smilingsenthil Posted December 30, 2012 Report Share Posted December 30, 2012 (edited) During my short visit to Perth, I enquired the rentals as well as home sales in few suburbs. A good individual house in a good suburb comes anywhere between 600 - 800 AUD and if you have to buy it it costs around 600k to 800k. Now the question is if you go for an INTEREST ONLY housing loan, one may have to pay only as much as what they would be paying for a rented house. In that scenario, why would people go for renting house when they can actually buy them and still end up paying more or less the rental amount as the monthly installment thereby giving a good chance of property appreciation down the line. Is it only to save that initial downpayment for buying the house or am I missing something else ? Edited December 30, 2012 by smilingsenthil Quote Link to comment Share on other sites More sharing options...
taylors4 Posted December 30, 2012 Report Share Posted December 30, 2012 During my short visit to Perth, I enquired the rentals as well as home sales in few suburbs. A good individual house in a good suburb comes anywhere between 600 - 800 AUD and if you have to buy it it costs around 600k to 800k. Now the question is if you go for an INTEREST ONLY housing loan, one may have to pay only as much as what they would be paying for a rented house. In that scenario, why would people go for renting house when they can actually buy them and still end up paying more or less the rental amount as the monthly installment thereby giving a good chance of property appreciation down the line. Is it only to save that initial downpayment for buying the house or am I missing something else ? Think this thread is an interesting one, and you will get many views on this I think. My own particular reason to rent initially, would be that you don't know if you are going to settle in the area in which you first arrive - it takes time to suss out which area is for you and your family work/schooling/lifestyle etc. Also people seem to be keeping their capital in the UK due to poor exchange rate and hoping they will improve, thus holding off buying in Oz. I can see why this seems a good idea, but like property markets here in the UK, surely it can change. Lots of people in the UK have done exactly what you are proposing and are now in negative equity situation, losing jobs, then homes - If you get into this situation its dire (I know lots who this has recently happened to). So unless you have a wad of cash in the UK or indeed in a bank account in Oz, you could get your fingers burned. I don't want to start a debate on the property and job market, but the prices in Perth are very high, the worst thing anyone anywhere can do is buy at the top of the market, as if it falls you are then exposed financially, especially if you have no way of paying back any capital. Therefore you won't own any of the property, just like people renting, but at least if you are renting you don't have a large deposit to lose if you want to move and its easier to walk away from it if you can't afford it. On the flip side, it could work if the markets continue to thrive - lots of people in the UK have also done this and made a lot of money out of this. Its all down to a bit of luck and being a canny investor. For me though I'm far to much of a conservative investor and think its a strategy with a too much risk for me. I'd be really interested to hear what others think though, as we are all in the same boat and going over what's the best thing to do. I'm not saying I wouldn't buy, though, I'd probably try to get a job then save up for a deposit and buy something small and a bit rundown, do it up and then when the time is right for me, I would sell it as well as my UK property and bring my capital over and then get the dream house!! Don't know how feasible this is though! Good luck with the research Quote Link to comment Share on other sites More sharing options...
lornarees1 Posted December 30, 2012 Report Share Posted December 30, 2012 We are renting and like u say til u suss out where u want to live its not a good iidea the deposit on a house minimum is 5% which on 600-800 is a lot , if not a perm res its 20% some people haven't got a good enough job to save a good deposit and like u say the exchange rate is rubbish so I've stil hot my house in the uk Quote Link to comment Share on other sites More sharing options...
smilingsenthil Posted December 30, 2012 Author Report Share Posted December 30, 2012 Taylor, from what I have been told the housing prices have actually gone down in the recent years. I have seen couple of houses where the owners have bought around 700k some 5 - 6 years ago and are willing to sell it for the same price even today ! In Rockingham, one great house close to the beach was sold for just 450k (a 4 bedroom one) and enquiries in that area revealed that there are great bargains at the moment. Ofcourse, I understand that no price is a good or bad price and if the economy falls it can hit the rock bottom. However, even if nothing changes and the property did not appreciate in the next 5 -6 years it will still give us a satisfaction of living in our own house and if it appreciates in value it is a bonus. But yes, i agree to the fact that some people may not have decided where to live and for some the deposit would be a lot of money initially. I'm not talking about that initial phase though, but once you get a job and steady the ship is it that people are buying houses ? I think still a lot are renting primarily because most of them might just be unsure of settling down for life I suppose. But is that a correct way of looking at it ? Becoz eventually when you decide to settle it could be too late to buy (as prices may rise). Would be glad if some senior members who are residing in Perth for long years could comment on this subject. Quote Link to comment Share on other sites More sharing options...
colinmacl Posted December 30, 2012 Report Share Posted December 30, 2012 Taylor, from what I have been told the housing prices have actually gone down in the recent years. I have seen couple of houses where the owners have bought around 700k some 5 - 6 years ago and are willing to sell it for the same price even today ! In Rockingham, one great house close to the beach was sold for just 450k (a 4 bedroom one) and enquiries in that area revealed that there are great bargains at the moment. Ofcourse, I understand that no price is a good or bad price and if the economy falls it can hit the rock bottom. However, even if nothing changes and the property did not appreciate in the next 5 -6 years it will still give us a satisfaction of living in our own house and if it appreciates in value it is a bonus. But yes, i agree to the fact that some people may not have decided where to live and for some the deposit would be a lot of money initially. I'm not talking about that initial phase though, but once you get a job and steady the ship is it that people are buying houses ? I think still a lot are renting primarily because most of them might just be unsure of settling down for life I suppose. But is that a correct way of looking at it ? Becoz eventually when you decide to settle it could be too late to buy (as prices may rise). Would be glad if some senior members who are residing in Perth for long years could comment on this subject. Buying a house on interest only is the same as renting as you are not paying the mortgage off but you do also have the maintenance costs etc to deal with and the full risk if the value depreciates. Although you could make money as some did if they sold before the crash. Just look at what happened to everyone in the UK and US to see why. Just like the countries i just mentioned the property market here cant possibly keep rising faster than people's salary. You could look at Japan for another long term example of what happens when property prices go too high. I don't think the banks even give those types of mortgages anymore. Quote Link to comment Share on other sites More sharing options...
xclairex Posted December 30, 2012 Report Share Posted December 30, 2012 The best thing to do if looking for an investment is to buy a cheaper house which will rent out for more than your morgage costs each month which, at this moment in time, there is a great lull in the amount of rentals available in Perth thus making rents more expensive as demand is high. I think the general idea for people when they first come over is to initially rent in a particular suburb to 'test the water' to see if they like the area then, there are a number of families who do go on to purchase their own home as the prospect of moving to another country and living in 'someone else's home' does take it's tow. But, in saying that, there are others who feel that renting their home is much easier and more convenient for them and works for them. It really depends on what you have at home and what you bring to the table when you are here. If you don't like the idea of renting, then purchasing your own property is a better idea or even buying a piece of land and building your own home, which is cheaper as you avoid the stamp duty. Some people actually know the area they want to live as they have visited previously and the go on to purchase a home as foreign investors and have the property settle before they enter Australia. There are many ways you can have a home, for some having a deposit to put down on an established property is just too much, but for some others, it is their committment to their new lives in Australia and they feel much happier doing so. Regardless, you must fee that you are doing the right thing for you and your family, before you commit. Hope this helps to some degree. ;o) Claire Sales Associated RE/MAX Coastal Secret Harbour Quote Link to comment Share on other sites More sharing options...
taylors4 Posted December 30, 2012 Report Share Posted December 30, 2012 Taylor, from what I have been told the housing prices have actually gone down in the recent years. I have seen couple of houses where the owners have bought around 700k some 5 - 6 years ago and are willing to sell it for the same price even today ! In Rockingham, one great house close to the beach was sold for just 450k (a 4 bedroom one) and enquiries in that area revealed that there are great bargains at the moment. Ofcourse, I understand that no price is a good or bad price and if the economy falls it can hit the rock bottom. However, even if nothing changes and the property did not appreciate in the next 5 -6 years it will still give us a satisfaction of living in our own house and if it appreciates in value it is a bonus. But yes, i agree to the fact that some people may not have decided where to live and for some the deposit would be a lot of money initially. I'm not talking about that initial phase though, but once you get a job and steady the ship is it that people are buying houses ? I think still a lot are renting primarily because most of them might just be unsure of settling down for life I suppose. But is that a correct way of looking at it ? Becoz eventually when you decide to settle it could be too late to buy (as prices may rise). Would be glad if some senior members who are residing in Perth for long years could comment on this subject. Smiling, can see exactly where you are coming from. I've been looking into it for 2 years since our last visit, and yes things change. I had thought the prices had come down a little but in that time, but not by much. This is a great thread as its not an exact science, but as another poster has already stated, if you only pay the interest you will never own the property, but as you point out if the market rises - you are quids in if you sell. I honestly prefer to own and I have never lived in a rented property before and I know it isn't going to suit me, so as soon as the time is right for me then I will buy, but obviously once there you will keep an eye on the market and get a feel for the place before making any rash decisions. Its difficult to assess the market until you are there and get to know your areas. But I'm sure others will love this thread - there is no right and wrong really, its all down to personal circumstance and market conditions. I can see that if prices rise again though, like the UK lots will be priced out of the market. Not sure any of what I think will help, but its just so good to hear other peoples thoughts on such a big decision. Quote Link to comment Share on other sites More sharing options...
Guest Lisa1234ken Posted December 30, 2012 Report Share Posted December 30, 2012 Hi all can anyone tell me my wife has NVQ1&2 pharmacy assistant with 6 years experience ,she is one half years off getting NVQ 3 pharmacy technician although her role as a pharmacy dispencer/assistant is more or less the same would the work experience convince visa authorities any info guys very welcome thanks ken Quote Link to comment Share on other sites More sharing options...
verystormy Posted December 31, 2012 Report Share Posted December 31, 2012 The answer is simple. The average salary in Perth is about $78k. On a rational basis it means you can afford a mortgage of $250k. But the average house price is $460k. So, you need one massive deposit. It also means that the market is becoming increasingly over priced. Interest only mortgages are a terrible idea. People just do not appreciate the fact that you still owe the full amount at the end of the mortgage term. In 20 years the bank will hold out it hand for the money and you either remortgage or hand back the house. If you remortgage, you are, unless a young buyer, now looking at having a mortgage in retirement. Not a good move. Then there is the WA economy. The mining industry is seriously struggling and there have been significant layoffs. There are likely to be a lot more to come in the first half of next year. That is going to hit the housing market hard. Quote Link to comment Share on other sites More sharing options...
Scot01 Posted December 31, 2012 Report Share Posted December 31, 2012 I also thought there were rules about buying depending on the kind of visa you had. Perhaps it has changed but when we first came we weren't allowed to buy an existing property and could only build new. And for those keeping their property in the UK - there was something about if you sell after being in Oz for 7 years you are clobbered with capital gains tax bringing the money in. Again, this may have changed. Quote Link to comment Share on other sites More sharing options...
smilingsenthil Posted December 31, 2012 Author Report Share Posted December 31, 2012 Does it mean that those who earn around 80k can only buy a house worth 250k ? That is a bit of a surprise to me. That puts a big stop on people to buy good houses as I don't believe that they can get decent houses for that price. So who is buying then ? The houses which costs more than 500k are being bought by those who earn 150k per annum ? Or is there any other short cut ? I'm sure that people who earn less would still be able to buy decent houses as banks basically give housing loan based on the property and little consideration to the actual income of the person. Correct me if I'm wrong. The answer is simple. The average salary in Perth is about $78k. On a rational basis it means you can afford a mortgage of $250k. But the average house price is $460k. So, you need one massive deposit. It also means that the market is becoming increasingly over priced. Interest only mortgages are a terrible idea. People just do not appreciate the fact that you still owe the full amount at the end of the mortgage term. In 20 years the bank will hold out it hand for the money and you either remortgage or hand back the house. If you remortgage, you are, unless a young buyer, now looking at having a mortgage in retirement. Not a good move. Then there is the WA economy. The mining industry is seriously struggling and there have been significant layoffs. There are likely to be a lot more to come in the first half of next year. That is going to hit the housing market hard. Quote Link to comment Share on other sites More sharing options...
SaffanZimbo Posted December 31, 2012 Report Share Posted December 31, 2012 We will be renting for the first year or two as we have all our money tied up in property in the UK. With the poor exchange rate and very slow housing market in the UK we have decided to rent out our house. We had Estate Agents visit to value to the house for rental and sale and both agents agreed that rental made more sense (although the sale agent said "don't let my boss know I said not to sell!!"). Our rental will cover our mortgage and insurance bills with a little bit extra to tuck into the UK bank for any emergencies. This does mean however that for the next 2-3 years we need to save like crazy to get enough cash to pay for a container and set up money when/if we decide to move (we will know more once we return from our validation trip in March 2013). We have a friend who arrived in Perth ex-Zimbabwe 5 years ago and they have just bought their 2nd home in Gosnells. The house prices are not that high but the land plots are small (600sqm) compared with suburbs to the west of them which sell for twice the price due to being in the Willeton/Leeming HS catchment zone...... We hope to eventually buy a fixer upper in a good school area as OH is a dab hand at building, plumbing, electrics and I've quite good at decorating..... and judging by some of the houses shown on on realestate.com.au there seem to be lots of houses which need some TLC! We would never go Interest Only though as in our minds it is the same as renting but with all the hassle/costs of homeowning and none of the benefits! Quote Link to comment Share on other sites More sharing options...
taylors4 Posted December 31, 2012 Report Share Posted December 31, 2012 (edited) Does it mean that those who earn around 80k can only buy a house worth 250k ? That is a bit of a surprise to me. That puts a big stop on people to buy good houses as I don't believe that they can get decent houses for that price. So who is buying then ? The houses which costs more than 500k are being bought by those who earn 150k per annum ? Or is there any other short cut ? I'm sure that people who earn less would still be able to buy decent houses as banks basically give housing loan based on the property and little consideration to the actual income of the person. Correct me if I'm wrong. No banks do not give little consideration of your earnings - your earnings are what they look at to decide the amount you can borrow. You are correct though about everything else you have said. There are no short cuts. Perth is an extremely expensive place to live. Don't forget people are bringing equity with them, or renting their homes at home and gaining an income from them, which will enable them to either rent or buy. It's all about getting as much money as you can behind you. Say someone sells up and brings $300K equity with them, they earn $80K therefore, they get a mortgage and can buy a property for $550K, they are the ones who are able to buy in Perth. Its not good news, but this is why so many people rent as they cannot get their hands on the money for large deposits, not sure where you are from, but if you live in the UK, you will see the same pattern, people can't afford to get on the housing ladder. Edited December 31, 2012 by taylors4 changes Quote Link to comment Share on other sites More sharing options...
verystormy Posted January 1, 2013 Report Share Posted January 1, 2013 Does it mean that those who earn around 80k can only buy a house worth 250k ? That is a bit of a surprise to me. That puts a big stop on people to buy good houses as I don't believe that they can get decent houses for that price. So who is buying then ? The houses which costs more than 500k are being bought by those who earn 150k per annum ? Or is there any other short cut ? I'm sure that people who earn less would still be able to buy decent houses as banks basically give housing loan based on the property and little consideration to the actual income of the person. Correct me if I'm wrong. As per the answer below and the fact that personal debt is one of the highest in the world and the banks are behaving as bad as those in the US and UK were before the GFC. I have been offered mortgages that have a repayment exactly the same as my income. So, they are willing to lend on the basis it is impossible to repay. Quote Link to comment Share on other sites More sharing options...
smilingsenthil Posted January 1, 2013 Author Report Share Posted January 1, 2013 Seems like I have got two answers which are contradictory to each other one saying that the income is the one which decides the mortgage and other saying that a bank has offered loan as much as the monthly income making it impossible to pay. Would be glad to hear more on this from others. Quote Link to comment Share on other sites More sharing options...
lornarees1 Posted January 1, 2013 Report Share Posted January 1, 2013 mu hubby is in the mines and we can get a mortgage for up to 700k, even tho we can we would never for that high as we still have to be able to survive and if anything happens with his job and he needs to take a lower paid job we would struggle once we can sell out house in the uk we will bring our money over and maybe invest over here but ayin that we only have 14 yrs left on uk mortgage so mite just keep it just incase my boys want to go bk in the future the other thing if we wanted to go to 700k we would need a massive deposit which would take forever to save , id rather get a lower priced house and get on the ladder Quote Link to comment Share on other sites More sharing options...
taylors4 Posted January 1, 2013 Report Share Posted January 1, 2013 Seems like I have got two answers which are contradictory to each other one saying that the income is the one which decides the mortgage and other saying that a bank has offered loan as much as the monthly income making it impossible to pay. Would be glad to hear more on this from others. The reason you have got contradictory answers is that I'm in the UK and that is how it works here, due to the American sub prime lending problem (ie collapse of US economy), same thing happened here in the UK. Verystormy is in AUS, yes I was not aware they were still sub prime lending in AUSt. What this means is lending to people who cannot, and never will be, able to repay the banks. Therefore, the banks shell out loads of dosh, people cannot afford to pay back, causing massive problems in the economy. As Verystormy says AUS has lots of folk with a lot of debt. If AUS economy slows down, people lose jobs, cannot pay therefore it all crashes, people end up homeless. It may not happen, but seeing trends in other countries is an indicator. But its totally up to you if you want to sink a large deposit into a house you will never own, if indeed they have interest only loans in Aus, I know in the UK, they will not allow this unless you can show how you will repay the loan. Remember nothing is every yours unless you pay for it in full. Quote Link to comment Share on other sites More sharing options...
taylors4 Posted January 1, 2013 Report Share Posted January 1, 2013 mu hubby is in the mines and we can get a mortgage for up to 700k, even tho we can we would never for that high as we still have to be able to survive and if anything happens with his job and he needs to take a lower paid job we would struggle once we can sell out house in the uk we will bring our money over and maybe invest over here but ayin that we only have 14 yrs left on uk mortgage so mite just keep it just incase my boys want to go bk in the future the other thing if we wanted to go to 700k we would need a massive deposit which would take forever to save , id rather get a lower priced house and get on the ladder Yep Lorna, exactly, same here this what we will do. Quote Link to comment Share on other sites More sharing options...
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