House prices to keep rising for years

[Lancelot]

yes, over the long term the sharemarket is a great as an alternative investment.

As are properties. Should see what the 1970's stuff is worth now

Perhaps the last 3 weeks return would be a better graph to post?

3 weeks? I thought you said above sharemarket long term, make your mind up

Or does that not suit the bias of your viewpoint?

My bias comes from the bears expertly advising me since 2003 to sell out of property and buy into shares.
Some of that "expert advice" was given just a few short months before that first major drop mid 2007, and at the time I was apparently crazy for suggesting prices were in a massive speculative bubble at the time.
Apparently I was even more crazy not to buy in near the bottom of that mid 2007 trough and was treated with derision by the "experts",Similar to the derision you offer now, 3 weeks of up must mean prices to the moon eh?

Luckily I didn't sell out and buy in at the time, it would all be gone now if I had listened to that "expert advise".

That expert has now lost all, wife, job, car any assets they had, everything.

Remember it doesn't take as much of a percentage fall in house prices to wipe out as much in real $$ from regular investors, as in housing you will find more people more highly geared.

Remember that not everybody is as highly leveraged as you may think

 

[Soft Dough]

As are properties. Should see what the 1970's stuff is worth now



3 weeks? I thought you said above sharemarket long term, make your mind up


My bias comes from the bears expertly advising me since 2003 to sell out of property and buy into shares.
Some of that "expert advice" was given just a few short months before that first major drop mid 2007, and at the time I was apparently crazy for suggesting prices were in a massive speculative bubble at the time.
Apparently I was even more crazy not to buy in near the bottom of that mid 2007 trough and was treated with derision by the "experts", luckily I didn't, it would all be gone now if I had listened to that "expert advise".

That expert has now lost all, wife, job, car any assets they had, everything.

Similar to the derision you offer now, 3 weeks of up must mean prices to the moon eh?



Remember that not everybody is as highly leveraged as you may think

I didn't say property was a poor long term investment.

Just that the correction is coming, and that it will be problematic, even if it is merely prices not rising for quite a few years.

The average housing investor is geared to a greater extent than a sharemarket investor.

I like you trying to use the 3 weeks thing... but you know what I mean. Why did you not use the last 70 years for the sharemarket?

I do not care what inexperienced investors told you, I am an experienced investor and have not been hurt too badly by the sharemarket falls ( Unfortunately/fortunately I sold just before the first dead-cat bounce ). Each to their own, I just hope for your sake that the market doesn't capitulate, and for my sake that it does

 

[Beej]

I have just moved again, and thought of purchasing a property for where I am for the next few years.

House = $400k -> interest = $446 per week, rates = $50 per week house insurance = $20 per week, depreciation = $120 per week.

= $636 per week
Rent = $350 per week

I do not expect any capital gain in housing over the next 3 years. So why would I buy when I can rent?

Holy moola batman! rates $2500/year? Where the heck is that? I pay < $800/year ($15/week). Insurance $1000/year? I pay half that (unless you are including contents). And I live in Sydney! In a 1920s double brick house (they don't make em like that anymore!). Interest? Currently 5% is the norm, so your interest bill should only be $385/week. And your rent - $350/week for a $400k place? That's cheap by Sydney standards - you'd be paying $400/week here if you were taking out a new lease on a $400k place.

And depreciation of $6500/year? Again, very high figure. Most allow 1% for maintenance/improvements (which is really your depreciation), which is about $75/week in your example.

So using my more realistic figures as an alternative example, weekly owning cost = interest $385, rates $15, insurance $10, maintenance/depreciation $75. Total $485. Rent same place = $400/week. Difference only $85/week; let's consider this the ownership premium, ie, what you pay to not have to move in the next 3 years (or 20), to be able to paint a room or hang a picture if you want, add value through improvements, landscape or change the garden etc etc. PLUS, see a mere 1.1%pa appreciation in prices over 3 years and you have made that back anyway. In most cities houses and units in that price range have appreciated that much in the past 3 months! And that also assumes you have used no deposit to reduce interest payments etc.

Or your rent could go up.....

EDIT: And if you save most of that $75/week maintenance by doing work yourself and looking after your house properly, then the weekly cost in my example is almost the same for owning vs renting.....

So you could wait 3 years yes, and there is a chance you would end up ahead, but don't ignore the chance that you could end up worse off, both financially and in terms of having not had your own place for those 3 years as well. What if prices stay flat for 2 years then jump 5% in the 3rd year before you got your act together and bought back in?

Cheers,

Beej

 

[Julia]

Holy moola batman! rates $2500/year? Where the heck is that?

I also pay a bit over $2000 p.a. That's in Hervey Bay on about 900sq m.
Maybe Sydney rates need to rise to replace some of your problematic ageing infrastructure?

 

[Beej]

I also pay a bit over $2000 p.a. That's in Hervey Bay on about 900sq m.
Maybe Sydney rates need to rise to replace some of your problematic ageing infrastructure?

Rates go to the local council - they take care of collecting the garbage, filling potholes in local roads only, maintaining the parks and other common area's, and provision of community services like libraries etc. My local council does all that just fine with their rate income thanks. It's the state level government who are responsible for the "aging" infrastructure (bunch of useless morons that they currently are!)

Cheers,

Beej

 

[MrBurns]

My comments about investing rather than home ownership are only for the very sophisticated investor, not your average punter.

In almost all cases you should just buy a house and pay it off, it's safe, secure and you dont have to stay awake all night worrying about your investments.

 

[Lancelot]

Add up ALL your expenses and you'll get a different result.

You would be wrong then

You must have missed the part where I said

I have been "investing" in this place for a few years now though to make it so.

Meaning I have paid back large amounts of it and only have a small repayment left.

My repayments/expenses are reducing considerably whereas my neighboring renters have had there rent only going one way.

 

[Beej]

My comments about investing rather than home ownership are only for the very sophisticated investor, not your average punter.

In almost all cases you should just buy a house and pay it off, it's safe, secure and you dont have to stay awake all night worrying about your investments.

Burnsie - I actually agree with you on this point. As you say, few could pull off the active, well-advised investment management that would be required to stay ahead in that game with that level of capital (I don't think I could do it, hence I don't, so I keep my house!).

Cheers,

Beej

 

[MrBurns]

You would be wrong then

You must have missed the part where I said



Meaning I have paid back large amounts of it and only have a small repayment left.

My repayments/expenses are reducing considerably whereas my neighboring renters have had there rent only going one way.

Ok you've paid a lot back but what if that was in some other property that was receiving rent and you had the tax deductions that went with it.

A lot harder I know but the theory is correct., not for me I'm not that keen, but what if you were given a once in a lifetime investment opportunity, you'd sell the house no problems I bet.

 

[MrBurns]

Burnsie - I actually agree with you on this point.

We must be getting old

 

[Lancelot]

How much would a FHB have to borrow to buy the same property today then (assuming 5% deposit)?

Does it matter?

When I purchased it, it cost me considerably more every week to buy compared to renting, but I took a more long term view on it.

But it would probably sell for around $360k and rent for $420/week

Minus a more realistic 10% deposit (I am always being told how cashed up the renters are) = $324k - FHBG = $310k @ 5.5% = $327/week

+ rates insurance maintenance (cost me about $3500k total) $67/week

TOTAL= $394/week. so cheaper than rent and extra could be put in the offset account

When rates go back up to say 7.5% in how many years? repayments will be $514/week (inc rates insurance etc) but rent will have gone up as well

So yes, it could again then be cheaper to rent than to buy. For a while anyway.

Your point?

 

[singlefished]

You would be wrong then

You must have missed the part where I said



Meaning I have paid back large amounts of it and only have a small repayment left.

My repayments/expenses are reducing considerably whereas my neighboring renters have had there rent only going one way.

So you're the one that's wrong then!

How can you compare repayments based on a mortgage you took out years and years ago to the rent that somebody is paying now?

Compare apples with apples... base your figures on what these renters would CURRENTLY have to borrow to stay in the same property, not the purchase figures of a bygone era.

 

[Lancelot]

Ok you've paid a lot back but what if that was in some other property that was receiving rent and you had the tax deductions that went with it.

A lot harder I know but the theory is correct., not for me I'm not that keen, but what if you were given a once in a lifetime investment opportunity, you'd sell the house no problems I bet

No, I'd leverage off of it.

 

[Lancelot]

So you're the one that's wrong then!

How can you compare repayments based on a mortgage you took out years and years ago to the rent that somebody is paying now?

Compare apples with apples... base your figures on what these renters would CURRENTLY have to borrow to stay in the same property, not the purchase figures of a bygone era.

Look up^^^

 

[singlefished]

Look up^^^

good boy

 

[Soft Dough]

Holy moola batman! rates $2500/year? Where the heck is that? I pay < $800/year ($15/week). Insurance $1000/year? I pay half that (unless you are including contents). And I live in Sydney! In a 1920s double brick house (they don't make em like that anymore!). Interest? Currently 5% is the norm, so your interest bill should only be $385/week. And your rent - $350/week for a $400k place? That's cheap by Sydney standards - you'd be paying $400/week here if you were taking out a new lease on a $400k place.

And depreciation of $6500/year? Again, very high figure. Most allow 1% for maintenance/improvements (which is really your depreciation), which is about $75/week in your example.

So using my more realistic figures as an alternative example, weekly owning cost = interest $385, rates $15, insurance $10, maintenance/depreciation $75. Total $485. Rent same place = $400/week. Difference only $85/week; let's consider this the ownership premium, ie, what you pay to not have to move in the next 3 years (or 20), to be able to paint a room or hang a picture if you want, add value through improvements, landscape or change the garden etc etc. PLUS, see a mere 1.1%pa appreciation in prices over 3 years and you have made that back anyway. In most cities houses and units in that price range have appreciated that much in the past 3 months! And that also assumes you have used no deposit to reduce interest payments etc.

Or your rent could go up.....

EDIT: And if you save most of that $75/week maintenance by doing work yourself and looking after your house properly, then the weekly cost in my example is almost the same for owning vs renting.....

So you could wait 3 years yes, and there is a chance you would end up ahead, but don't ignore the chance that you could end up worse off, both financially and in terms of having not had your own place for those 3 years as well. What if prices stay flat for 2 years then jump 5% in the 3rd year before you got your act together and bought back in?

Cheers,

Beej

I live in queensland, so yes $350 per week is the norm for a brand new 4 bedroom house.

um yes $2500 per year is what it costs for rates.
5.84% on the bank website = $450 per week interest only.
what does it cost to replace a kitchen 2 bathrooms, paint, carpets, general maintenance, curtains every 10 years again? and not rubbish bunnings stuff, to the same quality as before, and by a builder.

and using your example, what if prices fall 15-20% over the next 3 years? that is more likely than a 5% rise imo.

 

[kincella]

softdough....it's more like wishing and hoping for a 20% drop....you are so funny...
I am happy for the renters...for whatever their reason....we all need renters...otherwise there would be no point in being a property investor
so as long as your sums do not add up....just keep on renting....you and the landlord will both be happy....you could not ask for a better outcome

 

[Beej]

I live in queensland, so yes $350 per week is the norm for a brand new 4 bedroom house.

Maybe for now. Certainly not the case in Sydney.

um yes $2500 per year is what it costs for rates.
5.84% on the bank website = $450 per week interest only.

Nobody pays the standard variable rate - I get a 0.9% discount off standard variable at all times. At least a 0.5% discount should be available to anyone that shops around and asks for it.

As for rates - wow I thought living was supposed to be cheaper up north? Sounds like rates in NSW are far lower than in QLD......

what does it cost to replace a kitchen 2 bathrooms, paint, carpets, general maintenance, curtains every 10 years again? and not rubbish bunnings stuff, to the same quality as before, and by a builder.

For a start, you don't need a new kitchen/bathroom every ten years - maybe every 20. 1% over 20 years on a $400k place = $80k (inflation adjusted, ie in todays dollars). A new kitchen can be done easily for $10k-$15k (decent kitchen, but not top shelf). A bathroom reno is about the same - closer to $10k if you keep it sensible. (I've actually renovated 2 houses ground up so this is based on my experience, and I'm not a builder etc, just an average home reno punter!).

So let's say $40k over 20 years for the new baths/kitchen. That leaves $40k for regular painting, curtains, carpets, a bit of plumbing maybe, new gutters as required every 20 years. Easily enough! Of course if you do a lot of the work yourself, then you wouldn't even need $80k to handle all that maintenance.

So the bottom line is I think a 1% allowance is more than enough. And for a more expensive house, if the higher price is more due to location than the house itself, the maintenance allowance as a % of cost is even lower.

and using your example, what if prices fall 15-20% over the next 3 years? that is more likely than a 5% rise imo.

Well I don't think that's likely at all in Sydney. QLD? Who knows - maybe. If you really think prices will fall, as Kincella says stay renting, but I'm just providing the numbers based on my experience.

Cheers,

Beej

 

[kincella]

some of us older experienced people have been offering some good accurate advice about buying property....like the time I bought 2 sets of kitchen appliances at the june 30 sale all miele..stainless steel...normal price 12600 for 6300...I could have bought just one set...anytime during the year for the same price...big savings...
you can either do some more research into the costs...real capital costs and annual charges to find out the true costs....or just make excuses as to why renting is cheaper....read jan sommers books...about all the excuses people use as to why they should not buy a home

and then watch them squirm when prices go up...not down and they are priced out again.....
I have a theory...if you really want something...you will find a way of obtaining it

 

[Julia]

Rates go to the local council - they take care of collecting the garbage, filling potholes in local roads only, maintaining the parks and other common area's, and provision of community services like libraries etc. My local council does all that just fine with their rate income thanks. It's the state level government who are responsible for the "aging" infrastructure (bunch of useless morons that they currently are!)

Cheers,

Beej

The local council here has also had some responsibility for raising dam level which has been vital for growing population. And if an area is growing fast then obviously roads, more community facilities etc are required.
Rates are something I don't really mind paying if it means a better community.