Are you buying a house here or there?

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Are you buying a house here or there?

Postby thyrdrail » 22 Jun 2002, 09:39

Thanks Holg. I get it, but still not sure what to believe in when there's a million stats and numbers out there. Then I see per capita income based on GDP, then GNP, and of course there's the PPP. Well, whatever. Economics isn't my field so I'm not losing any sleep over it!!
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Are you buying a house here or there?

Postby Mr He » 22 Jun 2002, 10:46

Forgot: PPP is a way of calculating GDP, usually per capita.

The one I like the most is the big mac index, which is a comparision of big mac prices worldwide [img]images/smiles/icon_biggrin.gif[/img] :

here
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Are you buying a house here or there?

Postby amos » 22 Jun 2002, 11:13

Has anyone bought a place back home, but are paying it off from here? btw for others, that Big Mac index might be easier to find here [URL=http://www.oanda.com/products/bigmac/bigmac.shtml] Taiwan is bloody expensive mind you
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Are you buying a house here or there?

Postby Fox » 23 Jun 2002, 02:57

Buying a 6 million NT dollar property in Taiwan.

Assume: 7% longterm mortgage rate and borrowing of 4 million dollars. The deposit you provide from your own savings.

On a 20 year mortgage the property will cost a total of 9,441,926 NT not including stamp duty, rates, transaction fees or property maintenance. The property would then be likely to be valued at less than the original purchase price given the rate of devaluation in Taiwan of property values.

The monthly mortgage repayments would be: 31,008NT

Alternatively you could pay rent on the same property for 20 years. If you rented the same place for 20 rears at 20,000 NT per month. The whole experience would cost you 4,800,000. There would be no transaction fees or property maintenance or rates. If you were then to invest your deposit at 7% with interest reinvestment the same 2,000,000 would be worth 8,000,000 in 20 years time.

To compare the stratergies:

Buying: cost: 9,441,926 + House (4 to 5 million)

Renting: cost: 4,800,000 + portfolio (8,000,000)

In addition to this the renter could reinvest the 4,641,926 NT dollars that they didn't spend on buying the house. Assuming they invested fairly conservatively they could at least hope to improve on that amount by about a third. In the end the renter has spent 4,800,000 but saved and invested 6,189,234 + 8,000,000 = 14,189,234

The buyer had spent 9,441,926 and saved between 4 and 5 million depending on the house valuation after 20 years.

These calculations are based on the ANZ mortgage calculator. Without capital gain in a properties value and the disparity between rental prices and mortgage repayment rates buying a house in Taiwan is financial suicide.
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Are you buying a house here or there?

Postby thyrdrail » 23 Jun 2002, 08:26

Hmmm.....sounds like a plan, although I didn't understand all of the financial jargon since I've never bought a home before.

All I know is, if property prices are as low as they are for the past few years, wouldn't that be a good time to buy? Exactly how much lower can it get? And 20 years is a very long time. You're assuming value will continue to depreciate, but you don't really know do you?

I think I'd rather own my home rather than rent and risk the value depreciation that might or might not occur over 20 years.
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Are you buying a house here or there?

Postby Fox » 24 Jun 2002, 02:47

Gee...Thyrdrail. Go right ahead. Maybe you can ask mommy and daddy to lend you the big bucks.
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Are you buying a house here or there?

Postby Bu Lai En » 24 Jun 2002, 10:03

I agree that it doesn't seem like a good idea to buy a house in Taiwan. If you want to buy a house it seems wiser to buy one in your own country and rent it out and use that money to pay the rent here.

My plan is to buy a house in the part of New Zealand that I want to live. My thinking is that if the prices in that area really rise then I'll still be able to afford to buy a new hosue there by selling the old one.

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Are you buying a house here or there?

Postby thyrdrail » 25 Jun 2002, 09:26

Traveller, I think what everyone in this room is saying is that it's not worth it to buy a property in Taiwan because prices are too high and the market seems to be in a slump with 15-20% vacancy (in which case I'd think prices would be dropping). And Fox doesn't think the property will appreciate as much as if you bought in your home country, even though he can't predict what the status of the real estate market will be in 20 years. It could well be very positive.

I think if you are staying long term like 10-20 years in Taiwan, you should definitely consider buying. It's more economically feasible. And who wants to be 40-50 something and renting??? In Chinese society, it's more highly regarded to own your own home.

And if you don't want to get bogged down in big mortgage payments, do what Fox suggested. Borrow from your folks!!
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Are you buying a house here or there?

Postby amos » 25 Jun 2002, 12:48

I'm hoping that a few people might reply to the 2nd part of the question. Has anyone bought a place from home, and are (were) paying it off from here. I'm reckon this is the angle I'll take, but would love to find out people's experiences with it. After all, people must be saving for something yeah. Cheers Amos.
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Are you buying a house here or there?

Postby Fox » 25 Jun 2002, 13:18

Traveller,

Everybody's circumstances differ, of course.

The issue in Taiwan is that there is so much empty housing it is a renters paradise. As I mentioned in my earlier post I live in a 15 million dollar property for 20,000 NT per month. So in the case of my landlord he is committing financial suicide renting this property to me. Since you live in Neihu your welcome to drop by for a beer and see for yourself.

Most people renting in Taiwan are paying substantially less than what the mortgage repayment rate would be on a property. Most people I know pay about 10 to 24 thousand in rent for three bedroom apartments with book values of 6 million NT dollars or more. Without subsidized loans these places would have mortgage rates of 30 to 35000 as I mentioned in my previous post. Longterm interest rate assumptions of 7% are very reasonable. Ask any financial planner what they estimate the interest rate to be long term and they will say 7%. It is a rule the thumb. Of course it maybe less or more, but it will probably trend around this figure. I don't know why this is.

I'm not suggesting you put your money in the bank to achieve your 7% on your deposit. Bank interest is low. However, it is a reasonable investment goal to achieve 7% on your on investments each year.

I'm pleased your happy with your investment. That's the only way to be about a house. You might well have made a good choice and it seems like you have if you can contain your mortgage payments to 19,000. So good luck. I hope you can get more capital gain. It's always possible as you are in a good location.

However, on the issue of subsidized mortgage loans, there is only one reason the government would be offering subsidized housing loans, and that is that the market favors renters and it is likely ultimately to lead to loan defaults by building contactors of unoccupied apartment blocks. This in turn will lead to even more pressure on the banking system in Taiwan which already suffers from high levels of loan defaults. The banking sector lives in fear of having to write down their bad loans, and the government lives in fear of them doing it.
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