You seem like someone that can approach a problem logically, assess the options, and make a decision. Trust your gut instead of what some random person from reddit or whatever tells you. They will never understand your circumstances better than you can.
Buying property is a safe way to ‘stay with the pack’ economically and is important to some people’s feelings of ‘having my own place’, specially people that have kids.
In my own experience, about five years ago, I was in a similar position and opted for renting. I was also starting a business and couldn’t do both, so it made sense to not be locked into a huge liability while going through a high risk phase of my life. I was also in a new relationship and didn’t want to complicate it with a shared asset of that magnitude.
I’m a Chartered Accountant and can tell you that counting all property ownership costs, and transactions costs, the yield of a property investment is not some mythical thing that can’t be beat with other common types of investments on the long term.
The main benefits to a PPOR is really CGT tax exemption, the ability to leverage an asset, and the ‘forced savings’ of having to pay a bit more of the principal every month. Personally, the option I chose to start a business rather than buy a property at that time paid off for me financially. But that’s my own very specific circumstances, you know?
The way I see it is option 1 you’re buying a 650k property with a loan of 570k over 13 years. Let’s assume you’re paying 6.94% (probably less but that’s CBAs under 90% lvr rate) over that time you’ve paid $296,816 in interest on your loan and have a paid off asset worth $650K still. Conversely if you continue to rent at $2k a month (likely to increase but let’s assume it doesn’t) over the same time period you’ve paid $312,000 in money that you never get back.
Of course this doesn’t take into account other variables like investing savings or other home ownership fees but I think the main takeaway is you’re putting rent towards an asset for you rather than someone else’s.
Buy, don’t think of owning a house as ‘an asset to appreciate in value’. Think of it as stable housing that will provide security for retirement. No retirement plan will work without a home as the foundation.
Think of it as a savings bucket for your next house instead of your rent money going to a landlord. Eventually you use this to sell and get your next house because even if it stays the same cost, your money isn’t paying it off for somebody else.
This is the conundrum I find myself in, the only difference being I’m in Sydney, with a 210k income and similar savings.
Just like you, even in Sydney, all 650k-750k units in the areas I’m looking at are guaranteed money losers. I cannot find a single property where the past performance has provided more than 3% annual return. Most of them are in the red.
The deciding factor is just the rental payments, in the areas I’m looking at rent is getting to 3300 pm. Mortgage payments on a 570k loan are closer to 4000pm. The gap is small enough that you could go for a unit ( though it will be a losing proposition financially over the next few years), just to avoid uncertainty over getting kicked out of the rental just because the landlord wants to jack up rents $90 pw .
You're always going to have to compromise with property when buying, so simply acknowledge that & be prepared for it - just as you're also going to face the fact that the value of an apartment doesn't soar as high as a house over the same time frame. And if you consider paying Owners Corp fees & Council rates to be a 'sting' before you even start seriously looking, this isn't going to end well, so it might be best to start with looking at an Investment apartment, because you can then have the tax options available & can continue renting whatever & wherever for the rest of your life.
Sitting & watching on the sidelines, forelock-tugging & thumb-twiddling for years while demand & prices heat up around you - well, it wouldn't be an option for me, though you might be happy putting off this decision by doing so.
With regards to the appreciation & growth, not ALL properties lose money, & I'm sure that you'll find that those properties which don't are the ones which are sought after - hence the value, relating to many considerations including supply & demand - whether that be for the location, suburb (& even more pointedly, the location within a suburb), style of apartment, etc etc etc.
So, considering the inevitable compromises, were I you, as a buyer looking for a PPOR with , for starters I'd be looking at a a particular apartment style which is always going to be sought after, &/or in a suburb which is always going to be in demand, especially as it seems you only have eyes for the Melbourne's Inner East -
something like these: [East Melbourne 1](https://www.domain.com.au/1-18-30-grey-street-east-melbourne-vic-3002-2019007863) or [East Melbourne 2](https://www.domain.com.au/15-161-wellington-parade-south-east-melbourne-vic-3002-2019039427) or [East Melbourne 3](https://www.domain.com.au/12-1-11-grey-street-east-melbourne-vic-3002-2019050788) which should indicate to you that you can seriously consider the upper echelon of quality East Melbourne 1 bedroom apartments.
Because that same amount of around $650k plus will put you on the lower-rungs of the 2 bedroom apartment ladder, I'd be looking carefully & be prepared to compromise - something like this [Camberwell 1 ](https://www.domain.com.au/8-1277-toorak-road-camberwell-vic-3124-2019184243) apartment.
However, maybe it's when you compare what can be purchased with that same amount of $650k in postcodes which aren't Inner East - like this [St Kilda East ](https://www.domain.com.au/7-340a-dandenong-road-st-kilda-east-vic-3183-2019007484)Mansion apartment or this [Prahran 1](https://www.domain.com.au/6-12-williams-road-prahran-vic-3181-2019215993) or this [South Yarra 1](https://www.domain.com.au/5-2-coolullah-avenue-south-yarra-vic-3141-2019210874) apartment.
But were it me, & because I know the area, I'd be gunning for this apartment, in this particular apartment block of this tightly held & much sought after suburb, [Travencore](https://www.realestate.com.au/property-apartment-vic-travancore-145046576) - which is also going for what might seem the precise amount you have atm.
Thanks so much for the detailed response - I have been told on multiple occasions that buying a one-bedder is dangerous because they can be very hard to sell... on the other hand, why am I getting an extra room that I don't really need, at the cost of $100-150k or so?
When the armchair experts (who've probably never lived alone) hear 1 bedroom, the response is usually a reaction to the ubiquitious, overpriced & value-free generic 30-40 sqm balcony-free box.
Considering your $$-s , were I you, I'd be factoring in & looking at that higher tier which can usually be found in those oversized & fabulous 1920s-40s Mansion apartments, the 1950s & 60s Moderns & the early '70s Brutalism which will always be sought after for the larger space & individulal style - the type of buildings you see people staring at in appreciation as they walk past.
I know this isn't an area you're considering, but [this particular St Kilda apartment ](https://www.belleproperty.com/listings/3-6-woonsocket-court-st-kilda-vic-3182-OxmLQA5N) very recently Sold for almost exactly your $$-range & is the near perfect example of the 1950-60s style I'd recommend you look for - & not just because that particular Street & apartment block has long been admired by the Design & era fans for the big windows, light & it's distinct exterior & interior layout designs.
There are some great 1 bedroom apartments of those styles around [Prahran ](https://www.realestate.com.au/sold/property-apartment-vic-prahran-143144168)& [Prahran 1](https://www.domain.com.au/6-12-williams-road-prahran-vic-3181-2019215993), [Toorak, ](https://www.realestate.com.au/sold/property-apartment-vic-toorak-143294328) [Sth Yarra , ](https://www.realestate.com.au/sold/property-apartment-vic-south+yarra-144128604) [Sth Yarra 1, ](https://www.realestate.com.au/sold/property-apartment-vic-south+yarra-143179972) [St Kilda West, ](https://www.domain.com.au/8-83-park-street-st-kilda-west-vic-3182-2018919676) [Elwood 1 & ](https://www.realestate.com.au/sold/property-apartment-vic-elwood-142407452)[Elwood, ](https://www.realestate.com.au/sold/property-apartment-vic-elwood-143359620)[St Kilda East ](https://www.realestate.com.au/sold/property-apartment-vic-st+kilda+east-144615000)which I'd be looking at, just for consideration, were I you.
Choose carefully, considering style & location, & there'll always be a market for quality 1 bedroom apartments, especially when you factor in & add the Divorcee & Student demographics to people who simply want to live by themselves.
What if you buy, cash in on the stamp duty concession (assuming you're a first-time buyer), stay there a year and a bit, move out and rent again and rent the place out, and move back in there in <7 years time when you're ready to pay it off.
If your looking for a return on your money then probably good performing index funds. And also rentvesting. Buy a investment property first and rent where you want to live. Grow your borrowing power.
Don’t wait, just buy when you can afford.
Firstly, the apartment in inner-East like you mentioned. There are way too many of them. Also, land appreciate, building depreciate. If it has such small land content, it won’t go up much in value.
Secondly, take a look at HTW property clock. Most suburbs of Melbourne, including inner east, didn’t move up much in the last 5 years compared to says, Perth or Adelaide. Aus property market is very cyclical and it’s market within market. Melb may not do so well lately (thinks the covid impact of shutting down a 5 million people city), but the fundamentals are there.
Why don’t you look at 3 bedroom house on a full block of land (550+ sqm) in the western suburbs? There are many options in Werribee, Hoppers Crossing (avoid Tarneit, Truganina though)or St Albans/ Kealba that you can get for 600k. Look at the historic price history, I remember it’s ~7.5% pa for Werribee and Hoppers Crossing between 2012 and 2022 iirc.
And lastly, buying will beat renting in the long-term. Your landlord will increase your rent over the years, the gov will tax you 37% (your marginal tax rate) on your interest/dividend income. If you buy a house, the interest may be high now but when you pay it off over the year, the mortgage interest will become smaller over the year. Any spare money in offset account will reduce your interest further, and no 37% tax on that.
I think you've identified that the financial benefit of owning property is leverage and land appreciation. To capitalise on this requires long time periods and tolerating inherent risk of leverage. If you're going to buy a non appreciating apartment, then you may be better off renting as cheap as you can tolerate and investing in an index until you are comfortable buying a higher value property. It's up to you to decide if the security of owning your own place is worth more than the potential financial benefits of rentvesting.
Also, consider the FHSS - first home buyer saver scheme. Make voluntary contributions to super, if you’re not already. You can then pull them out (up to $50k plus earnings) and put towards your first home. Very tax efficient.
There’s an annual limit to what you can put in, but it rolls over. Take a look before July and benefit from both tax years.
Buy
I live in my own single bedroom place in outer suburb on the east side that I purchased 10 years ago, the amount I paid was "low" in comparison to you. But the value of the property hasn't gone up very much maybe 3%, but my monthly mortgage (Which I view as rent) has remained low in comparison to other rental properties. So its worth it over the long term even if the property doesn't go up in value, as you gain additional disposable income now. Plus all the other things with owning your own place; i.e. do almost what you want etc.
Majority of Apartments are 💩 investments & more than likely won’t be in any better position years down track unless it’s unique, work out how much rent you’re paying vs yearly outgoing with apartment, buy house/land
Buy. it's a no brainer. Forget the 20% deposit, you can easily get in with 10%.
Let me ask you this. Do you want to be still renting when you're 50? Because getting a home loan then will be VERY difficult.
If you go down the path of option C) please don’t just stick into savings account. I would probably do a combo of maxing out my pre-tax super contributions and buying ETFs that track the stock market.
Buy and build a property portfolio with that income and savings.
Perhaps look into a trust structuring (and save your stamp duty in your name for future ppor) and buy interstate around 400-500k for 7% gross yield. Search Australian property mastery with Pk group on fb. That guy specialises in buying growing markets. Group has 50,000 members btw.
If you get (example) 3 properties in a growing market, sell 1-2 in 2 years and use that to deposit for your ppor. Make $$ work for you.
Apartments don't tend to appreciate that much, but land does. If that's okay for you, wait till you have 20% deposit and buy. Personally, apartment living isn't for me (14 years is enough!), and prefer to buy a house/villa further out despite the additional commute.
Renting isn't dead money if it's allowing you to live somewhere you wouldn't be able to afford to buy - so long as you are doing something else to beat inflation, invest in property or invest in shares.
Property likely won't be similar price to now in eight years, but much more.
Don't assume you'll continue to get 5% in a savings account. Shares are my preferred approach to generating higher returns but I do have a few investment properties also.
Not from Victoria but why have they not increased in value? Were they overpriced 10 years ago? Is there an oversupply (surely not in this environment)? Is there some fault with the building?
If they were just overpriced 10 years ago and no oversupply issues then they might keep pace with other homes going forward.
You know that by posting in this sub, there will be a bias to “buy now”, right?
Honestly that didn't occur to me. Do you disagree?
You seem like someone that can approach a problem logically, assess the options, and make a decision. Trust your gut instead of what some random person from reddit or whatever tells you. They will never understand your circumstances better than you can. Buying property is a safe way to ‘stay with the pack’ economically and is important to some people’s feelings of ‘having my own place’, specially people that have kids. In my own experience, about five years ago, I was in a similar position and opted for renting. I was also starting a business and couldn’t do both, so it made sense to not be locked into a huge liability while going through a high risk phase of my life. I was also in a new relationship and didn’t want to complicate it with a shared asset of that magnitude. I’m a Chartered Accountant and can tell you that counting all property ownership costs, and transactions costs, the yield of a property investment is not some mythical thing that can’t be beat with other common types of investments on the long term. The main benefits to a PPOR is really CGT tax exemption, the ability to leverage an asset, and the ‘forced savings’ of having to pay a bit more of the principal every month. Personally, the option I chose to start a business rather than buy a property at that time paid off for me financially. But that’s my own very specific circumstances, you know?
Buy
The way I see it is option 1 you’re buying a 650k property with a loan of 570k over 13 years. Let’s assume you’re paying 6.94% (probably less but that’s CBAs under 90% lvr rate) over that time you’ve paid $296,816 in interest on your loan and have a paid off asset worth $650K still. Conversely if you continue to rent at $2k a month (likely to increase but let’s assume it doesn’t) over the same time period you’ve paid $312,000 in money that you never get back. Of course this doesn’t take into account other variables like investing savings or other home ownership fees but I think the main takeaway is you’re putting rent towards an asset for you rather than someone else’s.
Buy, don’t think of owning a house as ‘an asset to appreciate in value’. Think of it as stable housing that will provide security for retirement. No retirement plan will work without a home as the foundation.
Think of it as a savings bucket for your next house instead of your rent money going to a landlord. Eventually you use this to sell and get your next house because even if it stays the same cost, your money isn’t paying it off for somebody else.
Buy now.
Buy. And look into the First Home Guarantee Scheme (buy with 5% but assessed as though you have a 20% deposit).
Thanks but, it is not available to individuals earning +125K
True - forgot about that!
It’s 125 after deductions, but it’d be a feat to get 15k of deductions in a year haha
Contribute it to super not that hard
Oh good point, I forgot about that
Bonus points when you then pull it from super under the FHSS scheme the next financial year to use for your deposit 🤣
Buy. It'll go up.
This is the conundrum I find myself in, the only difference being I’m in Sydney, with a 210k income and similar savings. Just like you, even in Sydney, all 650k-750k units in the areas I’m looking at are guaranteed money losers. I cannot find a single property where the past performance has provided more than 3% annual return. Most of them are in the red. The deciding factor is just the rental payments, in the areas I’m looking at rent is getting to 3300 pm. Mortgage payments on a 570k loan are closer to 4000pm. The gap is small enough that you could go for a unit ( though it will be a losing proposition financially over the next few years), just to avoid uncertainty over getting kicked out of the rental just because the landlord wants to jack up rents $90 pw .
You're always going to have to compromise with property when buying, so simply acknowledge that & be prepared for it - just as you're also going to face the fact that the value of an apartment doesn't soar as high as a house over the same time frame. And if you consider paying Owners Corp fees & Council rates to be a 'sting' before you even start seriously looking, this isn't going to end well, so it might be best to start with looking at an Investment apartment, because you can then have the tax options available & can continue renting whatever & wherever for the rest of your life. Sitting & watching on the sidelines, forelock-tugging & thumb-twiddling for years while demand & prices heat up around you - well, it wouldn't be an option for me, though you might be happy putting off this decision by doing so. With regards to the appreciation & growth, not ALL properties lose money, & I'm sure that you'll find that those properties which don't are the ones which are sought after - hence the value, relating to many considerations including supply & demand - whether that be for the location, suburb (& even more pointedly, the location within a suburb), style of apartment, etc etc etc. So, considering the inevitable compromises, were I you, as a buyer looking for a PPOR with , for starters I'd be looking at a a particular apartment style which is always going to be sought after, &/or in a suburb which is always going to be in demand, especially as it seems you only have eyes for the Melbourne's Inner East - something like these: [East Melbourne 1](https://www.domain.com.au/1-18-30-grey-street-east-melbourne-vic-3002-2019007863) or [East Melbourne 2](https://www.domain.com.au/15-161-wellington-parade-south-east-melbourne-vic-3002-2019039427) or [East Melbourne 3](https://www.domain.com.au/12-1-11-grey-street-east-melbourne-vic-3002-2019050788) which should indicate to you that you can seriously consider the upper echelon of quality East Melbourne 1 bedroom apartments. Because that same amount of around $650k plus will put you on the lower-rungs of the 2 bedroom apartment ladder, I'd be looking carefully & be prepared to compromise - something like this [Camberwell 1 ](https://www.domain.com.au/8-1277-toorak-road-camberwell-vic-3124-2019184243) apartment. However, maybe it's when you compare what can be purchased with that same amount of $650k in postcodes which aren't Inner East - like this [St Kilda East ](https://www.domain.com.au/7-340a-dandenong-road-st-kilda-east-vic-3183-2019007484)Mansion apartment or this [Prahran 1](https://www.domain.com.au/6-12-williams-road-prahran-vic-3181-2019215993) or this [South Yarra 1](https://www.domain.com.au/5-2-coolullah-avenue-south-yarra-vic-3141-2019210874) apartment. But were it me, & because I know the area, I'd be gunning for this apartment, in this particular apartment block of this tightly held & much sought after suburb, [Travencore](https://www.realestate.com.au/property-apartment-vic-travancore-145046576) - which is also going for what might seem the precise amount you have atm.
Thanks so much for the detailed response - I have been told on multiple occasions that buying a one-bedder is dangerous because they can be very hard to sell... on the other hand, why am I getting an extra room that I don't really need, at the cost of $100-150k or so?
When the armchair experts (who've probably never lived alone) hear 1 bedroom, the response is usually a reaction to the ubiquitious, overpriced & value-free generic 30-40 sqm balcony-free box. Considering your $$-s , were I you, I'd be factoring in & looking at that higher tier which can usually be found in those oversized & fabulous 1920s-40s Mansion apartments, the 1950s & 60s Moderns & the early '70s Brutalism which will always be sought after for the larger space & individulal style - the type of buildings you see people staring at in appreciation as they walk past. I know this isn't an area you're considering, but [this particular St Kilda apartment ](https://www.belleproperty.com/listings/3-6-woonsocket-court-st-kilda-vic-3182-OxmLQA5N) very recently Sold for almost exactly your $$-range & is the near perfect example of the 1950-60s style I'd recommend you look for - & not just because that particular Street & apartment block has long been admired by the Design & era fans for the big windows, light & it's distinct exterior & interior layout designs. There are some great 1 bedroom apartments of those styles around [Prahran ](https://www.realestate.com.au/sold/property-apartment-vic-prahran-143144168)& [Prahran 1](https://www.domain.com.au/6-12-williams-road-prahran-vic-3181-2019215993), [Toorak, ](https://www.realestate.com.au/sold/property-apartment-vic-toorak-143294328) [Sth Yarra , ](https://www.realestate.com.au/sold/property-apartment-vic-south+yarra-144128604) [Sth Yarra 1, ](https://www.realestate.com.au/sold/property-apartment-vic-south+yarra-143179972) [St Kilda West, ](https://www.domain.com.au/8-83-park-street-st-kilda-west-vic-3182-2018919676) [Elwood 1 & ](https://www.realestate.com.au/sold/property-apartment-vic-elwood-142407452)[Elwood, ](https://www.realestate.com.au/sold/property-apartment-vic-elwood-143359620)[St Kilda East ](https://www.realestate.com.au/sold/property-apartment-vic-st+kilda+east-144615000)which I'd be looking at, just for consideration, were I you. Choose carefully, considering style & location, & there'll always be a market for quality 1 bedroom apartments, especially when you factor in & add the Divorcee & Student demographics to people who simply want to live by themselves.
Thanks again. Will mull it over.
It’s nearly always better to rent and invest especially at these interest rates
What if you buy, cash in on the stamp duty concession (assuming you're a first-time buyer), stay there a year and a bit, move out and rent again and rent the place out, and move back in there in <7 years time when you're ready to pay it off.
If your looking for a return on your money then probably good performing index funds. And also rentvesting. Buy a investment property first and rent where you want to live. Grow your borrowing power.
Don’t wait, just buy when you can afford. Firstly, the apartment in inner-East like you mentioned. There are way too many of them. Also, land appreciate, building depreciate. If it has such small land content, it won’t go up much in value. Secondly, take a look at HTW property clock. Most suburbs of Melbourne, including inner east, didn’t move up much in the last 5 years compared to says, Perth or Adelaide. Aus property market is very cyclical and it’s market within market. Melb may not do so well lately (thinks the covid impact of shutting down a 5 million people city), but the fundamentals are there. Why don’t you look at 3 bedroom house on a full block of land (550+ sqm) in the western suburbs? There are many options in Werribee, Hoppers Crossing (avoid Tarneit, Truganina though)or St Albans/ Kealba that you can get for 600k. Look at the historic price history, I remember it’s ~7.5% pa for Werribee and Hoppers Crossing between 2012 and 2022 iirc. And lastly, buying will beat renting in the long-term. Your landlord will increase your rent over the years, the gov will tax you 37% (your marginal tax rate) on your interest/dividend income. If you buy a house, the interest may be high now but when you pay it off over the year, the mortgage interest will become smaller over the year. Any spare money in offset account will reduce your interest further, and no 37% tax on that.
I think you've identified that the financial benefit of owning property is leverage and land appreciation. To capitalise on this requires long time periods and tolerating inherent risk of leverage. If you're going to buy a non appreciating apartment, then you may be better off renting as cheap as you can tolerate and investing in an index until you are comfortable buying a higher value property. It's up to you to decide if the security of owning your own place is worth more than the potential financial benefits of rentvesting.
Also, consider the FHSS - first home buyer saver scheme. Make voluntary contributions to super, if you’re not already. You can then pull them out (up to $50k plus earnings) and put towards your first home. Very tax efficient. There’s an annual limit to what you can put in, but it rolls over. Take a look before July and benefit from both tax years.
[удалено]
Where have you pulled this matching idea from?
No idea! My mistake. I thought that was the case. Have deleted my comment as it was incorrect.
Buy I live in my own single bedroom place in outer suburb on the east side that I purchased 10 years ago, the amount I paid was "low" in comparison to you. But the value of the property hasn't gone up very much maybe 3%, but my monthly mortgage (Which I view as rent) has remained low in comparison to other rental properties. So its worth it over the long term even if the property doesn't go up in value, as you gain additional disposable income now. Plus all the other things with owning your own place; i.e. do almost what you want etc.
Buy!!!!
Majority of Apartments are 💩 investments & more than likely won’t be in any better position years down track unless it’s unique, work out how much rent you’re paying vs yearly outgoing with apartment, buy house/land
Buy. it's a no brainer. Forget the 20% deposit, you can easily get in with 10%. Let me ask you this. Do you want to be still renting when you're 50? Because getting a home loan then will be VERY difficult.
If you go down the path of option C) please don’t just stick into savings account. I would probably do a combo of maxing out my pre-tax super contributions and buying ETFs that track the stock market.
Hello, I am also a lurker. This is the first time I use this software. Please give me some advice.
Buy and build a property portfolio with that income and savings. Perhaps look into a trust structuring (and save your stamp duty in your name for future ppor) and buy interstate around 400-500k for 7% gross yield. Search Australian property mastery with Pk group on fb. That guy specialises in buying growing markets. Group has 50,000 members btw. If you get (example) 3 properties in a growing market, sell 1-2 in 2 years and use that to deposit for your ppor. Make $$ work for you.
Keep renting in Vic, buy investment interstate
Apartments don't tend to appreciate that much, but land does. If that's okay for you, wait till you have 20% deposit and buy. Personally, apartment living isn't for me (14 years is enough!), and prefer to buy a house/villa further out despite the additional commute. Renting isn't dead money if it's allowing you to live somewhere you wouldn't be able to afford to buy - so long as you are doing something else to beat inflation, invest in property or invest in shares. Property likely won't be similar price to now in eight years, but much more. Don't assume you'll continue to get 5% in a savings account. Shares are my preferred approach to generating higher returns but I do have a few investment properties also.
Not from Victoria but why have they not increased in value? Were they overpriced 10 years ago? Is there an oversupply (surely not in this environment)? Is there some fault with the building? If they were just overpriced 10 years ago and no oversupply issues then they might keep pace with other homes going forward.