renth

Did you factor in negative gearing?

ABCDiamond

From 1984 to 2003 the Perth market has had an "average" annual growth of 7.98%
The median prices being worked from (from a property investment website) are:
Year - Perth
1984 - $ 48,200
1985 - $ 52,100
1986 - $ 58,000
1987 - $ 61,200
1988 - $ 78,000
1989 - $ 102,500
1990 - $ 95,800
1991 - $ 95,000
1992 - $ 100,600
1993 - $ 110,600
1994 - $ 123,900
1995 - $ 126,800
1996 - $ 127,600
1997 - $ 135,300
1998 - $ 142,900
1999 - $ 148,500
2000 - $ 156,700
2001 - $ 171,000
2002 - $ 181,600
2003 - $ 217,000

As you can see prices have dropped before, in 1990, after a particularly large jump, and this also happened in Sydney in the same year.

Unfortunately, only a crystal ball will answer Simone's question with certainty

4lex

I was of the opinion this wasn't relevant when considering the property in which one lives, rather only one which is tenanted?

bondipom

Lose money on rent in the hope of capital gains. Add in transaction costs and you have a capital loss around here.

Simone

grrrrr!

Well, they did fall, and then rose again quickly 2 years later...
Anyway, wouldn't nearly anything be better than keep wasting money on rent? ($720 a month, and mortgage would be about $1200(which we can easily afford, even if interest rates went up with 0.5 percent))


Argh, geez, I've got enough to consider just when looking at the actual house, the suburb, the street and the mortgage without having to worry about this!!! :scared:

ABCDiamond

Did you account for tax on the interest received, which could be almost 50% of the interest ?

I calculated $674k after 25 years at 5% gross, at a tax rate of only 30%. Which would be 68% more than the cost of that house at todays price of $400k. (At the higher tax rate it would only be $597k).

Now, if you had bought a house at the height of Perths property market in 1989 for $102,500, it would have taken 11 years for it to reach the same value that your cash calculations took 2 years to reach.

I'm not saying today is the best time to buy a house, just clarifying some figures, and giving more to think about

When buying a house to live in, it isn't always the financial cost to consider

4lex

Conventional wisdom always says you're 'throwing your money away' renting, but this needn't necessarily be the case. There are definitely attractive parts of the renting game, one of which being the comparatively tiny cost of moving house, should you find your first choice isn't ideal.

I don't know the figures for the last year in Perth, but I would put money on prices hardening at the very least, if not falling - and a market growing at less than 3.5% seems from rough calculation to be a poor time to buy.

Wouldn't it make sense to rent a place for the first 6-12 months at least, if nothing else to get the feel for the suburbs you might eventually want to buy in?

jad n rich

Yonks ago when interest rates were around 15% or something, it put me off buying, no regrets I packed up and went overseas, however.

The house I didnt buy in Melbourne was around $67,000, its worth around $600,000 now, had I bought for long term residence even with those interest rates I would have been laughing now.

People carry on like housing is for 3 months or something, its for long term gain and provides a handy bonus, roof over head. Agree with you most people do not want to rent longterm, just because interest rates fluctuate.

4lex

I assumed I'd be able to make 5% nett across a reasonably diverse portfolio, probably borrowing heavily from the Motley Fool's 'Value Investor'. On past performance it's a very modest assumption.

There's the rub....

Simone

We've been renting for 7 months now!
We live just north of CBD, have friends spread across north, I work south, know lots of people all over south, and have lived in WA previously as a kid!
I think I know what I want. I don't know where I'll be working in the future, but Pascal will nearly certainly be working in Subiaco area (central Perth) for 5 years at least, so if we move to an outer suburb, he needs a train line or a good bus line.

Indeed, I'm not looking at short term, I'm looking at getting a house to live in, paying it off as soon as possible, and then either starting to invest or put money into superannuation, so when retirement comes we'll have some money if there's no pensions anymore due to baby boom etc.

4lex

Well I wish you the very best of luck with it. It's highly unlikely of course you'll actually be worse off in twenty years time or whatever it takes - I guess I was just playing devil's advocate a bit. Here's hoping you find a place you like that meets all your other requirements - if nothing else you should find there's less demand on the market now, so a bit more room for haggling!

Muzza04

Indeed, so with pre-approved finance in place you will have an advantage as it is now turning to a buyer's market.

In some cases lately( here in Perth), houses/ villas valued upto $250K etc have been reducing prices by thousands. So best not to trust the RE advertised market price and put in an offer below the stated figure and see what happens.

Quinkana

Only suggestion is to make sure the house you end up with is affordable and adequate.

What I mean is don't underspend and buy a house that needs lots of maintenance (unless you can do it yourself) or that will be too small for children you may have - and don't overspend on a house where the mortgage will drain your savings.

All very obvious in general terms but not always so very obvious when you are on the ground trying to buy a house.

There are many aspects to buying and owning a house and it looks like you are aware of the important ones.

brisnick

in bris i very rarely see an advertised price by the real estate agents. it's almost always by auction. is it different in perth?

i want to buy a house, not to make money but to have somewhere to live. there's nowhere i would be happy living for anything other than short term that is remotely affordable. i have my fingers crossed for more interest rate rises, to bring house prices down!

Simone

THanks for all the tips, and I'm proud to say I knew most of it, as I'm finally starting to get clued up about these things. Also, my fathers a builder, and some friends are too

Yes, am soon going to get pre approved finance, so that will be good to get price down. And having only a 3 week or so notice period on our rental should be good too!

Our plan is to buy the worst house in a reasonable good area.
We went to a home open on Saturday, but that house was to bad, because the two smaller bedrooms were tiny, and the only bathroom was one tiny 'semi ensuite' onto the main bedroom. So this house would've been to hard to make into something good.
But yeah, my dad's going to be living in an area nearby, so he can help, and we can do the gardens and painting etc.
I was first looking at 2 bedroom ones too, but reselling it might be harder, and otherwise if we do end up staying in it and having kids.

We're not going to overspend either, first of all I hate borrowing money in the first place(haven't had any personal loans now, and hardly use credit card), and we have to take into account that we'll have kids in a couple of years, and anything can happen.

So, yeah, lots of aspects, so it's very hard, but I'm glad I do now know what I'm looking for.
Hmmm, now to get some free weekends to actually go househunting...!!! (going down to Albany this weekend.. nice and cheap, camping at friends parents house, and a gig in a pub )
(luckily I have heaps of time at work to look at internet sites, and after work I can drive through suburbs on the way home. I should maybe start involving Pascal a bit more in this though, but logistically that's not really possible at mo )

Thanks guys, I am getting more informed, but it's good to get other perspectives, and get my 'ideas' confirmed