House prices to keep rising for years

[MACCA350]

They should get whatever they need for education and travel and the lot when they're about 40, 25 is too young for most.

This money is for security not to take away their will to do it on their own, it's hard to set it up that way though, I've got a Trust that will be administered by a lawyer, but it's all complicated and I'm not really happy with it yet.

Good point, we also have set up a trust, though that's about as far as I've got so far.

cheers

 

[nunthewiser]

lawyers are too complicated and costly to set this kind of deal up guys

just donate all assets and monies to my convent and attach a note with all future instructions in it

happy to do my bit for mankind


a.nun

 

[MrBurns]

Good point, we also have set up a trust, though that's about as far as I've got so far.

cheers

I drove myself nuts trying to cover all the bases, but you just cant .

 

[MACCA350]

The hardest thing is to set it up so it's for their future without them thinking, I dont have to work because I've already got a house and they bludge, that could actually ruin someones life by taking away thier incentive.

True too, though if they have no access to it, to some degree it would defeat the purpose.

My hope is that it would give them enough security to be able to pursue the kind of work they love

cheers

 

[MACCA350]

lawyers are too complicated and costly to set this kind of deal up guys

just donate all assets and monies to my convent and attach a note with all future instructions in it

happy to do my bit for mankind


a.nun

Fat chance Nun: I trust religion even less

cheers

 

[MrBurns]

My hope is that it would give them enough security to be able to pursue the kind of work they love
cheers

Thats exactly my thoughts.

 

[MACCA350]

I drove myself nuts trying to cover all the bases, but you just cant .

Yeah, at some point you just have to let go and trust them to make their own decisions. Sometimes too much restriction can be more harmful than good.


..........Boy have we gone way off topic

cheers

 

[MrBurns]

Yeah, at some point you just have to let go and trust them to make their own decisions. Sometimes too much restriction can be more harmful than good.


..........Boy have we gone way off topic

cheers

Right on both counts - worthwhile though.

 

[MACCA350]

Right on both counts - worthwhile though.

Worthwhile that we scared off all the property bulls it's been quite peaceful in here since

cheers

 

[Beej]

Not at all. You are leaping to conclusions based on some sort of cognitive bias.

I don't think there is any "right" to home/land ownership whatsoever. Where did you get that idea? I have no problem with people renting. I choose to rent myself as it suits me right now.

However overpriced basic accommodation filters down to rent levels. People are entitled to a fair return on the value of their asset, so rent should reflect the asset value. Ergo, high prices equals high rents.

Hmmm - true to some extent, but not always? In Sydney for example when prices rocketed both during the late 80s and then 98-03/04, rents barely shifted. When capital growth is roaring, investors tend to focus on that rather than the yield (which of course is part of your point). So in effect anyone priced out by a price spike still has access to basic, affordable housing at rent rates that usually have not changed much. Over more time of course the rents do rise, but they tend to rise more slowly, or at least rises lag property price increases, and from what I have seen often occur while prices are stagnating more often than not.

Witness - what has happened to rents in Oz over the last few years? Rents have totally outstripped inflation. What you could rent in Perth for $250 4 years ago is now circa $450 or more.

This has varied from area to area, but in Sydney certainly did occur, however this was after a period in which rents were basically flat for 5+ years, so over the whole period from late 90s to present, rents in Sydney have only increased by a little more than inflation (in high demand area's) and probably less than inflation in more ordinary locations.

Perth as a society functioned perfectly well with some of the most inexpensive real estate and therefore rents in the country. Now it is among the most expensive. Why? (Yes I know the economics etc)

Fantastic if you own property. But if you're starting out, it is much more difficult than previous generations endured. There is something wrong with an economic policy that actually encourages this in my opinion.

And the same goes for Sydney/Melbourne where property was relatively cheap in the 60s/70s as well - I'm sure London had cheap housing widely available at some point in it's long history as well? The point is cities grow, demographics shift with the economic winds (eg resource super cycle and the high incomes that generates for a large number of people clearly has been a major driver of Perth prices). As the prosperity on average of a particular city increases over time, unless there is some major economic shift, those changes tend to be permanent. For example if the Australian financial services industry ever went into true long term decline, then Sydney property prices *would* take a beating - as there would be a fundamental shift in the drivers of the market here. Likewise Perth prices I'm sure would fall fundamentally over the long term if the developed world stopped buying our resources.

Are either of these changes likely to occur? (As examples - obviously there are more factors than just mining/finance sectors in each case). Will people who choose to live and own in Perth likely get richer or poorer over the next decade or 2? These are the questions I ask myself when considering how the long term demand for property might pan out.

You can still get rich in property without massive speculative price inflation, just might take a bit longer.

Sure you can, and in fact most PIs I know are long term investors (as was I, 10 year + time horizon with some specific goals for investing) and this is how they look at things - periodic strong capital gains are just icing on the cake. Of course these periods do attract *some* pure speculative investors, however the same can be said for *any* market from time to time.

I mean people should really buy/trade shares only for long term earnings growth and dividend flows shouldn't they? But instead you get periods of manic speculation driving prices north - this is bad as it effects the behaviour/decisions of the management of many enterprises to too much of a short term focus, but it happens, that's life, we all deal with it?

What I do object to very strongly is government actions in propping up house prices.

If we are to be Keynesian style interventionists, house prices should never have been allowed to get out of control. Policy would have tried to prevent it.

However if we are to be Austrian style laissez faire capitalists, then let them rip, but let people deal with the consequences of an Austrian style bust. Let housing, as a market, find its level without gu'mint support. Let the market do its job of price discovery.

But gu'mint policy flip flops from laissez faire to interventionism in order to perpetuate the house price boom.

I and others don't believe this is healthy or fair to all in the long run.

Personally, I'm in favour of Austrian style economics. I have no problems with a price boom, but am prepared to deal with the consequences of a bust, both in the sense of protecting assets and as an opportunity.

Current day investors are used to the nanny state nipple of middle class welfare and go whining to the government to bail them out of trouble. pffft.

Ultimately this type of economics cannot survive without unintended consequences.

I don't think I would disagree with much of what you wrote there - however I don't happen to agree with many of the Austrian economics based ideals. I think in a more "normal" downturn you would not have seen government intervention in the housing market like we did this time around. But nor do I think even in this situation that there would have been the type of asset prices falls predicted/hoped for by so many here.

In fact if anything I think that a "policy on the run" decision may have been sparked by the likes of Steve Keen running around the mainstream media scaring the **** out of everyone who owned property! There was a 7:30 Report where Kerry O' Brien kept hammering Rudd about what he thought of Keen's predictions - 3 days later the FHBG boost scheme was announced......

But I still think the intervention over-all was good, simply so that we could avoid the type of meltdown seen in the US. That would not have been good for *anyone*.

Cheers,

Beej

 

[kincella]

just some more views .....the world but mainly China has caught onto Australia's resources, which have contributed to the wealth in this country, which in turn contributes to a rise in house prices.....but not every house,
thousands of homes ,not in the inner city area...that are very affordable for everyone......and even more so in regional areas.....
some extracts..........

CRAIG JAMES: I wonder where the 30 per cent view comes from. I suppose in Australia we look at overseas and look at what’s happened in the US and the UK, but we tend to forget our own backyard is completely different. We’ve got the fastest population growth of any advanced country in the world, and really up there with some of the developing economies, faster than a lot of the Asian economies. Population is increasing, we’re not building enough houses, so we’ve got a housing shortage. And then it’s a case of demand and supply. Australians love their homes, love to put money into their homes, so that demand is out there. And it’s also a decision of choice in terms of your household spending. Food and clothing and transport are taking up much smaller proportions of our income, and as a result we can put more into housing. And through the magic of real wage gains we’re also getting ahead. So maybe it’s the case that we’ve got high house prices relative to income, but it’s a case that we’ve made the decision that we allocate money to housing. I would say in terms of the average person out there, their budgets aren’t overly stretched and house prices might be relatively high but it’s something that people are comfortable with.

Generation Y want to live close to the city, migrants want to live close to the city, so it’s demand for apartments rather than demand for four or five bedroom houses. If you’re living way out from the capital city centres and you’ve got a four or five bedroom house perhaps you’ll be a little bit worried about the degree of house price accumulation that you’re going to get over a long period of time.
http://www.news.com.au/business/money/story/0,25479,26090822-5013951,00.html

 

[Mofra]

You don't agree that 93-97% LVR is sub-prime?
Someone posted a US chart that indicated that anything above 80 or 85% LVR was classed as sub-prime, not sure where is is now.

Sub-prime within the industry is regarded as any exposure where the borrower has limited or no capacity to repay - capacity to repay is a seperate issue to LVR.

Yes, I do realise that. LMI would not be needed if LVR were capped at 80%..........100-110% LVR's were just stupid..........LMI is mostly to allow people to borrow more on less deposit...........Now why would most need to do that if house prices were affordable.

You've missed the point - LMIs have reduced their LVR exposures already, and in Australia we did not promote NGS > 95% LVR loans in the first place, unlike the US.

In short, the five "C"s of lending were adhered to in all but the 4% of non-conforming lender sin Australia, and even the non-conformers never appraoched the stupid lending principles of thos ehanding out NINJA loans, ARMS, etc.

Is it like the chicken and the egg? Did increased LMI and LVR from the 90's cause an inflationary effect on prices? or were they a result of increased prices?

Seems simple to me, if people can borrow more on the same income and deposit, they will........if buyers have more to spend, they'll push prices up. Mind you I'm no expert on bank lending

Given that tightened lending practices have still allowed for growth in prices thus far this year, the point is rather moot.

 

[Mofra]

Do they pay stamp duty on that ?

In Victoria they wouldn't if the TOL is noted as "for natural love and affection"

What a caring, sharing lot the Gov are

 

[Taltan]

Kincella, for those true believers in the China & India phenomenon I wouldnt waste my money on housing. Go Buy BHP, RIO, BSL, OST etc. What they produce is in a lot shorter supply than Australian housing. If China does boom for the next 30 years I guarantee you'll make a better return with those stocks.

 

[kincella]

I already have some of the stocks you mentioned.....its like having money on an each way bet ...both are winners....
oh and I doubt India will ever match China....its way too far down the ladder IMO
the money is on China alone

 

[nunthewiser]

the money is on China alone

and there lies the problem

 

[MrBurns]

and there lies the problem

True, anything could blow up there at any time.

 

[robots]

Kincella, for those true believers in the China & India phenomenon I wouldnt waste my money on housing. Go Buy BHP, RIO, BSL, OST etc. What they produce is in a lot shorter supply than Australian housing. If China does boom for the next 30 years I guarantee you'll make a better return with those stocks.

hello,

and bang 500k on BHP or RIO, no brainer in the mind thats about it

you might get a good return on 10k, chicken feed though

and the fund crew dont care if they loose it as its not theirs

thankyou
professor robots

 

[robots]

My post was 100% on the money as we can see by your oh so defensive response. I dont give a rats how hard you worked, those who revell in a residential property boom are a-holes in my opinion, it locks the young out or forces them to take crushing mortgages.
I'd be quite happy if my residential properties halved in price tomorrow.
Less rates and the kids would be able to get in.

Those who call it paradise are selfish morons.

hello,

i'm with you Kincella, going to put these trolls on ignore the contradictions are outrageous

i reckon the thread would have far more substance and helpful discussion/ideas about property investing if some of these trolls were silenced

how we looking brothers, the biggest financial event since 1929, are prices still 8x average income, paradise

thankyou
professor robots

 

[MrBurns]

hello,

i'm with you Kincella, going to put these trolls on ignore the contradictions are outrageous

i reckon the thread would have far more substance and helpful discussion/ideas about property investing if some of these trolls were silenced

how we looking brothers, the biggest financial event since 1929, are prices still 8x average income, paradise

thankyou
professor robots

Helpful discussion ???????? ROFL you've done nothing but troll and repeat ad nauseum the mantra of the dysfunctional, self centered property bull, or bull**** I should say....for this entire thread.

Those who call it paradise are selfish morons.