House prices to keep rising for years

[Tysonboss1]

outlay 15K
extra saving every year 12K
average save rate 5% compound a year
time: 30 years
money in hand in 30 years with little risk: $901,958.61

except inflation will take about 90% of the interest your earning,.. where as property will increase atleast with inflation,...

and you will be paying tax on your interest,... where as you'll get a tax deduction for the interest you pay,...

 

[Tysonboss1]

Looking at rent vs. prices in my suburb (which is an upmarket one admittedly, so im not sure what it would be for outer suburbs), rental yield doesnt go anywhere near covering interest payments.

..

Sometimes simply comparing rent of the property to the price is very misleading,...

Rent yield is basically what you can rent the current dwelling for,... but the price is based on what you can do with the property in the future.

Picture a house on a large 5 acre block,... you may only be able to rent the house for $350 a week, But that doesn't mean the land is not worth $2M,

Some people would look at it and say it's over priced because the rent doesn't cover the interest on the loan, But a developer would look at it and say it's a bargain,........

The same thing can be said for a house that's only getting $500 a week rent but is worth $2.4M,..... the fact that it might be zoned high density and you can build 5 stories on it might mean that $2.4M is a fantastic price.

 

[prawn_86]

Development isnt generally in the mind of the average property owner though.

And the ones I was looking at in my suburb are fairly small block or townhouses, and in this suburb you are not allowed to build over 3 stories.

I do see your point however

 

[stock_man]

You are assuming the money you put away for all those years not earning a single cents on interest or capital growth.

outlay 15K
extra saving every year 12K
average save rate 5% compound a year
time: 30 years
money in hand in 30 years with little risk: $901,958.61

Tysonboss1 is right.
De-inflate $900k by 2$/year gives $490K
Take an average amount of $300k in the bank (conservative in this example), and the tax is $4.5k (30% of $15K interest).
$4.5K x 30 years = $135K
$490K - $135K = $355K (for an outlay of $360k.... )

So property wins due to delaying the tax!
(this is the same principle as shares - delayed and cheaper tax)

 

[ROE]

Tysonboss1 is right.
De-inflate $900k by 2$/year gives $490K
Take an average amount of $300k in the bank (conservative in this example), and the tax is $4.5k (30% of $15K interest).
$4.5K x 30 years = $135K
$490K - $135K = $355K (for an outlay of $360k.... )

So property wins due to delaying the tax!
(this is the same principle as shares - delayed and cheaper tax)

Well this is what you do for 30 years investment...you put it in super
you salary sacrificed your 12K component after tax that give you ~15K

initial 15K before tax say 20K
so start off 20K = 15K post tax
each year increase 15K = 12K post tax
return 5%
time 30 years = 1,132,850.70
super tax at 15%, when you retire tax free.. so that give you around 900K mark still ..
outside super you get tax on your investment after you retire

and your bank saving rate always run above inflation... RBA based rate on inflation as you can see lately you don't see bank rate below inflation figure

 

[Freeballinginawetsuit]

You are assuming the money you put away for all those years not earning a single cents on interest or capital growth.

outlay 15K
extra saving every year 12K
average save rate 5% compound a year
time: 30 years
money in hand in 30 years with little risk: $901,958.61

No doubt there are probably plebs that do the aforementioned .

 

[Tysonboss1]

You are assuming the money you put away for all those years not earning a single cents on interest or capital growth.

Since when does property not have a rental return or capital growth, when you put this money away year by year,...

Inflation eats away at the debt you owe year by year,...

Inflaton increases the weekly rent year by year, to the piont where it will eventually cover the repayments.

and you should experiance capital growth by a minimum of inflation + higher demand as increasing density pushs up the value of your property or inreasing density in surrounding suburbs pushs up demand for your lower density suburb from people who refuse to live in higher density.

 

[gfresh]

Well this was ABC's Lateline last night...

http://www.abc.net.au/reslib/200803/r233769_937407.asx

Bit extreme.. but anyhow, don't shoot the messenger!

 

[tech/a]

Well this is what you do for 30 years investment...you put it in super
you salary sacrificed your 12K component after tax that give you ~15K

initial 15K before tax say 20K
so start off 20K = 15K post tax
each year increase 15K = 12K post tax
return 5%
time 30 years = 1,132,850.70
super tax at 15%, when you retire tax free.. so that give you around 900K mark still ..
outside super you get tax on your investment after you retire

and your bank saving rate always run above inflation... RBA based rate on inflation as you can see lately you don't see bank rate below inflation figure

Wheres your adjustment for inflation?
Whats the REAL buying power of the $s in 30 yrs.
Bugger all.

There is a product out there readily available through Adelaide Bank and Commonwealth Bank which puts to rest the Affordability issue.

I know why its not been widely used in the last 5 yrs but the time is very close when this product will come into its own.

 

[professor_frink]

Keep dreaming. With the public transport system in Sydney you only get to Hornsby 1 hr from the city.

rubbish. I'm nearly an hour north of Gosford by train, and it's 2 hours for me to get to Central.

 

[numbercruncher]

Got to love how many RE agents are now jumping on the talk down wagon!

Property prices tipped to plummet
12:00a.m. 19 March 2008
| By Kathy Sundstrom

The Sunshine Coast property market should gear itself for hard times ahead, with leading real estate agents warning prices could plummet by as much as 30% in the next 18 months.

The top end of the market has already begun to feel the pinch of rising interest rates, soaring petrol prices and the stock market crash, with houses selling for less than their original purchase price in some suburbs.

REMAX award-winning agent Michael Knights said he was aware of properties which sold for $4 million in exclusive suburbs a year ago that were now on the market with a $3 million price tag.

http://www.thedaily.com.au/news/2008/mar/19/property-prices-tipped-plummet/

 

[tech/a]

Stock market crash!!---when was that?

 

[theasxgorilla]

Well this was ABC's Lateline last night...

http://www.abc.net.au/reslib/200803/r233769_937407.asx

Bit extreme.. but anyhow, don't shoot the messenger!

Hahaha, yeah, but bring it on I say...prices halving on the Mornington Peninsula...thanks very much, I look forward to that.

 

[YChromozome]

Got to love how many RE agents are now jumping on the talk down wagon!

It makes sense, most only make a commission when they sell a house. Hopefully they can get a 50% crash done and dusted this year, so the next boom can start next year. Much better than house prices saying dormant for the next 50 years as inflation rises to catch up to house prices.

 

[nizar]

Hahaha, yeah, but bring it on I say...prices halving on the Mornington Peninsula...thanks very much, I look forward to that.

Yeh same.
There's some sweet properties down that side. Black Rock, etc.

 

[explod]

Hahaha, yeah, but bring it on I say...prices halving on the Mornington Peninsula...thanks very much, I look forward to that.

Near where I live on the east side of the Napean Hwy, Mornington things are looking grim and agents are knocking back stock. Along the beach no probs but in the bigger picture that's a small percentage.

And the Martha Cove Development (City Pacific) is looking like a ghost town in the Sudan.

 

[Mofra]

Got to love how many RE agents are now jumping on the talk down wagon!

Of course they will be lowering the expectation of sellers - the lower the reserve price, the more likely a sale (and therefore commission) is. The reputation of real estate agents hasn't been earned by accident

 

[robots]

hello,

anyone know whats going on with property prices?

a unit in our block sold last weekend for the highest figure in recorded history for the complex,

truly amazing

thankyou

robots

 

[numbercruncher]

A fool and his/her Money are easily parted ?

 

[tech/a]

A fool and his/her Money are easily parted ?

Whats a fool doing with money in the first place?