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Now let’s focus on Renting VS Home Ownership for a second! An increasing number of commentators are suggesting that with the housing marking at the moment, it could make more financial sense for young people to continue renting rather than buying.
Fairsy: Chris Browne, Director of Rising Tide Financial Services, Morning! Is that really the case?
Chris Browne: Yes, I think it is the case Fairsy! Property prices all over Australia are sky rocketing and the people that make the leap into the property market were just finding that their haemorrhaging due to the massive mortgage repayments. So, perhaps renting is a good option for others! Fairsy: So, even though
Fairsy: So, even though we’re at a record low 1.5% and obviously their doubtful it will go down anymore and the only way it up it seems! You’re still suggesting at this stage that people, youngsters particularly should continue renting?
Chris Browne: It’s a case by case sort of thing and I know that that’s a cash rate, mortgage rates at the moment are in the range of 3.5%-4% and then you’ve got to play principle on top of that. So, it’s higher than what you think and as you just touched on Fairsy, were at all time interest rate lows. When you’re at the point and this is the case with Japan, the only way is up! Typically, people have their mortgages for 20-30 years so you must anticipate an interest rate rise over that period of time.
Fairsy: A lot of people around Tasmania and of course the rest of the country find it hard to save up the deposit to buy a house. There was talk about being able to access super or whatever if they’ve got that, it is very hard to get into a house anyway if you haven’t got that deposit. Chris Browne: That’s right and
Chris Browne: That’s right and we’re finding with younger clients, they’re actually having a chat to Mum and Dad and they’re coming along as a bank guarantor. So, that is something that you can entertain, you must make sure that you’ve got good kids because at the end of the day if the kids’ default on their mortgage they come knocking on your door. Anytime that we employ that strategy we recommend a legal agreement between Mum, Dad and the child which is a smart way to play it.
Fairsy: In your experience in this area, are you finding that we’ve ever been in a case like this before where people are being suggested to rent instead of buying?
Chris Browne: I think historically in Australia people love the idea of buying their own home. I look at the global economy a fair bit and its not uncommon in Japan to have intergenerational loans because property is just so expensive. On the other hand, over in Europe people have become accustomed to renting just because property is just so expensive. I think we’re moving into a new chapter in Australia and I don’t think it’s a bad thing, I just think we need to explore options because it’s not sure to say that buying isn’t the right option for you.
Fairsy: Exactly and the old saying is, I was always taught renting is dead money and it is because you’re paying off someone else’s mortgage.
Chris Browne: I was thinking about that this morning, I think one of the main things on that note is that if you’re renting and you’re not using your surplus income (if you have it) to either put some money aside into your savings account, put some money into a managed fund or a share portfolio you should start thinking about that because you’re absolutely spot on. You don’t want to rent for 10 years, have that surplus income and then just blow it on lifestyle.
Fairsy: Exactly, you’ve made some very valid points. Chris, is there a website where people can go and find out more of what you do and get some advice?
Chris Browne: There is Fairsy, we have a blog on this topic with more information! Check out catchtherisingtide.com.au and in the toolbar, you’ll see “blog”. Thanks for having me along! Fairsy: No worries Chris, really appreciate it mate chat again soon! Very smart man indeed, Chris Browne Director of Rising Tide Financial Services.
Fairsy: No worries Chris, really appreciate it mate chat again soon! Very smart man indeed, Chris Browne Director of Rising Tide Financial Services.
This interview was originally broadcast on Launceston’s 89.3 LAFM