Tag Archives: renting

german housing affordability

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You can still buy a house in Germany for the same price, in real terms, as you could in the 1970s. If I look at the example of my parents – they were in no rush to buy because they could live very well in rented accommodation. They put their money in a bank account and bought their first home when they were in their early 50s and it took them six or seven years to pay off a small mortgage. They were extremely relaxed about it.”

Dr Oliver Marc Hartwich talks about affordable housing in Germany, where 67% of households rent. Taken from the excellent “Are we better off renting?” article by Elizabeth Day in the Guardian (UK).

renting sets you free

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I loved this quote from Bruce MacFarland in The Courier Mail. It perfectly sums up my attitude to renting.

For all those people who feel they are “trapped” in the rental cycle and somehow life has no meaning because you will never own your own home, it is important that you see the benefits of renting.

You don’t need a bank to rent a house.

Think about that for a moment – you owe the bank nothing.

If you rent you can live in places you can’t afford to buy. Have you ever wanted to live closer to work, the city, the beach? If you rent, you can just move there.

Similarly, if you have that rogue neighbour who is making your life a misery, the traffic build up gets too much or for what ever reason you need a change, you can just move.

Do you get nervous each month wondering if the Reserve Bank is going to raise the official interest rates? If you’re renting you don’t. In fact, your rent can only rise twice a year by law, and this has never happened to me. If it did, I’d move.

You don’t pay rates if you rent.

If something goes wrong electrically, structurally or with the plumbing, you just call the owner and they fix it for you at no cost.

bursting the security bubble on insight

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It was interesting frightening to watch Bursting the Bubble on Insight tonight. I still can’t get over how much debt Australians have taken on; Insight mentioned that we as individuals have seven times greater debt than during the recession in the early nineties: scary!

I read a lot about housing unaffordability in Australia and I have read lots of stories about Australian families who have bought overpriced housing (what housing isn’t overpriced) because of the alleged security that a house provides.

The one thing that Insight successfully showed tonight is that an expensive house with a large mortgage doesn’t actually provide security at all, it just quite the opposite. How can any person with a large mortgage requiring multiple incomes and uninterrupted employment just to service the debt at current interest rate levels feel any bit secure? Isn’t that what security is about, feeling secure?

I would feel insecure with a mortgage large enough to pay for the apartment we rent. I would feel insecure buying any apartment in Brisbane at the moment knowing that we would need two full times jobs for 30 years just to service the debt. I feel secure renting a place knowing that we have a few years rent in savings in case something goes wrong. I feel secure knowing that I could quit my job tomorrow and we could still easily afford rent and living expenses from just one salary. Now that’s security.

greed, stupidity or suffering?

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I was so stoked to see my letter to the editor about this article in the Courier Mail today, along with one from a fellow bubblepedian. I love the headline too.

Update (19/08/2008): I re-read it today and noted that I was quoted at the top of the page as well. Even better!

australian interest rates and rent increases

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I was having a discussion with a colleague today about how the big banks are continuing to raise their interest rates regardless of what the RBA does, including ANZ who raised theirs today to 9.62 % p.a.

He was of the opinion that the interest rate rises are small in comparison to how much rents are increasing. I told him it wasn’t so but he just thought that I was trying to bend statistics to suit myself.

So I thought I would follow up here on a post from this blog from November 2007 where I showed the current ANZ interest rate and how much it would have cost to borrow money for our apartment compared to renting it. Back then, with interest rates at 8.32 % p.a. the weekly repayment would have been $956.06. Now, at 9.62 % p.a. it’s $1074.19 per week. That’s an increase of $118.13 per week.

Now look at our rent situation. Last October we signed a 12 month fixed term lease at $420 per week. So last November we were paying $420 per week, and right now we are paying $420 per week. That’s an increase of $0.00 per week.

To be fair, we were clever to lock in the rent we did when we did. But even if the landlord raises the rent $50 per week come November 2008, he will still be at least $70 per week worse off compared to a year ago, not even considering that Brisbane City Council inner city rates rose by up to 20 % recently.

And if anyone still thinks that rent money is dead money they should know that total repayments for our apartment at current interest rates total $1,675,736 (yes, that’s $1.675 million!) and interest alone is $1,125,736. Now that’s dead money!

I can’t see how it’s not clear.

the hungry hungy landlord

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The unit that we rent was recently sold, albeit slowly and after many frustrating rental viewings. We’re under a fixed term lease until the end of October, so, although we have a new landlord, our lease remains intact.

This week we received a note from the our new landlord; who I will refer to as The Man. He suprised us by saying that come lease renewal time (end of October – about five months away) he is going to increase the rent by $50 per week to, quote, “market value”. The Man is such a hungry hungry landlord.

I have a few issues with The Man’s actions, these being:

  • He doesn’t know the value of having good tenants. The onsite manager said The Man would prefer to get more rent from 3-4 overseas students who will share the unit, than slightly less rent from us, a dual income couple, both with full time jobs, who have lived in the unit for the last 2.5 years and have always paid the rent on time and kept it immaculate. The students usually stay about 6-12 months whereas we will probably stay a few years.
  • He doesn’t realise that his plan may backfire. If the apartment is empty for just a few weeks then his weekly rent increase has been entirely lost and he is no better financially off than if he didn’t raise the rent so dramatically in the first place. If he gets a bad tenant it takes a lot of time, and money, to evict the tenant and get another new tenant.
  • He is doing Australian society no favour by investing in existing real estate. Unlike actually investing in real estate by building new housing, he is instead using negative gearing to speculate on future price increases of existing housing. This simply adds to real estate demand and increases housing prices. Struggling first home buyers are being gazumped by cashed up hungry hungry investors like The Man. It doesn’t help that the government encourages him to do this: he pays no land tax, can claim all his rental expenses and shortchange on tax, and then he receives a generous capital gains tax concession!

It is a sad day in Australia, as we are now at a point where current and future generations will not only find it increasingly difficult to buy a home, but to rent one as well! And it’s not at all being helped by the actions of my hungry hungry landlord, known as The Man.

Update (10 June): Here is a link to an excellent article that explains the difference between investment and speculation.