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Ask Paul: We live in Sydney – should we buy property elsewhere?

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Q. My wife and I are both in our mid-40s and live in Sydney, with two children of primary school age.

After looking after our young children, my wife is not currently in paid employment but is looking to get back into the workforce.

We have sold our property overseas and will soon be bringing the cash to Australia.

We will have about $700,000 in cash, including all other savings, but no other investments, excluding super contributions, which are split between the UK and Australia. We have two small investment schemes for our kids worth about $20,000 in total.

We don’t own any other property and our combined pension pots are worryingly underfunded at about $200,000 in total. I am making small additional super contributions from my salary.

It is tempting to move and buy in another city to reduce our mortgage and financial stress, have more financial freedom to boost our savings and be able to travel more.

Ideally, though, we want to stay in Sydney where there are more jobs, a vibrant city and a strong network of friends.

We are trying to decide what to do to get on the housing ladder in Australia and also secure a less stressful financial future.

Should we rentvest to stay where we live on the north shore and invest some of the cash elsewhere, outside a property purchase?

Or, should we buy the best house we can afford where we are and bank on the long-term value of greater growth in a desirable suburb? – James

A. I hear your logic about buying in a city other than Sydney, James, but I can easily see that is not a real option for you. As you say, Sydney is where your friends are, not to mention the vibrancy you enjoy and, of course, work. So I think I should assume Sydney is your future.

Both you and your wife are in your mid-40s and with the $700,000 from the sale of your overseas property I do think that owning a property on the north shore is very realistic.

One of the better pieces of news for you, which no doubt you are well aware of, is the slowing market. About the only people pleased about this are those with no property but with some cash – and that is you!

The logic of buying your future home, renting it and you renting elsewhere is technically sensible. But is it what you want?

I can’t give you advice on what is important to you but if I take myself back to when my wife Vicki and I had primary school kids, we would be using the savings to buy a home that we could afford, near good schools, and enjoy living there.

You probably have two decades of work in front of you, so there’s plenty of time to pay off a mortgage and grow your super and investments.

I can’t give you advice on how to live but I know what I would do in your situation.

Written by Paul Clitheroe

Paul Clitheroe

Paul Clitheroe AM is a respected financial adviser and Money’s chairman and chief commentator. He is chair of the Australian Government Financial Literacy Board, and author of several personal finance books. Ask Paul your money question.

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