Dude you are clueless, prices tripple every ten years forever do they?? So let me get this right if I buy 1 property for $500000 now you are guaranteeing I will be able to sell it for 13.5 million in 30 years when I retire, plus all the rental income I get in between. Sounds too good to be true.... oh wait, it is.
House prices to keep rising for years
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Dude you are clueless, prices tripple every ten years forever do they?? So let me get this right if I buy 1 property for $500000 now you are guaranteeing I will be able to sell it for 13.5 million in 30 years when I retire, plus all the rental income I get in between. Sounds too good to be true.... oh wait, it is.
I think what Kincella is saying it is POSSIBLE that an individual property, if you buy the right property in the right area, could well see this sort of price growth yes - especially if you own through a period of higher inflation (the last 15 years have been low inflation compared to the 70s and 80s). This is the same as if you buy the right share you can make heaps even in a crappy bear market.
Kincella - you have clearly done very well with your investments - I'd say you have a good eye for property with capital growth potential. I haven't made the sorts of gains you have. When I include all costs (maintenance, reno's, purchase stamp duty, agents fee's to sell etc etc), on 3 properties that I have owned and analysed in detail (and actually bought/sold), I've made about 85% capital gain (average of 6.5% pa compounding) plus rental income of about 4% pa over each 10 years of ownership (figures from between 1992 and 2008). Mind you these have been properties in established, low risk area's of Sydney, so probably would be ranked as fairly conservative investments.
Cheers,
Beej
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ned, it's called the "recency bias" effect, one of many cognitive biases that most people would NOT ADMIT they are being affected.
Past performance IS AN indication of future performance for them.
And not to mention that most people would view themselve as "unique" out of the rest of the herd. I'm sure most people think themselves are unique and the decisions that they have made would outperform most others. I definitely don't deny that myself too.
That's why almost every person who have real estate investments I have talked to say while median house prices may go down, their own choice of properties will not fall because it is in a great spot, etc, etc. Try asking around.
Well your logic is flawed, and you obviously know nothing about economics. The "house prices tripple every 10 years" makes no more "sense than stocks always go up if you hold them" logic. You are looking at past price levels of property and assuming that trend will continue forever, but do you think about why those price levels have been reached?? I assume not because if you did you would see the rise in house prices has been accompanied by an unprecedenyted rise in household (and business) debt levels in Australia, and you will see that we already have twice the level of household debt compared to when the great depression started. What did the GD do for house prices??? I suggest you look it up because debt deflation is a bitch of a phenomenon.
P.S I do own a property, but I don't let that blind me to plainly evidential facts when I see them. I don't want the value of my property to decrease, but unfortunately there is very little that can be done about it.
P.S I do own a property, but I don't let that blind me to plainly evidential facts when I see them. I don't want the value of my property to decrease, but unfortunately there is very little that can be done about it.
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So we can assume you will get the full $900 because you minimise tax by negative gearing? And all the while hinting at all the money you have made and will make, at the expense & subsidy of the taxpayer.
kincella
Good work, yes it is possible to have a huge capital gain if you buy the right property but as I said before, what goes up a lot can come down as well.
This doesn't mean that it will happen, but IMO it can happen.
That's the Prof Keen and co argument- fringe economics at best. The theory that the rise in household debt as a proportion of GDB MUST result in a period of massively falling house prices is unproven and disputed on many levels by many other economists etc. It is not gospel. Using the great depression as your example is not so hot either - the world was a very different place 80 years ago on so many social, economic, technological and political levels. Only the wealthy had any access to credit then, hence much lower household debt levels.
Again, that's not to say that house prices must or will increase at the same rate they have etc - the main factors I think have driven the growth of the past 20 years are increasing household disposable income (before housing costs), driven by both increased individual real earnings and trend to 2 income households, plus a prolonged low inflation/low interest rate environment. Add to this a growing population and a high level of urbanisation and all becomes clear.
If you think about it, either of the first 2 factors alone can account for a doubling of household debt level to GDP ratio's and you can still argue that the debt level could grow even more and still be sustainable. Ie - if long term interest rates (and thus inflation) remain at half previous historical averages - that supports a doubling of sustainable debt right there. If household disposable income has doubled as well, that could well support a debt doubling alone (sustainably). So bottom line when you consider these factors IMO is the alarmist diatribe over the household debt to GDP is way over-done.
It does add some risk in that high unemployment or any sharp rise in interest rates/inflation, or sharp falls in household income ,COULD have more of an impact in feeding an economic contraction than would otherwise have been the case. This is because as things turn bad consumers get more concerned about paying down that debt, and therefore reduce consumption more than they might have otherwise. However, this does not necessarily feed into an automatic massive and certain fall in house prices, as once the economy recovers and consumers are happy again, if we go back to low inflation/low interest rates and rising income, those debt levels will ramp right back up and a chunk of that will still flow back into housing. So long term even in the contracting economy scenario (where consumers are reducing debt), house prices still have potential for serious growth as we come out the other side of said slowdown.
Personally I think we will see a fairly orderly consolidation of that household debt in AU, which will result in only mild property price decreases in some area's (Perth, SEQ, maybe -10-15% for median prices peak to trough), and flat to mild increases in other area's (Sydney/Melbourne), for the next few years, with rises more likely for the lower end. 5 years plus things will take off again big time. I think all the action we are seeing in Sydney and Melbourne right now is supporting this outlook quite strongly.
Cheers,
Beej
beej,
the first prop in 1970 was the worst performer, and that area still is...equivalent to sydney's west....but it was the family home...but time over again I would not go there,,,huge difference to friend who bought the same time in armadale...that prop is 4 times the value of my old one....hers was inner suburb..mine was outer...that was the difference
now I only go with the inner suburbs
the best ones I had were in a similar environment to now...(although now is far worse)...but between 2000 to 2002....when everyone was focused on the falling stock market....props were unloved and not popular....I bought a couple for ridiculous prices and sold for triple the cost within 3 years....
I also made another mistake by buying a unit for daughter...it was inner suburb....had a bad reputation years ago....I thought with a few new owners we could turn it around.....but no....robberies every month....got out by the skin of my teeth....but would never try that again...far too risky....
I missed out on another of those bargains....I was watching it....a divorce again...it was on the market for about 80,000 less than others in that area, and then it sold in Oct 08.....I had actually been through and wanting to buy it about 5 years earlier (they were divorcing then) but they made up and took it off the market...it was in one of my fav streets....
I had my hands full earlier this year....of course I regret not buying it...such a bargain.....but apart from being lucky....I only watch 2 suburbs...I know each of them very well...in fact there are only specific streets I will buy in...not just anywhere in the suburb....
pretty certain I will find another 'bargain' this year....walking distance to everything that matters...I buy in the heart, in the middle of the city, that suits me...but when selling it suits the young, the old, and families, saves on transport, travel and everything is convenient......go out for dinner and drinks and walk home etc
I know people who do not like that...they prefer to be out of the way...where its quieter
I have found sales are easy and quick...so my ideas seem to be popular....
oh and usually a period style house
cheers
the first prop in 1970 was the worst performer, and that area still is...equivalent to sydney's west....but it was the family home...but time over again I would not go there,,,huge difference to friend who bought the same time in armadale...that prop is 4 times the value of my old one....hers was inner suburb..mine was outer...that was the difference
now I only go with the inner suburbs
the best ones I had were in a similar environment to now...(although now is far worse)...but between 2000 to 2002....when everyone was focused on the falling stock market....props were unloved and not popular....I bought a couple for ridiculous prices and sold for triple the cost within 3 years....
I also made another mistake by buying a unit for daughter...it was inner suburb....had a bad reputation years ago....I thought with a few new owners we could turn it around.....but no....robberies every month....got out by the skin of my teeth....but would never try that again...far too risky....
I missed out on another of those bargains....I was watching it....a divorce again...it was on the market for about 80,000 less than others in that area, and then it sold in Oct 08.....I had actually been through and wanting to buy it about 5 years earlier (they were divorcing then) but they made up and took it off the market...it was in one of my fav streets....
I had my hands full earlier this year....of course I regret not buying it...such a bargain.....but apart from being lucky....I only watch 2 suburbs...I know each of them very well...in fact there are only specific streets I will buy in...not just anywhere in the suburb....
pretty certain I will find another 'bargain' this year....walking distance to everything that matters...I buy in the heart, in the middle of the city, that suits me...but when selling it suits the young, the old, and families, saves on transport, travel and everything is convenient......go out for dinner and drinks and walk home etc
I know people who do not like that...they prefer to be out of the way...where its quieter
I have found sales are easy and quick...so my ideas seem to be popular....
oh and usually a period style house
cheers
That is not altogether unrealistic.. but by that measure, by 2014, it would have been 7 years since the GFC really kicked off, not a small period of time. That would fit in with the shorter term 7 year cycle...but could be in trouble if we're heading into the downturn leg of a longer-term cycle
I guess you have to take that risk.my 2 cents worth again......I disagree with the govt handout...it would be better spent on fixing all the road, rail, hospitals etc....I did not ask for it..they will just give it...and ...its such a small amount it means nothing to me...I have no plans for it...they can keep it....if we were talking 10,000 I may be interested.....however now I have to think about it, I will probably hand it over to the kids....and they can waste it however they like
the other points about debt.....my props are geared to less than 40%...I have 60% equity....and I only need to dump one small prop to wipe out all the debt....I have a convenient credit card, 55 days interest free, it records all the purchases conveniently for tax records....I am not massively in debt...I do not have car loans or any other debt....and I have a nice buffer of cash just sitting there....enough to live on for about 4 years...if everything else failed....or ready to buy another property if I want to....
repeat...am semi retired, only work part time....could work more if I wanted or needed to...am self employed....could sell some of my props if I chose to, but will more than likely buy another...
so narking off at me ...is like water off a ducks back.....
the other points about debt.....my props are geared to less than 40%...I have 60% equity....and I only need to dump one small prop to wipe out all the debt....I have a convenient credit card, 55 days interest free, it records all the purchases conveniently for tax records....I am not massively in debt...I do not have car loans or any other debt....and I have a nice buffer of cash just sitting there....enough to live on for about 4 years...if everything else failed....or ready to buy another property if I want to....
repeat...am semi retired, only work part time....could work more if I wanted or needed to...am self employed....could sell some of my props if I chose to, but will more than likely buy another...
so narking off at me ...is like water off a ducks back.....
Quoting Herald-Sun articles is not something I would take as gospel:-
Rent increases means rental squeeze encouraging more buyers, boom.
Rent decreases allows more people to save and buy, boom.
Increasing prices indicate good investment and you will miss the train if you don't buy.
Decreasing prices indicate very cheap to buy and you will miss the train if you don't buy.
Government not building cheap housing means short of supply.. boom market!
Government building cheap housing means they are going to buy land from landlords.. more boom!!
Higher stock market means people are feeling more wealth and they buy property ... boom market!
Lower stock market means people are turning to property market .. more boom!!
High building construction activity means booming market
Low building construction activity means short of supply.. more booming market.
High sale volumes indicate high turn over and a booming market
Low sale volumes indicate no distressed sellers and booming market (US/UK sales volumes have been plunging .... . so super boom for them)
Alternatively the above could be explained by the amount of money News Ltd makes from real estate advertisers.
Rent increases means rental squeeze encouraging more buyers, boom.
Rent decreases allows more people to save and buy, boom.
Increasing prices indicate good investment and you will miss the train if you don't buy.
Decreasing prices indicate very cheap to buy and you will miss the train if you don't buy.
Government not building cheap housing means short of supply.. boom market!
Government building cheap housing means they are going to buy land from landlords.. more boom!!
Higher stock market means people are feeling more wealth and they buy property ... boom market!
Lower stock market means people are turning to property market .. more boom!!
High building construction activity means booming market
Low building construction activity means short of supply.. more booming market.
High sale volumes indicate high turn over and a booming market
Low sale volumes indicate no distressed sellers and booming market (US/UK sales volumes have been plunging .... . so super boom for them)
Alternatively the above could be explained by the amount of money News Ltd makes from real estate advertisers.
lol, I've noticed the permabulls are the same - everything is positive news for property. I was going to post something along these lines a couple of days ago but really couldn't be bothered
Beej,
I accept your point that most families are two income these days, however when I said household debt is double what it was I was referring to the debt to gdp ratio, so household income has doubles, but debt has still doubled up on that!! Interest rates may stay low (nominal rates) as this reflects the demand for borrowing, and the banks attempt to stimulate borrowing by making the terms more attractive. It is already evident that this demand is slowing in the dropping of nominal interest rates.
kincella,
I wasn't saying that you personally are over indebted, and after your brief review of your finances I am not saying that you are not either. I am looking at this from a macro economic level, and from that perspective property looks crook. Just trying to point out that you want to sell your property to someone to make your profit. How are they going to finance it?? How much debt can others go into to buy a house??
If the government has to new buyers $14000 (plus more through the waver of stamp duty) to convince them to purchase an investment, it doesn't seem like that great an investment to me.
I accept your point that most families are two income these days, however when I said household debt is double what it was I was referring to the debt to gdp ratio, so household income has doubles, but debt has still doubled up on that!! Interest rates may stay low (nominal rates) as this reflects the demand for borrowing, and the banks attempt to stimulate borrowing by making the terms more attractive. It is already evident that this demand is slowing in the dropping of nominal interest rates.
kincella,
I wasn't saying that you personally are over indebted, and after your brief review of your finances I am not saying that you are not either. I am looking at this from a macro economic level, and from that perspective property looks crook. Just trying to point out that you want to sell your property to someone to make your profit. How are they going to finance it?? How much debt can others go into to buy a house??
If the government has to new buyers $14000 (plus more through the waver of stamp duty) to convince them to purchase an investment, it doesn't seem like that great an investment to me.
ned....my props are in the lower range, affordable, under 500k's...easy to offload at a profit...at anytime....that market is hot at the moment...
the average mortgage loan in Australia is 239,000....that is affordable for most people....
I think some of you place too much reliance on the US and UK markets.....and then say the same thing WILL happen here.....
I have several properties, bought when they were very cheap....prefer that method, rather than buying one bigger expensive property....
oh and waited 5 years for a commercial property to come onto the market, in a specific location....nabbed that one cheaper too.....its been an outstanding performer.....it will never be sold by me....passing it onto the kids...
most of my friends and associates have similar properties and situations
the average mortgage loan in Australia is 239,000....that is affordable for most people....
I think some of you place too much reliance on the US and UK markets.....and then say the same thing WILL happen here.....
I have several properties, bought when they were very cheap....prefer that method, rather than buying one bigger expensive property....
oh and waited 5 years for a commercial property to come onto the market, in a specific location....nabbed that one cheaper too.....its been an outstanding performer.....it will never be sold by me....passing it onto the kids...
most of my friends and associates have similar properties and situations
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566.67%
Which by the way is about 10.5% pa compounded. Sounds about right for holding through the high inflation periods of the 70s and 80s, + the late 80s boom.
Cheers,
Beej
fraid you made the error,,,12,000 x 5.667 = 68004 ??? different to 80,000
12,000 x 6.660 = 79920
I shortcut it to 80 / 12 = 6.666
who really cares...the point was it was over 6 times the price when sold...discussing the triple value every 10 years
12,000 x 6.660 = 79920
I shortcut it to 80 / 12 = 6.666
who really cares...the point was it was over 6 times the price when sold...discussing the triple value every 10 years
Kincella FYI Singlefished is right on that one: To calculate the percentage gain the formula is:
((Final Price / Purchase Price) - 1) * 100
Ie; for your example:
((80000 / 12000) -1) * 100 = 566.67%.
What you are stating/calculating is the multiplier of purchase price to final price, which is different from the percentage gain. So yes your property increased in value by over 6 times (6.66 to be exact), which equates to a percentage gain of 566.67%, which incidentally over a 19 year period equates to an annual compounding gain of 10.5% pa!
I think I have that all correct this time anyway
PS: Think about it with a 0% gain, or even try say a 50% gain, and it will all make sense.
Cheers,
Beej
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