First Home Buyer Strike? Lack of FHB recovery halting stronger housing market rebound; First-home buyers continue to stay on the sidelines of the housing market
Tweet Topic Started: 14 May 2013, 03:52 PM (2,753 Views)
I came back to Australia last year and still have all of our cash in foreign bank accounts in foreign currency.
At the moment it makes no sense whatsoever to either
Buy Australian Real estate
or
Move foreign currency into AUD
I tend to the view that for Australian domestic economic reasons (well outlined by plenty of others here) that nominal AUD house prices fall will be minimal, but I think to achieve that outcome the AUD will have to be driven massively lower.
HnH in the podcast a few weeks ago was talking about AUD making the Australian economy competitive circa 0.75 but the AUD needing to go well below that for a period of time in order to send the message to global investors and Australian industry that it was serious. I think that is right on the money.
My suspicion is that even if they get that then there are RE problems because of the banking system need to fund a lot of borrowing from offshore, when the collateral they have for that is mortgages on Australian RE (basically AUD drops enough and mortgage rates would need to rise) but that if they don't get that then we are looking at employment taking a kicking and some of the most heavily privately indebted people on the planet turning up as NPLs.
I am more than happy to rent it out. I told my Mrs that we wait until she has an Australian passport (circa 4 years), while my son does some education here, and if the environment hasnt improved in that time we simply go back to Europe or elsewhere.
This is a rational position to hold. My take from this is that you will wait up to 4 years to move your foreign funds here and if you dont get good gains you will either just move the money here (having given yourself the chance) or possibly move away yourselves. Although rational, it may or may not pay off. Personally I'd be nervous if your overseas funds are in Euro or Pounds but more optimistic if they are in US dollars (my view is that Europe may never really 'recover' to its previous global position but the US will recover strongly over the medium term). Having said that, if there is a decent war in the Middle East then the AUD may stay comparatively high for a number of years yet although with the associated volatility all scenarios are on the table.
“You Keep Using That Word, I Do Not Think It Means What You Think It Means” - Inigo Montoya
So many whingers on this forum. Stop complaining, and make your own luck people.
I never had much interest in traveling or eating out or anything, so after six years of working my partner and I had plenty saved and decided it was time to put the money into a house of our own. Just hated the thought of all of that dead rent money. Bought ourselves a modest little cottage on the inner city fringe, fixed her up a bit, and by the time my wife was pregnant we decided to upgrade to something a bit bigger in the suburbs, something with a yard for our kids.
We did pretty well out of the cottage – something like a 40% gain tax free in less than five years, so you’ve got to be happy about that. Well, the next house was a bit more expensive, but we just fell in love with it, we had to have it, you know. The bank was more than happy to give us everything we needed. We were daunted by the idea of carrying a $200,000 mortgage, but interest rates had been coming down, and things were going really well. We never imagined we’d both be living in such a beautiful big house, but over time we came to feel that this was our reward for being more careful with our money, for making sacrifices.
After a while, with the wife back at work, and another promotion for me – we thought it was time to start thinking about building up a property portfolio for our retirement, to give us some more flexibility down the track. Well, the bank was more than happy to give us everything we needed. We bought a fixer upper a few streets down from our current house, rented it out to a local teacher – he helped out a bit fixing it up. Rates were starting to go up a bit, but we’d fixed the bulk of it at 7.5% and were comfortable with the repayments.
Prices in our area were starting to really pick up. Our neighbors had sold their house – which was no bigger than ours, and probably needed more work done – for $550,000 ! It was incredible – they’d only paid $280,000 seven years earlier.
Well, we’d got some extra days at day care for the kids, so my wife was able to go back to work full time now. We thought we’d diversify the portfolio a bit, so got ourselves a unit off the plan in a neighboring suburb. The bank was more than happy to give us everything we needed. The rent wasn’t quite covering repayments at that point – but the tax effect was pretty sweet – we just needed 4% capital growth a year to be raking it in ten years down the track. Some of the spec buyers ended up selling after a month and pocketing a 40% gain. We were absolutely spewing we didn’t buy more!
A mate knew the developer, so we got in early on his next release and ended up buying two off the plan. The bank was more than happy to give us everything we needed. We turned over the units after a year and decided to pay off our debt. We own our house and the property up the road outright now. We’ll probably give the kids the other property once they’re old enough – let ‘em move into it when they’re ready for university.
I get really annoyed now when people talk about unaffordable housing. It wasn’t like we were gifted our own house. It was hard. It was bloody scary carrying so much debt. But we made sacrifices, worked hard, made some smart decisions. You’ve got to make your own luck. We're not special - if we can do it so can anyone. Just stop wasting your time whining on this forum and go do it.
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