Of course. For one thing, some would say it's better to invest in religion than invest in anything you have in this world. Money doesn't bring happiness on its own. However in my opinion, with money brings choice. It means I can choose to NOT work if I want to. I can do ANY job I want regardless of how much it pays, without worrying how to put food on the table. It means spending more time with family or doing the hobbies I enjoy do, because I need not be tied to work 44 hours a week.

Choice is power. Choice means happiness.

I'll answer these as well as the ones I posed:

Q: How old are you?
A: Turning 29 this year.

Q: What is your family situation?
A: Single, and enjoying the simplicity of it.

Q:  What is your work situation?
A: Veterinarian, working 44 hours a week (4 full weekdays and 9-1pm on every Sat). Wish I could work less and have leisurely breakfasts instead of the regular 6-10 minute deal. Also, I'd rather be spending time with people whose company I enjoy, not clients, who likewise probably don't enjoy seeing me, and are strictly at my clinic on a business-basis only. The job is fairly stable, but it took 5 years of Uni studying and 4 years of slogging in the workforce to get me to a salary that is only 'national average'. It ain't going to make me financially free. I need to do something more.

Q: When are you looking to retire?
A: The sooner the better, hopefully before I hit 50. Retiring before 40 would be awesome, but not at the rate I'm going, and I'm not counting on a massive inheritance from my parents to 'set me up for life', because honestly, they've done a magnificent job of bringing me up. It is up to me now to make my own success. However, retiring doesn't mean to not work at all. It could be working 2-3 days a week, in a job I enjoy more than my current one. That said, there's no point retiring when I'm say, 70 years old and about to get an aneurysm the year after.

Q: What do you value most in life?
A: Tough to answer. It might be Happiness or Freedom, or it might be Time. Either one would be very empowering. I'd like to live near the sea and to do photography of weddings, landscape, animals…Both photography and the smell and sights of the sea make me feel very much alive. Having Time also means spending more time with people I love, particularly family, and when I'm happier, I can make a better son, a better brother, nephew and friend.

Q: Are you a bear, bull or a 50-50?
A: Depends on the prevailing conditions. Won't consider myself an expert analyst, but I understand the fundamentals when they are there and similarly the effect that sentiment can have regardless of the fundamentals. Sentiment is hence one of the things in investing that has a self-fulfilling effect. People seem to react more to bad news than they do to good news. I've joked about this before, but in the news, the things that sell the best are stories about a disaster of some sort. Personally I think there is money to be made and lost with any venture you make. I was investing in the stock market for nearly 12 years before pooling the funds as a deposit for my first home. I don't see one investment as being better than the other, but the choice simply reflects my personal priorities. I absolutely WANT to have MY own place to live. But to answer the question directly, on Australian property, I'm 60% bull, 40% bear. I love how cheap Australian property is, compared to that in Singapore where I was born and spent most of my life. How lucky is this: I get to control a house on thousands of square feet of land and at a price my buddies in Singapore wouldn't even be able to dream of. The vast majority of my Singaporean friends and relatives (of my age) do not control property at all, and some have no hope of doing it in the near future. Having said that, the AU$ is way high at the moment and consumer sentiment is not good at all. I believe there is plenty of scope for property price growth in Australia in the future, however current conditions are a dampener and hence causing price drops in some areas, or at least constraining price growth. I am waiting for the baby boomer shift, which should create a stir in the property and share market.

Q: How many properties do you control?
A: Two properties. One is a Melbourne outer suburban house with a lovely rustic huge backyard that I plan to move into eventually with the woman of my dreams (if I find one). If not, then I'd be getting a couple of mates to board with me. The other is a beachside period home in North Geelong/ Rippleside. You could call this a 'regional' property. Considering the access of transport to Melbourne CBD and the commute time however, I'd consider it 'outer-suburban'. Eventually, this would be my 'retirement' home. Incidentally, I believe this is a possible area that the retiring baby boomers may move into in the future. Truly magnificent value in this area IMO. I love both my houses and consider them as much a place to live as an investment (if not more). For me, the importance is having a place to live that defines who I am, a place that is part of my identity. Making money from it is a secondary consideration.

Q: If you control properties (whether your own home or an investment property), how many do you own 'outright' (ie. unencumbered)?
A: None. The bank owns most of my house. I am prepared to pay almost ANY price to have a place I can call my own (so long as I keep up the repayments). The certainty of having a specific place to reside is crucial for me.

Q: Amongst the properties that you control, what are the approximate dates of purchase?
A: The outer suburban house was purchased in Aug 2009, and the North Geelong house in Dec 2010.

Q: If you do not control any property now, did you plan on buying/ would have bought at some stage but now cannot, because of current conditions?
A: Not applicable to my situation. When shopping for my first home, I did have difficulty finding something within my budget in the middle suburbs. So I looked to the outer, less trendy suburbs. Voila! Home ownership suddenly became easier.

Very revealing, isn't it?

And so the debate rages on. You know, there was an irritating voice that started to play in my head. It sang annoyingly,

'Would you like to take a survey??!!'

A survey that reveals the following:

– Are you a bear, bull or a 50-50?
– How many properties do you control?
– If you control properties (whether your own home or an investment property), how many do you own 'outright' (ie. unencumbered)?
– Amongst the properties that you control, what are the approximate dates of purchase?
– Last question: do you NOT control any property now and wish you did?

Not an exhaustive list of questions, but a good start. If we ever started something like this, it would be very revealing. The opinions of people on threads such as this are usually very much divided. That's because these opinions stem from a thought process based on their current situation. I suspect that, in the end, the property market will do whatever it wants, despite what any individual might say. 'Getting it right' is nothing to brag about, whichever way things turn out to be. That's because if a person 'gets it right', he/ she does so by chance.

People who are reliably able to pick a trend shouldn't be wasting their time here, or on television talk shows. They'd be out there spending all their time making billions of dollars.

I understand your concerns with owning a house as opposed to a strata-titled property. If you prefer a more hands-off approach it is fine to let the body corporate manage these issues instead of doing it yourself. This however assumes the following:

1. The body corporate is actually capable at managing all matters pertaining with the property. They keep everybody's interests at heart by ensuring the property is in the best condition at any time and hold sufficient amount of money in the sinking fund.

2. The others who are living in your block are happy to contribute as necessary.

Now, if you land up with a body corporate that is incapable, there are expensive repairs coming up and there are insufficient funds in the sinking fund (necessitating unexpected contributions from yourself shortly after purchase), and/ or inconsiderate, uncooperative neighbours who aren't willing to contribute, those are all major issues. Just be careful to check everything before you buy. This means getting the necessary inspections done, going through the meeting minutes, checking the sinking fund etc. Better to get a qualified solicitor to do this.

I might have read somewhere of an unfortunate instance where one person living in a small block of apartments had a leaking roof but could not get it repaired because nobody else in the block wanted to contribute to the costs. The body corporate was probably useless as well. Turns out that one landlord owned the rest of the apartments in the block…probably hoping this last owner would sell out and allow the landlord to own the entire block of apartments (perhaps for the sake of redevelopment).

I'm not an expert on this, but based on my understanding of things, here is a thought on this: a negatively-geared property loses money on a day-to-day basis, regardless of the tax benefits. For example, if your parents were in the 30% marginal rate tax bracket and own a property whose expenses outweigh its income to create an overall loss, they will get a tax benefit (refund) of 31.5% (including the 1.5% Medicare levy) of that loss. What this means is that your parents would still need to pay for 69.5% of that loss from their own pockets.

If the company is proposing using 'tax benefits' to pay for the family home in this manner, then it sounds like a self-defeating proposition. Why not buy a positive income or even a positively-geared property so that you're making a net income from the investment property from the get-go, and then use that profit to pay off the family home? The one big reason why I would buy a negatively-geared property is if you forsee that capital growth is likely to far outweigh the loss you're making on a day-to-day basis, and can eventually sell that house for a substantial profit and pay off the family home in one lump sum. The kind of tax benefits available in this case can also vary according to whose name the property is in, particularly if each of your parents are on very different levels of income and hence in different tax brackets.

Someone please correct me if I'm wrong here, but in short, I think the company should be recommending your parents an investment property that actually makes money if you're planning to pay off your family home in the immediate future. Suggesting that you use the equity in an investment property to purchase a third one in 7-10 years time is fair enough on its own, but consider this: in order to 'use' this equity (or the increased value) in the property, you need to take an additional loan out on that property. So you need to be able to have the income to service that additional loan. It is not as straight forward as drawing out say, an increased value of $40K for free and putting that towards a deposit for the third house.

Well, your guess is as good as anybody else's when it comes to this. There are people on both sides of the argument at the moment and with plenty more in between. The best advice I can give to you and your parents is to read up as much as you can, decide how big and real the risks are, how risk adverse you would be, and then make a plan from there. I'm not going to make predictions here because I'd be very guilty if someone made a mistake based on the said predictions. At any rate, nobody in the right mind should trust one or two 'predictions' they read in a book, let alone an internet forum.

Likewise there are plenty of friends around me who are considering to buy their first home and ask me questions about the process of things. I always tell them what I've learnt in my short life but at the same time warn that there are thoughts that the property market is going to crash and burn. I then leave it up to them to decide whether they want to get involved or not.

SmartGenY wrote:

Check out MattNZ, Unmester and to a lesser extent my on posts for reasons on not to buy. Check out ALF1 and basically the rest of the forum for reasons to buy. Have fun speculating

Well, that pretty much sums it up.

OK. Let's study these figures. Firstly, we should compare 'median' mortgage with 'median' household income, not 'average' mortgage versus 'median' income. 'Average' and 'median' are not the same things.

Secondly, taking these figures on board, let's examine to see if it's feasible. That is, is it possible for a single person on $55K annual salary to own a negatively-geared property without living on cardboard and grass for the life of the mortgage. Correct me if any of the calculations below are incorrect, after all, I'm not an accountant and hate working with numbers. These calculations also do make some assumptions of course.

An individual on a salary of $55,000 pa would have a marginal tax rate of 30%. He/ she would be taxed $4,650 plus 30c to the $1 over $37,000. This works out to tax of $10,050 pa. That leaves $44,950 after tax.

Let's say this individual takes an unreasonably high loan of $400,000 to buy a property, considering today's calculations at NAB would only allow for a loan of $311,600 at this salary, at a rate of 7.29% (which I know you can get today at Homeside and fix it for 3 years, and this rate being neither very expensive nor very cheap). The sale price of the property is $500,000 (for 80% LVR) and generates $370 a week in rent for a woeful yield of 3.85% (easily achievable, just look around at real estate websites at properties for rent).

Discounting for a moment, rates, rental agent's fees, repairs etc for the sake of simplicity:

Loan repayments on property at 7.29% interest rate pa (interest only): $29,160
Rent generated by property pa: $19,240
Shortfall: $9,920

A heavily negatively-geared property costing the owner just over $190 a week, before tax breaks.

So, subtract the $9,920 shortfall from $44,950 after tax salary and that leaves the owner with $35,030 to survive on. That's roughly $3,000 a month for living expenses for a single person, in this example. And this example assumes no tax breaks from negative gearing. Under today's tax conditions, this owner could expect over $3,100 to fall back into his/ her lap after getting a tax refund on this property. Consider also that if this owner had a 100% offset account associated with the mortgage, he/ she would be making interest repayments smaller than that above, because any money in the offset account serves to effectively reduce the principle amount and hence reduce interest.

Is it feasible then, for such an individual to own a negatively geared property? I think so. A person willing to buy a property and rent it out, and rent themselves can definitely make it work. If however, the said person prefers to pay off a massive mortgage on their own home PLUS own an investment property, things become very tight and only marginally 'do-able'. But that's a personal choice. I'd rather rent and have an investment property, rather than live in my own home and NOT have an investment property, although the bottom-line is the same: you get to control one property.

A person doesn't need to be rich or have six-figure salary to have an investment property. The point that 75% of negative gearing landlords have annual salary of less than $80K is moot. More important is sitting down and working out the figures to see if it CAN be done. And this example shows that a person on $55K can do it.

Tough. Look to the outer suburbs my friends…decent 3 or 4 bedder for that price. On land. Cast your net wider than the 'trendy' inner suburbs where every man, woman and their dog wants to live. Furthermore, nowhere in that article (as far as my bespectacled eyes can see) does it state the journalist was considering to buy a $500K 1 bedder apartment in Surry Hills.

Anyway, there were more crucial points I wanted to outline before. I'm still amazed at how much they were wiling to loan out in that example, because using me as a real life example, that wasn't what I experienced at all. Furthermore, to max out borrowings with a bank without a back up plan is sheer madness.

Haha, moving back with Baby Boomer parents? I've never actually moved out, except to qualify for the FHOG on a house. People sometimes make fun of me, call me 'mommy's boy' and what not. Ultimately it boils down to personal values. Parents who actually worked hard to bring up their kids are well worth hanging on to, and living close to.

Having a good relationship with parents is an important factor that allows a Gen Y person to get a financial headstart. The vast majority of my contemporaries are so busy trying to move out that they have no solid savings whatsoever.

Of course my parents also deserve much credit for getting me started in investing…I was about 15 years old back then. But from day one they didn't give me everything I wanted but held back and forced me to save up for life's little luxuries. These were simple things…a special pen, a 'collectible' eraser, a compass, a key chain. When I was young I thought my parents were being absolute tight ****** but that lesson is one of the most important I've learned in my entire life: that I had to work for the things I want.

Key point here is: don't be too quick to ditch your parents in favour of 'independence'!

Thanks for posting those. The second JPG in particular was very small and I had trouble making out the words in those graphs. Does a larger version exist in the article itself? I think it matters not whether we will like the article or not. All the better if you can post it up here.

Great post, xdrew.

Now at the risk of making this look like a spruik, I'm packing in one more vote for Geelong.

As JacM stated, Corio and surrounds offers property that is truly bang for the buck. Imagine this: a 3 bedder on a 600+ sqm block for around $200K. Such property can be found in Norlane, which is even closer to the CBD than Corio. People haven't quite caught on to this: if it takes 50-60 minutes to get from Geelong to the Melbourne CBD (and with reasonable rail access also), and it takes a comparable amount of time to get from an outer suburb into Melbourne city, then Geelong has become an outer suburb. It is no longer a 'regional center'.

I consider Geelong to be a real gem. It's starting to look more and more like Melbourne city itself, except better planned, less congestion and no trams. Even some of the street names make you think of the Melbournian counterparts. It is no longer the sleepy hamlet I remember it to be, about 10 years ago. If you live in Geelong, there's still plenty of employment opportunities, or you could commute to Melbourne for work. The atmosphere is far less stressful, almost holiday-like. And to me, a holiday atmosphere within easy commute to work is a real plus point.

There have been a number of articles over the years that talk about areas of the Surf Coast being popular with a wide demographic of people, ranging from the retirees to young professionals. Personally, I've been looking to the north of Geelong, at areas like Drumcondra, Rippleside and St Helens (the beachside area of North Geelong). There's lovely period housing in these areas, walking distance to the water's edge, and in the case of the latter two areas, an easy walk to North Geelong train station, 5 minutes drive into the CBD, house-proud owner-occupiers…and you can still buy houses in Rippleside for less than $450K (at time of writing).

If you're actually worried about climate change and rising sea levels, well, don't. Take a drive down to Rippleside and see for yourself that the houses are actually reasonably elevated above sea level. It'd take a tsunami to bring these houses down.

There was also a recent article in The Age that describes plans for a new industrial center to the north of Corio that would bring jobs into that suburb and Norlane. I presume the intention is to get this kicked off before the reign of car manufacturing in Geelong comes to an end. It could take a number of years, but the gentrification of North Geelong and Norlane is inevitable. As it stands, the old Rippleside shipyard is about to be transformed into low-rise, luxury waterfront apartments with private marina, and I've at least read about plans to turn the North Geelong golf course into a golf-links residential estate. There's a lot going for this area, IMO.

This might sound a bit far-fetched, but I reckon Drumcondra, Rippleside and St Helens are well set to become the trendy inner suburbs of Geelong. They lack the 'hip' and 'gritty' factor of suburbs such as St Kilda because of the really quiet streets and parks and the lack of cool cafes in the immediate area, but that's not to say they can't be popular with the yuppies.

Note: I have a house in St Helens/ Rippleside, so if you want to take the above info as a spruik, that's understandable. But just have a think about it: a 3 bed/ 2 bath/ double carport detached house on land (about 400 sqm) so close to the bay you can smell the sea, and a rental yield of 4.35%. When the tide is right, you can even walk to the nearby jetty, do some fishing and walk back home. Try getting something like this near Melbourne!

Also, a couple more areas that I like: Werribee South, again for proximity to the beach, although by the looks of things, it's miles away from most things.

Mount Eliza: already ritzy, but that doesn't mean the potential doesn't exist. I predict the area to become a playground for well-heeled baby boomers in the future (if it isn't already).

Alternatively, if you believe what people say about housing being overpriced, and the property market set to crash to the tune of 40%, you're better off waiting. Who knows, Geelong's median price could drop to $290K. Sorry, couldn't resist.