Australia vs UK - where's best to invest for the next 5-10years?!

costelloe16

Hi,

I'm a UK resident who's come to Australia and both my partner and I have found ourselves in a position for the first time where we have a £2000+ a month saving potential - and we're trying to work out where's best to invest, or how to find that answer.

Would it be better to take advantage of the lower UK house prices and the ability to quickly save deposits faster for the small amounts, gain money from rent on a few small properties - waiting for when the market goes back up. The theory being that prices will eventually have to rise and we'll be buying at their lowest, and earning rent in the meantime.

Or would it be better to save up a big deposit for 3-4 years in Australia and invest in one property here whilst the market is still rising. The worry there being that we'll have to wait a long time to get a decent deposit at which point we could be buying at the peak.

We were stung in England when the recession happened and the property we bought still isn't back to its original value so we don't want to make that mistake again!

Is there a place that provides detailed predications that's reliable for both the UK and Australia - or does anyone have any advice?

We'd really appreciate some help making the right decision!

SG27

Prices in the uk low? Maybe Ireland but here they still very high! Try Spain or ROI for prices that have dropped.

VfM4meplse

I've heard expectations in ROI are still high though, much of this is to do with the fact that worth is still tied up in capital assets. Homeowners expectations are well above what people are prepared to pay (given that banks aren't taking risks in their lending) = recipe for market stagnation.

costelloe16

We'd be buying in the north of the UK where prices are roughly £70k for a 2 bedroom terrace. We could own that outright in 3-4 years. VS saving that money as a deposit towards a property worth the equivalent of £300k and having a large mortgage.

(If that helps with advice!)

brit1234

There is a house price bubble in both the UK and Australia. Maybe worth waiting till property prices stop falling and bottom out.

sinbad182

brit1234 wrote: »

There is a house price bubble in both the UK and Australia. Maybe worth waiting till property prices stop falling and bottom out.

:rotfl:

Like a fly to !!!!

marathonic

costelloe16 wrote: »

We'd be buying in the north of the UK where prices are roughly £70k for a 2 bedroom terrace. We could own that outright in 3-4 years. VS saving that money as a deposit towards a property worth the equivalent of £300k and having a large mortgage.

(If that helps with advice!)

I was faced with the same dilemma recently - do I buy a cheap house that I could have mortgage free in less than 5 years or do I buy the more expensive house?

I went for the more expensive house. In doing so, I'm paying a higher mortgage but will not face moving costs in 5 years time (which some estimate to be in the region of £5k when you include legal fees, movers fees and the fact that you're likely to have to replaces stuff that doesn't suit the new house).

How long to you see a 2-bedroom place meeting your needs? That is the big question.

marathonic

brit1234 wrote: »

There is a house price bubble in both the UK and Australia. Maybe worth waiting till property prices stop falling and bottom out.

I negotiated a 15% discount to asking price for my property last December and the banks valuation came in at £5,000 more than what I paid for it.

In contrast, my cousin was consistently being outbid in 2007 and his bids were AT asking price - in other words, property was going for 5-10% more than asking price.

If you leave it until all the evidence points to an upturn in the market, I'm afraid you've probably left it too late. In my opinion, you're better to select a point on the way down where you're comfortable with payments (if it's your home) or yields (if it's a BTL) and take the plunge.

There's not much chance of being gazumped in todays market and the benefits of that cannot be overstated. This is especially true with the high mortgage arrangement fees of today - you could see yourself being gazumped in a rising market multiple times and stumping up multiple fees before you succeed.

HAMISH_MCTAVISH

costelloe16 wrote: »

Is there a place that provides detailed predications that's reliable for both the UK and Australia

No.

The failure rate of forecasters has been high in the last 5 years, I can't think of one that has called it exactly right here or in Australia.

So take anyones predictions, including mine, as nothing other than educated guesswork that is as likely to be wrong as right.

- or does anyone have any advice?

In very general terms, almost everyone accepts that the UK has had it's crash and has been bumping along the bottom for the last few years. At some point prices will rise quite strongly, indeed, they are already rising gently, but that could be next year or in five years.

And just like in Aus, there are strong regional and even local variations, with some areas and property types performing far better or worse than others.

As to Australia, that really depends where you are talking about. Aus is not one market, just as the UK is not, and different areas have performed very differently over the last decade.

Sydney hasn't seen much real terms (inflation adjusted) growth in the last decade, so may be due to take off again. Melbourne had a fairly big recent boom and some suburbs have then dropped 5% to 10% since peak. The touristy parts of the Gold Coast have taken a hammering on prices, as a rule, since that local economy has weakened thanks to the high Aus$ deterring tourism. But some rural towns have boomed thanks to mining developments and big resources projects. Perth has done well from the resources boom.

So it's very much a mixed bag.

Like the UK, Australia has a structural shortage of housing in most areas combined with a rapidly rising population, which has been the main driver of their boom, and may well shelter most areas from a serious bust in my opinion.

But some parts, such as inner Melbourne, have an oversupply of new build apartments just like Leeds or Manchester did when the crisis hit here. I'd stay away from those.

So there really isn't an easy answer to your questions.

Both places involve risk, and the risk isn't limited to property prices.

You also need to look at exchange rates, and what your long term goals are.

There is probably little point, for example, in investing in Aus property if you plan to return here after 5 years? But equally, there is little point renting in Aus for 25 years if you could buy?

Likewise, what happens when the Aus$ eventually crashes once the resources boom dies down?

If your goal is to convert back to pounds at some point in the near to medium term, being tied into illiquid investments in Aus could be a problem if the exchange rate swing happens quickly.

But then, if your investment horizon is 20-30 years, nobody can predict what will happen and exchange rates will no doubt fluctuate quite wildly, several times, over such a long period. So probably not worth worrying about just now!

We'd really appreciate some help making the right decision!

Well hopefully I've given you food for thought.

I don't think there is an easy answer, and the only advice I can give you is to do as much research as possible and think all the various scenarios through as much as possible.

If it were me, and I was going to be there for several decades, I'd probably buy the house in Aus. If I were only going to be there for 5 years or so, I'd buy here.

Anything in between is where it gets difficult....

spottydog

Would you be able to get a mortgage for a UK property while living in Australia?

From what I've seen on the expat boards this seems to be a major hurdle to clear first as Aussie companies won't take a UK place as security and UK companies won't lend to someone who resides outside the UK.