Australia Rental Prices a Joke

[Guest chris955]

Yes that is the problem, it affects locals far more than migrants. People cant just move because rents keep going up especially if you work nearby.

 

What, the entire struggling part of the Australian population? The discussion about extortionate rents on here is not limited to immigrants, but rather to the population as a whole.

[The Fisheys]

Property prices in Australia are quite simply unsustainable in the medium to long term.

Australian National Debt has ballooned, especially if you include State Debt onto Federal Debt.

The country over relies on mineral exports to China, to underwrite the failing economy. Once the crisis in the rest of the world subsides, which it inevitably, eventually will, the markets will take a much harder look at Australia. At the moment, the markets like Australia, because they don't much like Europe, and the USA, but once the markets are happy to lend to the "Old World" again, there will be trouble.

Also, China is looking to buy up mineral resources in the developing world, once it becomes cheaper to buy coal from South America, the mining boom here will turn to bust, and workers here will be left high and dry with unaffordable mortgages, based on income multiples that would frankly make even Northern Rock blush.

Australia doesn't waste a large portion of its GDP on public spending, compared to the rest of the world, which may be its salvation, however, the current beleaguered Federal Government is frantically trying to buy votes for the General Election in September 2013, by ratcheting up a plethora of bribes.

To see a real big fall in property values here would require a banking, or credit collapse, and although there doesn't seem to be any sign of this happening, like in the UK, Europe, and the USA in 2006 there is no apparent credible plan to prevent contagion.

[starlight7]

I think FNQ has seen a fairly substantial drop in property prices- at least since the last cyclone. If you look at properties in , say, Palm Cove, they are a lot cheaper than they were a few years back.

[Guest chris955]

Yeah but FNQ is a pretty small part of the market as many dont like like the climate. There is no sign of similar happening in the larger heavily populated areas although prices have dropped a little.

 

I think FNQ has seen a fairly substantial drop in property prices- at least since the last cyclone. If you look at properties in , say, Palm Cove, they are a lot cheaper than they were a few years back.

[Jacaranda]

​Again, it keeps the riffraff out!

Are you sure about that Wendee?I keep reading posts on this forum about people wanting to emigrate with crim records???Yep we'll keep sending them your way!:laugh:

[Guest chris955]

Are you sure about that Wendee?I keep reading posts on this forum about people wanting to emigrate with crim records???Yep we'll keep sending them your way!:laugh:

 

They have a big building in Canberra where they keep all the elected criminals.

[Incata]

I find it astounding that anyone could justify these prices. A 2 bed flat 9 miles away from central London can be had for around 250k (GBP) while a similar in Sydney (same distance from CBD) would cost you around 600k (about 414k GBP). Who on Earth can afford these places? Surely it all over valued and will decline at some point? I don't believe it's sustainable.

 

In Perth there are apparently over 2000 new immigrants landing every week. If there were fewer I don't think the market could be sustained but as it is, there is a constant source of fresh blood so I think prices will stay high. I haven't seen any stats about how many recent immigrants are leaving per week (that would be interesting!)

 

I've seen a couple of newspaper articles recently about building affordable housing in the Perth region, and how people in neighbouring areas objected because they did not want the value of their houses to be diminished.

 

I think it is a difficult one as while everybody would like cheaper prices, nobody would actually want their property devalued. It seems that one of the big topics of conversation over here is the value of people's investment properties and how many they have, so I think while the market is extortionate (for rentals), there is no imperative for the prices to come down.

 

Only at the point (if and when) Australia goes into a recession and people start losing their jobs in large numbers and are forced to sell because they can't afford their mortgages, only at that point will prices come down. However another statistic I read recently said that Australia has not been in recession for 21 years and there is nothing to suggest that one is imminent.

Edited May 5, 2013 by Incata

[Incata]

How do people manage paying those rents on casual work?I think I'd find it heaps stressful tbh!

 

When we were breaking our lease we had several people looking round who were house sharing as a way to reduce the cost. Certainly that's what my husband's cousin and his girlfriend did when they were out here (on a WHV) and doing casual bar work last year.

[Incata]

Absolutely, if the £ had not collapsed in 2007 your saving would be worth 25 - 33% more. If you wound back to 2002, a £ was worth nearly $3AUD.. I wish I'd bought an investment property here in 2002 rather than a home in the UK...

 

Me too :biggrin:

[Incata]

Fact: We pay $650 per week rent in Como, south of Perth city. We viewed many properties for less than $650 a week and refused to live in a tip or a box. We are not happy about it. I earn well over $ 100,000 a year. Any way you compare $ to £, black to white, English to Australian, apples to pears the rents are ridiculous. We cannot afford to live here.

 

We rented in Ocean Reef at $540 per week. It was cheaper to get a mortgage (which we did) and we ended up with a much nice place, twice the size and for under $450 per week. Why don't you buy if it is so expensive to rent?

 

Mind you, Como is lovely, I did like it there (we stayed in a furnished rental for a week when we first landed). Would have happily rented/bought there except that hubbies job is NOR and the commute would have been a nightmare.

[Incata]

So people are just being ripped off then ?

 

Can't speak for anywhere else, but in Perth the answer has to be, "yes".

[Incata]

I think the rents are way too high, most people on average wage would struggle to pay them. People have to live somewhere. I looked at a unit yesterday for someone and it was ok but the carpet was dire clean but falling apart, why should people pay top dollar for this. Also the locks were all loose etc. Landlords get the money but a lot think that its where it ends taking the money. Its time the negative gearing was taken off and house prices could drop to a normal level. No reason for us to have some of the most expensive housing in the world.

 

What is negative gearing?

[newjez]

Yes - but it's immigration pushing up the rents (for Perth from the east coast as well as the rest of the world). When this stops, rents will decrease.

 

​

What, the entire struggling part of the Australian population?

 

The discussion about extortionate rents on here is not limited to immigrants, but rather to the population as a whole.

[newjez]

What calculations say that buying is cheaper than renting? What purchase price and mortgage are we talking about?

 

Average home price in Ocean reef is $700,000. Mortgage repayments on a $700,000 mortgage would be $1000 per week. How is buying cheaper?

 

We rented in Ocean Reef at $540 per week. It was cheaper to get a mortgage (which we did) and we ended up with a much nice place, twice the size and for under $450 per week. Why don't you buy if it is so expensive to rent?

 

Mind you, Como is lovely, I did like it there (we stayed in a furnished rental for a week when we first landed). Would have happily rented/bought there except that hubbies job is NOR and the commute would have been a nightmare.

Edited May 6, 2013 by newjez

[starlight7]

 

Yeah but FNQ is a pretty small part of the market as many dont like like the climate. There is no sign of similar happening in the larger heavily populated areas although prices have dropped a little.

True. Though last time I was up there I was surprised at the number of permanents ( many exiled from Victoria)

[starlight7]

You can still get houses around the 400,000 mark in parts of Melbourne. Not all dumps, either.

[akiralx]

What is negative gearing?

 

From Wikipedia:

 

'Negative gearing is a form of leveraged investment in which an investor borrows money to buy an asset, but the income generated by that asset does not initially cover the interest on the loan (interest > income). In a few countries the strategy is motivated by taxation systems that permit deduction of losses against taxed income, and tax capital gains at a lower rate.'

 

As an example: you buy a property to rent out, the mortgage you pay is $1000 per week. The rent you can charge is only $750 however - so you are suffering a loss of $250 per week, from your own pocket. Under negative gearing you can count that loss against taxed income from other sources, e.g. your salary.

 

So your loss is effectively being covered by the tax system, while you are anticipating capital increase in the value of the property to make a profit on ownership.

[Incata]

What calculations say that buying is cheaper than renting? What purchase price and mortgage are we talking about?

 

Average home price in Ocean reef is $700,000. Mortgage repayments on a $700,000 mortgage would be $1000 per week. How is buying cheaper?

 

I can only talk about our experience and clearly it depends on your deposit. As you state in your calculations above, you certainly would not save money if you took a $700,000 mortgage out and had to repay $1000 per week. Most people spending that sort of money would have something in the way of a deposit which would take the mortgage down.

 

However, I'm not sure that anyone I know (admittedly that is not a lot of people) would choose to live in Ocean Reef, if they had the salary to be able to take out a mortgage of $700,000 without a deposit. The reason they would not choose it is because the high school has a dreadful reputation locally and all the locals I've chatted to (parents with young kids in the local parks) are planning to move out of the area as soon as their kids came close to secondary school age, so that they could send them somewhere decent. Duncraig was given as an example where you can buy a nice house for $700,000 (relatives of ours have just done it) and they have an excellent state secondary school which gets some of the best NAPLAN results in Perth.

 

Our bank seemed to work on a multiple of 4x my husbands salary in terms of what we were allowed to borrow. We actually did not borrow that much, but we had a large deposit and got the house we bought for much less that we had been willing to spend. Thus for us, our weekly repayments did go down from $540 per week to $450 per week.

[Incata]

From Wikipedia:

 

'Negative gearing is a form of leveraged investment in which an investor borrows money to buy an asset, but the income generated by that asset does not initially cover the interest on the loan (interest > income). In a few countries the strategy is motivated by taxation systems that permit deduction of losses against taxed income, and tax capital gains at a lower rate.'

 

As an example: you buy a property to rent out, the mortgage you pay is $1000 per week. The rent you can charge is only $750 however - so you are suffering a loss of $250 per week, from your own pocket. Under negative gearing you can count that loss against taxed income from other sources, e.g. your salary.

 

So your loss is effectively being covered by the tax system, while you are anticipating capital increase in the value of the property to make a profit on ownership.

 

Thank you.

[newjez]

Yes - but surely that large deposit would have been invested and earning interest, even if it's taxed? Surely you could have rented a house where you bought and been better off financially? I know there are other advantages to owning, (possible capital gains not included), but on a pure financial level, I think you would be hard to beat renting at this present time.

 

I also agree Duncraig is a better area. You do get a much older house without the street appeal, but the block value will hold, and you can always knock down rebuild (maybe even sub divide) at a later date. Depends on how many kids you have too, as you can always go private in Ocean Reef.

 

I can only talk about our experience and clearly it depends on your deposit. As you state in your calculations above, you certainly would not save money if you took a $700,000 mortgage out and had to repay $1000 per week. Most people spending that sort of money would have something in the way of a deposit which would take the mortgage down.

 

However, I'm not sure that anyone I know (admittedly that is not a lot of people) would choose to live in Ocean Reef, if they had the salary to be able to take out a mortgage of $700,000 without a deposit. The reason they would not choose it is because the high school has a dreadful reputation locally and all the locals I've chatted to (parents with young kids in the local parks) are planning to move out of the area as soon as their kids came close to secondary school age, so that they could send them somewhere decent. Duncraig was given as an example where you can buy a nice house for $700,000 (relatives of ours have just done it) and they have an excellent state secondary school which gets some of the best NAPLAN results in Perth.

 

Our bank seemed to work on a multiple of 4x my husbands salary in terms of what we were allowed to borrow. We actually did not borrow that much, but we had a large deposit and got the house we bought for much less that we had been willing to spend. Thus for us, our weekly repayments did go down from $540 per week to $450 per week.

[Guest Ptp113]

Are you sure about that Wendee?I keep reading posts on this forum about people wanting to emigrate with crim records???Yep we'll keep sending them your way!:laugh:

 

They don't get in to the ACT, pom riffraff can't afford it.

[flag of convenience]

Yes - but it's immigration pushing up the rents (for Perth from the east coast as well as the rest of the world). When this stops, rents will decrease.

 

​

 

Immigration is the backbone to keeping Australia's over inflated real estate market high, deliberately so in my view. No government wants to be in the position of being on watch when prices corrected and the free market found the true level of value.

The previous Howard government has to share a lot of the blame as well by introducing the First Home Owners Grant.

That was guaranteed to raise prices and together with the boom ..well the rest is history.

[flag of convenience]

From Wikipedia:

 

'Negative gearing is a form of leveraged investment in which an investor borrows money to buy an asset, but the income generated by that asset does not initially cover the interest on the loan (interest > income). In a few countries the strategy is motivated by taxation systems that permit deduction of losses against taxed income, and tax capital gains at a lower rate.'

 

As an example: you buy a property to rent out, the mortgage you pay is $1000 per week. The rent you can charge is only $750 however - so you are suffering a loss of $250 per week, from your own pocket. Under negative gearing you can count that loss against taxed income from other sources, e.g. your salary.

 

So your loss is effectively being covered by the tax system, while you are anticipating capital increase in the value of the property to make a profit on ownership.

 

A very negative concept that has played hacoc on the inflated real estate market. Sadly no government seems willing at the moment to bury due to political backlash, as happened on a previous occasion when it was scrapped in the eighties.

The result being the bubble forever gets bigger...well for the moment at least.

[flag of convenience]

Yes that is the problem, it affects locals far more than migrants. People cant just move because rents keep going up especially if you work nearby.

 

It's not even only the cost but the difficulty with the need to apply for the rental along with dozens of others. Not forgetting the time need to be made for viewings ..

[Guest chris955]

It's not even only the cost but the difficulty with the need to apply for the rental along with dozens of others. Not forgetting the time need to be made for viewings ..

 

Yes exactly, it isnt how it used to be where you could just move to another place with ease.

I remember years ago when we returned to Geelong after a stint in England we went to view a rental and there was already a couple there. They said, quite agressively, that 'they had seen it first' It was an old weatherboard with a railway line on one side and under the shade of a huge overpass. I smiled and said yep, you win