With rates rising so steeply, wondering if anyone (who has their finances sorted) is looking to buy their first house, upgrade your house or look for an investment property in this current market?
The advice I've always been given is, buy when you can and not time the market.
Even though I'm in a financial position to buy an investment property, the market just seems so gloomy and risky at the moment.
First home buyers, investors, or families looking to upgrade, let me hear your thoughts!
They could also grandfather it. Meaning existing investment properties would retain negative gearing and new investment properties would not get negative gearing status. If they did that investing now would be a good idea
Only the politicians and their rich buddies will benefit from this grandfathering! Better to abolish it altogether.
If you find a place you love, and plan to keep for the next 10 years, and if you can easily afford the repayments if interest rates rise to 12% then do not hesitate to buy now.
Last week I bought a house in Sydney - I do have this constant feeling that I'll throw up if I think too much about it.
Everyones circumstances and priorities are so different though that there is no correct answer to this.
But if you have the capacity, have done your research and know what you want and what your priorities are then I think the answer is always going to be to go for it as no one can predict the future.
home - yes
house - it depends
I´d wait til people who got properties they couldn´t afford start selling because they cannot afford the repayments. But who knows how long for that, though.
depends if your buying a home to live in, or a home to invest.
if its something to live in, and its repayments are 25-30% your household income after tax, interest rates wont really affect you.
but if owning a home is going to make you mortgage poor there is far easier things to put your money in
hypothetically if you had 300 grand as a down payment on a 700k house, which left you with a mortgage of 400k
if your in Victoria you would get a stamp duty deduction if its your first home
Stamp duty 25k
Running costs: 4.8k a year rates 1.8k, home insurance 1.5k, shit that breaks 1.5k a year,
after ten years:
average mortgage rate 5.4% property growth at 4%
if you only made minimum payments
your looking at approx 65k of principal paid off, be sitting at approx 335k left
house value at 4% growth: value 1.08m, your equity at time of sale is 745k, minus 50k of costs, 15k sale costs, 680k tax free, 380k profit
house value at 2% a year it be worth 850k, 450k tax free, so 150k profit
option sitting in a bank account: 300k at 5% over ten years is about 490k, minus existing investment 190k profit, 50% capital gain rule, 95k
If you were to invest 2k monthly that you would have paid in mortgage repayments into it, it be another story, but you still have to pay rent some where, and if you could afford that extra 2k a month and placed that in a mortgage it probably reduce your interest owing on your home loan significantly increasing profit.
things i doubt but could happen
property wont grow fast, for this to happen there would need to be an increase in supply, or a restriction in ability to purchase. but it seems like migration caps have been increased increasing pressure on housing markets, foreign investment into housing isn't really restricted, and rent increases too
other things which I haven't counted for, is inflation in running costs of a house, ie increase in rates with increase in house value etc.
probably also need to factor in 700K new immigrants in the next few years, all wanting to live in the nice areas….supply and demand
It sounds like you're buying an investment property so timing the market is an important consideration and it's not just about time in the market.
The notion "you can't time the market" is a cop out/being lazy - it's all about liquidity flows and how that flows through to asset prices whether it be equities, property, and other assets further out the risk curve. Pick the fastest horse that you're comfortable and that fits with your risk/return profile.
Obviously rates are something to consider and your level of debt service i.e. if you buy now are you comfortable/have enough headroom for further rate rises? There's a nuance between being able to comfortably service the repayments vs. just still being able to i.e. I wouldn't want to be in the latter and deal with the real and psychological consequences.
There seems to a witch hunt against the RBA and that they "must" lower rates / can't keep them high for long (yes, they could've been clearer with their messaging and not provided false hope). IMO they don't really have a choice and is just riding the bus with Powell / the Fed being the driver.
The current consensus - inflation peaked, disinflation, rates have to go down, great buying opportunity.
Some food for thought, have a look at this thread from about a year ago and the poll results - https://www.ozbargain.com.au/node/693921
If you have the capacity (based on a conservative rate), buy now.
Buy low, sell high
right now alot of people are fear selling, and in my opinion that's the perfect time for opportunity
Ofcourse, i am not a financial advisor, so take what i'm saying with a grain of salt.
But i can confirm that this is what i'm doing
Actually very few people are fear selling. very few people are selling in general.
https://www.realestate.com.au/news/plummeting-listing-levels…
You may get more listings from people who are forced to sell at the end of the year as their fixed loans turn to variable.. but the fact remains the reduced number of sellers is propping up the price.
Most investors will attempt to increase rents before they consider selling.
I think you will find more opportunities at the end of the year.
potentially true, but i believe those opportunities at the end of the year will only happen if interest rates continue to rise throughout the year.
I personally don't believe they will continue to increase for the remainder of the year.
I reckon we will see a couple more increases, but then it will stablize or come down.
Once that "stabilizing" happens, i reckon thats when prices will shoot up again, because people will be buying out of FOMO
Unless you’re buying a house to live, I think it’s prudent to wait.
I’m expecting my investment properties to fall in price marginally but it doesn’t matter, I can’t see myself selling in the next 10-15 years.
@JimB: Thats fair, and you're welcome to do so.
I think its prudent to take advantage of lower prices whilst we have them.
Like you, i too like to hold my investment properties for atleast 10 years.
Just an idea, different opinion etc;
While you're waiting to make up your mind, parking money in something like a 60/40 split of DJRE and VAP is worth consideration i would think. Less VAP if you don't want such a high stake in Aus property.
For me, I am waiting for the cash rate to hit ~4%
The cash rate will hit 6%
This will drive an outcome of necessary increases to wages, lowering of consumtpions and tapering inflation.
I will expect a marginal increase to GST 2% in about 3-5 years.
This is to fund education, health , aged child and NDIS. More sequeezing of the middle and the top.
Top taxpayers need to pay more.
Why would GST need to increase as a % when tax revenue increases with inflation anyway?
To reduce household consumption. Increase revenue for objectives above.
@mousie: Wouldn't be a fantastic idea politically to lift GST while the voters are squealing about cost of living, especially if it's for additional revenue like you say (as opposed to offsetting the increase with an equivalent decrease to a different tax).
@park: Doing the right thing isnt popular.
They need to make more items gst free on the household list.
Our currency needs to be worth something and not endless quantitive easing.
We have exceptionally valauable, in demand resources and not reinvesting.
@mousie: Individuals are already taxed far too much, meanwhile tech companies get offsets for R&D and don't pay any tax at all. Mining companies, how much tax are they paying these days for having the right to profit off our countries primary source of wealth?
Nah instead lets go from handing over 60% of our wealth to tax to 70%, that'll fix things. Oh it doesnt? Better up it to 80%. Better yet, like you say, lets make certain items "tax free" and make other items 5000% tax, the government can micromanage our lifestyles better that way, and they have the environment at heart, so that's a good thing!
The irony is this wouldn't even fix what you think it would. Inflation isn't due to lack of tax. You want to fix inflation? Make it illegal for banks to create money out of nothingness routinely via loans. They loan what they have, then interest actually makes sense, rather than all "wealth" building in society being a competition between people to loan as much as possible to steal wealth from people with savings, using the bank as a fat middleman/broker (who takes the largest cut of the swindle).
@mousie: Doing the right thing isn't always popular, but immediately getting kicked out of government and being replaced by a populist campaign which promises to reverse the changes isn't successfully doing the right thing either.
Depends, where you live , how much rent you are paying.. capital growth is what you want so in an over heated market will take time to build up if you look at the interest you pay on the loan compare to what you can save while renting and get a return on.. if you look at gains from shares .. depending on age look at pumping into super. Market tends to stabalise for quite some time, but factors like supply and demand will be interesting what building costs and land costs are. And what builders will still be in business.
If you can afford to, yes.
It is better than renting !!
Renting is dead money.
BUY BUY BUY!!!
Best time to buy a house is when you can afford it. You can't go wrong in the long term and prices will always go up.
Not in Japan, prices have never recovered since the 1991 bust.
The Japanese market is completely different to ours. Houses are commonly replaced every 10-15 years and older houses especially in the outer areas can be bought for next to nothing. It’s easy to say that their prices have gone down but the context is that you can own your own house for 1/2 - 2 years salary and still only be 40 minutes out of the centre of Tokyo.
That's true it's rather different, but it does show that property is not inherently destined to go up in the long run, depends on many factors and circumstances.
Japan's population has also been slowing and declining in the last twenty years, it also has one of the worst portions of ageing populations in the world.
Japan's city, population in number, population in spread, house spread ie theres lot more cheaper housing in less expensive areas pushing down the reported means, different cultural trends etc.
We are more similar to nations like Canada than Japan, and when you do compare cities like Tokyo to Sydney they aren't better. Ie Tokyo house pricing is growing, very unaffordable etc.
I don't envy people who want to buy right now. Personally If I was in the market to buy I would wait until mid 2023 and then make an assessment based on the inflation and interest rate forecasts at the time - possibly buying then or waiting. But the picture of the direction of prices is never fully clear.
You could be paying rent, or paying high interest on a loan. The interest might be justified if prices go up. But that's not what most forecasts say.
The best time to buy (assuming you have strong finances, not those on the edge kind) is when everyone has no clear view of what is gonna happen. The moment RBA says, "this is it guys, im not gonna move any more" (i still dont trust them but just hypothetical), that is when prices get more firm or might even start moving upwards.
Here's a thought: Never is there a good time to buy a house. Even in a collapsing market, you would have something to hesitate about. Keep on renting or camping.
"Keep on renting" I hope I'm missing a joke here?? I would rather take the risk that my place never appreciates in value than knowingly pay dead money to a landlord
Definitely worth renting! (says people that own investment properties).
ikr if i am paying 3k mortgage, 2.5k is going to the bank and the rest is going towards the principal amount.
if i were renting the same house, i would be paying even if $500 a week, $2000 at most. also not having to pay council fees, home insurance and the other costs. more savings, more power.
@yummycoot: Yeah the only problem with that is that over time mortgage repayments and rent deviate. As an actual example (real life example from myself):
I bought a 3 bedroom house 10 years ago for $300k - loan amount was $250k. If i didn't have it paid off already - i'd currently owe about $188k. A $188k loan at current interest rates is $350 per week. I currently have tenants in there now paying $600pw. Which is well above the mortgage repayments (if i had any on that property). The tenants are now assisting in covering my second house mortgage repayments.
When i bought the house - average rents were around $300pw, so i was paying more at the start - it was my first home that i initially moved into.
Beats paying dead interest to the bank.
What do you think your landlord is doing with your rent?
Ah yeah the old adage of rent money is dead money. in that case mortgage interest money is also dead money. What if one is paying off their rent with dividends from shares? is that rent money also dead money?
I'd argue that you can pay mortgage using dividends from shares too. But mortgage you've got an asset at the end that's worth something.
No one can predict if it's bottomed out, or there's more to go or if it will rebound, largely because the market is propped up, any govt policy they decide to pull out of their arses could impact it, and there's no way to tell.
The simple rule of thumb really is, do you have enough of a deposit, do you have the ability to service it with more interest rates increases, and finally will you be living in it for a long time? If it's all yes, then I would say proceed to buy. Unfortunately the housing market feels like the stock market in that you can never time it. Everyone assumed COVID was our saviour and it would come crashing down, well… government policies with stimulus and RBA's lower rates propped it up.
Depends on the area but I don't think its a good time to buy. Where I live, the market is so overpriced. House prices will come down as rates increase so you don't want to take a loan when the property decreases in value.
I'm not sure what to do either. I've been saving for 3 years, I was planning on buying a house as soon as I could afford.
I'm looking in areas that have historically been considered rough, but have and continue to increase 10% per year with no end in sight. 500k is my upper limit now and would've got a nicely renovated 4x2 with a pool on a large block two-three years ago and now it will get you decrepit 3x1. I can't bring myself to buy right now.
My lease runs out in 3 months, I can rent another place for a year, save up another 65k+ (between me and my partner) and try again in a year with hopefully lower prices .
I can buy within 3 months but it will likely be a terrible house in a terrible neighbourhood. Doesn't sound like a good idea if we are to expect a housing to not make any real gains for a while
People asked the same question when things were good…. its always doom and gloom when buying a house and yet investors jump with glee when we get a huge downturn like this.
Im so glad I never cared what the economy was like when I bought my house, as others have stated "buy when you can"
No one has any idea. Future price changes are baked into present price. For every person right with their future prediction, there will be another one on the wrong side. Whatever your decision, it will be based on your best knowledge at the time, and you will have to comfort yourself with that.
A housing bubble and interest rates rising, wouldn't you be wise waiting?
We have been lucky, our house went up 250k in value in 4 years mostly as the cost to build a luxury style home now costs an extra 100-150k, its actually now more affordable to move to a better area with an average builder house.
Kinda makes it funny when you realise most house investors build the cheapest crappiest houses.
Even in the current climate with expensive trades people?
Sometimes you just have to take a dive and get into it.
Those who are reluctant, wait and inaction can set you back.
In general, people have always done well with buying property.
If you can afford it, just do it.
If house prices double every 10 years, there will be fewer and fewer suburbs you can buy into.
House prices have always gone up. It may increase slowly but it always goes up.
Yes, always buy within your means.
If I was ready to buy now, I’d wait 6-12 months for the increase in interest rates to bite and house prices fall.
All depends on the market you’re buying in. With a lot of (profanity) companies going back to the office, regional areas will likely fall (works for me)
Yeah, this might be true. Even ATO seems pushing people to go back to office by the new rule to make WFH more difficult.
That would be an incredibly bold move. Which major party would take such a risk?