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If you want a house, then move cities…

Thumper 30 January 2008 42

ABC online is reporting that Canberra is set to overtake Perth as Australia’s second most expensive city to buy property.

Guess that’s it kiddies. You will only ever own a house now if your daddy is rich and your mummy is good looking.


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42 Responses to If you want a house, then move cities…
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JC 9:20 pm 01 Feb 08

Holden, that is what I did back in 2007. The saving on the house itself was minimal but the savings in stamp duty is where it made it worth while. I paid stamp duty on the block which cost $50,000 contracted the builder to build the place for about $110,000. If I had of just brought the same place off the builder it would have been about $170,000 + stamp duty on the whole lot.

As for the whole debate the market is just nonsense for what ever reason. Prices are way too high and for someone coming in it must be so hard. Guess just one of the many problems of having an interest rate that was so low for so long. Maybe people might now understand why the RBA uses rates to control inflation.

In one way I shouldn’t complain because I got in before the market went silly and my place has more than doubled, almost trippled in 7 years. But the problem is if I want to move up myself then I would have to double my mortage, whereas 7 years ago the increase would be marginal. So my gain is on paper only. It is usless to sell because any gain would be lost in buying the next property. The advice I was given was to use the equity in my current place to buy an investment property say every 2 years, then in 10 sell them all and my own place and move up. Sounds like a lot of hard risky work. Oh I wish for simpler and cheaper times.

Holden Caulfield 12:18 pm 01 Feb 08

Also consider buying off plan. If you’re comfortable reading plans and visualising spaces you can save quite a lot of dough by essentially agreeing to take on some of the builder’s risk.

We bought our investment property off the plan and it saved us in the region of $20-30K I’d suggest.

VYBerlinaV8 9:57 am 01 Feb 08

Bear in mind that investors tend to buy property at or below market rate. The main advantage investors have is that once you’ve bought some property, you stop being so emotional about The Decision. The last place I bought I got the agent to open it early, looked through for ten minutes, then made an offer on the spot, which was accepted 20 minutes later. THAT, is what first home buyers are competing with. s-s-a, there’s not much point getting upset if someone else beats you to a property – that’s what the free market is all about.

s-s-a 10:23 pm 31 Jan 08

I hear you on investment buyers – back in the mid-90s my ex and I wanted a townhouse in Emu Ridge. No chance to get one as they were all snapped up by investors as soon as they got onto the market so instead we spent about $30k extra on a 3br/1bath/1carport new house in Palmerston. Of course when we came to sell we were punished badly by the buyers not wanting anything without an ensuite and attached garage…

tybreaker 9:52 pm 31 Jan 08

Having seen the yobbos who live in our street with their gen Y disregard for everyone else, their loud, all-night parties and vandalism of others’ front yards including tipping over cars etc I’d be very happy to see them homeless let alone let them be tennants in my house. Good luck to whomever they’re renting from!

Sands 9:43 pm 31 Jan 08

cool, will check it out tomorrow. But for now… I’m surfing for cars 🙂

The Jas 9:33 pm 31 Jan 08

Not really, our accountant at work did most of the work for me, but I certainly did my home work. It really only works if you can do 25,000km per year though for the FBT advantages.

Sands 9:17 pm 31 Jan 08

Wouldn’t it just! Did you have to get advice? I think our department uses McMillan Shakespeare. I might check them out. I just keep figuring if I’m not paying anything for my car now, then any amount would be more. But I don’t really factor in the rego, insurance etc.

The Jas 9:11 pm 31 Jan 08

The tax is not the only money benefit, I might save $3000 a year in tax, the biggest advantage is you work everything out at the start of the FBT year, repairs, lease payments, rego, insurance etc. and then divide that in to a weekly payment, your salary is reduced by that and you save the tax. The big benefit is that when the rego/insurance comes up I don’t have to worry about saving or putting money aside, I just ask my boss for a cheque!! Simple. I just pay for my petrol, as the plan is an employee contribution lease but my car is far more fuel efficient than my previous one so I save quite a bit on petrol which in this hard economic enviroment, is a good thing. And I have a nice new car of course. I’m still in 2 minds whether I will pay it out or roll it over in a year and a half when the lease is up, but I change my mind every week. A new Audi A3 would be nice though…..

Sands 7:59 pm 31 Jan 08

dobaman – there’s a great book called “Please just fuck off it’s our turn now” by Ryan Heath which looks at that very thing (the baby boomer freezing out first home buyers. I highly recommend it.

The Jas – I own my car and thought about salary sacrificing but was told that it wasn’t really that much of a tax benefit. Mind you I was earning $25K less then. Maybe that has something to do with it.

The Jas 6:55 pm 31 Jan 08

Thanks all, I think at the end of the day you have to put your pride aside and knuckle down. 5 years ago if you said that to me I’d have laughed, I was living in a great (rented) apt in Redfern and living the Sydney high life which came back to bite me with the debts I incurred.

I had I guess what I would call a moment of clarity about 8 months ago (not that I’m a religous man), so if anyone can learn off my mistakes then that is a good thing. I think the first thing before considering buying property is to get rid of any debts you have, especially credit cards and personal loans. I learnt my lesson with C Cards long ago and the interest is shocking and even personal loans it’s not the best. After my loan is paid off I will only have my car but that is good debt as I salary sacrifice it which saves me shitloads in tax. Everything else will go towards the house. I’ll get a 2 bedroom place that I can afford to pay off by myself and get someone in to rent and use that as extra payments which can make a massive difference to your interest.

In conclusion, I don’t think owning a house is out of the question for the majority of Canberrans, you just need to make what money you have work for you and be smart about things. The biggest thing I learnt though is you dont get something for nothing in this life, if you sit around waiting for things to happen you’ll be in the same position 10 years later!!

Holden Caulfield 5:37 pm 31 Jan 08

@dobaman

You’re absolutely right about the investors (ourselves included). One of the main reasons for purchasing ours was for the tax benefits. I agree that to genuinely tackle housing affordability clamping down on investors could help, a lot.

Trouble is, it would be close to political suicide for any Govt to do so as it would affect so many Mum & Dad investors.

Holden Caulfield 5:34 pm 31 Jan 08

The Caulfields took out a $10K personal loan in early 1999, stashed it away, and added to it from time to time, for six months so that it counted as a “savings record” (haha, remember them). We then built our first house in Nicholls, starting in mid 99 and moving in in early 2000. Then the GST came in and house and land prices went north real damn quick. Our timing was impeccable, fortunate, but impeccable nonetheless. Our block of land cost under $75K and only had it secured with a $100 deposit for about 6 weeks while we worried if paying that much for land would limit what we could spend on the house, haha – FFS that seems crazy now!

A couple of years later we had enough equity to help fund the purchase of an investment property, which even then we freaked at the price we paid for a standard 4 beddy in Gungahlin as it was substantially more than the house we were living in. It’s rented to DHA and is pretty much set and forget.

A year or so later we sold our first house and moved to inner North to a house in original condition, but good condition. The hassle of an older house sometimes gets you down, but the location is great.

And to think, if we played it by the book and saved for our deposit we’d have taken an extra 6-12 months to “get into the market” and paid an extra $30-50K for the same house we originally moved into.

A wise man once said to me, shortly after we bought our investment property, “you think you paid a lot for your house now, just wait until you come to sell it.”

While there will be troughs in real estate, the overwhelming evidence in the Canberra market, at least, is that the peaks definitely outweigh the troughs.

I know it is almost 10 years ago now, but we have friends buying basic entry level housing in Qbn/Belconnen for almost double what we paid for a brand new custom designed house in 2000.

As I said, our timing was very kind to us.

dobaman 5:16 pm 31 Jan 08

What we have in Australia at the moment looks like a classic housing bubble, mainly caused by the changes to CGT and negative gearing around 2000 as well as relatively low interest rates since then. There isn’t a housing shortage as much as there is a group of baby boomers who are investing in property for tax reasons. These guys are competing with the traditional first home buyers and driving up prices. The question is which side is going to stop bleating about housing affordability and start seriously talking about changing the tax incentives to invest in property.
15 – 25% p/a increases (for example in Melb) is not sustainable and eventually first home buyers aren’t going to play anymore. Then the bubble will burst or prices will stagnate.

http://www.allhomes.com.au/ah/ah0052
Look at the jump from 2000.

Davo111 3:35 pm 31 Jan 08

The biggest problem that I see amongst friends and colleagues is the attitude of “I’m not living all the way out there, it’s not convenient for my work”

True, but
/me looks at my bicycle, my only form of transport.

VYBerlinaV8 2:48 pm 31 Jan 08

Although the property market moves in cycles, it’s worth noting that it rarely drops much in nominal terms. Of course, an extended period of time where the nominal price doesn’t move equates to a slow price drop, but it doesn’t drop much in real terms. If you take a long term view, it’s always a good time to buy.

Also, the Canberra property market is largely shielded from other factors that cause markets to drop. The govt spends big and regularly, and there’s plenty of demand. Given too that the Australian mortgage market is about 4% sub-prime (US was 16.5%!!), we are largely safe from the property price drops caused by adjustable rate mortgages all falling due around the same time.

Bottom line, prices have nowhere to go but up.

caf 2:37 pm 31 Jan 08

You’re right that house prices are unlikely to return to circa-2000 levels, but in the medium term the market is still cyclical, so it can make sense to try and buy at the bottom of the cycle.

s-s-a 2:35 pm 31 Jan 08

“I have mates who have always said “i’m not buying now, the bubble with burst” and now comment that they (still) can’t afford it”

About 5-6y ago we were on the case of a particular couple we know who had something approximating a deposit to just buy SOMEWHERE. But no they wanted to wait 6m until the market “slowed down” and also had a requirements list as long as your arm. Needless to say they are now 40-somethings with two kids at school and still renting.

Danman 1:57 pm 31 Jan 08

Failing that I can get a transfer and we will move to (ideally) Booroondara shire in Melbourne, but somewhere in Melbourne anywho. Pretty easy to queue a job in Nursing up for Mrs Danman

Danman 1:56 pm 31 Jan 08

I got a mortgage and drive an eb falcon that was given to me – but you have to begin somewhere. In a few years Mrs Danman and I are goin gto purchase in Weston Ck Area (Between Dufy and Cotter Rd and keep our current residence as a rental/investment property. We are both lucky that we have well paid jobs and are frugal with our luxury items.

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