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Except young Australians, who have to rent and cannot rely on real estate property for their retirement. This is orthogonal to the money laundering, but wh
by kspaans 10y ago
Except young Australians, who have to rent and cannot rely
on real estate property for their retirement.
This is orthogonal to the money laundering, but what's stopping the young people from investing for their retirement? Houses are not the only way to build savings.
- a_bonobo 10y agoThat's true, the Australian system of superannuation is actually pretty great, your job pays a portion of your income into your super which gets invested for you, you have some choice as to where it gets invested (high risk vs. low risk etc.) However what I fear is that if the super isn't managed well, inflation hits, or you just don't build up a large enough investment the high rental prices in Australia will eat up the majority of your investment returns.
- spoonie 10y agoBut you don't fear buying a house that depreciates in value, or doesn't appreciate enough to cover mortgage interest, property tax, house insurance, and maintenance costs?
- adaml_623 10y agoPeople don't fear buying housing because we always (as a general rule) need a roof over our heads.
- an_account_name 10y agoBecause you still have to pay rent - if you could buy, your housing costs would be earning equity.
- sanswork 10y agoIt's not uncommon for it to be better financially to always rent and just invest the difference between rent and mortgage+maintenance+taxes. With interest first mortgages as they are it is generally a long time before you earn any equity at all.
- aianus 10y agoThis. I did the math when I rented an apartment in downtown Toronto and the rent was less than mortgage interest + condo fees + property tax + maintenance.
- ec109685 10y agoExcept if the value of the real estate goes up.
- aianus 10y agoAh but my equities-heavy roboadvisor portfolio has gone up way more than the landlord's apartment...
- tehlike 10y agois it so? Is that still the case when your landlord leverages 20/80?
- nostrademons 10y agoUsually when mortgage interest + etc. > rent, it indicates that the property is overvalued and the value (over the long term) is more likely to fall than rise. Every other buyer - or almost every other buyer, except the ones that need to launder money - is making the same economic calculation, and if the cost of money to buy the property is more expensive than the rent you can earn from the property, they're not going to buy the property.
- prklmn 10y agoSo let's say you save 10¢ on every dollar by renting in your scenario. You'd have to have a hell of a return on that 10¢ you saved to beat the 90¢ you would have invested in the property but instead flushed down the drain in the form of rent....
- sanswork 10y ago
- fratlas 10y agoEspecially when rent for young people is around one third to one half of their income (I would know, it's about 1/3 of mine). Would take me about 6-8 years to save for a deposit on an older apartment.
- sanswork 10y agoIf your rent is 30-50% of your income you are living in too expensive of an area for your means or need more housemates.
- shakna 10y agoI've found that 30-50% of income being used for rent is fairly normal, regardless of where you might be living.
- Gargoyle 10y agoIt's also the market rate in the affected cities. You begin to see the nature of the problem.
- sanswork 10y agoI've lived in 2 of the affected cities. When I was making less I had housemates to bring the rental costs down(Sydney) or lived outside the city and commuted(Toronto). Both would work for either city and allow you to not have to spend 30-50% of your income on rent.
- Gargoyle 10y agoThe existence of ways to work around a problem doesn't mean there isn't an actual problem.
- sanswork 10y agoI don't consider high demand locations having high cost a problem personally. But if you want to live in a high demand area and you don't make enough money there are ways to do it without spending excessively on rent.
- NeutronBoy 10y agoProperty investment in Australia has a huge amount of subsidies that make it an extremely lucrative investment category compared to things like shares. If you get into the property market, you can count on capital gains tax benefits and negative gearing against any other income you have. Additionally, other benefits that are means-tested often exclude property (at least primary residences).
- rdlecler1 10y agoNo, but it takes a lot less work to invest in real estate that you also live in than to try to find and monitor a 6% annual return on your own.
- kchoudhu 10y agoI've been throwing money into broad spectrum index mutual funds for the last 10 years, and in that time have averaged about 9% annually while investing maybe 20 hours thinking about asset allocation ("my age in bonds"), fees ("as low as possible") and deleting brokerage statements from my email inbox ("I know my worth to the cent already, thanks"). Meanwhile, I have invested at least 50 hours touring houses, applying for loans and trading texts with braindead realtors in December of 2016 alone while trying to buy my family's first home. From where I stand, real estate is a terrible waste of time, energy and effort. If you want exposure to the asset class (why?!) buy into an MBS mutual fund; if you feel the itch to be a landlord (again, why?!) toss money into a REIT[1]. Do anything, basically, to avoid a large, career limiting[2] asset of uncertain value on your personal balance sheet. [1] Assumes you live in high COLA area where renting is more sensible than buying. Do your math, I am not an investment advisor, and your situation may be different from mine. [2] To avoid charges of hypocrisy: I no longer have a career, so I am happy to settle down, buy and customize the hell out of a house.