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High rent pushing gen Y to buy their own home; warning warning
Topic Started: 26 May 2012, 12:46 PM (1,485 Views)
zaph
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High rent pushing gen y to buy their own home

MANY renters are buying their first home rather than fork out for exorbitant rent, new research shows.

First home buyers are dipping their toe back into the market while prices and interest rates are low.

New research has revealed they are more confident about buying a house now than they were six months ago.

Rising rents is one of the key factors that has first-time buyers considering if it is time to take the plunge.

Latest CBA/Mortgage & Finance Association of Australian research has found that current high rents mean two-thirds of first-time home buyers were re-evaluating the trade-off between renting and buying.

It found about 17.2 per cent of first-home buyers were planning to enter the housing market sometime in the next 12 months.

But almost 70 per cent say they are still holding back due to the fear of servicing higher debt mixed with a fear of future job redundancies.

About two-thirds of first-home buyers believe rentals are too expensive, and about 40 per cent feel they are caught in a rental trap, according to Commonwealth Bank executive general manager of third party banking, Kathy Cummings.

She says in many cases it is cheaper to buy than rent and first-home buyers appear to be working productively towards raising the required deposit to get into property.

Emma Raphael of Place at Camp Hill in Brisbane says that is what many of her recent clients have been telling her



An Hele written article spruiking how buying is better than renting.
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Elastic
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Nice find Zaph.
One of the better spruiks.
Only a rat can win a rat race.

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Pig Iron
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Bogan scum

it's pretty simple maths. if it's costing the same to buy as to rent and you have the deposit, your a idiot if you don't buy.
your house costs less and less as time goes buy where rent will only increase. i wouldn't like to be facing retirement and have to pay rent.
I am the love child of Tony Abbott and Pauline Hanson
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earthsta
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timmy
26 May 2012, 01:22 PM
it's pretty simple maths. if it's costing the same to buy as to rent and you have the deposit, your a idiot if you don't buy.
your house costs less and less as time goes buy where rent will only increase. i wouldn't like to be facing retirement and have to pay rent.
Not if interest rates rise boofhead. Seeing they are at generationally low levels at the moment, the odds are that they will be substantially higher in future years.
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miw
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timmy
26 May 2012, 01:22 PM
it's pretty simple maths. if it's costing the same to buy as to rent and you have the deposit, your a idiot if you don't buy.
your house costs less and less as time goes buy where rent will only increase. i wouldn't like to be facing retirement and have to pay rent.
In Brisbane it is now entirely possible to buy an Apt in a good location on an 80% LVR and have the mortgage repayments work out to less than the rent. You still have to pay the BC and rates, so you would work out being a moderate amount of bux (~$30/wk) behind, but still the equation has not looked this good for buying since 1998. You could swing this if you had $60-$65k deposit, even in good suburbs like Toowong and Indooroopilly. Auchenflower or St. Lucia if you are lucky. The problem with going that low is the apt would be small so if you had plans for a family in the next 5 years you might be faced with a changeover before you have held for 5 years, which is ineffiecient.

And if you just assume CPI increases in rent, you would be ahead within 2 years and have equity unless interest rates went up a lot. But if rates went up a lot, that would probably mean housing prices had risen appreciably and you might have missed an easy entry point.

So if I were 30 and had a stable job and could find $60k I would be very tempted, especially since term deposits are now <3% after marginal tax. The things I would be most worried about are:

* If I choose to buy now, what happens if interest rates shoot up to 12% - could I still service the mortgage?
* If I choose to buy now, is the the property likely to be cheaper next year? (I could get a cheaper entry point by waiting)
* If I choose to sit now, what is the likelihood that prices shoot up 5% while I am not looking and I miss the easy entry point like so many did in 2001?
* If I choose not to buy now, what if interest rates shoot up and prices go up, and I am no longer able to get enough finance given that banks will mostly not lend if repayments are more than 30% of salary?

The equation is finely balanced for the FHB right now. The thing that would decide it for me is that buying into something I can afford right now is effectively giving me a call option on the next house I want to buy. Also, if I am 30 I can get a 30-year loan no problem, whereas a 30-year loan is very hard to get when you are 40.

Edited by miw, 26 May 2012, 10:52 PM.
The truth will set you free. But first, it will piss you off.
--Gloria Steinem
AREPS™
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Pig Iron
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Bogan scum

earthsta
26 May 2012, 01:54 PM
Not if interest rates rise boofhead. Seeing they are at generationally low levels at the moment, the odds are that they will be substantially higher in future years.
well a bit of space junk could fall from the sky and strike you dead as well, but i don't let the *chance* something bad might happen paralyse me with so much fear i fail to act on things which are obviously good.

what is your logic that rates will be substantially higher any time soon? the only way that would happen is if the bears are all wrong and housing goes through another boom.

as for rates being at historic lows, massive fail. rates haven't gone over 10% in 16 years. the average is about 8% long term, so we aren't at any kind of amazing low right now.
I am the love child of Tony Abbott and Pauline Hanson
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raveswei
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timmy
26 May 2012, 01:22 PM
it's pretty simple maths. if it's costing the same to buy as to rent and you have the deposit, your a idiot if you don't buy.
your house costs less and less as time goes buy where rent will only increase. i wouldn't like to be facing retirement and have to pay rent.
your math skills seem to be very poor

not only that cost of buying (repayment) will likely go up (even in real (wage) terms), but also house price will go down so buying now looks like foolish thing compared to renting and buying in few years.
http://popping-bubble.blogspot.com/

Thinking of an Australian property speculator (PI):
Inaction = missing opportunities.
Missing opportunities = losing.
Too much thinking = inaction.
Thinking = missing opportunities.
Therefore thinking = losing.

disgraceful little man Frank Castle owes a house to Salvation Army

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labrynth
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Lol yes the majority of you have assumed that property prices will go up in short-medium term. What if they stagnate?? you would still be behind. This is your PPOP so you are not buying for growth but for lifestyle and so the location you choose will have even less chance to increase in price.
Edited by labrynth, 27 May 2012, 12:16 PM.
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miw
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labrynth
27 May 2012, 12:15 PM
Lol yes the majority of you have assumed that property prices will go up in short-medium term. What if they stagnate?? you would still be behind. This is your PPOP so you are not buying for growth but for lifestyle and so the location you choose will have even less chance to increase in price.
Even if they stagnate you may not be behind, depending on how rents go.

I don't buy the "Rent is Dead Money but paying off a mortgage is not" argument because as far as I am concerned anything you pay for the place you live in is "dead money" - rent OR mortgage. However, on the assumption that you are going to consume accommodation, you need to look at future cash flows, and one thing that buying your own place does is pin the path of your future cash flows to the vagaries of interest rates rather than to the path of rents, which go up according to household disposable income in the long term.

Also, if one (like many people) intends to buy their own place at some point, then one also has to take into account the possibility that house prices might go up. It's the other side of the risk coin.
Edited by miw, 27 May 2012, 02:27 PM.
The truth will set you free. But first, it will piss you off.
--Gloria Steinem
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labrynth
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miw
27 May 2012, 02:26 PM
Even if they stagnate you may not be behind, depending on how rents go.

I don't buy the "Rent is Dead Money but paying off a mortgage is not" argument because as far as I am concerned anything you pay for the place you live in is "dead money" - rent OR mortgage. However, on the assumption that you are going to consume accommodation, you need to look at future cash flows, and one thing that buying your own place does is pin the path of your future cash flows to the vagaries of interest rates rather than to the path of rents, which go up according to household disposable income in the long term.

Also, if one (like many people) intends to buy their own place at some point, then one also has to take into account the possibility that house prices might go up. It's the other side of the risk coin.
Look at it this way.

The past 20 years prices in cities have risen because of a couple of things:

-Mass availability of credit
-Duel income mortgages
-Population movement to cities
-95% leverage loans
-Cheap oil = cheap goods
-Government stimulous
-Government intervention favouring property over business and enterprise

In today's world people are buying property based on the experiences of the last 20 years. They think that 2010-2012 is just a small blip and price rises will return to previous growth levels. Future Australian property prices will be stagnation with more downside to prices. Why buy when you can buy the same property cheaper later?
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