House prices to keep rising for years

[pepperoni]

Thanks for the compliment guys.

Actually, please ignore that model for now. : I had a deep thought about it last night (yes, while sleeping!!) and I believed I've made some mistakes in terms of how the return of capital should be calculated from. So treat any values generated by this model with a grain of salt for now. I will come up with a new version and post it again in the future.

Meanwhile, keep it up with the thread, contain a massive amount of useful info.

As mentioned previously, I have sold my house, invested the $1.8m equity with CBA at 8% ($2770 a week before tax) and am renting a $5m house on Balmoral Slopes in Mosman for $700-800 per week.

In addition to any views on the financial aspects of this, this is my dream home. I would buy it in a heartbeat if i could but definitely could not buy now and would almost certainly die, rot and be long forgotten before getting within cooee of ever living my dream.

Irrespective of what any spreadsheet says, I think the idea of small profits compromising my life/living arrangement for any part of my very finite life in the hope of a small profit is pretty sad.

 

[professor_frink]

Irrespective of what any spreadsheet says, I think the idea of small profits compromising my life/living arrangement for any part of my very finite life in the hope of a small profit is pretty sad.

well said pepperoni

 

[nioka]

As mentioned previously, I have sold my house, invested the $1.8m equity with CBA at 8% ($2770 a week before tax) and am renting a $5m house on Balmoral Slopes in Mosman for $700-800 per week.

In addition to any views on the financial aspects of this, this is my dream home. I would buy it in a heartbeat if i could but definitely could not buy now and would almost certainly die, rot and be long forgotten before getting within cooee of ever living my dream.

Irrespective of what any spreadsheet says, I think the idea of small profits compromising my life/living arrangement for any part of my very finite life in the hope of a small profit is pretty sad.

In 5 years time you money is worth less, your rent will have gone up. The property probably will have been sold and you will probably have been told to go.( nobody will continue to rent a $5m house for $700 week) The place you sold will be worth more than you sold it for and you may not be able to afford to buy back in.

That is the history of a lot of my friends that have done that sort of thing thinking it was a smart move at the time.

 

[robots]

hello,

http://www.theaustralian.news.com.au/story/0,25197,23666031-12377,00.html

awesome stuff, 20% rise

i imagine property owners would be looking foward to bumping things up and up

thankyou

robots

 

[YChromozome]

awesome stuff, 20% rise

With rents having a weighting of 5.22% in CPI, no wonder inflation is out of control. Coupled with Petrol & food, we should brace for more interest rates.

 

[robots]

With rents having a weighting of 5.22% in CPI, no wonder inflation is out of control. Coupled with Petrol & food, we should brace for more interest rates.

hello.

yes just have to "plod" along i guess,

has the labor gov started any new public housing or still relying on the private investor?

thankyou

robots

 

[trendsta]

ahh yes Robots.. rents will just have to keep rising 20% yoy ..

only a matter of time until wages catch up... and they also have a lot of catching up to do with rising costs.. maybe they will match the rent rises.. and everyone will be happy.. just "plod" along.

 

[Macquack]

As mentioned previously, I have sold my house, invested the $1.8m equity with CBA at 8% ($2770 a week before tax) and am renting a $5m house on Balmoral Slopes in Mosman for $700-800 per week.

Better watch out pepperoni, the owner may be thinking of doing the same as you. $5m @ 8% ($7692 a week before tax). Does sound a lot better than $700-800 per week (0.832% gross return!).

 

[Pommiegranite]

In 5 years time you money is worth less, your rent will have gone up. The property probably will have been sold and you will probably have been told to go.( nobody will continue to rent a $5m house for $700 week) The place you sold will be worth more than you sold it for and you may not be able to afford to buy back in.

That is the history of a lot of my friends that have done that sort of thing thinking it was a smart move at the time.

Unless you have a crystal ball, I wouldn't overlook the well known investment maxim "Past performance is no guarantee...blah..blah.blah"

 

[bvbfan]

I was just watching an auction (via live link) and saw this one go through.\/

Just need to brush up on the German.

Another large semi in a semi rural area just went for £9,000 too.

LOL

Which site did you see that? I wouldn't mind a cheap flat in Germany

 

[CAFA1234]

As mentioned previously, I have sold my house, invested the $1.8m equity with CBA at 8% ($2770 a week before tax) and am renting a $5m house on Balmoral Slopes in Mosman for $700-800 per week.

I can understand your view about being in a nice place renting as opposed to the struggle to purchase. However there are a couple of things that are worrying me in your 'story'.

You are either paying $700 or you are paying $800. Whenever I've rented, as I do currently, I actually know how much my rent is. Or is it that you hope to be able to rent this house for around $7/800 a week?

Secondly, I know the area you are referring too, as I suspect many others do and as you will know, if you are genuinely renting a $5m property for even $2000 a week then you have the bargain of a life time, or you know the people concerned and there is some extra element to this story.

The market pricing of rentals in Mosman on the slopes of Balmoral do not suggest that your numbers are right. Do you want to check them out just in case there is a slip up.

The danger is, if the bargains are that good we will get all the mobs from WA and VC flooding into the area - not good my friend!

 

[wayneL]

Which site did you see that? I wouldn't mind a cheap flat in Germany

http://www.eigroup.co.uk/public/future_property_auctions.asp

...but it is a bit of an anomaly for German property to be sold in Blighty. Still a good guide as to what is available in certain parts of Germany. Some areas are jolly expensive though... Hamburg especially.

Cheers

 

[robots]

hello,

interesting one:

http://business.theage.com.au/mortgage-hardship-no-worse-than-usual/20080508-2ccv.html

seems a seasonal issue all those issues in the paper that number highlights,

no issue by the looks of it

thankyou

robots

 

[YChromozome]

hello,

no issue by the looks of it

thankyou

robots

Glenworth is listed on the US Stock Market, so you are highly unlikely to say defaults are up, the housing market is likely to crash 50% and the company will fail. Rather, this will be in the administrator's report when the company is wound up.

 

[professor_frink]

With rents having a weighting of 5.22% in CPI, no wonder inflation is out of control. Coupled with Petrol & food, we should brace for more interest rates.

just what is needed to bring investors back into the property market!

Considering petrol and food are currently being driven up on the cost side of things, and raising rates isn't going to help bring more investors into the market to help bring new rental stock online, you'd have to question the RBA if they raised solely because of those 3 things. They don't need to raise to try and stamp out any rampant speculation on shares or property, both have been struggling of late, the only benefit I can think of for them to keep raising rates hard is to try and dampen some of the rise in O/S oil & food prices by trying to strengthen the currency. But even then that will possibly fuel more demand for some of the imported items we have in the CPI, such as electronic goods.

Basically it's looking like the RBA will be damned if they do, damned if they don't right now!

 

[Tysonboss1]

In 5 years time you money is worth less, your rent will have gone up. The property probably will have been sold and you will probably have been told to go.( nobody will continue to rent a $5m house for $700 week) The place you sold will be worth more than you sold it for and you may not be able to afford to buy back in.

That is the history of a lot of my friends that have done that sort of thing thinking it was a smart move at the time.

Totally agree,..

That is the price people pay for living above their means,

 

[Tysonboss1]

Better watch out pepperoni, the owner may be thinking of doing the same as you. $5m @ 8% ($7692 a week before tax). Does sound a lot better than $700-800 per week (0.832% gross return!).

Again an over site people make while judging property vs cash,...

Cash investment only gets an 8% return which is fully taxed every year,.... so the capital and cashflow is eroded by inflation year on year,.. interest can also fall from there ten year high which they ar currently at...

Property returnsa smaller cash flow than cash at the moment,.... but both the cash flow and the capital are effectivly hedged against inflaton due to capital appeciation and rent increases,... also you don't get taxed on te capital appreation pat of the equation till you sell years later and you also get a 50% discount on the gain ( or no tax if it is your own home),.... so your capital growth is compounded for years until you finally get taxed on it,..... you can also time the sale for a year when your income is low (such as retirement) so the tax is further reduced.

 

[Pommiegranite]

Again an over site people make while judging property vs cash,...

Cash investment only gets an 8% return which is fully taxed every year,.... so the capital and cashflow is eroded by inflation year on year,.. interest can also fall from there ten year high which they ar currently at...

Property returnsa smaller cash flow than cash at the moment,.... but both the cash flow and the capital are effectivly hedged against inflaton due to capital appeciation and rent increases,... also you don't get taxed on te capital appreation pat of the equation till you sell years later and you also get a 50% discount on the gain ( or no tax if it is your own home),.... so your capital growth is compounded for years until you finally get taxed on it,..... you can also time the sale for a year when your income is low (such as retirement) so the tax is further reduced.

Inflation can also fall. Or do you property bulls always twist arguments to suit yourselves?

Rents can also fall

So can property prices

The bottom line is that property bulls always use past perfromance as an indicator for future performance.

Cash can be locked into a long term deposits. So in effect hedged against deflation.

 

[nioka]

Inflation can also fall. Or do you property bulls always twist arguments to suit yourselves?

Rents can also fall

So can property prices

The bottom line is that property bulls always use past perfromance as an indicator for future performance.

Cash can be locked into a long term deposits. So in effect hedged against deflation.

History is well and truly against you though.

The reasons;

1. There is no more coastal land available. Most of the coastal land not developed is locked up forever by the conservationists and the Nimbys, this accellerates the law of supply and demand for city and coastal living.
2. Urban spread and the cost of fuel will cause steep rises in city land values.
3. While ever the Aussie balance of payments continues in the negative way it has done for many years now we will have interests rates higher than most of the rest of the world as we struggle to attract overseas money to fund our extravance.
4 Rents will only fall if there is a surplus of rental properties. There will only be a surplus if a. The population falls or
b. A surplus of new homes are built faster than the demand.
Neither of those look like happening.

I'm not a property bull myself but a long term property investor. I bought my first block of land 60 years ago and the situation hasn't changed in that time. There are flat periods but they don't last long so make the most of those that do.

 

[Tysonboss1]

Inflation can also fall. Or do you property bulls always twist arguments to suit yourselves?

Rents can also fall

So can property prices

The bottom line is that property bulls always use past perfromance as an indicator for future performance.

Cash can be locked into a long term deposits. So in effect hedged against deflation.

I am the first to admit that property prices go both up and down,... the value of any freely traded asset does,... but it will up swings will always out way the flat and down periods.

If you take a 10year period,.... I don't think many people would argue that property prices and rents would not increase by atleast inflation,... so if you believe that property prices and rents will atleast be maintained will inflation then property is better than cash.

But I could be wrong I guess,... may be locking your money into an investment vehicle where over 80% of your return is lost in tax and inflation is a good idea,.... thats the choice you hav to make as an investor