About a year ago I had this sick feeling in the pit of my stomach that I’d just blown up my life in one swift move.
I battled the swarms of investors and bought a property in Sydney’s red-hot housing market.
Heck, I was the smart kid who bought on the same day the RBA said property was overvalued.
A year on, property prices have continued to increase but not a lot else has changed. The sinking feeling that I would never have a social life again has receded, but the headlines that Sydney is in a housing bubble are still everywhere you look.
The message from Australia’s banking regulator APRA, and the RBA, has been clear. They are concerned about Sydney’s house prices and believe bubble conditions exist.
Over the past 12 months I’ve come to a few realisations. I feel like I have more freedom, even though the bank still owns most of our place. I’ve learned to budget a bit better, although it’s probably more about prioritising bills and juggling expenses than budgeting.
I also pay much more attention to even small changes in rhetoric from the RBA now, because it has an impact on personal life now as well as my work.
Here are a few other things I’ve noticed.
While I’m not wealthier, I do feel wealthier
This isn’t gloating – it’s more of a state of mind, because our mortgage is still HUGE. But no matter what happens, we can always sell the property and everything will be ok, right? We have a real asset which can increase in value, rather than a car or a pair of shoes which, no matter how I like to convince myself are a smart purchase, rarely* hold their sticker price.
We also have more flexibility with our loan. We can refinance and draw on equity in our mortgage, not something we’ve ever done. But, you know, it’s an option.
The first few months were very tight and it’s been a long, broke year
When the mortgage, strata, council rates and water bills all had to be paid in the same month I admit to sitting on the bedroom floor and “having a moment”. But I quickly fell into a routine. While I’ve never been one to budget well, I am good at juggling things around. Now every month, the first thing I do is transfer the mortgage payment, then the car payment, and then all the other bits and pieces. Next I formulate my month around what’s left. It was a bit sad to begin with but now, I don’t notice as much.
Looking at your mortgage account is a very quick way to the bottom of a bottle of cheap red wine
I mistakenly had a bit of a look around our mortgage account and found a number which I never want to see again. It was how much interest we’d paid. Despite interest rates being at record lows, the first few years of mortgage repayments are largely allocated to interest and the principle loan amount barely nudges. It’s a horrible sight when you’re working your behind off to make some big monthly payments, and not feel like you’re getting anywhere.
After a year, we figured out how much of the property we actually own
We estimate we own our hallway linen closet which is about 40 centimetres deep. Buying a property is a long-term thing, something that’s difficult for us Gen Yers to get our head around sometimes.
I thought it was expensive when we bought but I’d hate to be trying to buy now
Property prices in our street have gone up by more than 15% in a year. A two bedroom apartment in an old block down the road which needs to be completely renovated, is selling for more than we paid for our newer unit. While that growth rate is expected to slow, there’s no talk of property prices going backwards.
I have a new found respect for how families do this on one income
I grew up in a one income household but I never really thought about what that meant for the bank balance when I was young. Families all over Australia rely on one income and my hat goes off to them. I’ve done the sums: my partner and I will be working for a very long time to pay off the house and I’m not too sure how we can squeeze a kid into this scenario.
I pay a lot more attention to the RBA on the first Tuesday of the month
Interest rate movements can affect us in a very real way now. While they’ve been lowered several times since we bought and we’ve received lovely letters from the bank notifying us that they’re passing the savings on, it’s scary to think about it going the other way. So we pay off more than we have to each month. Not a lot more, but more than we have to, just to try and stay ahead. When we first looked at buying, we made sure we could make repayments at 10% interest so that if, or when, interest rates go up, we’ll have a bit of wiggle room.
I read the property section in the local paper every Saturday
I hardly ever read physical papers but since buying a property I now pick up the glossy property section of my local paper to see what’s around, and keep a tab on prices. I also have email alerts set up for when properties are listed in our area. But what I’m really looking for are signs of price corrections. While any gains in our property price are currently just on paper and won’t materialise until we sell it one day, it’s good to know where we stand, and that we owe less than its current value. The other thing which lets me sleep soundly at night is that once you’ve got your foot in the door, if you are to sell, you’re usually buying in the same market. It’s all relative.
Strata is just as bad when you’re an owner
When you’re renting the real estate commonly blames strata for slow progress on maintenance. It’s no different when you’re an owner. I’m not sure why they’re so damn slow but I’ve been waiting for our common area carpet area to be cleaned for almost two months and for our garage door to be fixed since February.
One year down for me in the Sydney property market. Twenty-nine to go.