Is Purchasing a House/Getting a Mortgage The Best Financial Decision

• 

  Hybroid on 07/04/2025 - 01:13

  +10

  No one can give you financial advice here, but, usually the best time to buy property was yesterday, the next best is today.

  While it feels like a trade-off between lining a landlords pockets, or the bank's coffers with a mortgage, at least you start to build some equity for yourself too.

  Also, property prices don't usually go down either. That $600k house will be $650k or $700k next year. Property prices in New South Wales grew 9.6% over the last year .The $700k houses in Sydney pre-Covid are now at the ~$1m mark. There's of course many factors that can affect this, but generally, demand is far outstripping supply in Australia and will continue to do so.

  The whole process of buying property here is extremely frustrating, time-consuming, and full of awful lying REAs and greedy sellers. It's not uncommon to be on the market searching for over a year, failing at many auctions and spending tons on inspections and contract reviews till you find a place.

  Alternatively, you could get lucky gambling your savings on Crypto (or lose a significant amount), you could get ~5% interest sticking it in a savings account (quickly eaten by tax and inflation), or you could venture out to start a business or invest in someone else's and see how that pans out if you're comfortable taking the risk and confident your income will increase significantly to cover any losses.

• 

  trustnoone on 07/04/2025 - 01:18

  +1

  Different people different options, housing has been a very stable one for a long time because there is little risk for many. But definitely people have gotten rich in other ways too.
  I will say though, it sounds like you are getting a property because you think it makes financial sense not because you want to, which makes the process mentally harder. And your going for auctions which are even more difficult, as you noted they are all underquoted by $50k minimum. No matter how much people say its illegal.

  At the end of the day I can't tell you what the best financial path is forward, a financial advisor would work great for that. But a property means you aren't paying rent and if it has land it will likely go up in value in the long term. When you retire its also much easier to live on an owned property then a rented one. I feel your in range for a house in Melbs wouldn't you be? You'd just have to keep it long term or rent it out. You note about income increasing, it will also do so when you've paid off HECS.

  Not saying this is a good idea but if you are looking for other options then property that your final sentence has, I'd go maybe ETF and maximising super for that pre-tax benefit. I think there are many other options, but you'd have to analyse them similarly to what you'd do for a property.

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  JIMB0 on 07/04/2025 - 05:40

  +5

  You need to look at sold prices of similar properties and come up with your own valuation.

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  cauilfield on 07/04/2025 - 09:35

  Aussie dollar dropping will open many more doors for the overseas investors effectively reducing the supply in the market

  • 

    Duckie2hh on 07/04/2025 - 09:44

    Of course its always the investors fault that house prices are through the roof (even though they only make up 30% of the current market).

    • 

      tenpercent on 07/04/2025 - 11:08

      +1

      Not only investors. There's also an oversupply of people (immigration in excess of available dwellings).

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  Duckie2hh on 07/04/2025 - 09:40

  Purchasing a House/Getting a Mortgage The Best Financial Decision

  depends.

• 

  Duckie2hh on 07/04/2025 - 09:43

  -1

  AUD is losing value.

  relative to what?

  I've considered buying land in the middle of no where, purely so that the savings are converted into land

  owning an empty piece of land will not allow you to claim a deduction on the interest of loan against your personal income tax.

  will increase significantly by (2-3x) in 3-5 years

  can you loan me this crystal ball so I can check my future income?

  • 

    shreyt on 07/04/2025 - 10:30

    +1

    No but land won't necessarily lose value with inflation the way cash is. And if I bought land, I wouldnt be getting a large loan, it would be very small.
    As to crystal ball - its not a promotion - (medical specialty training salaries increase each year as you progress (and its a preset increase) and once you're a consultant- the pays significantly better- even if you work just in the public sector)

• 

  TheMindsetTraveller on 07/04/2025 - 09:49

  -1

  The "reserve" is set by the vendor and instructed to the agent/auctioneer. In my experience, for the properties I have sold this way, have never reached reserved because that is my intention.

  I learnt this strategy from the first agent who sold my property told me almost 30 years ago this:-

  1. Selling over reserve makes the agent look good. This house sold for $200k above reserve etc and makes the news, makes agent looks good, gives them marketing propoganda to say '80% of our homes sold are over reserve"

  2. Keeping the reserve high allows me, the vendor, to have one final "tool" to negotiate more money. Just because the bidders have exhausted themselves, one of them has a spare $10k, $20k, or even $50k to go more. If that is more money in my pocket, then excellent for me.

  • 

    shreyt on 07/04/2025 - 10:20

    +2

    right cause 50-100k extra is spare change for most first home buyers. You're just hoping people can be exploited into blowing their budget. Theres a reason people have budgets - its set by their burrowing capacity. You end up wasting peoples time going to houses that you know very well - the owner will not sell within the suggested price. It further wastes your time too fyi.
    Eg property last week - auction ends and the owner refused to sell 2x. First round - they got an extra 10 but the owner still didn't want to sell but eventually agreed with some guy. few days later - the property is back on the market- and is listed 100k below what the original had estimated. I know very well the owner will not be selling at that range given he refused the previous auction amount. Yet in order to get more people to the auction they reduced the advertised estimate. Wasted everyones time in the first couple of attempts and is going to continue wasting peoples time in the 3rd round.

    • 

      surfingedge on 07/04/2025 - 10:47

      +2

      So then go to auctions and open homes where the suggested price is 150k lower than your budget

      Then you know you can bid 100k more and you still have an extra 50k to go further

      • 

        shreyt on 07/04/2025 - 11:22

        listed price 660-720, bidding ends at 720, owner refuses, they rebid and it goes up to 790, they refuse again - reserve isn't met. They want 840. Even if I could, I wouldnt agree with it, its bs manipulation

        • 

          surfingedge on 07/04/2025 - 11:29

          +1

          @shreyt: I don't think any buyers like it.

          If you don't think it's worth 840 (based on actual recent sales of similar houses in the same area) then the owner will have to face reality if they want to sell.

          Or maybe they are wasting everyone's time and don't really want to sell right now unless they can get a sucker to pay a stupidly high price

        • 

          lgacb08 on 08/04/2025 - 13:15

          +3

          @shreyt: It's only because you're new to the game and didn't do your research. You won't get cheaper house going through auction, your best bet is to look at a couple of house on private sale and see how much its sold for then you get a better idea of the average price of the suburb.

  • 

    TheMindsetTraveller on 07/04/2025 - 11:26

    yes selling is a game, i am not a charity and i am going to get the price i want even if i know you are a first home buyer. $10k or $20k might blow a first home buyers budget but consider every weekend wasting their time inspecting properties etc only to end up with nothing, Your/their time is $$ too.

    I am just saying I have my strategies to sell and this is one of them.

    • 

      shreyt on 08/04/2025 - 19:43

      I don't think you understand the concept of "charity". Expecting the advertised price range to reflect the price the owner is willing to accept - is not unreasonable nor is it charity.
      Also don't undermine it with "10-20K " they're often setting the reserve 100k above what is being advertised.
      heres an idea - advertise a true price range the seller is willing to accept - so you dont waste anybody's time and are getting the right type of buyers.

• 

  DingoBilly on 07/04/2025 - 09:50

  +1

  It's way too dependent on your situation, your risk profile, where you want to be in life Etc.

  No, despite what people tell you housing is not some miracle get rich without work type deal. It has its own risks, and in some places you will make little to no money.
  Also just because the past shows crazy returns doesn't mean it will continue in future. It's becoming extremely unsustainable.

  Alternatives are things like ETFs which should give similar performance without the headache of property. Crypto if you love to gamble. Otherwise setting up your own business/company if you can think of a decent idea.

• 

  star-ggg on 07/04/2025 - 10:00

  I'm finding the whole thing very confusing/frustrating and scummy

  In Australia, a house owner always has the upper hand.

• 

  JimB on 07/04/2025 - 10:00

  +5

  Buying a house to live it may not be the best financial decision, however it's probably the best lifestyle decision you can make (at least it has been for me). It just so happen to a decent financial decision too.

  Having a permanent place to live and not worry about getting evicted.

  Good thing about a mortgage is that it's a forced savings mechanism. Bad thing about a mortgage is that it's a force saving mechanism.

  If I was young and my income will double in the near future, I'd borrow the max the bank can lend me and buy an run down house in the best suburb you can afford. Think where you would like to live in 10-15 years.

• 

  netjock on 07/04/2025 - 10:29

  +1

  any tips on what else I should look into outside of the property market ? ( I do have a significant amount saved - 20% deposit)

  The problem here is:

  IF you put it into a on call high savings account you might find your 5% is really 2% after inflation. Assuming house prices don't rise. If RBA drops rates the financial illiterates are out to push up prices because the only question and answer they know is "how much can I borrow?" and add their deposit then bid much as they can.

  IF you put it into something like the sharemarket no guarantee it isn't going to be lower than your initial investment when you want to cash out.

  I've also looked at mortgages and interest alone for a 600k property costs more than average rent in that area (not to mention finding property around 600-700 is very difficult ) .
  Is there a better way to invest your savings so that it increases in value (at least for 3-4 yrs)

  This is more complicated. Say $3000 a month to rent and $4000 mortgage. Because of how loans amortised most of your repayment is interest at the beginning. But if you flat line it (to say you are paying off $500k over 30 years at $1388.88 a month it is cheaper to buy than rent).

  Investment property is a whole different ball game.

• 

  tsunamisurfer on 07/04/2025 - 11:37

  There are so many factors that go into this decision that it is very difficult to determine if it's a good decision or not.

  No one here can tell you, it requires intimate knowledge of your finances, your goals, your timelines and in general needs time to tell.

  Generally buying is more expensive than renting, it's not just the repayments, its the shire rates, maintenance, insurances and other sundry costs.

  In the long term, the benefit is once it is paid off, you have no more repayments to make, but that's a 30 year journey.

  Then you consider whether the property appreciates, if it does, good, if it doesn't then it's a bad decision. There are many more to consider.

• 

  ForkSnorter on 07/04/2025 - 12:06

  Listen to society telling you to take on a mountain of debt in your 20s and glue yourself to a computer screen for the next 30 years to pay it off while also paying rates, maintenance, repairs, renovations, garden work, etc.

  Or live more freely, live in share houses, travel a lot, rent a bunch of different properties to see what kind of houses and areas you like, live cheaply and save money, focus on your career, then think about buying property in your 30s or 40s when you have a decent deposit saved and potentially a partner to lighten the load.

  • 

    star-ggg on 09/04/2025 - 23:40

    +1

    How are you living cheaply traveling a lot, and constantly moving around on new leases? And what if OP decides to have a family in 30s or 40s which is the age bracket when more people make that decision.

    • 

      ForkSnorter on 10/04/2025 - 06:40

      Traveling in your 20s doesn't cost much because you can do it cheaply. You can also work overseas if you're not tied down to a $3600/month mortgage. I worked overseas in my 20s, and it was the best experience in my life.

      New leases don't cost anything. The only cost is having to pay a cleaner when you move out, if you're too lazy to do it yourself. Furthermore, you can live in share houses. I don't know when people in their 20s suddenly thought they're all entitled to a 4-bedroom mansion courtesy of the bank. When I was in my 20s, nearly everyone I knew lived in share houses.

      • 

        star-ggg on 10/04/2025 - 09:00

        20 year olds do live in sharehouses and their rents spiked like everything else during the inflation spike. Traveling is more expensive than not cause doing stuff everyday takes money. New leases means competing with others for properties which means paying above market to secure a good one. "Good" in Australia is relative. It just means the rental being actually livable.

        The last generation that could follow the timeline you mention was millennials. Since then house prices have just outgrown inflation to make it near impossible. Of course there would outliers who start on 100k once they've settled back in Australia and quickly jump to $200k+ within 2 years.

• 

  freefall101 on 07/04/2025 - 13:01

  I've been looking at houses and despite the claim that house prices "dropped" the last several auctions I've been to has shown me it hasn't changed much (For Melbourne at least).

  The average selling price is a pretty misleading figure, because it says nothing to the quality or location of properties being sold. Even within suburbs you'll find big variances. It's a bit of a guide to the overall market, that's all. It shouldn't drive your buying decisions.

  From a sellers perspective, there's an expectation rates will come down soon, which should drive up prices more. Some are willing to wait for that.

  I'm finding the whole thing very confusing/frustrating and scummy. It ends up being a massive waste of time- because it gives the elusion that a house maybe in my (small) budget - only to find out they want 100k more for it.

  Chalk it up to experience, but also you need to work on understanding the market for the price you're aiming at. Firstly, you have to accept that if it sounds too good to be true then it probably is.

  My recommendation would be to track sold properties. Look at what sells within your price range that has all the features that you want and try match that to what you want to buy, then go hunting for similar properties.

  If you see something that looks great for the price, try understand whether it's misleading pricing or there's a particular reason why it's cheap. Don't assume the number being given to you is reflective of what you'll pay. Look at the statement of information on how they defined the price and google the properties listed. If the house for sale is nothing like those ones used to develop the price then they're fudging the numbers. Everyone else has the same info here, there aren't sellers out there just trying to be nice and sell a house on the cheap. Even if they were, it'd get bid up higher at auction.

  Few things that always apply, look at the school catchment zone (people will pay lots more to get in area with a good school), if the property requires no work on it it will sell for significantly more and there will be a lot more competition at prices that get the most incentives. Under $600k means a first homebuyer can go in with a 5% deposit and no stamp duty. As a result, there aren't many houses under $600k in Victoria. Sometimes you'll find the improvement in properties from $600k to $650k is quite substantial as a result, because while it's only an extra $2.5k for the deposit, it's an extra $11k in stamp duty.

  I bought a house a couple of years ago, there was a good month of just going to auctions to understand what other people are doing. Every weekend I was looking at houses and going to auctions, for 3 months. Sometimes it just sucks, a house will sell for $100k more because someone has their heart set on it, sometimes the owners are idiots, sometimes no one turns up to the auction and you can negotiate directly with the seller. But I also went to places that just sounded too cheap and they never sold cheaply. There were always a lot of frustrated people at those auctions.

• 

  jason101 on 07/04/2025 - 13:20

  +3

  When I was 18 years old my sales manager at the time told me, "houses are too dear, i'm waiting for prices to come down before I buy" - he is now dead and never owned a home. No one can give you the right advice. Most likely people who don't own property will tell you not to buy - those with a home (or homes) will tell you its always the right time to buy.

  When you are old, will you really want a landlord jacking your rent 10% per year or telling you he/she's getting divorced and the house you live in needs to be sold? Literally no one who can afford to buy wants that head ache.

  • 

    shreyt on 07/04/2025 - 17:28

    I'm not buying a forever home at this stage (just someplace livable short term) - I'd be able to get a decent loan for a proper home in maybe 5 yrs time. so question is about what to do in the interim.

• 

  Gunther on 07/04/2025 - 14:12

  +1

  Yep, somewhere to live in retirement. I couldn't imagine renting, and moving as an elderly person.

• 

  morse on 08/04/2025 - 06:17

  The thing with buying residential property is that you can also live in it, so if you’re investing money in other ways, you still presumably have to pay rent, which reduces the amount you can dedicate to other investments. If you don’t have to pay for your accommodation eg you live with family or work pays, by all means there are other investments.

• 

  wetsandwich on 08/04/2025 - 14:03

  +2

  I mean, you're paying rent if you don't buy a place, and rent is a lot of money even in horrible bogan/immigrant suburbs hours from anywhere.
  Buying and owning a place is definitely not cheap, and it's not just the mortgage payments, it's every other bloody bill that you thought you just received last week - it never ever ends.

  But after 5-10 years, you start to actually own a decent portion of it, and everyone else's rent went up 5-10% per year probably, so in the long run you must be better off. Then when you're 45 or 50, your mortgage is small and you have been getting pay rises in your career, and you're starting to have a lot of spare cash.

  If you don't buy a place, you really need to be putting most or all of your spare money into investments, as that's the part that is killing people. 30 years of working and you should be either owning a house, or having a 3-400k share portfolio to be generating income from.

• 

  Some Guy on 08/04/2025 - 18:29

  I say it will be a very good decision, all things being equal.

  I'll also say that it appears that the experience of buying real estate and dealing with real estate agents hasn't changed in more than 20 years. Not one f**king bit.

• 

  brad1-8tsi on 09/04/2025 - 07:33

  +1

  It really depends what you want from a residence and how much cashflow.

  While I fully acknowledge that affordability has become extremely difficult, mortgages huge and real estate agents are the scum of the earth (which has always been the case).

  My "family PPOR" I owned for 17 years. I walked away from that in 2016 with a suitcase of clothes. Lived in a friends shed for 6 months, rented a furnished apartment for $850/week which was 60% of my net salary (which was unsustainable) for 7 months (it was beautiful and not much more expensive than unfurnished) and lived in my sister's spare room for 6 months.

  I hated renting and being at the whim of the managing RE Agent, the landlord, the body corporate and worst of all the nosy neighbours that were best friends with the landlord and reported every minor infraction I made.

  When the financial settlement for the divorce and a inheritance came through at the same time it enabled me to buy a strata townhouse that was "perfect" for my needs and wants.
  I love it because I can do what I want with it and it's a stable place of residence. I value the intangibles a lot. I'm still under a body corporate but I joined the Owners Committee and have been President for a few years and that gives me a lot of control. In that time rents have increased by about 55% and I couldn't afford to rent where I live.

  Think about what you need in a house, what makes you comfortable and your lifestyle. Maybe it's for you and maybe not.