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Buying or selling? Get the right advice

Is it too soon or too late in buying a property in Canberra?

By MangaGal 19 April 2010 23

I have started thinking about getting a property in Canberra, preferably a freestanding house. Is it too soon or too late?

Recently I realised the housing prices have gone up so much in the last few years. I’m worried it will continue to rise. If this is true, then will it be better to buy now?

Will the prices come down in the future (say after 5 yrs?)?

Recently I noticed the prices in Queanbeyan have gone up too. Am I imagining it?

My other option is to get a piece of land first and then save up for a house later. But I heard I have only 12 months to buy the house. Am I right?

My friend also recommended that I get a 1-bdr unit/apartment outside of Canberra and after 2 yrs or so, I can use it to refinance for a house in Canberra. Is this do-able when the prices have increased over the years?

I’m also looking into investment property too.

There’s still so much to research. Thought I’ll put it out here and would love to hear what you guys think.


What’s Your opinion?


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23 Responses to
Is it too soon or too late in buying a property in Canberra?
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Hank 12:25 pm 20 Apr 10

Get in now; Higgins and Holt are still great buys in my opinion.

realityskin 9:13 pm 19 Apr 10

prhhcd said :

Pottsy is still with Independent. Hasn’t seen the light yet…

Only cuz is making a squillion.

2604 8:30 pm 19 Apr 10

Clown Killer said :

It also helps to consider what other asset classes will be doing in periods when housing is stagnant of heading backwards. There’s not too many times when a fall in housing prices isn’t matched by falls in equities or other investments – so then it’s about focussing on whether or not real estate is losing value quicker than say equities.

IMO it’s all about what interest rates are doing. House prices stagnate when interest rates have peaked and are on their way down.

When interest rates are high but haven’t peaked, cash is the best investment. Avoid equities at this time as their value will either be on the cusp of collapsing or will have collapsed. Ditto houses as this is when they tend to be at their most expensive.

When interest rates have peaked and are coming down from their high, bonds are the best investment, until interest rates are low again (RBA rate below ~5%) when equities become the best investment. But this is also a good time to purchase property as buyers have mostly been scared off by the high interest rates and the share-market fall.

moneypenny2612 8:26 pm 19 Apr 10

I don’t know if it’s too early or too late – and, to be honest, as an unmarried 30-something female, I don’t think I care anymore. I don’t think Australian realty offers value for money.

If you decide to buy, don’t over-commit. Life’s no fun if you become a slave to your mortgage. Budget for living a good life. Then see what mortgage you can afford.

Invest in your kids’ education and/or set up a trust fund if leaving a legacy is important to you. If you don’t have kids, invest diversely (managed funds invest in realty among other things), and make charitable donations to worthy causes. Invest in people rather than inanimate objects, I say.

In the long term, bricks and mortar are only worth what someone else is willing to pay at the time you (or your successor) want to sell…

deye 7:41 pm 19 Apr 10

Snarky said :

It’s been may years and a few cities since I was renting, but I recall the single biggest argument against renting and investing the difference was the instability you had as a tenant – as a student we often changed houses every 6 months; later on as a new family keeping a place for a year was about the best you could hope for (although it sometimes stretched to 18 months) before rents went up so much that it was time to move again. It wasn’t till we went overseas that we were able to easily rent one place with some certainty for 2 years or more. Is this instability still the case?

I’ve been in my current place just under 5 years. The one before that was 4 years.
I think I will stay here for another few years (depending on how much the rent rises) then buy a place (or maybe even buy this place).

How long you stay depends on the renter, the landlord and the agency.

If it’s a good renter who doesn’t destroy the place the landlord is often happy to have them stay even though the rent may drop below “market standard” for the area. As long as the rent doesn’t go up to much and the agency and landlord deal with any maintenance issues the renter is usually happy to stay.

The tricky part is usually the agency who I find tend to push the landlord into raising the rent as much as possible knowing that for them it’s win/win. Rent goes up, they get more cut. If the renter moves out they get to find someone new at what is a much higher rent so they get even more for their cut.

Clown Killer 6:00 pm 19 Apr 10

It also helps to consider what other asset classes will be doing in periods when housing is stagnant of heading backwards. There’s not too many times when a fall in housing prices isn’t matched by falls in equities or other investments – so then it’s about focussing on whether or not real estate is losing value quicker than say equities.

Having said that you can get out of an awkward position in the share market in a matter of minutes, whilst real estate will take weeks to months. You can also cover yourself in the share market in a way that’s possible to yield positive returns no matter which way the markets going.

random 5:02 pm 19 Apr 10

It’s basically impossible to tell. The data suggest that prices will correct in the long term, but the long term is, well, long.

A person born in Amsterdam in 1815 would have seen the properties in the Herengracht index rise consistently for 75 years — a long enough time-series for most to say that prices “always” go up. (And then they spent the next 30 years falling.)

Snarky 3:44 pm 19 Apr 10

It’s been may years and a few cities since I was renting, but I recall the single biggest argument against renting and investing the difference was the instability you had as a tenant – as a student we often changed houses every 6 months; later on as a new family keeping a place for a year was about the best you could hope for (although it sometimes stretched to 18 months) before rents went up so much that it was time to move again. It wasn’t till we went overseas that we were able to easily rent one place with some certainty for 2 years or more. Is this instability still the case?

troll-sniffer 3:40 pm 19 Apr 10

I don’t really subscribe to this get in as early as you can mantra. A bit of balance in your life is good, and so it should be with investing. Unless you’re an extraordinarily enthusiastic type, it’s likely that your appetite for the things you’ve slaved and scraped for will be lower later in life. So by the time you get to the enjoy the fruits of your labour you’ll find you no longer want to.

My parents bought their first house at age 35, and ended up owning 2 houses and 2 farms. I bought my first house at 31 years, and now own 4 units, on a very mediocre income too I might add.

So my advice would be to not waste your teens and at least the first half of your twenties settling down too hard, make sure you travel and party for some years before you are forced to pull your head in and become a house-bound victim of the property spiral.

prhhcd 3:36 pm 19 Apr 10

MissChief said :

prhhcd said:
on average: property prices double every 10 years. The general advice given is: buy as early as you can.

So given that house prices have almost quadrupled in the past 10 years, there’ll be no rise for the next 10? Or are you saying people will be paying close to a Million dollars for a run of the mill house in 10 years? Realistically, who’ll be able to afford that?

I think there’ll be a correction and a lot of people will get caught buying at the tail end of the upward cycle.

Many people said exactly what you’re saying now 10, 20, 30 ,40, 50 etc yrs ago. My grandfather bought a massive house in Chatswood in the 60s for 7000 pounds (a huge amount back then). Sold for a ridiculous amount (seven figures) of money a year or so ago

prhhcd 3:33 pm 19 Apr 10

Holden Caulfield said :

prhhcd said :

on average: property prices double every 10 years. The general advice given is: buy as early as you can.

+1

Also buying land yourself, rather than in a house and land package could be a good option. We did this when building our first house in Nicholls back in the day (mid-late 1999) and by getting the land first we only had to pay stamp duty on the cost of the land. However, I’m not sure if you can actually buy land now without being locked into a builder first, or of that small loop hole still exists, so double check that.

The other saying a friend of mine often says also generally rings true, “if you think real estate is expensive now, just wait 5 years”. The inference being, of course, that real estate rarely gets cheaper.

When we bought our current place in the inner north in 2004 a few people raised their eyebrows at the price we paid (mid 400s), now most people just say we were so lucky to have bought then for such a cheap price. And I suspect the same applies for most suburbs of Canberra.

Good luck!

Where is Pottsy these day anyway?

Pottsy is still with Independent. Hasn’t seen the light yet…

Spoono 3:02 pm 19 Apr 10

Eternal renting could be a great thing but you have to be disciplined. The mortgage equals forced savings cause you have to pay it. If you didn’t have to pay a mortgage would you definitely invest that money elsehwere week in and week out or would you fritter it away?

Holden Caulfield 2:25 pm 19 Apr 10

MissChief said :

…Or are you saying people will be paying close to a Million dollars for a run of the mill house in 10 years…

Seen what $1M gets you in Canberra these days?! It’s pretty depressing really. More often that not it doesn’t go as far as you might think.

VYBerlinaV8_the_one_they_all_copy said :

…If I had to go back and give the younger me advice, though, I’d say buy the best you can afford as soon as you can afford it. Make sacrifices, because the quality it will add (in both lifestyle and finance) to your life after the first 8-10 years will be huge.

Good advice IMO.

Holden Caulfield 2:17 pm 19 Apr 10

astrojax said :

don’t discount the option of eternally renting – do the figures and see what you think. that is, using some of the funds you might have kept paying for the mortgage for other investments, not just rent vs mortgage…

Given the cost of housing these days I’m surprised this theory doesn’t gain more traction. Over 10 years ago Paul Clitheroe, among others, was recommending want-to-be homeowners at least consider this option to see if property really was the right move for them.

There’s very little chance of there being a genuine crash. You basically have a few options:
1) Buy the most expensive property you can afford (only you can work out what you can afford), and struggle under the loan for a few years until inflation and/or income increases reduces the relative proportion of your income being spent servicing the loan.
2) Buy a cheaper property than you’d ideally like, live in it for a few years, then ‘trade up’ to something better once you have some equity to work with.
3) Rent, as per Astrojax’s comment. It’s not a crazy idea. Try to put some of the savings over owning into an investment to benefit you later.

I would expect prices to stabilise, even stagnate, over the next several years. I suspect that there could be another big property boom sometime between 2023 and 2035 (due to demongraphic factors), and this boom will push many into eternal renting.

If I had to go back and give the younger me advice, though, I’d say buy the best you can afford as soon as you can afford it. Make sacrifices, because the quality it will add (in both lifestyle and finance) to your life after the first 8-10 years will be huge.

MissChief 1:55 pm 19 Apr 10

prhhcd said:
on average: property prices double every 10 years. The general advice given is: buy as early as you can.

So given that house prices have almost quadrupled in the past 10 years, there’ll be no rise for the next 10? Or are you saying people will be paying close to a Million dollars for a run of the mill house in 10 years? Realistically, who’ll be able to afford that?

I think there’ll be a correction and a lot of people will get caught buying at the tail end of the upward cycle.

astrojax 1:35 pm 19 Apr 10

don’t discount the option of eternally renting – do the figures and see what you think. that is, using some of the funds you might have kept paying for the mortgage for other investments, not just rent vs mortgage…

MrPC 1:19 pm 19 Apr 10

A full on crash would require large numbers of baby boomers to either want to sell or be forced to sell, coupled with a substantial drop in immigration numbers.

That said, I still wouldn’t buy at the current prices on principle. Buying requires handing over massive amounts of money to speculators (sellers) in exchange for them having done relatively little. I’d rather live in a converted bus (hypothetically) than reward the speculators.

Holden Caulfield 12:07 pm 19 Apr 10

prhhcd said :

on average: property prices double every 10 years. The general advice given is: buy as early as you can.

+1

Also buying land yourself, rather than in a house and land package could be a good option. We did this when building our first house in Nicholls back in the day (mid-late 1999) and by getting the land first we only had to pay stamp duty on the cost of the land. However, I’m not sure if you can actually buy land now without being locked into a builder first, or of that small loop hole still exists, so double check that.

The other saying a friend of mine often says also generally rings true, “if you think real estate is expensive now, just wait 5 years”. The inference being, of course, that real estate rarely gets cheaper.

When we bought our current place in the inner north in 2004 a few people raised their eyebrows at the price we paid (mid 400s), now most people just say we were so lucky to have bought then for such a cheap price. And I suspect the same applies for most suburbs of Canberra.

Good luck!

Where is Pottsy these day anyway?

OzChick 9:40 am 19 Apr 10

Register yourself to the Village Building Company website. There is going to be a release in Watson of units and townhouses in early May 2010. Prices will be starting from $300,000. You may be able to get a package under the Affordable House and Land Package (AHL) scheme.

http://www.villagebuilding.com.au/

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