Shud I buy now, or Rent till next year, and hold off

WJ Hooker has a good point

If you are going to be a passive growth investor that is just looking to buy and hold, you would want your property to appreciate faster than the amount of money you are out of pocket by

Simple calculation based on your numbers you provided above:

• $33,000 holding costs
• $13,000 rent
• $20,000 extra out of pocket expenses
• $540,000 purchase price

Means that you would need your property to appreciate by a minimum of 3.7% p.a. to break even

Also of note

• A property that is 80% below the median house price i.e. $450,000 as opposed to $540,000 has more room to the upside, especially if there are lots of buyers at that range and mortgage repayments are less than 30% of household income for the area you are investing in
• Depending on how you structure things, you might be able to claim depreciation and interest repayments, but whether this is in your best interest will depend on your goals and circumstances

Based on recent news, it seems that the GFC2 will be coming – that's my gut feeling too (but I can't predict it with a guarantee). If the GFC2 does come, then yeah I reckon prices will go down, and that'll affect your decision too

So everyone here is predicting every area in Australia will go down? haha. Yeah I'll wait for that.

 In the meantime I'm making money buying undervalued properties because on the news they said GFC2 is coming.

Advice- don't watch the news. Do real research into what's happening IN THE AREA YOU WANT to buy. Get educated that way you won't be swayed by people who believe everything they hear on the news. .
Some areas will go up, some will go down.
Most of the time it's financially better to rent AS LONG as you do something productive with the money you would be putting into a mortgage (if you had one).
Another idea would be to buy an investment property. But I wouldn't advocate buying and hoping for capital growth, Hope is not an investment strategy.

Reading through your post, I figure that you must either be thinking aloud, or otherwise posing rhetorical questions to the forum. Nobody is going to be able to tell you with absolute certainty what is about to happen in the immediate future.

Let's consider human nature for a start. Public perception of the state of the market usually lags behind that which is true. This means that when people are swooning over property prices like the boom will never end, then it indicates that prices have already peaked. When people think the market is down and is continuing to head downwards, prices could well have stabilised. The brave few who predict the market is going to recover are already busy doing their research and too busy buying up to actually be commenting in forums like these.

So that leaves us with two main groups of people who will be commenting here:

1. The people who think the property market is shot and headed down.
2. The people who really don't know and hence can't give you a clear answer.

Hence, are you really giving yourself a fair shot at an alternative opinion? Not really.

For the most part, continuing to rent is the way to go for now. Considering the previous run up in house prices, yields are down in most areas (ie. the areas where your average Joe will be looking to buy). Therefore it makes renting in these areas comparatively more affordable than buying a PPOR. So I have to echo what was mentioned above: that you should rent but put your 'savings' towards an investment. If you have a 'dream house' in mind, there is always the possibility of buying that house to rent out first while continuing to rent yourself, and take advantage of tax benefits if the property is negatively geared, or to gain additional income if the property is positively geared.

Unless you're very experienced with property, you're not going to make money overnight. And that's not the point with property. When you buy an investment property, consider what is likely to occur after 5 years, 7 years or 10 years, NOT worry about what's going to happen in the next 5 weeks.

Just as a property boom with unprecedented capital gains doesn't last forever, neither does a property bust. But if you ask me, I'd rather be buying when the sentiment is bad than be clamouring with 50 other buyers for one house when the market is absolutely boiling over and the vendors hold all the cards.

Personally, I'm already fully invested, however our family is in the market looking for a house for my brother to buy. I spoke to a couple standing thereby after the auction had passed in at an unheard of price (ie. low) and this couple was wondering if they should go in to negotiate. One of them said with some degree of panic, 'I don't know what to do. Some people say that house prices are falling by $200 a day.'

I told him this, 'Well I assure you, that's NOT going to last forever.'

The house subsequently sold for an absolute bargain price, and even my brother who is absolutely sticky on buying ONLY bargains was regretful not having finance ready and not being able to bid on that day.

It's also interesting because during the auction, the auctioneer declared, 'C'mon first home buyers! When the market is hot you say prices are too high! Now we have a bargain and yet you do not bid! We can't win you either way!!'

Easy to dismiss the auctioneer's words as 'sales pitch' but it has some truth in it. Most people get stuck in a rut and decide to sit on their hands and do nothing except complain.

Key thing is to decide what decision YOU are comfortable with, then make a move.

Personally, I'd take a long term view. Your post doesn't state where exactly you're living. But Australia is very popular with migrants and that's not about to change. I stay in Melbourne, rated most recently as the most livable city in the world. Do we truly believe that Melbourne will become a vacant slum in the long run? Not a chance, unless an unforseen disaster occurs. And if we're going to spend our lives worrying about 'unforseen disasters', we might as well hole ourselves up in an underground chamber and be miserable, because we're not truly living at all.

BWAHAHAHAHA

Ok .. for anyone who is sensible .. DONT READ THE NEWSPAPERS. Simple as that. Every second article is doom gloom and how there will be an eventual reckoning. If I trusted the papers I would have missed both major booms in the last 5 years. So .. I didnt .. i actually used my head and it made me richer.

June 2006 – Markets overbloated .. destined for a rethink – THE AGE

(sept 2006-Feb 2007 prices go up by 30% on average)

Feb 2009 – sharemarkets set for more turmoil .. investors flee – THE AGE

Invested big in stocks (blue chip) as of March 2009. Who is laughing now?

Papers are a hard sell to morons. Look at the facts .. look at the figures .. and ignore the papers.

Hi Desilucky,

Why don’t you buy in towns in regional QLD that are benefiting from the new coal mines in the Galilee and Bowen basins. With all the infrastructure expenditure occurring and continuing to happen over the next several years, then the property market will almost certainly go up. A GFC2 will affect the capital cities more however these regional towns will only feel this temporarily. There are cash flow posi properties out there and all interest would be tax deductible. As long as you feel comfortable buying a property and renting it out instead of living in it yourself. Would only need to use half of your savings for a deposit and stamp duty. It’s just another way of looking at property investing.

Cheers

I dont have to read those articles.

Because consistantly … and regularly the 'experts' in the paper have been proven wrong.

I am not going to mention names .. but there is a certain person in the investors section of the paper that gives me a regular giggle with her insights. She's been SO wrong … i read her for the laughs now.

The market HAS bottomed .. and before it starts up again its going to need a supply of people able to get loans. IF as predicted the credit markets overseas seize up .. then even with cash, equity and baseball cards .. you wont be able to pick up a loan from the banks for love or money. That'll plug the flow of cheap money. And as people compete for getting whats available .. that will raise interest rates by several notches.

Or you can listen to the newspapers. Try the comics section. Do they still publish Garfield?

OK, comics aside for a moment, entertain me, I implore you. What should we do?!

I suggest you treat the market with a degree of caution. And look whats ACTUALLY happening in it. Because that way you can be the best judge of whats happening and whether you can be moving your investments in the right direction.