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BFCSA investigates fraud involving lenders, spruikers and financial planners worldwide.  Full Doc, Low Doc, No Doc loans, Lines of Credit and Buffer loans appear to be normal profit making financial products, however, these loans are set to implode within seven years.  For the past two decades, Ms Brailey, President of BFCSA (Inc), has been a tireless campaigner, championing the cause of older and low income people around the Globe who have fallen victim to banking and finance scams.  She has found that people of all ages are being targeted by Bankers offering faulty lending products. BFCSA warn that anyone who has signed up for one of these financial products, is in grave danger of losing their home.

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BFCSA: Over 60% of Sydney buyers better off renting

Posted by on in ROYAL COMMISSION URGENT
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Over 60pc of Sydney buyers better off renting

Australian Financial Review Apr 16, 2019 12.00am

Ingrid Fuary-Wagner

 

More than 60 per cent of Sydneysiders who bought properties in the past 25 years would have been financially better off renting and investing their money in the local stockmarket instead.

An analysis by EY of the stockmarket and Sydney property prices across the city's 43 local government areas between 1994 and now found that in 62 per cent of like-for-like cases, it was financially advantageous – over a 10-year period – for would-be buyers to take the amount of money needed for a 20 per cent deposit for an apartment in a particular area, invest it in a leveraged ASX200 fund (with a margin loan at 50 per cent loan-to-value ratio)and to rent a similar property in the same location instead.

"A lot of people assume you’re better off owning your own home and that renting, saving and investing in other ways is always a less attractive option," said EY's Sydney managing partner Andrew Price, who commissioned the study.

"It's also about financial literacy. People buy property because they can understand it. You know you can go to the bank and get a loan, you can talk to a real estate agent, and a lot of people understand that better than investing in the stockmarket," Mr Price said.

The study yields some interesting results. For example, a renter in the upmarket and leafy local council area of Woollahra between 1998 and 2008 who invested in shares was $608,000 better off than a buyer over the same 10-year period. A decade later, between 2007 and 2017, the buyer would come out on top, but not by as much – $304,000.

"Timing is everything. With Woollahra, the popular perception would be that you'd never lose money by buying in a premium suburb so close to the city whereas within a certain time frame you would have been better renting rather than buying there," Mr Price said.

In the inner-west area of Marrickville, renters who moved into an apartment in 2004 and maintained a leveraged position in the sharemarket for 10 years had a $115,000 advantage but those who bought a unit three years later in 2007 would have been $209,000 better off than those renting.

Looking at just the past 10 years, the results swing heavily in favour of the buyers of properties in the inner and middle rings in Sydney, whose purchases coincided with a dramatic increase in prices.

"Broadly renters have come out ahead of owners around 1998 and 2003-04 whereas buyers have broadly come out ahead if they bought around 1994-95 or 2006-07, which meant you entered right before the big property boom," EY chief economist Jo Masters said.

Those who owned properties in the inner city often came out ahead of those who had bought in outer areas of Sydney.

"It's ultimately about the relative pace of house price increases in the two areas – if you think about our rental scenario, all renters are buying into the ASX200 fund but house prices in the inner ring have accelerated or appreciated faster than those in the outer ring – which you would expect, with population growth and more constrained supply compared to the outer ring," Ms Masters said.

While a recent EY Sweeney survey found two out of three Sydney residents think renting is dead money, Ms Masters said the results of the analysis challenged the hegemonic belief in Australia that home ownership was the only way to get ahead.

“Yes, when you’re paying rent to a landlord, you’re not investing in an asset that you own, but with today’s property prices you could be better off renting somewhere affordable and investing the cash you’ve saved,” Ms Masters said.

What EY's financial comparison doesn't take into account is the intangible benefits of owning your own home, like the physical and emotional security that comes from having control over your own personal space.

But Mr Price said renters could benefit from those intangible values too, if governments were to improve tenants' rights through measures like long-term leases and pet-friendly rental properties.

A "levelling of the playing field" to remove the current tax disincentives for foreign institutional players investing in residential property in Australia would also be beneficial to the rental landscape, Mr Price said.

Under current tax office rules, institutional investors, through managed investment trusts (MITs), are taxed at a rate of 30 per cent for residential property – double the tax rate on investments in commercial property like office buildings and shopping centres.

Shadow treasurer Chris Bowen recently announced that if Labor were to win the federal election the MIT withholding tax rate would be halved from 30 per cent to 15 per cent for build-to-rent housing projects.

"You find institutional investors do come in prepared to enter into a 10-year leases whereas if you are an individual owner you are probably less likely to enter into a long lease because you want the flexibility to be able to sell the property," Mr Price said.

 

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