Rental half mortgage costs in Sydney ?

padington

http://www.dailymail.co.uk/news/article-3193240/Australian-entrepreneur-Nick-Holmes-Court-founded-BuzzNumbers-GoodCall-goes-epic-Facebook-RANT.html

remorseless

padington wrote: »

http://www.dailymail.co.uk/news/article-3193240/Australian-entrepreneur-Nick-Holmes-Court-founded-BuzzNumbers-GoodCall-goes-epic-Facebook-RANT.html

that has been going on for zonkies! It has been cheaper to rent rather than buying in Sydney (and most of capital cities) for a while. Also, unlike the UK, council tax/water is paid by the landlord and not the tenant.

Main reason is also negative gearing!
Most hope for capital appreciation cause yield in most cities is pretty low.

padington

remorseless wrote: »

that has been going on for zonkies! It has been cheaper to rent rather than buying in Sydney (and most of capital cities) for a while. Also, unlike the UK, council tax/water is paid by the landlord and not the tenant.

Main reason is also negative gearing!
Most hope for capital appreciation cause yield in most cities is pretty low.

Could this be a sign of what's to come for us ?

HappyMJ

padington wrote: »

Could this be a sign of what's to come for us ?

I think investors haven't quite figured it out here yet.

I can't really figure out why anyone would buy a house in Australia when renting is far cheaper but the buyers are there ready to pay over the odds for a property then rent it out for half of what they are paying in interest on a mortgage. It really doesn't make sense to me. Average house price in the Sydney region now exceeds £1,000,000. Crazy prices....and there's insufficient skilled work available in country towns so you have to work in a city and if you have to work there you've got to live there and pay the high prices.

remorseless

HappyMJ wrote: »

I think investors haven't quite figured it out here yet.

I can't really figure out why anyone would buy a house in Australia when renting is far cheaper but the buyers are there ready to pay over the odds for a property then rent it out for half of what they are paying in interest on a mortgage. It really doesn't make sense to me. Average house price in the Sydney region now exceeds £1,000,000. Crazy prices....and there's insufficient skilled work available in country towns so you have to work in a city and if you have to work there you've got to live there and pay the high prices.

You'd be surprised... it's actually quite lucrative from a tax perspective.
You keep the house empty and you offset your losses against your taxes and ta-da, your tax bracket is lower! Whilst it's appreciated so you keep refinancing :T

It is a very risky game, that slowly it's getting harder and harder to keep going. I really would like to see the bubble deflate in Sydney.

Rest of Oz is pretty okay, a tad lower would be nice, but it's not too bad.

HappyMJ

remorseless wrote: »

You'd be surprised... it's actually quite lucrative from a tax perspective.
You keep the house empty and you offset your losses against your taxes and ta-da, your tax bracket is lower! Whilst it's appreciated so you keep refinancing :T

It is a very risky game, that slowly it's getting harder and harder to keep going. I really would like to see the bubble deflate in Sydney.

Rest of Oz is pretty okay, a tad lower would be nice, but it's not too bad.

Where's all the money going? If you keep refinancing to release equity then the money's got to be going somewhere. Are the investors spending all this tax free money on luxuries or buying into more overpriced property? If you've got a small rental portfolio of let's say just 5 average Sydney houses what happens if prices drop by just 10% in one year causing a loss of half a million dollars and makes another refinance impossible due to insufficient equity, the rate on the mortgage then goes to the standard variable rate the mum and dad investors can't afford the interest payments any more as the rental income only covers half the payment and has to sell one in a depressed market to release equity. Wouldn't that then cause more forced sales increasing the rate at which property prices plummet causing bankruptcies? Why bother keeping a property portfolio that's seriously in negative equity? May as well go bankrupt and leave the property to the bank. I can't see this ending well at all. But hey there's hope...House Price Inflation can fix it though and make the mortgage smaller in relation to the price of the house. To get high HPI you need general high inflation and therefore wages must increase so everyone's happy again.

remorseless

HappyMJ wrote: »

Where's all the money going? If you keep refinancing to release equity then the money's got to be going somewhere.

I guess it's all in the hypothetical assumption that if you sell, your house would be worth more. It may work as investment homes, obviously as first home is a bit flawed unless you keep on moving... Musical chairs kinda game.

It's not much different than some (most) parts of the UK where house prices have snowballed out of control.

It always go pop :rotfl:

MARTYM8`

padington wrote: »

Could this be a sign of what's to come for us ?

It already is in much of London isn't it. Rents haven't gone up 50% since 2010.

remorseless

MARTYM8` wrote: »

It already is in much of London isn't it. Rents haven't gone up 50% since 2010.

really? I don't believe that for example the flat I am in now (or the one before) would have been 50% less 5 years ago! If so, rents were really undervalued. Even now, rents here are still cheaper than Sydney.

Generali

The other part of the equation is that capital gains are taxed at half the rate of income so you're better off with a dollar of capital gain than $1.50 of income or even more, depending on your marginal tax rate.

happylucky

Also lack of inheritance tax supports wealth maintenance in families.

Multi-generational purchases and living arrangements (grandparents looking after kids so both parents can commit to careers more easily) moure common in key Chinese buying segment which increases affordability.

That said, activity has stalled significantly in last month or so in my part of town. I guess related to:

1. Talk of neg gearing and cgt discount exemption to possibly be reviewed

2. Economic woes of China impacting both money coming in to country

3. Too much talk of bubble and correction expected 2016 ish

4. Changing attitude and costs applied by banks to investment loans

IMHO it's quite tough to justify investment now unless you're using non-Aussie money and want the functional benefit of living in it. New immigrants buying in sterling won't find it too awful at all.