can afford both holidays and buying assets. It doesn't really matter if you go through your whole life never owning anything. I'd be a tad more concerned if he was 45 and still living with mummy and daddy, understand people get sick or have changes in circumstances but some people just sponge off their parents and don't know how to look after themselves though life could be a lot worse.
Everyone has different circumstances i agree with that… I often wonder what went wrong.
I'm looking forward to the OP's next post: I'm not a racist but…
…some of my best friends are renters, but the way some of them behave…
Maybe i'm doing the maths wrong, but Ive just bought land and plan to build a house. The rental for a 4x2 being nearly $500 a week at a conservative level nearly pays for all the interest, and will only get better as rates drop (assuming rent will drop too,but on a 400k loan im sure the interest rate drop will prove more positive). Now the only reason I see people as renting as they 'cant afford' the property, is they can't afford to save 40k for the 10% deposit.. repayment wise it seems to be nearly identical for the amount of per week you pay for a home of your own…
wouldn't count share houses or apartments as obviously you're sharing accomodation with multiple parties so it will be alot cheaper.
Interest rates may go down but you cannot guarantee that and for how long. What happens if they start to rise and you have maxed out your borrowing power. When you rent if something goes wrong with the property it is fixed by the landlord if you buy a house you have to pay for these.
Comparing repayments for a mortgage to rent is not an ideal comparison as there are a lot more expenses to owning your own house. Also when the house is being built if you are currently renting you still have to pay rent while the house is being build as well as some interest on the mortgage. So the not being able to afford it argument may be genuine.
…
Everyone don't look the same and don't do the same things in life !! IF you want to own you will make that happen ( Some sacrifice here n there ) but the assumption that if you meet a 50 years gentlemen to own this house ( And have few investment property ) is just not correct. Your thought process surprises me !!
I often wonder what went wrong ..isnt first priority to pay off a house rather than go overseas?
Seriously? Not everyone wants to put all their money into paying off a mortgage, then be stuck in that one place for the next 30 odd years.
rough sums on a $500k property
say $100k deposit to avoid LMI
$400k loan, $15k+ stamp duty
that's $3k+ mortgage
that's not an unsubstantial amount
that's $36k+ a year out of your taxed income so that's $55k+ gross income needed to cover the mortgage
for 30 yrs
and $500k isnt a realistic figure for many places
The problem is there are a lot of people who are unable to save 100k.
so use a 10% deposit but pay LMI
not sure if they even give you a loan on 5%
Funny thing, buying a house is only marginally more expensive than renting.
Problem is everybody wants to live close to the city.
There are affordable suburbs further out.
But that's the price you pay to own your own home, you may have to travel further for work
I'm 25 and me and my wife purchased land and built a brand new home just last year, so I was 24 back then! By the age of 54 it should be all paid for maybe even before then! Definitely our first priority compared to an overseas holiday!
We had a 10% deposit saved also
If you can stagger the purchase of the land and build stages that would go a long way at minimising interest. It's what I did and I was able keep the debt owing to less than 100k at all times.
This is not always possible.. more for young adults who live with their folks, or in my case.. free loading on the company's purse.
OP, in 50 or so years when you and your workmates leave this earth, home ownership will be irrelevant.
Face it, it's none of your business and the only reason you're belittling them is because you're having difficulties boosting your ego elsewhere. It shouldn't matter to you what they spend their money on. If they EARNED their money, it doesn't matter if they bought hundreds of clothing, shoes, cars and jewellery, if it brings them the same joy as you having a house, I don't see a problem. Some people just don't prioritise a house more than they do for other stuff. If they're on welfare and blowing it on this stuff, then it may unethical I guess, but this is earned money you're talking about so its none of your business at all.
PERSONALLY, I prioritise purchasing a house first and I believe it's really important to do so, but I know it's not my duty to judge others on their priorities.
I have no problem what people spend their money on. Or if they do not want to buy a property. What i have a problem is with people who constantly whine about not being to afford property but can afford to splurge on expensive luxury items or travel overseas every year.
Majority of people who do choose to buy a property understand that they have to forgo certain luxury items or overseas travel. They understand this because their income cannot pay for both. Many people are in this situation just like me. Would be nice if my pay can cover both but the sad reality for most people this is not the case.
The other gripe i have is those renting saying they are saving for a deposit therefore they argue that everyone else renting is doing the same. I got nothing against people renting to save deposit money. My parents did exactly that. However to argue to other people till they are blue int face to make them think everybody else renting is doing the same thing because you are saving up for deposit money is just kidding yourselves.
Before any of you think I am pro property ownership. I am far from it. I have a friend who earns a decent income. Even moreso when combined with his wifes income and they do not have any property in their name. They can afford to buy a property 3 to 4 time my apartments price. They just choose not to be tied down. So I understand if you choose not to want to own property.
TL;DR
Spend your money how you want to however don't complain you cannot afford a property if you are not prepared to make sacrifices.
Sacrifices such as living further out from the city, buying less luxury items and going on fewer holidays or going for less expensive ones.
It's sad but with shows like the block, block triple threat, block all you can and using children to speak about how good it is to borrow in mortgage ads (st george). The culture have made getting into huge debts a fuzzy warm cutesie thing. Nothing can be further from the truth. Most people cannot afford loans that are unrealistically high. Many people rent. There is no shame in renting, even if you have to do it for the rest of this century. It is not a crime to rent. It's call living within your means. If you think majority of the population just keeps busy all day wondering if the toilet tiles should be blue or white or sleepless nights over bedroom curtains like reality shows, then you don't know how the majority lives.
Not everybody who makes an honest living can borrow to buy, most get rejected by banks. And not everyone who can buy a house have made their money through honest means. There have been cases where lenders push a loan through despite difficulties in establishing source of incomes.
Live within your means, if you cannot service a loan, then don't. It's not criminal to have no property in your name. Even though the social cultural norm here does not agree to it.
snort, not everyone who makes a dishonest living can borrow to buy!
its hard to save money to buy a house with all these great daily offers from ozbargain, lol
This is the first generation I've known to cry that they can't afford a 4 bedroom, 2 bathroom double-lock-up-garage in a good location, and do nothing about it.
Houses were unaffordable when I started working, so I stayed at home longer, then rented a tiny bedsitter, then a 1 bedroom apartment when I got married. Of course, I never owned a car, because we all know that cars are the biggest money drain.
At the time some banks would offer first home buyers a 110% loan, and we scrapped every cent together to buy a tiny townhouse out in the suburbs.
My parents had the same deal. We grew up in a little cottage at Caboolture, 5 people in a 3 bedroom, 1 bathroom home. Plenty of others have multi-families sharing a home.
The difference now isn't that houses are less affordable, it's that people want a bigger place in a better location and aren't willing to give up the car, the phone plan, the gadgets, the coffee, the eating out…
I agree Slickmick…people want the latest gadgets and wont save
My partner and I save a minimum of 50% of our take home pay every month and yet we still rent. I've had the same phone for the last 5 years but even if I did upgrade it each year, it would have no impact on my ability to buy a house and no influence on whether I think buying in today's market is a good idea or not for my current needs and situation.
Please stop making out that home ownership is akin to some kind of superiority.
I'm very pleased for you that you own your own city apartment and it obviously gives you a sense of pride and achievement but there is more than one path to financial success. Different people have different goals and priorities in life.
Maybe they have lots of shares or investment property else where and they're renting with the income from that.
My tenant is earning $300k pa, and is still renting.
I have also considered renting in a cheaper suburb and paying for that by renting out my current place.
Maybe they have invested in one of these places overseas they've been visiting. In a lot of countries north of us, you can buy a good place for $60k.
In global terms a lot of home owners just lost 25% of the value of their assets in the last few years compared with many currencies. And that goes for salaries too.
But even then I can't think of anywhere else in the world worth buying into permanently.
If life was a board game I would certainly recommend buying a house to finish with the most "winnings" at the end. This mentality is probably one of the greatest contributors to progressive social inequality and superficial attitudes to life's priorities. There's a reason Monopoly bores most people to death after a couple of hours and often results in fighting and/or cheating. Now imagine a Monopoly game for life where you pass your assets (or lack of) to your children and your children's children. You'd think some of those later generations would realise it's the system that is broken but how willing would the winners be to give everything up?
I own a house and still rent.
I won't bore you with the details but sometimes it just works better that way.
For those who consider property to be the perfect asset class in Aus, consider thw following stimulus which has had to be rolled out over the last 20 years, which squandered the mining boom the process:
1) Negative gearing (only Aus, NZ and Canada is it legal to offset losses against unrelated oncome. NG os also an utter failer with 90% of claims against existing builds.
2) First home buyer (read: vendor) grants. Each time brought about inflation greater than the 'free' money.
3) 50% CGT concession on profits on investment sales from Howard.
4) More grants…
5) Change to laws to allow SMSF to leverage into property, allowing more flow into this one asset class. Another 'gift' to the boomers from Howard.
6) Lowest interest interest rates, ever. Surely the sign of a healthy economy right? Result: stampede of investors and little else.
7) FIRB doing literally nothing about the illegal foreign purchases/laundering into existing builds. In fact Rudd relaxed foreign investment rules to facilitate this.
8) Big Australia, designed to stress evem further demand side and fails to do anything about supply side.
9) Lower interest rates still with zero action from APRA nor FIRB to do their jobs.
Now Hockey is spitballing ideas of first home buyers to use their retirement savings to buy property on the presumptiomln that the magic pudding will keep giving.
After all this help over several decades to specifically assist inflation, one wonders how strong property would be without the help, or what would happen ig any of the above are altered.
Negative gearing and 50% CGT tax concession also apply to share investments. As do interest rates, which weren't rolled out by government but set up the Reserve Bank, which was made independent from government in the 80s.
Although most people would (quite rightly) feel very uncomfortable to gear into shares as much as they do with Property, so there's definitely a greater benefit to property investments.
As for Hockey, the fact that such proposals are coming from our Treasurer is ridiculous.
And I"m totally with you on the First Home Buyer Grants, which really should be renamed the Vendor Assistance Subsidy as that was the ultimate effect of them. Basically propping up an asset class to curry favour among the electorate who perceived they had the most to lose by any decline in value of this asset class.
Yeah understand it's for leveraged investments, but just look at the number of Aussies who try to claim that NG is specifically invented 'for them to reduce income tax' to see the very real distortions this flawed policy is. It's also very unusual for anyone to take out an $800k neg geared position in shares like is quite common with property, further highlighting the gross distortions to that asset class specifically.
Yep, I'm actually kinda on the same page with you wasabinator. My second para acknowledges that NG theoretically applies to shares and property equally, but the actual application is vastly different.
My view is that asset prices have the potential to rise, irrationally, until investors realise that the asset no longer offers a decent return. Then its a rush for the exit as they try and sell. And then irrationally push prices down further. I reckon the vast streams of debt being used to increase asset prices can cause a reckoning, eventually. I'm loathe to suggest a crash will happen. Government is too busy painting itself into a corner to support asset prices, as you've pointed out.
I was reading an article about how much Australians are actually invested into property. Our major banks are heavily invested in residential mortgages and a lot of our superannuation is invested in these banks and other shares. So if property values drop it not only hits the direct investors but also our super and SMSF's. Also just a note….negative gearing works by the investor losing money to increase deductions but tax deduction is only equivalent to your personal tax rate. Negative gearing only benefits you when the asset moves up in value enough to cover the loss.
"Negative gearing only benefits you when the asset moves up in value enough to cover the loss."
That is a pretty major oversimplification… it makes it sound like unless property values in general go up, negative gearing won't work. That is not the case/not the essence of negative gearing at all.
Also, all the "negative Nancies" in this thread crapping on about the Australian property market "crashing" (some even warning of crashes of 40%! LOL); get real. It has never happened, and it never will. The most it tends to drop in even the most over-valued suburbs (some of those at the high-end of town during economic downturns for example; think "Toorak" in VIC, etc.) is about 5% and even then within a couple of years it's back in profit.
In Australia, buying real-estate will usually be (as the saying goes) "safe as houses"; unless you do sommat silly like buy into a speculative/ massively over-supplied market (think off-the-plan Docklands highrise apartments 10 or 15 years ago), or buy a "fixer-upper" then lose motivation/capital, etc. A 40% crash in property values? Jesus, spare me the BS will ya?
I'm pretty negative about housing prices being so high but don't think housing in Australia will crash, at least not for a very long time. At some point in the not too distant future I would expect that growth will need to slow down and I do think we will see a stagnant period (some markets are already experiencing this).
Any young person buying their first home today who expects to see the kind of growth that their parent's experienced is being a little naive. I wouldn't say that it is impossible but it is unlikely.
Buying will still hold financial benefits even in a flat market and there are also plenty of potential lifestyle benefits to buying beyond financial benefits, just as there are many potential lifestyle and financial benefits to renting. Which is best will depend on the needs/wants of the individual.
Incidentally I had a builder call me tonight to ask if I would be interested in talking about building a home with them to escape "the rent trap" (I gave them my contact details as part of a competition). The OP would be proud of me as I gleefully advised that I am leaving for an overseas holiday soon so now probably wasn't a great time. I can only assume I'm now an anecdote for how Gen Y have their priorities all wrong :)
I also hear property doubles in value every 7-10 years. Nice to see the property spruicker kool-aid is still the best selling beverage among property investors here.
"Nice to see the property spruicker kool-aid is still the best selling beverage among property investors here."
Are you suggesting that property values don't tend to go up reliably every year? Of course they don't usually double in 7-10 years, but no one on here has mentioned that percentage, except you. Since 1960, Australian house prices have risen steadily by about 2.5% a year:
http://www.rba.gov.au/publications/confs/2011/images/yates-f…
@GnarlyKnuckles:
Just because housing has enjoyed a prolific boom in over the last 15 years doesn't mean it will continue to do so into the future. As far as I am aware no other asset class makes the claim of being able to "go up reliably every year" and if anyone tried to sell me that tripe I would consider that an instant red flag for said asset class.
So what special treatment has property investment enjoyed over other asset classes to help keep the good times rolling and prices high?
* Negative Gearing - Allow investors to lose money on property in the hopes of flipping it for a profit at a later date assuming prices keep rising.
* FHB incentives - get more fresh blood into the market to keep demand artificially high and therefore keep prices rising
* Deposit guarantee - Play the confidence game with the Australian public, as the banks are inexorably tied to property. A property collapse will trigger a banking collapse and vice-versa.
* Relaxtion of foreign investment rules for property - yet another tactic to keep demand artificially high and the perfect way to absorb outflow of corrupt money from China.
* Coming soon - Allowing FHB's to use their super to buy their first home - keep the good times rolling I say!
Australia has some of the highest private debt levels in the world and I don't know how anyone can possibly think this is a good thing.
And why should property get special treatment at the expense of the tax payer?
Also excellent graph provided, do you consider real property price growth sustainable compared to real wage growth? Are you confident that interest rates will never ever go up?
growth isnt uniform over australia though… hell it aint even uniform over a particular city
some places have seen less than 5%
some have minus growth (obvious rural mining agriculture)
some have doubled
the info is all there, you can find historical data for most places
"Just because housing has enjoyed a prolific boom in over the last 15 years doesn't mean it will continue to do so into the future."
I never mentioned a "prolific boom", and the evidence I provided was for a steady increase of ~2.5% a year for the last 50 years, not the "15 years" you (somewhat randomly) refer to. Actually if you add the data from the last few years, it's closer to 55 years that real-estate in Australia has been consistently rising.
If the population was shrinking, you might have a leg to stand on. In fact, it's growing rapidly, as is demand for property.
ERGO, there will not be a substantial drop in property values any time soon.
"…excellent graph provided"
Cheers mate.
"Do you consider real property price growth sustainable compared to real wage growth?"
Yes, I consider the long-term historical increase of 2.5% per year sustainable compared to real wage growth.
"Are you confident that interest rates will never ever go up?"
I'll assume this was a joke; no one in their right mind would be silly enough to make such as assertion. Of course sometimes they will go up, just as sure as sometimes they will go down. That's what they do.
@GnarlyKnuckles:
You haven't addressed all my points about the tax payer supporting property as an asset class, but continue on your hyperbole about it being able to go up forever unimpeded.
Also the 15-year boom is clearly presented in the graph you kindly provided, just look from the year 2000 onwards.
"… but continue on your hyperbole about it being able to go up forever unimpeded."?
That's a bit rich. I was merely steering the dialogue back to what my original assertions were; away from your attempts to subtly incorrectly imply that I suggesting that there would be a never-ending property boom.
"Also the 15-year boom is clearly presented in the graph you kindly provided…"
As are a lot of things. What I said was, I did not mention the "boom"; nothing I was talking about was related to it. I'm talking about the steady increase over the last >50 years. Feel free to continue your somewhat abstract hyperbole apparently based on the last 15 years; but maybe start a thread of your own all about that, rather than pretending that that is what I was talking about?
@GnarlyKnuckles:
Still avoiding the subject about property being back stopped by the tax payer and why it should be entitled to this special privilege.
You yourself said "Are you suggesting that property values don't tend to go up reliably every year?" So are you suggesting that property can never go down?
Furthermore your graph clearly shows that up to around 2000, wages and housing growth increased almost in lock-step. Going forward we see property price go through the roof while wages appears to continue at it's long term average growth. And you continue to deny there has been a 15 year boom assisted by the government through the tax payer?
"Since 1960, Australian house prices have risen steadily by about 2.5% a year"
So, basically worse then just leaving cash in the bank to compound during the same period.
@wasabinator:
No.
You cannot live, or raise a family in a bank account full of cash. Unlike a bank account full of cash, if you don't own property, you have to rent it; to live in. Also, you cannot rent out a bank account full of cash to someone else for $1000-$2000 per month, for them to live in. You cannot negative-gear a bank account full of cash. I could go on, but I think you're getting the picture.
There's a common assumption that rent money is dead money but this paper by the Reserve Bank last year suggests it's not a clear cut decision. But to each their own.
"We find that if real house prices grow at their historical average pace, then owning a home is about as expensive as renting. If prices grow more slowly, as some forecasters predict, the framework used in this paper suggests that the average home buyer would be financially better off renting."
http://www.rba.gov.au/publications/rdp/2014/pdf/rdp2014-06.p…
It's ozbargain and noone said anything about paying your rent with eneloop share dividend?
People who go on about home ownership forget a MAJOR cost: upkeep. Driveway done? 5-10k, new decking? 5-10k. Bathroom? 10-25k. Leak in roof? Can easily result in a 4-6k plumbing job. Pointing of ridge tiles, another 5-6k thanks. Termites? $$$$ Oh they came back again? $$$$$
I haven't met a homeowner who isn't blowing unlimited wads of cash just keeping their house hospitable.
Surely you jest? If you do a reasonable bit of due diligence when you buy the joint, and don't buy into sommat unpredicatable like a unit where you "share maintenance costs of common areas", the ongoing upkeep should be nothing like the nightmare picture you paint.
"Drive-way done? 5-10k…" What? most driveways never need "doing", provided they're in good shape when you buy. Those bad boys are "set and forget", hombre.
"New Decking? 5-10k…" Here you are referring to value adding; unless you bought a joint with a deck that was so far gone that it could not be maintained/needed replacing.
"Bathroom? 10-25k…" That kind of estimate equates to changing a modest, functional bathroom into something fit for a king. Just repairing something that breaks in a functional bathroom, or retiling it, etc. would be under 3k. So again, you are referring to "value adding", not functionality; and value-adding is entirely optional; you do it at your own peril, under the assumption that you'll "get it all back" when you sell.
"Leak in roof? Can easily result in 4-6k plumbing job". Well plumbers don't fix a leaky roof, but I understand the point you are trying to make. The fact is though, unless it is a major structural problem, it will not be uber-expensive to repair. If it is, then you should have been aware of it at the time you purchased the property.
"Pointing of ridge tiles, another 5-6k thanks…". I don't really know what this means, because I've never known anyone who's needed to have it done. Aren't the ridge tiles just the ones along the tops of all the edges/'apexes'? If so, why on earth would you pay 5k to "point" them, when you could just replace them for way less than that?
"I haven't met a homeowner who isn't blowing unlimited wads of cash just keeping their house hospitable."
Either you only know about two homeowners and both of them bought a run-down shack, or you are erroneously counting "value adding improvements" as "keeping their house hospitable".
I don't know any home-owners spending "unlimited wads of cash" just keeping their house hospitable. The only peeps I do know who are spending uber cash on their properties either bought a dump and are fixing it to sell (or rent-out) at a tidy profit, or they are undertaking renovations (i.e. value-adding); neither of these scenarios are relevant to your assertion that owning property is inevitably some kind of never-ending "maintenance costs money sink!"
People who go on about home ownership forget a MAJOR cost: upkeep. Driveway done? 5-10k, new decking? 5-10k. Bathroom? 10-25k. Leak in roof? Can easily result in a 4-6k plumbing job. Pointing of ridge tiles, another 5-6k thanks. Termites? $$$$ Oh they came back again? $$$$$
Wow. Just wow. This is so wrong. GK has already summed up the costs accurately, but I'd also like to point out that if you choose renting over homeownership (or homelessness) then:
- if the driveway needs doing… it doesn't get done.
- new decking… for a renter??? Haha yeah right!
- bathroom… what wrong with the old one? They're just renters…
- leak in the roof? OK this probably gets repaired by the landlord… for $400 by a roofer (not a plumber)
- pointing of ridge tiles… do renters even know what this is???
And IF any of this was done to the property from a value added perspective you don't think rent wouldn't be increased $50-$100 per week to cover the costs? So in the end who do you think pays for the works?
IMO, housing prices in Sydney or Australia are not going down anytime soon. Reason being low population. Australia needs population to grow YOY, hence the influx of immigrants every year. New residents will need housing so rental market will not go down. People with money will continue to invest.
For Eg: 21% of Australian economy comes from overseas students. When I came back in 2000, I had to study and attain certain level of points before i could apply for permanent residency.
Now, the student traffic is directed towards Adelaide/Canberra and other regional centres as students cannot apply for residency if they study in Sydney or Melbourne.
Add to this skilled migration.
IMO, market may flatten but will not go down…
21% of Australian economy comes from overseas students
LOL
Excellent answer. You must be proud of your R&D and literature skills.
Everyone has their 2c about property, and that's the problem. Owning something isn't on my radar. I'm not interested in other people's opinions on the matter. If owning property is high on your agenda, good for you. But I haven't "failed" because I don't own a house.
And for those that think property is a good investment; the rest of the world doesn't think so. Good luck.
What do you invest in?
lol, I am single, and bought a house when I was 26, and completely paid off at 32 !
Doesn't sound like anything has gone wrong for your friends, you are being judgmental, and they obviously have different priorities to you.