Seneca21

He is yes, but he will also wind up with an asset at some point in the future. You can make the same argument against someone renting who is collecting the 150 per week on his savings, but who is not contributing in any way to ownership of an asset.

Seneca21

I hardly put thecase that it is a bed of roses. I simpy say that depending on one's life circumstances, being in negative equity might be preferable to paying off some swine's mortgage for 15 years and having nothing at the end of it except the shirt in your back.

Steve2009

~$150 of his ~$250 mortgage payment is interest. Effectively his rent at the moment is ~$300 and his "savings/investment" is ~$100.

Steve2009

As opposed to paying for bankers boozy lunches and bumper bonuses?

Vash the Stampede

In other words, I am paying $250 per week, but I could be earning interest on the money that is tied up in my equity. That's very true. However, this is not the same as "paying closer to $400 a week" for my property. I am still only paying $250 a week. That is what I am literally paying. I am not paying "closer to $400 a week."

All you've done is to speculate about what I could be earning through an alternative investment, and pretending that by forgoing these potential earnings I am somehow paying more than I really am. This is pure semantics, and does not reflect my actual outgoings.

In any case, if I withdrew that equity, my mortgage would rise and I would be paying even more than I am now. So I don't see how I'd be any better off.

Further down the track, I would like to sell out UK property and whack the profit into a mortgage offset account to reduce our weekly payments. However, we will need to wait until the British market recovers.

jimbo_d

You can't compare Ireland or the US, Spain or any of the other recent big housing busts to Australia's. They are completely different and were a result of massive over supply and lax lending. Here the planning and land release is set to always try and maintain more demand than supply, and it's always been quite hard to get a mortgage, aside from homestart's 100% loans a couple of years ago that is. No more of them, 20% min or you pay insurance to the bank. Only unemployment will trigger a bust here, almost forgot to add the negative gearing chestnut that adds another dimension to things here.

The markets can stay irrational longer than you can stay solvent.... or married....

Seneca21

But how old will you be in 2075?

Steve2009

Just because it doesn't change your cash position doesn't mean it's not a cost. You talk about 'recovery' in the UK market like it's a given fact too. No offence, but people are often irrational when it comes to property. The heart rules the head. If it were a business they would be a lot more cold and analytical.

Steve2009

Australia is different? Wow! I never thought of it like that... nor did Ireland, US, Spain, Japan... oh wait....

Seneca21

Vash does bring up a good point. For example, if he were renting and collecting your 150 eveyr week from interest, he is 150 per weke better off, but you would have to calculate how much he is losing by renting instead of working towards ownership of an asset which could be worth whatever in the future - plus he could let it out and benefit that way as well.

jimbo_d

Well the housing market is different here whether you like it or not, like the UK too. They haven't had much of a bust yet either, although that could change with all the unemployment coming.

Steve2009

If the renter also saves $100 a month then they are in the same position except the renter does not have the positive/negative risk of property market fluctuations.

Steve2009

All housing markets are different. It doesn't take a particular type of market to have a bubble. All of the above mentioned bubbles had different features.

Steve2009

As I mention above, for property owners there is a positive/negative risk arising from depreciation/appreciation of asset values. This positive/negative risk does not apply to renters.

He is paying ~$300 for his housing utility. ~$150 opportunity cost on capital employed and ~$150 in mortgage interest. This money contributes nothing towards owning the asset. Only ~$100 of his mortgage payment is contributing to owning the asset.

If rents the property out then he does not get housing utility from it. He has to live somewhere else. That is an extra cost.

Rod-Helen-Poppy

some people just prefer to have the security of owning their own home and affording to do so. they also (theoretically) get an assett to sell off in later life should they wish to, kind of pension i suppose.

markets go up and down, if you own a home you take that on the chin i suppose; unless you bought at peak time and are in negative equity - even the phrase negative equity shits some people - but as stated if you're hgappy where you are for thenext 25yrs it shouldnt really bother you too much.