Investing capital in property or super or both?

[Rhino1]

When liquidating all our assets and investments, and bringing it over to Australia, I was wondering if I should not invest it all into property or whether I should partly invest it in super.

My worry though is whether the property market is currently over inflated and may drop, which will be a loss for me. If it continues to grow, so will my investment.

Another concern though is that I would reach 40 by the time we make the move and I would only effectively have 25 years or so left to safe up a retirement nest egg in super.

On the other hand property is expensive though and I would rather give a bigger deposit and pay less interest, and reduced bond installments...

Any thoughts on this, as I am sure this is a consideration for most when coming over?

[Bams]

Sjoe, good questions. I can't answer any, but would like to follow your post and the answers you receive.

Good luck.

[HansaPlease]

I'm not an expert, or an investment guru, but personally I would invest in property 10 times over before I invest in super.

Super to me, is almost like a "nice to have" but I don't want to bank on it in case some fool makes the wrong decision with my money, or the government makes sone stupid law. Happy to let my employer pay their 9% (soon to increase) into it and see how it looks when I retire, but the real retirement plan will be investments that I have more control over.

With property at least you have a choice of where you you invest, you can free it up, do it up, sell it, etc. Of course things can go wrong, but I prefer the odds.

Call it a simplistic view, but hey.

[AndreaL]

Hansaplease is right, there are already murmurings about super and all it would take is for the redhead to start taxing our super to get some cash so they can get the budget back into surplus.....they are already going to slug us with extra taxes.

You know,a lot of us have come over here on the bare bones of what we could scrape together, I would imagine that as many as half of the forum have, or have spent so much on the visa costs that they have little left, so you might only have a few people that arrived with significant assets to invest that could give advice, however, I would be doing my own research and not relying too heavily on what others say.......the other thing to remember is that Australia is a big place, so advice on property purchases in Perth might not be comparable to Brisbane or Sydney.

Maybe you should come over and get some professional financial advice......and when you make millions you can share your secret with us all...

[Emille]

a bit of both

i am of the view though that property is the way to go - its physical, you save the most interest etc

super is pretty risky - as its related to the stock market and as you know thats not exactly the best place at the moment

governments can 'grab' super - just look what happens in places like greece and cyprus

however you also cant 'retire' on property alone - unless you sell your house then and live of the money - so yes you do need super

[Rynier]

Rhino my view is to diversify into different asset classes if you can. If you bring retirement annuities / pension funds across that you encashed, invest those into super annuation. If you sold your house, buy a property and use as deposit on a property (bear in mind that one first needs time to understand the property market and where you want to live). My take on it anyway and route we are busy following. Think about using a financial advisor - each person's circumstances are different.

[Rhino1]

Thanks guys, its good to get a variety of opinions. What is the general take on the property market? Some reckon it is over inflated while others insist that it will continue to grow into the forseeable future... I suppose it depends on so many variables, macro and micro economic influences etc.

[Emille]

Thanks guys, its good to get a variety of opinions. What is the general take on the property market? Some reckon it is over inflated while others insist that it will continue to grow into the forseeable future... I suppose it depends on so many variables, macro and micro economic influences etc.

you are asking the jackpot question

property is the way to go because half of what you pay in your installments on the total amount will be interest. so every bit of interest that you dont have to pay is a huge saving.

secondly property always goes up - i dont know of any place where houses are now cheaper than what they were in 1980, or 1990, or 2000 - you need to see property is long-term investments - the long term trend is always up

property is physical - in other words, not just 'digits on a computer screen' which could be wiped out. once you have paid off your house nobody can take it away from you

property is a good security to borrow more money - so say your house is paid off or 50% paid off, you can borrow on that and buy other stuff (preferably property i.e investment property and from that income you can use to add to your income and live on it i.e add to your pension income when you retire)

i dont think the property boom that the world saw in the early 2000's is going to happen soon - so dont think about this short term - however gradually it will add value

the rental market in australia is quite strong, and i am of the view it will remain so - the more expensive property become, and the general first world trend is just that - the more difficult it is to afford/buy property especially for young people - so the rental market will always be there and will be quite strong. but you need to buy the right property in the right area for this - dont buy a single house 40 km from the CBD, rather go for units in preferably as close to CBDs/coast/universities that you can afford - there will always be demand for these

i would say property in australia (as in worldwide) is closer to the top value/peak. so no, if you want to buy now and sell in 2-5 years i would say dont do it. if however you will live in it or will keep it medium to long term, i say go ahead. and dont expect it to go down much, if at all

dont worry too much about the 'trends/newspaper articles' - every other day the property market is terrible and will burst, and every other day prices will go up - according to the 'experts'

as a very general generalisation in terms of cities - i would be hesitant for the Perth market and the Brisbane market and Adelaide market. I dont think you can go wrong in the sydney market and melbourne markets. this is based on the generalisation that perth and brisbane economies are less diversified and very much based on mining - and mining busts in these mean busts in the property market. perth i think is more high risk than brisbane. Adelaide's population and prominence if anything is going down and not up (SA is the only state i think who loose more of its population than it gains from other states. melbourne and sydney's economies are more diversified, their populations will continue to increase as the country's main centres and thus pressure on property markets.

with locations in cities - go as close to CBDs that you can afford. try to go for areas that have 'limits' on expansion (be it other suburbs, rivers, mountains or the coast) rather than huge areas that have a lot of vacant areas ('greenfield sites'). choose suburbs that are more mixed use and less just residential - so middle to inner city suburbs you really cant go wrong generally speaking. areas close to good public transport are good options, areas with good schools also and near universities.

i think go for the basics that have stood the test of time:

- property is physical so its an actual asset and you can live in it

- property long-term always go up in value

- buy the right property in the right area - the best you can afford

there you are - emilles guide to property investment - there are intricacies, exclusions, exceptions, contradictions, local circumstances that apply obviously

hope this helps

e

Edited May 24, 2013 by Emille

[Rhino1]

Thanks Emille, some good local perspective is invaluable when one makes decisions with life savings. We are however planning to settle in the Adelaide area but can already see that property prices are somewhat lower here than the other urban centres. Much appreciated

[Emille]

Thanks Emille, some good local perspective is invaluable when one makes decisions with life savings. We are however planning to settle in the Adelaide area but can already see that property prices are somewhat lower here than the other urban centres. Much appreciated

Adelaide is a nice city. yes its more affordable to buy there which is good for south africans and rands. i dont think buying in adelaide is a 'risk' per se, i think SA will just 'carry on' the way it has done in the past. less risk than perth i think (you see with perth all the economy's eggs are in one basket - which is mining)

Edited May 24, 2013 by Emille

[Eagle101]

you are asking the jackpot question

property is the way to go because half of what you pay in your installments on the total amount will be interest. so every bit of interest that you dont have to pay is a huge saving.

secondly property always goes up - i dont know of any place where houses are now cheaper than what they were in 1980, or 1990, or 2000 - you need to see property is long-term investments - the long term trend is always up................................

Thanks Emille - very nice post!

[Jacques Voogt]

Yup, Emille said it. Property is generally a safe long term investment with predictable steady growth.

I can only add, DIVERSIFY. Don't just do property, do some shares too. Over long term they usually grow better than property and require less effort but have more risk.

Even within property, diversify the types of property, location and sizes. At times some will be more sought after than others.

If you can get hold of repo lists it may help to buy an investment slightly cheaper.

If you can get it at 30% below it's value, your rental income should cover the bond which means that the tennant essentially pay for the total investment over time.

Once fully paid it generates income. If you have enough money to put a 30% deposit to an investment you will have the same scenario.

As the investment grows, it becomes more complex with positive gearing of some assets and negative on others to negate taxes etc.

At the end of the day, households typically spend 20% to 30% of their income on housing. So if you have 3 to 4 additional houses just like yours, fully paid in 25 years. They will generate you a similar income of typical people living in a house just like yours. You have less personal expenses yourself as your home is paid of but you have some additional expenses related to the property investments themselves.

When you do speak to a financial adviser or planner, diversify. Speak to at least 3 of them separately.

Lastly, never take any financial advice from anyone who has not made millions themselves using those principles. That is difficult, as the millionaires usually do not work, and if they do, it may not be as financial planners.

Good luck!!!!

[Gerhardk]

Keep in mind the cash rate in Australia is very good and deposits up to $100k guaranteed (forget Greece for a sec). However there are no tax free interest as in SA (first R10k???) so from $1 is taxed. However consideng the history of ZAR:AUD it is an excellent global investment.

Super has its benefits since broadly currently it pays out tax free. Can change at any time yes but super is compulsory so if a Government wants to loose an election they will mess with somehting that everybody has, which shoul be unlikely. Same for shares and property.

I would suggest you do not buy property before you arrive to benefit from first home owners grant. I think it is only $7k but in WA it is also stampduty on property of less than $500k which phases out to property of $600k.

You will likely have to work longer in Australia before you can retire but at least there is excellent infrastructure so a good place to retire.

[CLAREandANDRE]

If you have any Lending questions, fire away. I am a Lending Manager for ANZ. Cheers, Clare.

For what it is worth, seek independent financial advice on your investments. Your circumstance and "risk tolerance" will be taken into consideration on any plan presented.