cava83 Posted July 21, 2014 Share Posted July 21, 2014 Good evening all, I have gone through the search quickly but cannot find anything too descriptive on this, if there is, please point me in the right direction. I was reading a website the other day about prices in victoria, stating that buying is a lot cheaper than renting, I see quite the opposite. They were talking about $1200 pcm rentals in victoria vs 880 pcm mortgages, however in semi descent prices, there is no way those are the prices. Seems that mortgages are a lot more than the rentals. We are currently paying $2500 pcm for a 3 bedroom, 2 bathroom house with a garage, house is ok, but not built very well. This house is valued at around $750,000 if I were to take a mortgage out at 4.89 it would be $4336 a month (25 years), that is nearly 2k more per month. Am I missing something? I have a house in the UK which I own, mortgage stuff there is easy. I understand there is negative gearing here on investment properties but not sure on main residence. I know the numbers are rough, no stamp duty, no fees or nothing have been included but what are your thoughts? If we are going to be here say 5 years and properties go up at the standard rate they have been over the last 3 years, on average, I will probably still be better off renting than buying. Thanks, C. Link to comment Share on other sites More sharing options...
wolvesaussie Posted July 21, 2014 Share Posted July 21, 2014 someone important , may have been the reserve bank put out a study just last week saying they expected it to be cheaper to rent than buy over the next 10 years. We are in same possition, 450 a week rent on a $650,000 (it sold 12mths ago) house. Mortgage is a lot more than that if you like us and have little/no deposit Link to comment Share on other sites More sharing options...
wolvesaussie Posted July 21, 2014 Share Posted July 21, 2014 http://www.smh.com.au/business/the-economy/the-rba-says-youre-probably-better-off-renting-20140714-zt6xx.html Link to comment Share on other sites More sharing options...
cava83 Posted July 21, 2014 Author Share Posted July 21, 2014 someone important , may have been the reserve bank put out a study just last week saying they expected it to be cheaper to rent than buy over the next 10 years. We are in same possition, 450 a week rent on a $650,000 (it sold 12mths ago) house. Mortgage is a lot more than that if you like us and have little/no deposit Thanks for the reply. More than that price? Most deposits here as far as I have read on average is 5%, can increase to 10%, if a new build can be 20% to 40%. I really want to buy, but just isn't feasible. Even if we released a large amount of equity from our property in the UK, it would still be a lot here sadly. Link to comment Share on other sites More sharing options...
wolvesaussie Posted July 21, 2014 Share Posted July 21, 2014 i mean the repayments on loan will be more than 450 a week rent Link to comment Share on other sites More sharing options...
cava83 Posted July 21, 2014 Author Share Posted July 21, 2014 i mean the repayments on loan will be more than 450 a week rent Ah, apologies, for sure Link to comment Share on other sites More sharing options...
Oaklaurel Posted August 13, 2014 Share Posted August 13, 2014 G'day Cava83, it looks like you are comparing the rent payment to a mortgage payment of principal and interest. This is a good start. A better comparison to rent could be interest only payments as this levels the field a little as you are not actually paying down the loan - like renting. Excluding capital gain renting is still cheaper than owning under the figures you have quoted, when you add the capital gain back in it can tip it back to being buying is better depending on your location (high demand area like the inner and middle ring suburbs in the major capital cities have generally performed the better in the past - that is why property there is so expensive). The Australia housing market is a low yielding (rent %), high capital gain market. Usually the reason that the rental yield is low is because it is yet to catch up with the capital appreciation. To make things more complicated, due to the high transaction costs (stamp duty etc..) property investment has performed better as a longer term investment 10 years+. The other thing to consider is that interest rates are a historic lows now so don't count on them being at below 5% (as you have quoted) long term. When the economy is going well and house prices booming expect interest rates to increase too. I doubt if this has answered your question but hopefully it shows that the pros and cons of purchasing Australian property are more complicated than just if your mortgage payments are more or less than the rent payments. Link to comment Share on other sites More sharing options...
canadianaussie Posted August 13, 2014 Share Posted August 13, 2014 Good evening all, I have gone through the search quickly but cannot find anything too descriptive on this, if there is, please point me in the right direction. I was reading a website the other day about prices in victoria, stating that buying is a lot cheaper than renting, I see quite the opposite. They were talking about $1200 pcm rentals in victoria vs 880 pcm mortgages, however in semi descent prices, there is no way those are the prices. Seems that mortgages are a lot more than the rentals. We are currently paying $2500 pcm for a 3 bedroom, 2 bathroom house with a garage, house is ok, but not built very well. This house is valued at around $750,000 if I were to take a mortgage out at 4.89 it would be $4336 a month (25 years), that is nearly 2k more per month. Am I missing something? I have a house in the UK which I own, mortgage stuff there is easy. I understand there is negative gearing here on investment properties but not sure on main residence. I know the numbers are rough, no stamp duty, no fees or nothing have been included but what are your thoughts? If we are going to be here say 5 years and properties go up at the standard rate they have been over the last 3 years, on average, I will probably still be better off renting than buying. Thanks, C. And then as an owner you have to pay council tax, upkeep, etc which adds even more to the ownership costs. I would buy only if you are confident of ongoing capital appreciation...which I wouldn't be in melbourne today. Just my opinion. Link to comment Share on other sites More sharing options...
surfndirt Posted August 13, 2014 Share Posted August 13, 2014 Only stupid, un-educated people would buy an over inflated liability in the capital cities of Australia. You have answered your question yourself - it is significantly cheaper to rent; that's because we are in the throws of an end game bubble. Most people who live in these $700,000 couldn't afford them either so don't worry. Don't be a sheep, next fool, and get swept up in it. As an example, this is what I have done; 1) Beach house down the coast which is permanently on airbnb hence 100% deductible 2) Small portfolio in Texas returning 12 - 18% a year 3) Small shack in the bush - 100% paid for 4) Rent a 2x bedder in one of the flashest areas of Melb which costs less than half it would to buy it Don't be the next usury slave / fool Link to comment Share on other sites More sharing options...
Keith and Linda Posted August 14, 2014 Share Posted August 14, 2014 Good evening all, I have gone through the search quickly but cannot find anything too descriptive on this, if there is, please point me in the right direction. I was reading a website the other day about prices in victoria, stating that buying is a lot cheaper than renting, I see quite the opposite. They were talking about $1200 pcm rentals in victoria vs 880 pcm mortgages, however in semi descent prices, there is no way those are the prices. Seems that mortgages are a lot more than the rentals. We are currently paying $2500 pcm for a 3 bedroom, 2 bathroom house with a garage, house is ok, but not built very well. This house is valued at around $750,000 if I were to take a mortgage out at 4.89 it would be $4336 a month (25 years), that is nearly 2k more per month. Am I missing something? I have a house in the UK which I own, mortgage stuff there is easy. I understand there is negative gearing here on investment properties but not sure on main residence. I know the numbers are rough, no stamp duty, no fees or nothing have been included but what are your thoughts? If we are going to be here say 5 years and properties go up at the standard rate they have been over the last 3 years, on average, I will probably still be better off renting than buying. Thanks, C. You really need to look at all the figures and variants, like stamp duty, rates, interest payments, house price, (you would be looking at a 20% deposit so that knocks the mortgage down to 600K). As you say only five years then, if purchasing, it could be possible for that period to cost you nothing or very little, but that is dependent on capital growth a risk with any, shall we say investment, but being your main home tax free on any gain. Renting would be all non-recoverable. Do your sums. Long term then renting could be a cheaper option initially, so long as any saving made is put away towards a deposit for buying in a few years time, otherwise you are stuck at stage 1 all the time. I tend to look at it this way, over 25 years my mortgage repayments stay the same (give and take on the interest rates) and therein after ZERO, where as rent will keep increasing over the 25 years, and therein after keep increasing. Link to comment Share on other sites More sharing options...
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