Buying a house in Australia

[Hanneke12345]

Have any of the ex South Africans on this forum been able to buy a house in Australia? Is it really as close to impossible as everyone says?

 

 

[RedPanda]

Lots of forumites (in my estimation, which might not be really accurate) have bought houses. We have just bought a house. BUT....

 

It's a total shock to your system. You can look online on realestate.com.au, especially in the SOLD* section, for your suburbs to see what houses cost. The one thing that helps a little is that the interest charged by banks is very low, compared to RSA. You can currently get home loans at interest rates under 4%.

So no, it's not impossible, it's just really different.

The competition is also totally crazy. Houses can sell within 4 days of going on show for the first time. If a house is on the market for more than a month, something's funny with it. There are more affordable land-and-house packages available, and the bonus of those is that the state will help you out quite a bit in the form of First Home Owners Grant, and Stamp Duty reductions. All of this varies a lot accross the states, so read up on the state you are going to.

 

*The reason you need to look in the SOLD section is that realestate agents under quote in Australia, and often by a lot (eg advertising $495k plus, and selling for $600k). Sure they are legally bound to be within 10% of the final price, but it's really hard to prove that they are doing it on purpose. (but they are) This drums up artificial interest in the property and generates more offers to show the vendors. It's a big show. But if you look at the sold value of property you will know what people really paid for it.

 

 

I also just realised that your potential house buying experience will depend a lot on where you want to buy a house. If you want a house near the centre of Sydney, dream on, the fact that you are asking this means that you can't afford it [The prices are counted in multiples of $1mil, AUD] But you will see that people have managed to get houses in suburbs that are a little further out, or in cities where the property market is not so crazy. So it depends what you are willing to compromise on.

[Hanneke12345]

Thanks. I'm glad that it is possible and it is good to hear that South Africans can also afford to buy property there. We are hoping to find work in Melbourne and live a bit further away from the city. That would be ideal for us so in that case it sounds like it will be a bit cheaper   Thanks for the feedback!

[RedPanda]

It's hard to answer someone on affordability. You will get the best idea of prices from realestate.com.au, so that you can figure out how much of a deposit you'll need to have, usually 10-20% but there are exceptions and ways around it, of course with draw backs, so the best is just to have a 10-20% deposit before talking to a bank.

Then you can go onto sites like Common Wealth Bank, and use their loan calculator to find out what you will need to repay each month. Always select the maximum loan period of 30 years (they don't penalise you for paying it off early). And then you can have a look at expected salaries. The rule of thumb is to not borrow more than 1/3 your monthly income as a repayment amount.

 

So this should give you a better idea of whether or not you will be able to buy a home. Since I guess that is really the question?

[rozellem]

We bough almost 4 years ago (in Sydney) and are about to head into the territory of professional renovations (we have done all we could do ourselves, now for the big guns).  Daunting, exciting, nerve racking and very very expensive.  Watch this space.....

[Hanneke12345]

That is exciting! Well if you could afford to buy a house in Sydney then there is definitely hope for the rest of us! 

[Mara]

We have never bought a house, but we have built twice... we preferred doing that, as we get exactly what we want. Also, we were always wary of termites, although you can have a test done, there have been plenty of situations where new owners have found termites not long after they moved in... When they complained to the person that checked the house before purchase, their only comment was that on the day of the test, there was no activity! Yeah right!

[elleneo]

Bought a house almost a year ago (7th April 2016 on Auction)

 

competition is tough, lots of dissappointing auctions but we got there in the end. Chin up it can and will happen for you!

[Nev]

Might be worth holding on a little, even the reserve bank is warning of a property bubble now, and everyone expects prices to go down.

 

For sure nothing is certain, but when the RBA gets on board you know some serious thinking has gone into it

[RYLC]

They've been talking about the housing bubble and prices set to go down for the past 15 years (RBA and property "experts")  It predicted a couple of times every year.  It's happened in far regional mining towns (and Perth because of the mining boom) and with the over supply of city apartments bought off plan in certain areas of Sydney and Melbourne.  Only those markets so far in the past 15 years.  I know people who have been "waiting" nearly 8 years now for prices to "drop". They are kicking themselves that they didn't just get in with what they could afford then. 

 

[RedPanda]

The thing is, nobody has a crystal ball. And when it comes to Australian property I personally feel that we as migrants have the least feeling for what the market is likely to do. So we just jumped in, as soon as we possibly could. Granted, our house is primarily a home, not an investment. So by the time we want to sell it, any bubble busting should have smoothed over.

But it is true about the bubble: Everyone agrees it's a bubble. Nobody knows when it will pop. Nobody even knows if it will pop or just slowly deflate.

 

Short answer: Nobody knows.

[Nev]

Panda makes a good point, eventually, prices will rise to above a popped bubble again as salaries rise, so

If you are buying the house as a long term home then even if the market does drop it doesn't matter, because you have your home, if you are getting it because you want in on the investment, then you need to do different maths.

 

Just make sure you can handle an increase in the interest rates, you can pay it off faster now if they don't go up, but if they do (Which will happen) you won't run into trouble

Edited April 4, 2017 by Nev

[SurferMan]

We are here almost 7 years and are now just in the firing line to buy in the next 9 months. Been a journey I tell you. It can be done.

[woodag]

20 minutes ago, Nev said:

...

 

Just make sure you can handle an increase in the interest rates, you can pay it off faster now if they don't go up, but if they do (Which will happen) you won't run into trouble

 

That in itself is tricky.

 

We have been in Australia long enough to have seen home loan interest rates at around 17%. Will that happen again? I don't know. You will probably find some "expert" who will be able to explain to you exactly why rates won't go so high ever again, and when the rates do get to that level again, the very same person will be able to tell you exactly why that did happen.

 

As a great man once said: "Prediction is very difficult, especially if it's about the future."

 

Good luck.

Edited April 4, 2017 by woodag

[monsta]

I am no expert... but from what I have read, the reserve bank is nervous to raise interest rates that high. Also banks have better access to capital on a global scale now. So if they are borrowing from the USA at 4% and lending to you at 17%, the politicians might have something to say about that.

 

The real issue is wages are not growing, i.e. people salary increases are terrible at the moment. Sure, it means that inflation is not going up and there is less pressure to rase interest rates. But what happens if, in 4 years you need to put a kid in day care? Your salary won't have increased enough that you will have spare cash.  Buying a house for $700 000 and then in 4 years its worth $800 000 means nothing if you don't have the cash flow to pay your bills . 

 

I guess, take the advise I hear a lot, "what if my situation changes? would I still be able to pay for this loan?"  and don't assume it will be easier in a year or two.

 

[rozellem]

We have bough houses/apartments in 3 continents, currently we have a flat in London and a house in Sydney.  I also believe that if you are looking at the house as either a long term home to live in or a long term investment, you should not be effected by short term waves and bubbles.  Buying property as a high risk financial gamble is a complete different ball game, which I dont have the ovaries for.   Every single time we have bought a property, it had been in one of the "The bubble is about to burst!" periods.  AND....then it didnt crash, for many years.  We did however buy a flat in London about 6 months before the market crashed.  But, we chose well, a very rentable flat in the city centre.  Fair enough, the market crashed, prices dipped below what we paid for it, but it came back up and is almost worth double of what we paid for now.  Who cares, I will own it for at least another 20 years.  We often also fix our rate, for 2 or 5 years, just so that we are guaranteed a predictable monthly expense.  Sure, sometimes we loose out on small rate fluctuations, but we are looking at the bigger picture and love stability (Libra here).