Young homebuyers who took Prosper Australia’s advice – Don’t Buy Now! – exactly a year ago have typically saved themselves $58,000.
“I congratulate everyone who stood aside from this dreadful Ponzi scheme known as the Australian property market,” Prosper Australia Campaign Manager David Collyer said today.
“These savings are staggering – they are genuine and they are conservatively calculated. For homebuyers who waited, it is as if someone just slipped this much in their wallet.
“It would take years to save $58,000 from after-tax earnings.
Consider a typical Melbourne first home buyer couple with a 20% deposit ($120,000) ready to buy a home at the median $585,000 a year ago. Instead, they waited.
Melbourne median house prices have fallen 6.1% (ABS) – $35,000
The difference between Melbourne median rents $17,680 (TUV) and interest at 7.46% (WBC) on a $465,000 mortgage (ignoring stamp duty, principal repayments, rates, insurance, depreciation and repairs) – $17,009
Interest earned on $120,000 savings at 5.5% (ignoring tax) – $6,600
“There is a further long-term benefit not included above: the smaller required mortgage would leave an extra $250 per month interest in a buyer’s pocket, or $41,000 over a 25 year loan. This money would be available at the buyers’ discretion for living expenses or to accelerate principal repayments.
“This is not a cue to immediately buy a house,” Collyer warned.
“Prosper expects house prices to fall much further. We repeat our forecast made February 23 of house price falls of at least 15 per cent and possibly 20 per cent this calendar year.
“A fall of this size will deliver massive further savings to those who resist the temptation to commit to a working life of toil lived 90 days from bankruptcy.
“We urge prospective homebuyers to focus on saving as large a deposit as possible. Avoid exchanging renting a house for renting money from the bank. That is not the path to economic freedom.
“Don’t Buy Now!” Collyer concluded.
Media contact: David Collyer firstname.lastname@example.org
About Prosper: Prosper Australia is a tax reform lobby group and think tank that is now 120 years old. It seeks to move the base of government revenues from taxing individuals and enterprise to capturing the economic rents of the natural endowment, notably through Land Value Tax and Mining Tax.