Looking to buy our first house/property in the Northern/Northwest side of Melbourne, we have a 120k deposit and both have stable jobs despite the current climate.
Would you:
a)aim to find something bigger/newer but further away or
b)something smaller closer to the CBD and potentially older?
It would be just for my partner and i, no kids.
Would you consider this a good time to enter the market, and if so why? besides the lower interest rates.
Cheers,
awkward
That's putting it mildly. It's a (profanity) terrible time. Property valuations are largely based on household income. Household incomes for the majority of Australians are unknown at this point. It's impossible to value a property.
we have a 120k deposit
I don't know what the median house price is, in your city, but if you're looking at a 90% LVR, then you seriously need to reconsider. I just don't see a bank lending that, regardless of how stable your jobs are. If you're at 70% LVR, then you'll probably pull it all together, but be prepared for a big drop in the coming months/years and possibly negative equity.
Big 4 will still do this no LMI depending on profession - i.e. medical, accounting..
Well we all know how smart banks are in times of crisis. Under estimate the risk all the time.
I got pre approval last week from cba for 80%
I expect changes to come to lending criteria’s including income assessment and LVR’s - some broker may want to chime in ?
@Maxdax: I am not a broker, but have heard some anecdotal stories of banks requiring representations from the prospective mortgagee's employer stating their intentions for keeping the employee on if their businesses are affected negatively by coronavirus.
I got pre approval last week from cba for 80%
I'd expect to see some valuations short falls in the coming months.
@salmon123: Well yes technically i still have to have a subject to valuation clause even though its pre approval. So no auctions for me.
Entering from the front door or back door?
Hahahahhahaha. Sorry. Hahahhah
I accept your apology
120k deposit and both have stable jobs despite the current climate.
a)aim to find something bigger/newer but further away or
b)something smaller closer to the CBD and potentially older?
in Melbourne ? 120k ? 5% deposit ?
Could use the guvments first home buyer deposit thing in the next financial year
5 percent is all you need
Not in moonee ponds. Mate I know bought a place sub 500k.
Nice location and apartment.
If there is a property you like and you can afford it it is a good time to enter the market.
You can never predict the future but prices are more or less guaranteed to drop over the next 6-24 months. How much they drop by will depend on where you are looking and what kind of property and will be difficult to predict.
No.
yes, u just mad coz you bought in the past 3 months
When the news reports the market has gone down… it's already on the way back up! A stressed property right now… perfect. It's fear of the future that allows good buys. I'd buy for sure, if you can get a cracker deal. Then in 5 months, people will report how the market has gone down… and you'll be part of that reason..
There is VERY little demand now, so you can get a steal.
LOL
How much experience do you have in the property market phunkydude?
Hi Wololo Wombat, Is your property investment experience based on the last 25 years of recession-free streak in Australian economy ?
It's true, news reports are shit at predicting anything
Maybe for the sharemarket but real estate is not as dynamic
Unless we find a miracle cure the property bubble will not continue.
It's not a bubble though. Syd and Mel top end… sure, but a place is live is an inelastic commodity and supply is limited in major cites, while demand will always be high.
Banks are freezing mortgages for 6 months. Sellers have valuation expectations and are going to want to hold out. If in 6 months, a significant amount of forced sales are going on then. Confidence might give way to panic. But considering how long the property boom had been going. Its going to take a bit too convince people the a run down weatherboard is not worth a minimum million dollars
https://www.ozbargain.com.au/node/510511#comment-8199416
Check out my comment early this year and jumping into property Well now will change your life forever. Don’t do it.
Spot on
I've found a property but this seems like the absolute worst time to enter the market. I feel like we're at the peak and it's all downhill from here. My parents are pushing me to buy because they really like it and think it'll be fine but I'm worried it'll be a huge financial mistake. 6-12 months from now is probably a better time to look at buying imo. I might have to pass this one up and hope something just as good comes up later.
depend on your age and/or how long you consider hold the property. if you hold a property for at least 20yrs+ the gain will surely be there eventually. but if you like trade property in 7-10 yrs for margin profits it may be harder at this time
If you HELD a property for at least 20yrs+ the gain WOULD surely…. New times are coming mate
Same story I've heard since I was a child. The good news is, every time there is a dip, you can say "see I was right".
@SlickMick: How many times have you faced such situation with full lock down of economy since you was a child?
@Lado: He might be Gerry Harvey, apparently he was around when the 1918 Spanish flu was going around.
You should have bought in Japan 20 years ago and you will be laughing(Sarcasm)
One strategy is to wait for this crisis to get worse. They are investors that own more than one investment property. Wait for them to lose their job and their ability to service their mortgages. At some point they may have to sell to keep food on the table. This is bad for them but good for you.
Why would you make a 30 year decision over 2 year speculation. When you are ready to buy, just buy. I'm sure the same things were being said about property in the 80s and 90s but those that made a 30 year decision then are laughing now even if we see a 30% drop. I know people that sit there and just talk about property prices and the right time to buy and they just never do.
wow property common sense. That's rare on ozbargain. The most vocal here seem to equate buying a house with playing roulette.
Finally a voice of reason.
Look for a property you like within your budget (make a budget for the worst case scenario, not the best. Calculate your repayments based on a higher interest rate and your ability to service the mortgage on one income).
It may take 3, 6, 9, 12 months to find a place you like (or build up a bigger deposit). Be ready to buy when you find the right place.
If you're going to be holding onto the property for a long time, what does a 6 month fluctuation in prices matter if you've found the right one?
When economic times are uncertain, people are far less likely to buy. Less buyers makes for desperate sellers. You're going to have a lot of bargaining power this year.
These are not normal times.
Property in Australia was stable from the 1980s - 1990s.
Property prices started inflating the early 2000s to record highs.
The property market now is at an all time historic high.
Some people consider this to be a massive property bubble that can burst at any moment.
Given that no one knows if it is a bubble, or if it will burst now (and not in another 30 years), and given the world is now also dealing with a crazy pandemic for the first time since 1918….I would be pretty cautious about entering the market right now.
There has been consistent growth in the property market since 1950. If you find a resource that can give you a percentage year on year movement on the property price index, you will find that the high percentage growth we have seen since the 1990's goes as far back as 1950 post world war 2. While our lifetimes have seen a huge increase so have previous generations. I wouldn't call this a property bubble, I'd call it the industrial revolution. The entire world saw this level of growth not just Australia.
Likewise you can also find a table that outlines the percentage of home ownership among Australians has been consistent since the 1950's which indicates that … the people that are going to buy will buy, the commentators on the side line will just commentate and not buy.
I would be pretty cautious about entering the market right now.
Everyone has to look at their individual circumstances to make a decision, a blanket caution is not applicable. What if your planning to enter the market, buy one house, never buy another house again and you are a doctor and you are putting down a 50% deposit. The property value has no impact on you, your job is stable you are not investing etc. etc. Vice versa if you are a flight attendant and you are planning to enter the property market for capital gains, I would take ALOT of caution and not buy at all. Every situation is different and has to be treated individually.
There has been consistent growth in the property market since 1950.
That's not true.
https://www.macrobusiness.com.au/2013/02/the-history-of-aust…
By almost any measure, from 1950 - 2000 there was steady incremental growth. And then from 2000 - to present there was wild, crazy growth that cannot be described as 'consistent'. 2000s onward is a different period that what came before. This shows it quite well:
https://www.prosper.org.au/wp-content/uploads/2013/05/Philip…
Some people would call that the start of the bubble inflating.
Likewise you can also find a table that outlines the percentage of home ownership among Australians has been consistent since the 1950's which indicates that
This is also not true.
The percentage of Australian home ownership peaked in the 1968 and has been steeply declining since the 2000s.
https://tradingeconomics.com/australia/home-ownership-rate
I would take ALOT of caution and not buy at all.
No one in the thread has said anything about not buying at all. Just not buying at what looks like the top of a bubble.
@koalabargains: I don't know if you are joking with me or serious?
Based on the link you posted there is;
This is exactly the definition of consistent. Likewise if you break it into decade increments it will be consistent on that measure also. The smaller you break this down the more 'wild' it gets, but that is not the purpose of property, unless you are a share market speculator, property investors generally go long on property, that is why loans are for 30 years.
Based on the second link you posted, there is;
That is also the definition of very consistent.
Over 60 years there has been nothing WILD about Australian property.
@TheBilly: Are YOU kidding? I think you're being facetious.
A 6% drop in homeownership rate is huge. ItsThe 65% current rate is the lowest it's ever been in modern times. And it is continuing to decline. Anyone can lie with statistics. You could look at that same data and say the homeownership rate in Australia from 1968 till 2005 never dipped below 68.3. But since 2005 it has hit record lows and continued to decline reaching neverbefore seen lows. And we are now at an all time historic low of 65% and dropping.
This is exactly the definition of consistent. Likewise if you break it into decade increments it will be consistent on that measure also. The smaller you break this down the more 'wild' it gets, but that is not the purpose of property, unless you are a share market speculator, property investors generally go long on property, that is why loans are for 30 years.
Please don't waste time with sophistry and disingenuous nonsense. Actually you know what? Do. I don't care. If you want to say there's no bubble and it's business as usual, go ahead. It's not my problem.
@koalabargains: You sound very inexperienced and naive. Nobody should go short on property, every successful investor goes long, if your numbers stack up for a long position on property (think 15-30 years) then bubbles DO NOT MATTER only CASH FLOW matters because over that period of time your asset will be paid down, all you need to do is hold it, the capital growth is just the cherry on top … Even if we are in a bubble, if you are looking to buy and sell property by only holding for 1-2 years you are silly and your opinions are dangerous and more than likely you will get caught out with a short term drop in prices because you lacked the understanding to begin with - why even invest in property with a short position, property is the most non liquid investment and the worst to do that with, go shares, bonds, currency etc.
if your numbers stack up for a long position on property (think 15-30 years) then bubbles DO NOT MATTER only CASH FLOW matters because over that period of time your asset will be paid down, all you need to do is hold it, the capital growth is just the cherry on top
Its lovely that you moved from "we're not in a bubble" to bubbles dont matter atball, just hold property for 10-15 years. And a strawman about holding property for 1-2 years. Who said that, ever?
IMHO youre a joke.
IMHO youre a joke.
Yes, I may be a joke to you but I own a bunch of property. So you are a joke to me.
Yes, I may be a joke to you but I own a bunch of property.
That makes a lot of sense. People believe what they have to believe.
I own the right amount of property for me, with an appropriate amount of debt. I have nothing to worry about if there is a bubble, and if it does burst. Bet you can't say the same.
@koalabargains: You own the right amount of property for you is a smart way of saying you have no idea and own nothing. Keyboard financial planner, grow up.
@Bratam: More useful than you. You have contributed nothing to this thread, at least I have contributed an opinion people disagree with.
@TheBilly: I dont think you understand english here. I own property and a, comfortable with my debt in light of the massive bubble we're in.
Im not the obviously overleverged one who trolls forurms to scream that we're not in a bubble, bubbles dont exist, and even if they did then bubbles are great.
You should read up on tulipmania because your language are arguments are literally textbook asset bubble talk.
@koalabargains: Just remember my comments for 20 years. Then you can have this discussion with yourself and realise how dumb you were for not understanding what a long position on property means.
As long as the Australian population keeps increasing, housing prices are sure to go up. About 500,000 people enter Australia long term every year, and 300,000 leave. Cornavirus will surely temporarily stop people resettling in Australia, but 6 months from now the gates will be open again.
Cruise ships and airplanes have to cheap now…
I consistently read these days of a significant drop in values. The number I most often read is 20% but its pure speculation and no-one knows. Remember, we may be looking at up to 15% unemployment soon. That has to have a direct effect on housing. I would rent for a while and ride it out.
The great trick is to pick the bottom of the market.
I think being in negative equity must be one of the most depressing feelings. Years of savings and hope just gone!
Of course, speak to any agent or the REI and "there's never been a better time to buy" … but then, that's the only song they know
They also know one more song to sing for the sellers - ''There's never been a better time to sell..'' They are making money on their turnovers, it's better to sell 3 properties for 200K each rather to wait when one property worth 600K may be on the market for ages
The problem is it feels like a shit time to buy and as such there is currently less competition.
May 19 was prety much the bottom in VIC anyway, but i remember thinking at the time it had more to go. Then July August results came in and we were off again. I still get fustrated when i look at sold listings and see all thew bargains in around the May-June period of 2019.
I feel this will be the same.
Sure, uncertainty around jobs and such but people will always have money in every economic climate, properties will transact and good properties will continue to sell for fair price.
It is a good time to buy if you can find what you after being sold buy a motivated seller who wants to retire or has been forced to sell.
A good time to buy will revolve around your situation not the market's. IF everyone is shitting their pants but you're in 6th gear cruising through these difficult times in a well paying stable job, go for it.
2019 people were jumping at shadows. Right now we have
Interest rates
Sellers expectations
Pushing prices up.
Banks lending practices
Lower immigration
Lower rental yields because people can afford their rent
Unemployment
Job Insecurity
People moving in with their parents
No auctions
Pushing Prices down.
Sellers expectations is certainly big
Better off waiting a few months, you won’t get a bargain but might be able to secure a better house in a good area. Not sure of the suburbs you are looking at, however homes in a suburb with good infrastructure (close to a hospital, schools, public transportation etc) will usually be worth more than a volume build.
If prices are expected to drop then there should be a lot of sellers putting their properties on the market right now to try and beat the price drop.
But a lot of sellers have actually withdrawn their properties for sale.
If it is true that demand will drop, so can supply.
If you see a house you like and are comfortable with the price then I say go for it. If the price drops well it will eventually rise again in the long term. If prices don't drop well then you have no regrets and would be happy that you didn't miss out altogether.
Take a loot at what happened during 2008 GFC. Many sellers thought they could ride it out, only to be proven otherwise in a year or so. GFC happened in 2008, but property prices went down in 2009~10
OP: Wait at least a year, cash is king now. Learn from the GFC history, the consequences of this situation is coming.
Most owner-occupier mortgage holders don't have the the luxury of that kind of discretion. Once we have 15% unemployment AND the six month repayment holiday is over, then wait about three months for the last remaining funds to be used up and then we will see what happens.
Poop should really hit the fan by about Christmas 2020
In these cases I would think of two situations:
1- you get a steal because of low interest from others and seller might want to get rid of property so you would save 30k at max.
2- the prices go down and you’ve paid 30k+ more for a property and might even go down later on the track.
Option 1 sounds good but option 2s risks are higher, therefore you should think of both scenarios before purchasing:)
No one should tell you which option to take. Good luck.
What about option 3 - prices go up and you can't buy a house anymore because prices have gone above your budget and then you are doomed to rent forever.
What about option 4- prices go up and you buy a house and then a recession happens boom you’re stuck with a house that you paid 200% over.
So many options, i just gave the two options that OP mentioned throughout the thread :)
No doubt higher unemployment will lead to lower disposable income and lower prices. Interest rates and government subsidies aren't going to save it this time . Unknown factor maybe Oversea's buyers still have interest in Australia and because of this make the drop less .
The federal government is ready to kick out international visitors. It will be less overseas buyers when that happens.
| 3. You buy now, then house prices halve and you lose your job because the whole economy is stuffed.
Logic never applies to the market and the news can't predict anything, that's what I've learnt. Australia already went through a per capita recession before the coronavirus and house prices were still going up. People will be out of jobs but they're people who couldn't afford a house anyways. People in the city, health care workers etc (those earning much more money) still have their jobs.
With $120k deposit, I'd try buy an older 2 bedroom apartment close to the CBD and use as little of that deposit as possible and putting the balance in an offset account that you can get at in an emergency. It's hard to predict what's going to happen in the future, the government is being super generous at the moment but they'll be needing that money back at some point, taxes will change, life will change. Having 6+ months of living costs sitting in a readily available format lets you sleep easily.
Disagree , even prior to the pandemic apartments were going through a nightmare . Eventually the biggest block of land is the way to go .
Do you think people want to live close to each other after this event ?
Yes.
Have a look at the PRC, HK, Taiwan, Singapore, Vietnam and Thailand.
Apartment is the worst thing you could buy
I bought (first home buyer) an older 2 bedroom unit in Jan this year within 7km of Melbourne CBD. Luckily I have good job security and another apartment in the same block in similar condition sold for 40k more in Feb. No one knows where the bottom or the top is, all a guessing game.
I did a calculation a few months ago & the 35 year return in Sydney is 7% compound. The long term return in the stock market is 7% compound.
This is why I have a PPOR and maybe another place for renovation. You make money when you buy property (at a low price). The rest is in the stock market stock market & bonds.
Are you talking about total return or just capital gain? another thing is that cost of ownership for property is quite high, you are usually in negative income. The only one thing that is a plus for property vs stock is the borrowing cost.
Capital gain. The purchase & sale price of a number of properties.
I subscribed to a youtube channel (which had disappeared) about a guy age 30 who bought & renovated 8 houses. All the houses cost under $20,000. He had a fine arts degree, had various practical jobs, started building & selling farm-style tables, improved his DIY skills including electrical, then started buying and renovating full time.
That's different though, renovation is completely different beast. Australian Market is quite shitty for flipping house. You pay 5.5% stamp duty, 3% sales commission and sales campaign. And if you flip house, you pay 10% GST as well. Renovation is full time job, you turn yourself to a trademan, not everyone can do it plus i wouldn't quit my full time job to do it.
The SP500 returns 300% since the GFC and I think invest in Index share is safer than investing in a house. Now being a landlord myself, I just find property investment is not that great. A lot of maintenance, low liquidity and high risk as well. Like i said, the only plus side of Property investment is cheap money from bank.
This what I don't understand about the landlord-haters. Surely 7% is a modest return on an investment - if it was less, the only rental properties would be government housing.
Does your calculation include return during the life of the investment as well as capital gain? Does it include tax offsets?
Just capital gains from buy/sell prices.
I've been buying ecommerce wesbites from www.flippa.com since 2012 and >50% return on equity. I'm not interested in real estate. I make far better returns running e-businesses (helps if you have a computer science degree, worked as an IBM consultant, and have real bricks-and-mortar business ownership experience). Investment properties are real businesses with business risks and not a passive investment.
Virus or not, I would always go for (b) - an existing house that is closer to the city. It may be smaller but I think if end up commuting to the city (if not now, possibly in the future) it will burn up so much time daily. Also I'd rather a house that has obviously stood for many years rather than a hastily built money-maker-McMansions you see all over the likes in say Point Cook.
As for the current times I'd say I'm more worried your job rather than whether the house happens to increase or drop by (say) $30k. I'd say my job is pretty safe in the current situation, but whether it's safe when it's over and companies and Governments are out to claw back the losses who knows what will be on the table and the flow on affects from that.
Virus or not, I would always go for (b) - an existing house that is closer to the city
Bought first house in 1978 in Croydon $38 k new.
South Melbourne terraces $35 k then - no one wanted those slums. Southbank was a swamp.
Luckily acquired South Melbourne investment 20 years ago.
OK Boomer
Unless speed limits go up to 150km with no traffic, or we start running bullet trains into the city is going to take a long time to make up the distance out to say Caroline Springs than what was needed to go from city to South Melbourne.
And yeah, I think we have bigger problems if wage growth is going to match that kind of property price growth.
But hey good on you for being old enough to have an investment property and one from the sound of it that isn't all "hold onto it interest only for capital gains" like current investors.
After COVID-19 companies will change the way they operate. Office spaces will be reduced and government will give them subsidies to move out of CBD. In 30 years time the property market will be upside down.
Office spaces will be reduced and government will give them subsidies to move out of CBD.
How's that Melb Airport rail link coming?
Where are all the main offices of big internationals and the big 4 banks?
How many skyscrapers have been built since Sept 11? Probably too many to count.
The only ones really moving out are Government.
And uhh, I think people want to enjoy their home now, not in 30 years.
I'd wait until the banks stop offering the 6 months freeze on loan repayments. I think that is when people will get into trouble and need to sell cheap.
b)something smaller closer to the CBD and potentially older?
Ignoring the timing portion of your question, always, always this. Location location location.
Save yourself, your health, and your wallet on not commuting. Better access to public transport, restaurants, culture, friends.
Outer suburbs are lifeless wastelands anyway.
My ten cents is it depends on what you're looking for. I suspect quality houses on land will hold up ok, if only because they appeal to owner occ or renter and banks are waiving repayments presently. This alone means less properties will hit the market than would have otherwise with such severe macro conditions which would have put downward pressure on prices.
I suspect quality houses on land will hold up ok
Lots of Australian houses have suspect workmanship. I agree with that.
Haha I agree with this too! Nothing but old houses for me
Definitely not now. I'm waiting too. Prices should start coming down. No rush really. Unless you see your dream house or something.
A lot depends on why you are buying this property?
Is this going to be your PPOR for the next 10-15 years? if yes, then as long as the mortgage + all expenses of owning a house can be comfortably met, you should go ahead and buy it. In this case even if the property loses 15-20% over next 5 years, since its your PPOR that will not hurt you much and rest assured that over 10-15 years property market will go back up.
If you or your partner are in jobs which requires you to move frequently OR you are trying to speculate on capital appreciation to deliver spectacular returns on your investments then you should definitely wait. As an investment you need better economic climate around you to ensure lower risks and better returns on your investments. Unless you are getting an investment property at 25-30 % discount, you should'nt rush into this investment.
I'm just in the process of buying my first house now.
Is it a bad idea to buy? I'm aware that property values are about to drop by 20%, so one school of thought would be "don't buy now, the price will drop".
However, that specific house you're keen on today, thats likely not going to be the same house on sale 20% off later. If the house is really worth it, it'll be taken off market, rented out and put up for sale again when the market bounces back in a year or two. Or alternatively some guy (like me) is going to buy it now, and start gaining equity in it over those two years.
So I think that if you're keen to buy now, and can afford the repayments, just go for it dude.
I think this is an awkward time to enter the market, expecting prices to drop in the months ahead.