The future of Australian property prices

[Tysonboss1]

Right... interesting.

1,So is debt (as an asset class) in a bubble?

2, Also, define unsustainable in this context.

1. Not in the context that I believe it relates to longterm property ownership.

2. wayne, I am sure you can find wikipedia site and link.

 

[wayneL]

1. Not in the context that I believe it relates to longterm property ownership.

2. wayne, I am sure you can find wikipedia site and link.

OK, thanks for your:

1/ view

2/ (non) answer

Your answer is actually far more comprehensive than it appears on face value.

 

[medicowallet]

Yep, thats the catch though isn't it.

You only have about 8 years of actual savings by renting, and the biggest savings are in the first few years.

Now, I am not silly enough to believe that the average joe lower middle class is such a "cold blooded weigher of the odds" and has the disapline to allocate the savings from those first 8 years into a successful investment operation over the next 40 years where by he ends up better off.

In the great majority of cases if I recommended people took that approach it would end with them not saving the "savings", and therefore end up acustomed to a higher lifestyle than they can afford, little savings and never owning their own home.

However if I recommend that they start a plan to own a modest family home, the forced saving of it all will likly end up better for them.

Now, offcourse this is not true for everybody, there are countless individuals who will save the savings and put them to good use, and if the person is such a good cold blooded weigher of the odds, then eventually they will be so successful that buying a house may work out to be a great lifestyle decision for them.

Um... no,

The $780ish P&I repayments start to make a larger dent into principal at around 8 years according to your assumptions....

However, even making the assumption that rent will keep pace with inflation over the next 25 years,

the difference between a P&I repayment of $780ish and a rent starting at $400 will still be maintained for much longer

That is, unless, you truly believe that a house worth $450000 will rent out at $780ish per week in 8 years time.

If this is the case, can you please convince my accountant of this..


( I do however, agree, that it takes discipline and a good investor to be able to pull off the alternative, but I would hope most of the people here are disciplined enough to do that, otherwise, yes, housing is a good "forced saving" scheme. )

I do like how you put "modest" house, the problem I see, through observation, is that the Mcmansion is becoming the norm.

 

[Wysiwyg]

Well in retirement you get to live in it rent free, just paying rates and a bit of maintaince which is a fraction of the rent, and eventually you can sell it for a lump sum tax free and enjoy a higher standard of living in your later years.

Boss Tyson, what I have highlighted is exactly what I am pointing to. We are talking about the average family and eventually owning their family home. The cost of living and everyone elses house price has gone up so how can a higher standard of living be realised by selling? The only gain as you note is the building maintenance costs (including rates) will be the continuous outlay.

 

[Tysonboss1]

Um... no,

The $780ish P&I repayments start to make a larger dent into principal at around 8 years according to your assumptions....

However, even making the assumption that rent will keep pace with inflation over the next 25 years,

the difference between a P&I repayment of $780ish and a rent starting at $400 will still be maintained for much longer

That is, unless, you truly believe that a house worth $450000 will rent out at $780ish per week in 8 years time.

Let me clarify,

At 8years, the Interest on the loan, combined with other costs excluding principle payments, would be about what the inflation adjusted rent will be.

The "P" part of P+I repayments is the forced saving, not a "cost", the P component is not dead money like rent and interest.

 

[Tysonboss1]

Boss Tyson, what I have highlighted is exactly what I am pointing to. We are talking about the average family and eventually owning their family home. The cost of living and everyone elses house price has gone up so how can a higher standard of living be realised by selling? The only gain as you note is the building maintenance costs (including rates) will be the continuous outlay.

1, no one lives forever, you goal should not be to die and leave the house to the kids.

So when I said you can sell it and enjoy a higher standard of living in your later years, i meant that eventually you sell the family home, down size or draw equity out of it to fund nicer holidays, more free time, a better retirement villiage or nursing home than a person could afford that didn't have a home to sell because they lived it up when they were younger and were stuck paying high rent their whole lives.

 

[medicowallet]

Let me clarify,

At 8years, the Interest on the loan, combined with other costs excluding principle payments, would be about what the inflation adjusted rent will be.

The "P" part of P+I repayments is the forced saving, not a "cost", the P component is not dead money like rent and interest.

lmao, I am butting my head against a brick wall, of someone who wants their cake and to eat it too. You have no idea about cash flow and expenses if this is your take. I am trying to help point out the facts ,but you cannot see them, at all, as you are blinded into thinking that the capital is magically made up for someone to buy a house, or it mystically evaporates for someone who rents.

ONCE AGAIN, you want to compare apples with oranges.

You want to count the "P" part for the home owner, and disregard it for the renter. Poor, biased approach, designed to artificially make your position stronger.

You are either a Cassimatis, or Enzo.

PS

This is getting too frustrating for me to continue with, your persistant ignorance of reality has won the battle for you today. Well done??

 

[Tysonboss1]

You want to count the "P" part for the home owner, and disregard it for the renter. Poor, biased approach, designed to artificially make your position stronger.

?

Not at all,

I am simply saying that the P part is not an expense in a way the I part is, You want to include the P part along with the I when calculating the weekly cost of buying a home this is not correct, the P part is equity, not an expense.

And no I am not disregarding the savings of the renter, as I said before I just question whether average joe uses these "saving" effectively to save for a stable future of just shouts an extra round or two at the pub and buys a better than average car.

 

[medicowallet]

Not at all,

I am simply saying that the P part is not an expense in a way the I part is, You want to include the P part along with the I when calculating the weekly cost of buying a home this is not correct, the P part is equity, not an expense.

And no I am not disregarding the savings of the renter, as I said before I just question whether average joe uses these "saving" effectively to save for a stable future of just shouts an extra round or two at the pub and buys a better than average car.

Seriously my last post regarding this, I promise.

PLEASE, check out the formula YOU wrote and I fixed, it clearly shows that your above statement is incorrect. You MUST include both, if, as in YOUR example, you can use the sale price of the property to calculate the benefits/negatives of home ownership vs renting and investing as at the current time.

I grow tired of continuously correcting your flawed logic and analysis. Please, if you do control any assets of worth, consult an accountant for advice..

 

[satanoperca]

Hi,

Interesting read you two debating buying over renting.

Okay, is renting now and for the next five years more beneficial financially over buying residential property?

I believe that buying your PPOR over renting if property price growth is >= inflation.

Yes, been over the fomulas a million times, way to many variables.

But I ask you this, do you see property prices keeping up with inflation over the next five years?

Cheers

 

[medicowallet]

Hi,

Interesting read you two debating buying over renting.

Okay, is renting now and for the next five years more beneficial financially over buying residential property?

I believe that buying your PPOR over renting if property price growth is >= inflation.

Yes, been over the fomulas a million times, way to many variables.

But I ask you this, do you see property prices keeping up with inflation over the next five years?

Cheers

No, I do not see property prices keeping up with inflation over the next 5 years. It has to return to trend somehow..

This was a tough question to answer as it involves a prediction on inflation, NOT easy to make predictions about, as the reserve has a different view than our wasteful, incompetent government.

 

[Tysonboss1]

Well some people believe currency destroying inflation is at hand, but who knows for sure right.

A better question would be do you think rents will not keep pace with inflation. Because that's what your comparing it with.

 

[medicowallet]

Well some people believe currency destroying inflation is at hand, but who knows for sure right.

A better question would be do you think rents will not keep pace with inflation. Because that's what your comparing it with.

Which is another complication.

It is really hard to make predictions as, in your example, a lot has to do with employment, relying on Americans and Europeans increasing debt to purchase stuff from China, so that the Chinese need to purchase our raw materials..

I, however can tell you that there are thousands in retail, soon to be followed by 1000 from Qantas, 400 from Bluescope and hundreds, if not thousands from banks, who will find it hard to pay the mortgage or to pay ever increasing rents over the next couple of years..

The system is so saturated by debt, that the shock to make it crack may not be that great.

 

[prawn_86]

A better question would be do you think rents will not keep pace with inflation. Because that's what your comparing it with.

The rent i pay has def not increased with inflation. It has only gone up 6.5% over 5 yrs across 2 different properties in 2 different cities/states.

 

[Tysonboss1]

The rent i pay has def not increased with inflation. It has only gone up 6.5% over 5 yrs across 2 different properties in 2 different cities/states.

I can tell you that the rent on every property I own has increased more than cpi every year for the last 10 years.

Offcourse some inexperianced land lords hesitate increasing rents each year (such as my mate) which can lead to them coolecting rents below market value which can give the impression to the tenant that rents don't go up.

 

[sptrawler]

1, no one lives forever, you goal should not be to die and leave the house to the kids.

So when I said you can sell it and enjoy a higher standard of living in your later years, i meant that eventually you sell the family home, down size or draw equity out of it to fund nicer holidays, more free time, a better retirement villiage or nursing home than a person could afford that didn't have a home to sell because they lived it up when they were younger and were stuck paying high rent their whole lives.

It would be nice if the world worked that way. In Australia it doesn't ,usually what happens here is if you have nothing you get the service for nothing. If you have money or asset you pay for the same service.

 

[againsthegrain]

Or you lose the tennant and risk having your property on the lease market for weeks or months putting you back in the red on the "under market" rent you could have been collecting, yes there is plenty around where I live that have been on lease for months.

Housing shortage is a myth

 

[Tysonboss1]

It would be nice if the world worked that way. In Australia it doesn't ,usually what happens here is if you have nothing you get the service for nothing. If you have money or asset you pay for the same service.

What, the government pays for interstate holidays to visit grankids, will they buy you a new caravan and fourwheel drive? I don't think so.

The pension is peanuts, trust me, from spending time with some retirees it is better to have a bit of wealth.

And when it comes to nurcing homes it is good to pay a bit extra.

 

[satanoperca]

If property prices do not keep up with inflation who would risk money in this highly overleveraged asset class.

It would seem that most people after nearly 20 years think that its growth will continue, but just like shares, after 20 straight wins one must be aware that the odds are stacked against you to keep winning.

Just like CFD's and other highly leveraged investment tools, the going is great when everything is going your way, but it leaves you will a very bitter taste when it goes against you.

Cheers

 

[Tysonboss1]

Or you lose the tennant and risk having your property on the lease market for weeks or months putting you back in the red on the "under market" rent you could have been collecting, yes there is plenty around where I live that have been on lease for months.

Housing shortage is a myth

Well thats not my experiance, and I have been land lording for a while. Generally I have a new tenant lined up to move in within 1 or 2 days.

My biggest vacancy has been 2 weeks, and that was because we did some minor renovations in between tenants.

Offcourse it all comes down to the area and the property type.