Buying a house

[Guest Seeya]

Hallo Everyone,

We have no choice than to go over on a Temp Provisional Visa and will therefore only be able to apply for PR after 2 years. We have no intention of returning to RSA and would prefer to buy a house as soon as possible.

BUT Somewhere on this forum I read about the difficulty in buying a house while on a Temp Visa. Is there someone who has attempted to do that? It has something to do with buying a property as a foreign investment.

We will be moving to Adelaide and there is a $7000 figure which is mentioned as a rebate of some sort to first home owners in S Aus. It seems we will then miss this as well, if we buy immediately.

Please, could someone shed some light on some of these statements?

Seeya

[Queensland Girl]

Hi Seeya

The $7000 homeowners grant is for people with PR or citizens.

You are able to buy property on a 457 visa as long as it is off plan or brand new.

[Mara]

Hi Seeya

QLD Girl is correct, you have to have PR or be citizens to get the grant.

I would not worry to much about being in a hurry to buy. Rent first, get to know the areas, gives you an opportunity to ascertain which area you would like to buy in, perhaps if possible, even move and rent in the area first.......then when you have all the facts and figures you can buy! Before you know it your 2 years will be up!

[Nilo]

I Agree with Mara and QG's posts.

It might also be worth mentioning that the FHOG (first home owners grant) can not be used as part of your deposit, only costs at Settlement. If there are any money left you can do with it what you want.

In Qld there are much less costs for FHO. Our costs at settlement will be about $4500 to $5000, for a $268 000 loan.

Edited October 21, 2007 by Nilo

[Guest Bronwyn]

Hi Seeya.

Yes, you only get the $7,000 FHOG if you have PR or are a Citizen, and only for your first home, irrespective of your earnings. You download forms online, post them, and the Government will credit the $7,000 to your mortgage account on date of settlement (that means 'transfer' to us). The whole thing takes about 2 to 3 weeks. I know this because I worked for the ANZ this year and saw the system in action. Here is the website for the FHOG info. If it doesn't help you right now, maybe it will help someone else. I see this is for South Aus I'm not sure whether other states work differently.

http://www.revenuesa.sa.gov.au/forms/fhogapplicsa.pdf

We are currently buying a house with only a Temp Visa. It is an existing dwelling (not off-plan or brand new). There is no problem in applying for your FIRB approval (Foreign Investment Review Board) for an existing dwelling, but;-

-You cannot get 'pre-approval'. You must have a signed contract by buyer & seller, stating the address, and stipulating that purchase is subject to FIRB approval

-They can take up to a month to process. Ours took 2 weeks but I phoned them about 5 times.

-There should be at least 12 months still to go on your Temp Visa

-You must live in the house yourself, you may not rent it out. This effectively stops us from buying an investment property.

There are a few more details. Read all about it here:-

http://www.firb.gov.au/content/default.asp

In South Australia you can work on a rule of about 5% of purchase price for costs. All states have different stamp duty levels. For eg if you buy for $300k, you must allow 5% or $15,000 towards stamp duties and conveyancing costs. IN ADDITON, you must have a 20% deposit, so $60,000. In total you must have $75,000 if you want to buy a house for $300k. You would then owe $240k on the mortgage. There is one way you can borrow more than 80% of valuation, and that is by taking out LMI. (Lender's Mortgage Insurance). It is very expensive. It is added to your mortgage, and then you can take for example a 90% loan. I refer you to the ANZ website calculator where you can play around with figures and it will calculate all your costs for you. http://www.anz.com/aus/personal/Home-Loans/default.asp

I would agree with Mara, in that you should rent first and get a feel for areas. I personally didn't want to wait too long to get into the market again, but rushing in and making a mistake can be even more costly.

Good luck, Bronwyn

Edited October 22, 2007 by Bronwyn

[Bob]

Wilna,

as all the troops are quite rightly saying, the First Home Owner's Grant of $7 000 is only available for Australian citizens and those folks who are permanently resident here.

It would be a waste of good ol' taxpayer's money if the Australian gov't subsidised temporary people the princely sum of $7 000 to help with buying a house, only to see them disappear overseas again once their temporary visa expired! (which is what happens from time to time)

The First Home Owner's Grant is given out by the Australian Commonwealth (or "Federal") government and is the same wherever you buy throughout Australia, no matter which State or Territory you're in.

Also, in South Australia, the local State government gives a rebate on the stamp duty payable on the purchase price of the house.

Other State and Territory governments will also have something similar on the go, for people buying their first home in that respective State within Australia.

[Guest Bronwyn]

Hi again

I thought I better add that it IS possible to buy a house at auction with FIRB approval. If you read the site you will see how they do it.

Good luck! Bronwyn

Edited October 22, 2007 by Bronwyn

[Nilo]

Bron,

Just thought I might add that as a PR or citizen you can get up to 103% from some lenders i.e. RAMS. We're getting 95% with NAB and our LMI is just under $4000, but that's the price we have to pay as we have not got a 20% deposit. They might add it into your loan amount if you ask. Altought that will not be clever as the FHOG will cover it nicely.

Our luck is we're buying off plan and will only settle sometime next year so guestamating we would have at least $20 000 equity built by then. We're gonna jump into an investment property asap after that.

[Guest Bronwyn]

Hi Nilo

We don't get the FHOG, sadly! Only have a Temp visa.

I think you plan sounds good

[Alibaba]

Hi

While on this topic of house buying I want to know how affordable it is to buy a house on only one salary. Ok, I know this depends on the area, the price of the house and of course the salary.

Can you people who have bought houses or are in the process, please give me examples or an indication if this is possible? How does renting compare to a payment on a house loan? We would be looking at a 3-4 bedroom house, with 2 bathrooms and in an okish area.

If all goes well, we should have just approximately $AUS 100 000 for a deposit (conservative guess).

My husband flies to Melbourne in early November for an interview and we hope for a job offer and a good one at that. For the beginning I wouldn't want to work, and let us settle first and then perhaps consider working part-time.

Alibaba

[Nilo]

To buy a decent house in Brisbane in a reasonable area could cost you $400 000 up.

There are areas where you might get a bit cheaper but not much.

We bought a townhouse in Brassal, Ipswich about 30 minutes from Brissie. Because thats what we could afford and it's in a good area in Ipswich. (3 bed unit) It's not our dream house but a first step into the property market.

You'll do well with the 100 000 deposit. Don't forget the costs though!

[Guest Seeya]

Thank you Everybody,

I appreciate all the info and advice.

My mind is so set on Permanent that this Temp Visa is really a spanner in the works. But as you say, 2 years fly by and it leaves time to settle in and learn the ropes.

Thank you for all the help

Seeya

[Bob]

Ali,

a 100 Grand deposit will be enough for just about any house this side of a million dollars, but the next thing is to be able to service the outstanding home loan on one salary.

That's where the bank comes in.

You have to see what the bank will lend you on the strength of just one income, add that to the 100 Grand you've already got as a deposit and you start shopping around for a house within that price range that appeals to you.

Simple. . . . but just don't forget that you have to eat before the home loan is all paid back, so factor in some extra spending money each week or month to live well on.

Have fun in Melbourne.

[Annette]

Ali and Seeya, I found the following calculator quite useful.

http://www.homestart.com.au/calculators/bo...-calculator.asp

It certainly makes me despair to see just how much we'll need to save just to cover the fees, let alone the deposit!

[Nilo]

Annette

I know there are places where one can get 100% loans and then as first home owner you get the grant and that should cover costs. Just take care that you are able to service the weekly payments!

[Mara]

Hi Alibaba

Melbourne is huge, it all depends on where you wish to buy as to what you will pay. As the others have said it also depends on what kind of debt you can service. In Doncaster area, where so many SA's live you would be hard pressed finding a home for under $550,000, however, in Sunbury where we live you could buy a new home for $350,000. So it is all relative, as always.

[Springbok]

We have no intention of returning to RSA and would prefer to buy a house as soon as possible.

Property is usually a longterm investment and so it doesn't really matter WHEN you buy, if you intend to keep that property for 10 years or longer. However it's somewhat of a different story if you have a mortgage and therefore at the mercy of fluctuating interest rates, especially when interest rates are coming off a low base. Don't feel you MUST buy a house as soon as possible, especially not in overvalued areas... while property is generally perceived to be one of the safest investments, remember that, contrary to popular belief, prices can go down as well, as we're seeing in Spain, the USA and the U.K. I'm not trying to be a prophet of doom, but just consider the following:

Over in California -

“developers are walking away from unfinished homes, giving up in a fast falling market” – “ 1.2 Trillion dollars has been lost in value in US housing so far this year, and as much as 4 Trillion dollars by the end of next year is expected” – houses being auctioned reveal just how much prices have dropped … those who bought at the top and paid $585,000 are seeing the same house now having an opening price of $295,000. Ouch! What was that about prices never going down?

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And in Florida –

Much unhappiness when developers auctioned properties that originally sold for $300,000 for only $145,000 – “You’ve got to be kidding dude, it’s not fair” says one of the guys who bought at the peak of the bubble. “They promised us they wouldn’t sell below market value” says another angry bubble buyer … The developer replied that the housing market has shifted and that these prices ARE now market value … ouch again...

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Over in the U.K., where the crash is just starting (their timeline is a year or two behind the US), estate agents say things have gone deadly quiet and they are only getting offers for 10-15% less than asking price … over at Bernard Marcus auctions this last Tuesday they had 300 properties on the block …

http://www.barnardmarcusauctions.co.uk

A third of them had reserve prices and NOT ONE OF THESE was sold …it seems sellers are still in denial that prices have to come down … sounds familiar … In the same week the IMF has declared UK property prices to be 40% overvalued.

Moving to South Africa, this is what Malcolm Guest, CEO of Coface, had to say about property in the USA, U.K., Spain and South Africa, on Summit TV:

AAKASH BRAMDEO: It’s a great pleasure now to welcome Malcolm Guest from Coface South Africa. Malcolm, I want to start off by talking about the sub-prime crises in the US and its possible impact in South Africa?

MALCOLM GUEST: When I was here in April I actually forecast that something like this could happen. We realised there was a big problem with the housing market over there. We have also since then watch-listed the UK in July because they have a similar problem with housing. Recently we watch-listed Spain. All three of these countries in many ways - I could almost say it’s the Anglo-Saxon effect - and you must wonder why Spain is Anglo-Saxon and that’s because so many British buy holiday homes there. What is happening is that total lending in the US was around about 138% of the gross domestic income. So when you actually look at the US it was around about 130% but in the UK it was around 165% so it was causing a big problem. The UK has been pulling back slightly, so houses in Spain have been suffering - sales of houses, construction companies have been starting to see problems - so that’s why we did this with Spain. Now the question is about South Africa? All of these countries I’ve mentioned - they used to say an Englishman’s home is his castle, you own it. Most people here also like to own their homes. Now if I said to the SA Reserve Bank what is the lending to gross domestic income here they would say around about 75% so there’s no worries. However, if you look at this country and how many people fall below the level where credit is available you would actually start to think it’s a little bit more than 75%. In fact for people with income between R8,000 and R14,000 per month it’s closer to 130% which is the same problem that you have got with Spain, so we’re actually building towards this lending crisis on property.

AAKASH BRAMDEO: But people would say that the National Credit Act is there to prevent exactly the thing you’re talking about?

MALCOLM GUEST: It is. In fact the National Credit Act in my opinion came in to help on account of the fact we hadn’t changed the Usury Act since the 1950s. Interest rates etcetera are far too high so you’ve got people that could not afford credit cards, could not afford to borrow - they were having to go to very high rates of interest. Now if you think about it this is what started the problem in the US, because in the US it was always “you never have to worry about interest rates because your property is going up so much.” Property fell, interest rates went up even more - your sub-prime crisis starts. Here the National Credit Act is actually having a double effect - we all know it’s having the effect of saving people from not being sent credit cards through the post so they will borrow a lot of money, but it’s also having the effect that people that can afford to borrow aren’t allowed to because the parameters of their salaries etcetera are not within the National Credit Act so they’re entering into rental and leasing agreements instead. This will affect the price of property most certainly - it’s already affected the price of cars, because it’s just been announced that new car sales fell by 20%. That’s again the National Credit Act - so regulation can go too far in the wrong direction.

AAKASH BRAMDEO: Fair point. Are you then saying that in terms of the local property market we could be in a bubble scenario?

MALCOLM GUEST: I think the local property market here is at the present time still in for a soft landing - I don’t think you will get the bubble scenario, however I have to say with inflation going to 7% which it will do - I have to say that with interest rates rising by at least another 0.5% before the end of the year which we believe it will - you are going to see a tightening of the belt once more. If that tightening of the belt happens then people that are very close to not being able to afford will want to sell - they won’t be able to sell because people that would normally buy won’t be able to buy under the National Credit Act. So you could have a harder landing than we suspect, and the beginning of 2008 you could start to see house prices start to fall.

As for Australia... who knows? Seems pretty certain that the cash rate will be hiked to 6.75% next month. Then we have the oil price knocking on $100/bbl which will push up inflation, which will call for even higher interest rates... anyway, just a few thoughts.

[Nilo]

So if I understand what you are saying correctly, we should be extremely careful not to buy properties that are overpriced because of the area they are in like close to the city etc.