I have given up buying a house

arlee123 · 14 November 2006

Stop_the_clock said:
This will be a hot topic....

I have been living at parents place - free rent, or my mates place free rent!

I have decided to give up on the Great Australian Dream, turn my back on it and deposit extra money into my superannuation.

Housing is the most un-affordable it has been in 20 years according to many experts.

The government gives first home buyers $7,000, but is very happy to take back up to 25% of total monies deposited into housing as taxes.

House prices are now stable, or going down, expect for a very small amount of suburbs in a few cities. So it does make for a bad investment in the short to mid term.

I am able to gain access to the free $1,500 super co-contribution, each year, and every year, so this will be over-time a better investment than the poxy one off payment of $7,000 for the first home buyers grant.

I have also decided on gearing my superannaution, which is exactly the same as buying an investment property.

and here are the returns...
1 Year % 58.66%p.a.

2 Years % 55.76%p.a.

3 Years % 55.76%p.a.

5 Years % 48.14%p.a.

7 Years % 21.07%p.a.

care to discuss?

Hey guyz..just have a question, say if you put your money into this super fund..and can only touch the money when you're 65...what if the super company that you put your money broke ..ie.bankrupt...then what will happen to your super ?

Smurf1976 · 14 November 2006

Would it have been a smart move to buy shares in XYZ at $5.80 paying a 15 cent annual dividend using borrowed money in 2004 when you could now buy the same shares for $5.10? Didn't think so and it's no different with property - if prices are going down in the short term then it makes sense to wait before buying no matter what you expect to happen in 10 or 20 years time.

Cash in the bank earning 6 - 6.8% beats property earning 3% with ongoing maintenance costs pretty easily. When property is returning a decent yield, I WILL be buying it. That's not now. :2twocents

chops_a_must · 14 November 2006

Casper said:
I agree in principle with what you say nizar but I think that most people buy their first house as an investment/lifestyle combination and some may even buy purely for the location and lifestyle.

If you are buying for a lifestyle/ location, then it isn't an investment, so much as it then becomes a consumer good.

ghotib · 14 November 2006

arlee123 said:
Hey guyz..just have a question, say if you put your money into this super fund..and can only touch the money when you're 65...what if the super company that you put your money broke ..ie.bankrupt...then what will happen to your super ?

A VERY good question. I don't know the answer. When it happens, I would expect some form of guarantee system to come into effect, but as far as I know there's no such thing yet.

For the moment, I think spreading your super around among a few managers is a sensible idea, so long as you can keep track of it. Many funds managers enable you to do this: your super is with XYZ company which has arrangements with AXD, ZYX, FPL, SMR etc etc so that they can invest some of your super money. The retail managers charge fees, but you could think of them as a kind of insurance. Better yet, investigate the industry funds - very good returns and no shareholders demanding dividends from your money.

Cheers,

Ghoti

Ferret · 15 November 2006

I don't think a super fund can go broke.

They are not allowed to borrow.
The only expenses they have are management etc and they recoup these from the fund members.

Sure, the value of the fund might drop (meaning the member's balances drop) and this could be a big % if markets crashed. But actually go broke? - no.

Ferret

ghotib · 15 November 2006

I hope you're right. But there's an almighty ocean of money under superannuation now, and that has to be attracting attention from people who are... um... more interested in the integrity of their own assets than those of super funds. And there's always the possibility of mistakes. Financial institutions can fail.

Cheers (really)

Ghoti

nioka · 15 November 2006

Smurf1976 Cash in the bank earning 6 - 6.8% beats property earning 3% with ongoing maintenance costs pretty easily. [/QUOTE said:
Wrong. Inflation and tax will reverse the equation.

Flathead Flick · 15 November 2006

The Mint Man said:
For someone thats probably half way across the country to come in here and generalise like you have, that being that property is a dud investment everywhere and that its some kind of Government conspiracy, is a joke. There are deals to be had in all asset clases. Full Stop.
As casper said, go tell it to someone like the Packers! they will laugh you out the door. Especially when you tell them that you know better cause you were once a top notch lender.

cheers

Yeah, great point TMM - the Packers have made their entire fortune investing in property, not any of their other piddly investments in media companies, casinos and mining companies... :cautious:

We'll see how much you love property in 5 years' time. Actually, I'll bring that back to two. Property is about to go down big time TMM, but you keep telling yourself that your $30k 'profit' is safe.

FF

tech/a · 15 November 2006

Property is about to go down big time TMM, but you keep telling yourself that your $30k 'profit' is safe.

Define Big Time.
Australia wide? Or selected areas such as Mint Mans Suburb.

Flathead Flick · 15 November 2006

Ferret said:
I don't think a super fund can go broke.

They are not allowed to borrow.
The only expenses they have are management etc and they recoup these from the fund members.

Sure, the value of the fund might drop (meaning the member's balances drop) and this could be a big % if markets crashed. But actually go broke? - no.

Ferret

Yep, you're right Ferret - they simply can't go broke, unless the whole world melts and then it doesn't really matter. They can't borrow, and they've got both ASIC and APRA looking over their shoulder - ASIC makes sure they abide by company law and APRA regulates how they operate so they don't make stupid investments and lose all your money.

With the changes to super in the 2006 budget, for the cautious investor there probably isn't a better place to put your cash.

Check out the gov website (and yes, I do see the irony in recommending a gov website

) or do a Google search to find out why.
http://www.simplersuper.treasury.gov.au/

Flathead Flick · 15 November 2006

tech/a said:
Define Big Time.
Australia wide? Or selected areas such as Mint Mans Suburb.

Big Time, as in Australia wide. For that matter, globally. The US and the UK have been teetering on the edge of a precipice for a while, and as with war and other matters, we'll sign on to their dance card as soon as they ask.

We've had three rate rises this year and inflation is still sitting at 3.9%, while unemployment is at all time lows - putting pressure on wage growth. What's more, everyone is WAITING for a crash. When emotion mixes with economic fundamentals, all hell breaks loose. Just look at property in the late-80s and the tech wreck of 2001.

Sure, not everyone is going to lose their house, but there are certainly going to be a lot of hard luck stories thanks to bloody loose lending policy from most of the banks. Mortgage brokers hitting the scene over the last decade hasn't exactly strengthened lending policy, not to mention competition from players like St.George and GE Money.

And when the crash comes, I'm almost certain that one of the banks will go down too. St.George, for example, has been using mortgage brokers to lift their lending figures - and it's lo-doc or no-doc loans that they've been giving out. Bad for them and bad for the poor suckers who have overborrowed without taking into consideration interest rate rises or a potential rise in unemployment. Both only have one way to go.

What's different at the moment is the magnitude of the loans that people have taken out. Small incremental rises in interest rates could level most people. Many have $500k+ loans. Do the sums. :2twocents

The Mint Man · 15 November 2006

Flathead Flick said:
Yeah, great point TMM - the Packers have made their entire fortune investing in property, not any of their other piddly investments in media companies, casinos and mining companies...

I expected this reply

seen it coming a mile away

Flathead Flick said:
We'll see how much you love property in 5 years' time. Actually, I'll bring that back to two. Property is about to go down big time TMM, but you keep telling yourself that your $30k 'profit' is safe.

Firstly, Im not sure why you quoted 'profit', I never said that. the term I used (without even looking over my original post) was equity I belive. I havnt sold the house and dont intend to for quite some time.
Second, Im not an elephant but I do have a good memory. If we and the forum is still here in 2 & 5 years time I will bump this thread back up just to remind you..... Ill even put a post-it on my wall to remind me, as I said Im not going anywhere for a while

Flathead Flick said:
And when the crash comes, I'm almost certain that one of the banks will go down too. St.George, for example, has been using mortgage brokers to lift their lending figures - and it's lo-doc or no-doc loans that they've been giving out. Bad for them and bad for the poor suckers who have overborrowed without taking into consideration interest rate rises or a potential rise in unemployment. Both only have one way to go.

and you thought what I said about the packers was bad enough to be sarcastic about.... :roflmao:

:bong:

cheers

Flathead Flick · 16 November 2006

The Mint Man said:
Firstly, Im not sure why you quoted 'profit', I never said that. the term I used (without even looking over my original post) was equity I belive. I havnt sold the house and dont intend to for quite some time.
Second, Im not an elephant but I do have a good memory. If we and the forum is still here in 2 & 5 years time I will bump this thread back up just to remind you..... Ill even put a post-it on my wall to remind me, as I said Im not going anywhere for a while

And I always thought equity was a term for unrealised profit. Could be wrong there...

I have a feeling you won't want to remind me about my post, but hey, go for you life, chuck it on a post-it note on the wall. I'm tipping it'll last as long as the profit - I mean equity - in your house.

FF

constable · 16 November 2006

Flathead Flick said:
Yeah, great point TMM - the Packers have made their entire fortune investing in property, not any of their other piddly investments in media companies, casinos and mining companies...

We'll see how much you love property in 5 years' time. Actually, I'll bring that back to two. Property is about to go down big time TMM, but you keep telling yourself that your $30k 'profit' is safe.

FF

Cant see a big correction coming ....can see a big plateau.
End of the day people still need a place to live , the new generation grows up and the old generation is living longer and longer and longer. And unless there is a huge correction in rental prices (which i doubt because we all have jobs and there is generally a labour shortfall in this country) every man and his dog will keep his investment property. Which still remains in the eye of 70% australians a far less "scaryier" proposition than shares.
Another point worth mentioning is that try borrowing 350k to throw at the market.....this is why often property is first choice for investment and will continue to be underpinned in australia, which happens to one of the most liveable countries in the world (we just dont realize it)

Mofra · 16 November 2006

I am fortunate enough to have access to information most would pay thousands for in terms of residential property (as a function of my employment).

The biggest trend I can see is the panic seems to set in 18 months after the fact ie the quartely price results based on settlements lead even the newspaper articles. Volumes are down Australia wide but prices have stabilised in areas that supposedly are about to "dive" (never mind the fact they are already down 25-30% from their 2003 highs and nobody was saying boo a short time ago).

As a percentage of volume, mass acquisitions (ie buying 5-20 units at a time) appears to be rising & some areas still have a high level of development activity.

In short (to finish this vague rant) developers & higher end purchasers have not been scared off the markets because there are pockets of short supply scattered across Australia that have been uneffected by recet rate rises, and demographically theer are still areas of severe shortage of rental properties, making the rise in yield shield existing owners from a drop.

Not good news overall for those of us (myself included) who have limited current exposure to property, but it does provide some measure of hiope that even in this "doom & gloom" environment there is still plenty of opportunity out there.

wayneL · 16 November 2006

from the UK:

http://business.timesonline.co.uk/article/0,,9063-2455507,00.html

Snip

BANKS in the UK have been ordered by financial regulators to assess how they would cope in the event of house prices crashing by 40 per cent.

The instruction to include a housing slump scenario in their stress-testing models comes after the Financial Services Authority found that some banks were failing to include gloomy enough assumptions in their modelling.

YChromozome · 16 November 2006

constable said:
every man and his dog will keep his investment property.

Nope. Maybe every women, though.

Women 'waiting out' property slowdown - The Age - 15th November 2006

The number of Australian men with an investment property dropped by almost 19 per cent from 568,000 in June 2004 to 462,000 in June 2006, showing one in five male property investors quit residential property altogether.

But in the same period, the number of women dipped by less than one per cent from 405,000 to 401,000.

Among singles, from 2004 to 2006 males with a property investment dropped by 39 per cent to 41,000, while the overall rush away from property was led by 35 to 44 year olds.

Or if you would like a graph, I posted one over in the Sydney Property Price History Charts thread :

This graph shows investor's credit growth to buy existing dwellings

constable · 16 November 2006

YChromozome said:
Nope. Maybe every women, though.

Women 'waiting out' property slowdown - The Age - 15th November 2006

The number of Australian men with an investment property dropped by almost 19 per cent from 568,000 in June 2004 to 462,000 in June 2006, showing one in five male property investors quit residential property altogether.

But in the same period, the number of women dipped by less than one per cent from 405,000 to 401,000.

Among singles, from 2004 to 2006 males with a property investment dropped by 39 per cent to 41,000, while the overall rush away from property was led by 35 to 44 year olds.

Or if you would like a graph, I posted one over in the Sydney Property Price History Charts thread :

This graph shows investor's credit growth to buy existing dwellings

i want to know how lady investor has time away from her domestic duties to buy property?
no look im just kidding........

geez you cant be too politically correct these days !

YChromozome · 16 November 2006

constable said:
i want to know how lady investor has time away from her domestic duties to buy property?

I guess at first they borrowed our credit cards and went shopping, pushing consumer credit growth into unsustainable double digit figures. This has in turn underpinned company profits, increased employment and inflation with money we don't have. Now they are working on housing keeping housing debt growth in unsustainable double digit figures.

While we thank them for keeping the economy rocketing along (We admit, we couldn't do it without them), I suspect it will end it a lot of domestics around the country and in fact around the world. You crashed the economy - no, you crashed the economy!

constable · 16 November 2006

YChromozome said:
I guess at first they borrowed our credit cards and went shopping, pushing consumer credit growth into unsustainable double digit figures. This has in turn underpinned company profits, increased employment and inflation with money we don't have. Now they are working on housing keeping housing debt growth in unsustainable double digit figures.

While we thank them for keeping the economy rocketing along (We admit, we couldn't do it without them), I suspect it will end it a lot of domestics around the country and in fact around the world. You crashed the economy - no, you crashed the economy!

i love this .....lets date!

I have given up buying a house

arlee123

Smurf1976

chops_a_must

Printing My Own Money

ghotib

THIMKER

Ferret

ghotib

THIMKER

nioka

Flathead Flick

tech/a

No Ordinary Duck

Flathead Flick

Flathead Flick

The Mint Man

Flathead Flick

constable

Mofra

wayneL

VIVA LA LIBERTAD, CARAJO!

YChromozome

constable

YChromozome

constable

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