Halt Condition

Sudden huge debt

So today, after a mad 24-hour deadline to deliver a bank-cheque (not helped by a crashed bank network) myself and Maree officially took ownership of our first home:

Ya ain’t in Newtown anymore, boy!

We’ve bought up in Katoomba, for two main reasons:

• This is where we eventually want to live
• This is where we could afford

Lets call it one of life’s fortuitous coincidences that these two things came together.

The first reason probably doesn’t need much explanation; the Blue Mountains is a World Heritage listed area, recognised for its beauty and culture, and last year became recognised as a Cittaslow area. Katoomba itself is a small but vibrant town with many of the benefits of Newtown, not least the cafes and other eateries. Given I have a long history of burning myself out at work I had promised Maree (and myself) that I would work towards getting a better work/life balance and this is a key part of that plan (the move from military projects to the more healthy environments of Vislab and Atlassian were the first steps in that direction).

The financial aspect should be fairly obvious to anyone who’s lived in Sydney in recent years; it’s just too expensive to buy unless you’re prepared to go into deep debt for a long time. Given I have a deep life-long aversion to debt this wasn’t really an option for us. Although the price difference between Sydney and Katoomba isn’t as big as it has been in the past, the few-hundred thousand saved can make a huge difference to the length of the loan; this is because the initial deposit will take up a larger proportion of the total cost (assuming you’ve actually been saving of course), meaning you get to the tipping point much faster:

What we’d be paying if we followed the rules (red being interest)

Add to this that I’m playing some games with full-offset accounts and we have a best-case scenario of completely owning the property in under 4 years*. Of course, in Katoomba you also get a hell of a lot more for your money; 1000m² at the end of a tree-lined street 5 minutes from the station in our case.

A more interesting question (at least to me) is “Why now?”. The recent over-heated market aside, property rarely out-performs the shares market so logically we should invest elsewhere for now and then purchase nearer the time. The reasoning goes like this:

Australia is getting older. This is an accepted fact now, and is of some concern to economists and politicians (the latter of which are starting to realise what a giant ponzi-scheme has been going on for decades). This is going to come to a head in the next few years, specifically 2010-2015 (the period when the baby-boomer generation start retiring**). One of the side-effects of this is that a large number of people currently living in the city and suburbs are going to start migrating out to the sea-change and tree-change areas. This in turn will drive up the prices, possibly to the level of the city (if this seems excessive check out the property prices in Leura some time). (There’s a related effect to do with pay and work conditions for those left-behind in the workforce, but that’s probably wandering too far off topic; Ross Gittins has written about this in his book.)

Given all this it seemed prudent to buy now rather than later before the market heats up.

Of course, it goes without saying that I could be completely fucking wrong about all of this.

The bigger question now is how to manage the distance to the city. Some people at Atlassian do commute from the mountains but I’m not sure we can handle that. Longer term I would like to come to an arrangement where I can work from home most of the time, but in the interim we’re going to try it for six-months or so while keeping a rental place in the city; if it we can’t keep it up we’ll have to rent the house out for a few years before making the final move.

So all that remains now is to start moving our stuff up to the new place and get settled in. There’s also some work and minor improvements to be done over the next couple of months so that will be taking up a lot of my weekends. All-in-all I have an odd feeling of adulthood about me, which is probably about 10 years late now.

* There’s a strong case to be made that paying-off your mortgage quickly is not always the best option. One advantage of using a full-offset account to rapidly pay off the mortgage is that the principal is still available to us, so we can change this tactic later if we wish.

** I’m working on the assumption that the 1968 “Summer of Love” was the peak of the baby-boomer’s coming-of-age (i.e. turning 18-21); some believe we’ll start seeing the effects even sooner.

This entry was posted on Tuesday, January 15th, 2008 at 3:18 pm and is filed under Misc. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.