Buying a house in Oz

sponge_bob

Ok, so we haven't been here that long, roughly 9 mths on PR, but we are already considering buying/building a house.
Has anyone done this? and have they any helpful tips on it. For instance is there any grants available, stamp duty, mortgages, rates, etc and any other helpful information.
I heard recently of a crowd called keystart that do mortgages and look for only 3% deposit, charge 6.48% and do 30 year loans, as far as I can make out they help you get your first mortgage if you are not upto bank criteria. Does anyone know anything about them?

Anynama141

Bob, just a word of warning - many folks believe that Australia is in a property bubble at the moment. Whether they are Ireland 2002 or Ireland 2007, I don't know - but have a look at some graphs and do some research that doesn't rely on people who make money out of property* before you buy.

*the general media, banks, brokers, estate agents etc. etc.

Coileach dearg

sponge_bob wrote: »

Ok, so we haven't been here that long, roughly 9 mths on PR, but we are already considering buying/building a house.
Has anyone done this? and have they any helpful tips on it. For instance is there any grants available, stamp duty, mortgages, rates, etc and any other helpful information.
I heard recently of a crowd called keystart that do mortgages and look for only 3% deposit, charge 6.48% and do 30 year loans, as far as I can make out they help you get your first mortgage if you are not upto bank criteria. Does anyone know anything about them?

Took the plunge 18 moths ago and we bought a two bedroom apartment in Sydney. 6.48% sounds a bit high, shop around and my suggestion would be to start with a broker and the best thing would be to have as much as possible for a deposit.
We used a broker from Aussie home loans and he was very good, I only had a 457 visa at the time too and didn't have much of a choice on who would take me up on a mortgage, eventually went with CBA. You obviously are at more of an advantage being a PR.
You will hear talk of the bubble and the prices of some places in Sydney are quite shocking! Where are you planning to buy?
Go along to a few auctions and get a feel for the prices. I know loads of people who have been looking to buy but won't in the current market. At the same time, if you are paying high rent it seems a bit of a waste when you could be paying off your own place.

sponge_bob

Anynama141 wrote: »

Bob, just a word of warning - many folks believe that Australia is in a property bubble at the moment. Whether they are Ireland 2002 or Ireland 2007, I don't know - but have a look at some graphs and do some research that doesn't rely on people who make money out of property* before you buy.

*the general media, banks, brokers, estate agents etc. etc.

I know what you are saying,

Zambia

Do you want to build or buy?

sponge_bob

Coileach dearg wrote: »

Took the plunge 18 moths ago and we bought a two bedroom apartment in Sydney. 6.48% sounds a bit high, shop around and my suggestion would be to start with a broker and the best thing would be to have as much as possible for a deposit.
We used a broker from Aussie home loans and he was very good, I only had a 457 visa at the time too and didn't have much of a choice on who would take me up on a mortgage, eventually went with CBA. You obviously are at more of an advantage being a PR.
You will hear talk of the bubble and the prices of some places in Sydney are quite shocking! Where are you planning to buy?
Go along to a few auctions and get a feel for the prices. I know loads of people who have been looking to buy but won't in the current market. At the same time, if you are paying high rent it seems a bit of a waste when you could be paying off your own place.

I am in WA and thinking of building a house rather than buying as it will leave a bigger return if we sell.

ballooba

sponge_bob wrote: »

I am in WA and thinking of building a house rather than buying as it will leave a bigger return if we sell.

That sounds like investment is part of the motivation. Its good to be clear why you're looking to own a property.

Coileach dearg wrote:

Go along to a few auctions and get a feel for the prices. I know loads of people who have been looking to buy but won't in the current market. At the same time, if you are paying high rent it seems a bit of a waste when you could be paying off your own place.

Unless buying outright with cash, you are still renting. The only difference is you are renting capital in the form of a mortgage. Usually in Australia it is more expensive to rent this capital than it would be to rent the property itself, especially given that interest rates on cash deposits in Australia are very good. The financial attraction of buying/building is that values may increase over time.

Dats_rite

Its a worldwide known fact that you cannot lose money on property and house prices only rise...........just saying

Coileach dearg

ballooba wrote: »

Unless buying outright with cash, you are still renting. The only difference is you are renting capital in the form of a mortgage..

Yes, but you are at least acquiring equity when you pay off your own place whereas you are paying the landlord's mortgage when renting.

catbear

Coileach dearg wrote: »

Yes, but you are at least acquiring equity when you pay off your own place whereas you are paying the landlord's mortgage when renting.

But if your house loses value then that's even more money pissed away. I looked at buying already and came to the conclusion that there's actually way too much risk at the moment.
Here's some graphs to consider.

The biggest treat to house prices here is actually the amount of baby boomers that will be divesting themselves of negatively geared property before they retire. If you haven't heard of negative gearing I suggest you read up on it as it is basically a tax break for taking on property debt, I've seen one tax office figure showing over a million people using the scheme to offset shortfalls in yield from their investment property.
NG only works if you've got a taxed salary, so as more NG equity investors, of which the vast majority are between 45-60, head towards retirement they'll be flooding the market with their properties.

There's no doubt that demand is high in Perth but on the other hand I have serious doubts about sustainability of the current prices, I believe that price increases seen in the last ten years will not be repeated. On discussing the market here one bank adviser told me that they weren't foreclosing on a lot of problem mortgages as that would add more stock onto the market and suppress the value of their assets.

Another thing to consider when discussing price rises is the dwindling volume of sales that set these new prices.

eringobragh

a 97% mortgage.....what could possibly go wrong :rolleyes:

Coileach dearg wrote: »

Yes, but you are at least acquiring equity when you pay off your own place whereas you are paying the landlord's mortgage when renting.

Year 2005? is that you?

Coileach dearg

eringobragh wrote: »

a 97% mortgage.....what could possibly go wrong :rolleyes:



Year 2005? is that you?

Of course there's risk involved. If everybody took that line of thought, then we wouldn't even get out of bed in the morning.
I paid an average of $10000 in rent in 10 years, that's 100,000. What have I to show for it? Would I be better off putting that into my own place?

pclancy

If you're going to build a house for yourself then with the way things are now you should be thinking its a place to live for a long time and have a family etc. Not for investment or capital gains purposes. A home to live in, not a way to make money. Make as large a mortgage payment you can to get out of it quicker at the best interest rate you can get. Interest payments are just as bad as paying rent.

Be wary of brokers...they get paid from the bank for their services and often only search through a few of their most lucrative loans on offer from the banks that they have good terms with. You might think you're getting something for free with a broker, but generally they will cost you more as you pay their upfront or trailing commissions within your mortgage payments. Deal direct and save.

Over the next 10-20 years there will be at least one (if not more) housing price resets in Oz. If you're in a house you plan to live in for a long time then you don't care. But if you're in this to make money I'd suggest something else as the **** is really about to hit the fan in property across Oz.

In NZ where I'm living there are a LOT of people with investment properties in negative gearing thinking their tax back every year is a sign that they're doing something right as prices keep on rising in the major cities. They seem to have no idea of what has recently happened in Ireland, US and Japan. They actually do still think prices are going to keep on rising no matter what.

Careful now.

eringobragh

Coileach dearg wrote: »

Of course there's risk involved. If everybody took that line of thought, then we wouldn't even get out of bed in the morning.
I paid an average of $10000 in rent in 10 years, that's 100,000. What have I to show for it? Would I be better off putting that into my own place?

alot of variables when calculating risk, do you think $500,000 for a 3 bed house/shack is value for money...it might be relative to the price of pint / local wages, but is that sustainable forever?

Remember the days of labourers alone getting a €1000 a week after tax here, prices were relative to that here, you'd do well to get a pint in town for under €5 in those days.

It's inevitable that Australia will follow suit and crash in spectacular fashion like many of the other bubbles across the globe...its just a matter of when at this stage:could be another 10 years for all we know.

Whether $100000 is dead money is up to you, discount the landlords mortgage interest payments, water charges, property tax, wear and tear and the 100k figure starts to shrink very fast.

Example: I've a friend that bought his place in 2008 as "rent was dead money"...paid €400000 on a 99% Mortgage,house needed work etc...roll on 5 years and same house probably wouldn't net him €140,000.....

...........dead money me hole. :rolleyes:

Peregrinus

Coileach dearg wrote: »

I paid an average of $10000 in rent in 10 years, that's 100,000. What have I to show for it?

You got accommodation for ten years. Do you regard your grocery bill for the past ten years as wasted?

Coileach dearg wrote: »

Would I be better off putting that into my own place?

Over the past ten years? Probably not. You'd probably have got accommodation for ten years (but probably in smaller or otherwise less desirable accommodation), but you'd also have a sodding big debt in the form of negative equity.

sponge_bob

ballooba wrote: »

That sounds like investment is part of the motivation. Its good to be clear why you're looking to own a property.
.

Mostly investment purposes, as we don't plan to stay in Oz permanently, but then again who knows a lot changes in 4 or 5 yrs.

eringobragh wrote: »

It's inevitable that Australia will follow suit and crash in spectacular fashion like many of the other bubbles across the globe...its just a matter of when at this stage:could be another 10 years for all we know.


Example: I've a friend that bought his place in 2008 as "rent was dead money"...paid €400000 on a 99% Mortgage,house needed work etc...roll on 5 years and same house probably wouldn't net him €140,000.....

...........dead money me hole. :rolleyes:

Of course every rise/bubble in property is followed by a down swing, you keep saying it long enough and eventually your day will come where you can stand up and say "I told you it was going to happen". Shur after all wasn't David Mc Williams and George lee proven correct......
You're friends example is based on hindsight, Hindsight tells me I shouldn't have taken out such a big mortgage in Ireland and I wouldn't be in this position now.
Basically just cos I fall of my Bike doesn't mean Iam never going to cycle again.

eringobragh wrote: »

a 97% mortgage.....what could possibly go wrong :rolleyes:



Year 2005? is that you?

Better the banks money tied up in it than mine.
That's what I did wrong with my mortgage in Ireland, I pumped all my savings into it, now I have no savings and my mortgage is probably still more than my house is worth.




Anyhow to move along, This is not what I came on here for, While the words of warning are welcomed I am well aware of the risks myself, whether or not I will go ahead with it is still not certain an depends on certain factors some already mentioned and some not.
What I am looking for is advise on the likes of grants, stamp duty, mortgages, do's and don'ts of buying a property, pitfalls to avoid, things to make sure you do, etc.
From what I have gathered so far, is that builders in WA are a shower of gangsters (who would have thought there was builders like that :rolleyes:).

catbear

On the matter of rent being dead money I disagree.

I rented an average house through the bubble in Ireland and what I paid in rent over ten years was wiped off the value of the average house in two years, it's dropped a lot more since then. I looked at renting as paying the landlord to carry the risk of negative equity.

Just ask yourself how would Australia's property market have reacted after 2008 if it weren't for demand for dirt from China. In fact I'd argue that places like Perth have the furthest to fall in the event of a drop in demand from China.

Australia has a property bubble supported by a commodities rush that is fueled by an investment bubble in China, Australia is leveraged leverage.

On the plus side Australia has its own currency which it can devalue to help with debt but the resultant inflation could reduce standard of living.

This is an interesting piece about Australian property exposure from last week: http://www.theage.com.au/money/borrowing/exposure-to-housing-could-come-back-to-bite-us-20130402-2h42v.html?fb_action_ids=532234496819830&fb_action_types=og.recommends&fb_source=aggregation&fb_aggregation_id=288381481237582

I'm not adverse to buying but I doubt I'll look at it again for a few years.

eringobragh

sponge_bob wrote: »

Mostly investment purposes, as we don't plan to stay in Oz permanently, but then again who knows a lot changes in 4 or 5 yrs.



Of course every rise/bubble in property is followed by a down swing, you keep saying it long enough and eventually your day will come where you can stand up and say "I told you it was going to happen". Shur after all wasn't David Mc Williams and George lee proven correct......
You're friends example is based on hindsight, Hindsight tells me I shouldn't have taken out such a big mortgage in Ireland and I wouldn't be in this position now.
Basically just cos I fall of my Bike doesn't mean Iam never going to cycle again.




Better the banks money tied up in it than mine.
That's what I did wrong with my mortgage in Ireland, I pumped all my savings into it, now I have no savings and my mortgage is probably still more than my house is worth.




Anyhow to move along, This is not what I came on here for, While the words of warning are welcomed I am well aware of the risks myself, whether or not I will go ahead with it is still not certain an depends on certain factors some already mentioned and some not.
What I am looking for is advise on the likes of grants, stamp duty, mortgages, do's and don'ts of buying a property, pitfalls to avoid, things to make sure you do, etc.
From what I have gathered so far, is that builders in WA are a shower of gangsters (who would have thought there was builders like that :rolleyes:).

:pac: on your own head be it, obviously on the mcwilliams/lee analogy you are aware it is almost certainly inevitable so no "told you so", it's just going to happen sooner or later.

anyway moving on...best of luck and all, don't forget to drop back and keep us updated when your thousands of $$$$ in neg equity

Peregrinus

sponge_bob wrote: »

Mostly investment purposes, as we don't plan to stay in Oz permanently, but then again who knows a lot changes in 4 or 5 yrs.

OK. What they call the "frictional costs" of buying and selling houses are high - estate agents fees, stamp duty, legal and registration fees and so forth can fairly rapidly start to approach 10% of the house cost or even more. You don't incur anything approaching those costs buying any other real asset.

What this means is that, if you're buying the house to resell it at a profit, it needs to rise by something like 10% in value before you will even break even on the deal. And that's before you start to cover the interest cost you have borne through your mortgage.

The result is that buying houses on mortgage and selling them again over a relatively short period is unlikely to be a particularly good investment in anything other than a strongly rising market.

FernandoTorres

sponge_bob wrote: »

Mostly investment purposes, as we don't plan to stay in Oz permanently, but then again who knows a lot changes in 4 or 5 yrs.



Of course every rise/bubble in property is followed by a down swing, you keep saying it long enough and eventually your day will come where you can stand up and say "I told you it was going to happen". Shur after all wasn't David Mc Williams and George lee proven correct......
You're friends example is based on hindsight, Hindsight tells me I shouldn't have taken out such a big mortgage in Ireland and I wouldn't be in this position now.
Basically just cos I fall of my Bike doesn't mean Iam never going to cycle again.




Better the banks money tied up in it than mine.
That's what I did wrong with my mortgage in Ireland, I pumped all my savings into it, now I have no savings and my mortgage is probably still more than my house is worth.




Anyhow to move along, This is not what I came on here for, While the words of warning are welcomed I am well aware of the risks myself, whether or not I will go ahead with it is still not certain an depends on certain factors some already mentioned and some not.
What I am looking for is advise on the likes of grants, stamp duty, mortgages, do's and don'ts of buying a property, pitfalls to avoid, things to make sure you do, etc.
From what I have gathered so far, is that builders in WA are a shower of gangsters (who would have thought there was builders like that :rolleyes:).

There's another saying that says the definition of insanity is doing the same thing over again and expecting different results i.e. buying property on a high mortgage in a market that many are predicting to be a bubble about to burst.

You have another property in Ireland you say. Do you have any other investments? Sounds like property will make up around 99% of your portfolio which is a terrible investment strategy no matter what the asset is. Why the obsession with property, there are other Australian assets you can buy you know.

I've just recently come to Oz and I hear the exact same things from the people here as I did before the crash at home, "dead money", "rising market" etc. Good luck with it all the same, I just wouldn't have the stomach for it!

ballooba

Coileach dearg wrote: »

Yes, but you are at least acquiring equity when you pay off your own place whereas you are paying the landlord's mortgage when renting.

No, I have to disagree. You're muddling two related but separate concepts. The capital repayments on a mortgage are separate to the interest. The mortgage interest is equivalent to rent. The capital repayments are equivalent to saving (assuming your property neither gains nor loses value).

The capital repayments as a portion of the payments on a new mortgage are tiny. They increase proportionally over time as the amount owes decreases.

Google mortgage amortisation tables.

Also, your rent wouldn't even come close to covering the interest portion of a new mortgage repayment. never mind the full repayment.

s.c

ballooba wrote: »

No, I have to disagree. You're muddling two related but separate concepts. The capital repayments on a mortgage are separate to the interest. The mortgage interest is equivalent to rent. The capital repayments are equivalent to saving (assuming your property neither gains nor loses value).

The capital repayments as a portion of the payments on a new mortgage are tiny. They increase proportionally over time as the amount owes decreases.

Google mortgage amortisation tables.

Also, your rent wouldn't even come close to covering the interest portion of a new mortgage repayment. never mind the full repayment.

This is a very good explanation. I really like it.

sponge_bob

FernandoTorres wrote: »

You have another property in Ireland you say. Do you have any other investments? Sounds like property will make up around 99% of your portfolio which is a terrible investment strategy no matter what the asset is. Why the obsession with property, there are other Australian assets you can buy you know.

I've just recently come to Oz and I hear the exact same things from the people here as I did before the crash at home, "dead money", "rising market" etc. Good luck with it all the same, I just wouldn't have the stomach for it!

I am just an ordinary Joe and not an investor so before I came to Australia property made up 100% of my portfolio.

ballooba

sponge_bob wrote: »

I am just an ordinary Joe and not an investor so before I came to Australia property made up 100% of my portfolio.

And that has gone so well for you? To be frank, what you're proposing to do sounds ludicrous. It sounds ludicrous rather than plain risky because you have already been burnt. You personally have already made a costly mistake on property in Ireland and appear to have learned nothing. The only saving grace is that unless you commit fraud and deceive the Australian lender with respect to your existing property they won't touch you with a barge pole. I'm starting to wonder if you're trolling here, but I'll suspend disbelief for a moment.

FernandoTorres wrote: »

You have another property in Ireland you say. Do you have any other investments? Sounds like property will make up around 99% of your portfolio which is a terrible investment strategy no matter what the asset is. Why the obsession with property, there are other Australian assets you can buy you know.

With one asset in negative equity and 3% positive equity in another, where does that leave the portfolio? It's probably still in significant negative equity overall. Any bank that lends in full knowledge those circumstances, or even fails to recognise the possibility of overseas issues, is highly irresponsible.

FernandoTorres

sponge_bob wrote: »

I am just an ordinary Joe and not an investor so before I came to Australia property made up 100% of my portfolio.

If you're spending hundreds of thousands on property then you are an investor. For some reason people seem to see property as something any person can get into without any real knowledge whereas stocks, bonds etc are "for the experts". Not true in my experience.

Anyone can learn the basics of any investment asset and a portfolio should be balanced, not all in one asset class, especially property which is high risk.

pclancy

sponge_bob wrote: »

my mortgage is probably still more than my house is worth.

Are you still paying this at home as well? :eek:

sponge_bob

pclancy wrote: »

Are you still paying this at home as well? :eek:

Well that's why I am out here

mel.b

sponge_bob wrote: »

Anyhow to move along, This is not what I came on here for, While the words of warning are welcomed I am well aware of the risks myself, whether or not I will go ahead with it is still not certain an depends on certain factors some already mentioned and some not.
What I am looking for is advise on the likes of grants, stamp duty, mortgages, do's and don'ts of buying a property, pitfalls to avoid, things to make sure you do, etc.
From what I have gathered so far, is that builders in WA are a shower of gangsters (who would have thought there was builders like that :rolleyes:).

Check ou the information on here...http://wa.gov.au/information-about/housing-property/home-buyers-builders


And this webiste for stamp duty info...http://www.westrealestate.com.au/Stamp-Duty-Calculator.aspx
According to this...http://www.housing.wa.gov.au/housingoptions/homeownershipoptions/FirstHomeBuyers/stampduty/Pages/default.aspx there is no stamp duty for FTB buying under $500,000

You may also be eligble for the $7000 FTB grant...will depend on your visa.

Also you will be paying LMI - lenders mortgage insurance. This ocvers the lender if you default. Generally any loan that is over 80% LVR has to pay it, on a sliding scale, so a loan at 95%LVR pays a lot more than ine at 85%. Some lenders will let you capitalise it into your mortgage, bringing you up to around a 97% lend.

mandrake04

I bought a house a couple of years ago, put down 20% to avoid mortgage insurance, stamp duty was exempt and got the first homeowners grant. I only took a modest homeloan which is about 2.8x my income or twice our joint income, since then my wife inherited a property in the blue mountains which we are renting out. I changed my homeloan recently and because of the second property I was able to get a good rate.

My father-in-law has been living in Australia for 35 years and his advice was cut you cloth to suit and every thing will work out in the end, good advice I reckon. I definitely will buying a bigger house in the future but like everyone else I am waiting to see what will happen, I am a hater of debt full stop and have only a house loan and a business loan for my car and I prefer cash over credit cards but if you are going to borrow take no more than 3 times your annual income and plan to keep the property for at least 7 years. (ie. its a home before an investment)

Its also worth pointing out that I have a property in Ireland for the last 10 years and even though the whole crash/bubble crap over there it didn't affect me one bit.

Zambia

In relation to buying property and renting.

If you are in your 20's and decide the market is to risky that is all well and good. You wait a few years and in the current climate you could well be in your late 30's by the time the effect of the downturn wears off. So you rent for the 15 odd years, you buy and you can safely calculate you have saved on the devaluation that occurred.

However you have spent 15 years living in a house that you had very limited control over. You can't get those 15 years back.

We live in probably one of the last places in the world where you can buy the house you drew as a kid.

sponge_bob

mel.b wrote: »

Check ou the information on here...http://wa.gov.au/information-about/housing-property/home-buyers-builders


And this webiste for stamp duty info...http://www.westrealestate.com.au/Stamp-Duty-Calculator.aspx
According to this...http://www.housing.wa.gov.au/housingoptions/homeownershipoptions/FirstHomeBuyers/stampduty/Pages/default.aspx there is no stamp duty for FTB buying under $500,000

You may also be eligble for the $7000 FTB grant...will depend on your visa.

Also you will be paying LMI - lenders mortgage insurance. This ocvers the lender if you default. Generally any loan that is over 80% LVR has to pay it, on a sliding scale, so a loan at 95%LVR pays a lot more than ine at 85%. Some lenders will let you capitalise it into your mortgage, bringing you up to around a 97% lend.

Thanks mel.b some interesting links there, do you know what % LMI is charged at or is it a case of shopping around like any other insurance.

catbear

sponge_bob wrote: »

Well that's why I am out here

So you moved to Australia to be able to pay for a mortgage in Ireland and now you want to double up, where will go if you lose you're income in Australia?

And just a word of warning about repaying back in Ireland, the Aussie Dollar is strong versus the Euro right now but before China pushed the button on its spending spree the aussie Dollar crashed to $2 per Euro. Even if you don't lose your Aussie income you got to factor in a volatile exchange rate.

The aussie government will lower interest rates further (which will help repaying aussie debt) and depreciate their currency (which would be bad for your Irish debt.)

If you're servicing loans on more than just your principle residence then you're no ordinary joe.

mel.b

sponge_bob wrote: »

Thanks mel.b some interesting links there, do you know what % LMI is charged at or is it a case of shopping around like any other insurance.

There are only two providers of LMI - Genworth and QBE (i think). Who you get depends on which bank you use. Here is a link to genworth's LMI calculator...http://www.genworth.com.au/homebuyer-centre/homebuyer-tools/lmi-premium-estimator/