House prices to keep rising for years

[Mofra]

If lossing $50 or $80 a week from your pay secures you a $250,000 asset that increases at 10%, then in my book thats better than putting that $80 a week in a cash account.

.. a cash account whose real capital value is guaranteed to fall due to inflation. Always love those that advocate "safe" "low risk" investments.

Risk is a tool to be mitigated, not avoided completely.

 

[ColB]

Glad someone pointed that out TysonB

Quote: "...If losing $50 or $80 a week from your pay secures you a $250,000 asset that increases at 10%, then in my book thats better than putting that $80 a week in a cash account..."

I purchased a house 7 years ago for $140k fully geared. Was paying $1030 per month loan payment and only getting $830 pm rent. Yeah it was costing me $200 a month out of my own pocket plus rates etc so on paper I was suffering a (tax deductible) Loss.

Just sold the property 2 months ago for $347k and after CGT of around $50k and paying the loan balance of $80k I end up with over $200K in the hand which I would have never saved had I not bought the property.

Not a bad investment but if I had put my money into shares over the same period I may have done better.

Anyway the reason I sold was to get out at what I thought was the peak of the market. House prices will keep rising but not like they have over the last 3-4 yrs. Next strong cycle 3-4 yrs away.

CB

 

[pepperoni]

.. a cash account whose real capital value is guaranteed to fall due to inflation. Always love those that advocate "safe" "low risk" investments.

Risk is a tool to be mitigated, not avoided completely.

At 8% for a 3 month term cash is guaranteed to return about double inflation right now - looking alot better than shares or property that are on average giving negative returns BEFORE people are foolhardy enough to increase the loss through 10%+ interest borrowings.

Shares and property are certain to do worse in months to coming with $130 oil and food prices soaring putting pressure on rates.

Risk is to be completely avoided where possible and always minimised unless you enjoy the multiple bankruptcy lifestyle.

Certainly avoid when the risks are as high as they are now.

On property specifically, 2 weeks back residex quoted a 29% auction clearance rate for mosman and 49% for the north shore. However Im sure they will level out arounf 50% as agents counsel sellers to lower their selling expectations.

 

[Temjin]

It beats me when people say property is a "safe" investment when their investment capital is usually geared 10 or even up to 20 times. Hardly anybody realise it or even bother to do a mental comparsion between that and standard share margin lending.

Remember, if you put down 10% deposit for a house and borrowed the rest, a decline in asset value of even just 5% would mean half of your initial investment capital is essentially wiped out, without counting the cost of holding the property! Of course, people then argue that house prices never fall and you never receive a "margin call".

Obviously though, negative gearing worked wonders for the past 8-10 years while the credit boom is in full force. This give the false illusion that such good time will continue forever and the same strategy will work for eternity.

 

[stock_man]

residex quoted a 29% auction clearance rate

Thats is if you believe these so called 'experts'. (Residex)
According to their suburb profiling (no longer on their website, surprise surprise), my last house should be worth $790K by the years end. Currently worth about $450K.

This analysis was done back in 2005.

Where do they get their data from?

 

[pepperoni]

Housing affordability confirmed to hit a new low todaydue to rate rises which will continue to flow through to the bottom of the market and will to some degee hurt investors wishing to sell thereby hitting there ability to pump up the top of the market.

http://business.smh.com.au/firsthome-buyer-hopes-fade-20080521-2gox.html


On the flip side I saw 8.5% term deposits at citi and bankwest today. Good news for savers (if bad for negative gearers).

Of course when saving comes back into fashion Im sure I will again find bargains in property and will be back at it with a vengance.

.... Until the bellhops start talking about property investment again, at which point I will cash out again.

 

[Tysonboss1]

Hardly anybody realise it or even bother to do a mental comparsion between that and standard share margin lending.

Remember, if you put down 10% deposit for a house and borrowed the rest, a decline in asset value of even just 5% would mean half of your initial investment capital is essentially wiped out, without counting the cost of holding the property! Of course, people then argue that house prices never fall and you never receive a "margin call".

.

how is this dufferent from margin lending for shares,... the ratio of debt to equity applies with both asset classes

 

[Go Nuke]

Of course, people then argue that house prices never fall and you never receive a "margin call".

Haha tell that to the people of Sydneys western suburbs whos value in their house price has fallen to less than what they bought it for.

Property CAN go down

 

[Gspot]

Haha tell that to the people of Sydneys western suburbs whos value in their house price has fallen to less than what they bought it for.

Property CAN go down

All depends where you invest in property, shares or other.
Do your homework and pick a good stock or good area and your investment will profit. Pick a dud and you will lose sleep. Patience is the key for any good investment today, something which is lost on many.
I have invested in the sea change locations on the west coast, because immigration and retiring baby boomers are the big picture. This will insulate us from the likes of west sydney.

 

[robots]

Housing affordability confirmed to hit a new low todaydue to rate rises which will continue to flow through to the bottom of the market and will to some degee hurt investors wishing to sell thereby hitting there ability to pump up the top of the market.

http://business.smh.com.au/firsthome-buyer-hopes-fade-20080521-2gox.html


On the flip side I saw 8.5% term deposits at citi and bankwest today. Good news for savers (if bad for negative gearers).

Of course when saving comes back into fashion Im sure I will again find bargains in property and will be back at it with a vengance.

.... Until the bellhops start talking about property investment again, at which point I will cash out again.

hello,

hang on, I thought prices have crashed every where,

so wouldnt these HUGE crashes well and truly negate the IR rises?

thankyou

robots

 

[explod]

hello,

hang on, I thought prices have crashed every where,

so wouldnt these HUGE crashes well and truly negate the IR rises?

thankyou

robots

House prices have nothing to do with interest rates. The supply of money does. Hard to simplify what I am saying without writing a book. Lending is now a very risky business even between banks, so for the risk a higher premium has to be paid.

Sorry Robots, but interest rates will go higher and house prices will drop lower. Gold is up because the US have suddenly realised that Europe is going to increase rates when in fact their pundits tipped they would fall. The world has been living in dreamland for 40 years, the rude awakening has just begun.

 

[robots]

House prices have nothing to do with interest rates. The supply of money does. Hard to simplify what I am saying without writing a book. Lending is now a very risky business even between banks, so for the risk a higher premium has to be paid.

Sorry Robots, but interest rates will go higher and house prices will drop lower. Gold is up because the US have suddenly realised that Europe is going to increase rates when in fact their pundits tipped they would fall. The world has been living in dreamland for 40 years, the rude awakening has just begun.

hello,

maybe you should read the article sir,

the latest IR rises have supposedly again worsened house affordability,

but my question is hasnt RE crashed everywhere across aus and wouldnt this greatly change the affordability index?

furthermore, with the crash in prices has the income to house cost ratio graph dipped or is it still up there at the wonderful 6x income?

ahh, the great divide

thankyou
robots

 

[explod]

hello,

maybe you should read the article sir,

the latest IR rises have supposedly again worsened house affordability,

but my question is hasnt RE crashed everywhere across aus and wouldnt this greatly change the affordability index?

furthermore, with the crash in prices has the income to house cost ratio graph dipped or is it still up there at the wonderful 6x income?

ahh, the great divide

thankyou
robots

Yep, see your point. I look at things a bit different obviously. As a Farther and Grandfather my concern goes out to those struggling with higher prices, interest rates and mortgages. The playing field in our day has been pretty good, but not so for those taking the reins for the future.

Just depends on which side of the fence you are.

 

[Bronte]

Hi Bronte,
Long time no hear,
Good that my tongue in cheeks post..
drew you out of the closet...
Now that you are back..
Keep them..
coming. :emp:

Cheering
.................Kauri

Hi Kauri,
Missed this post...sorry
Thank you for the support.
All the very best......
Bronte

 

[robots]

hello,

yes same here explod, some people are struggling in the current environment

lots can be done about it though on an individual basis

thankyou

robots

 

[theasxgorilla]

Yep, see your point. I look at things a bit different obviously. As a Farther and Grandfather my concern goes out to those struggling with higher prices, interest rates and mortgages. The playing field in our day has been pretty good, but not so for those taking the reins for the future.

Just depends on which side of the fence you are.

I can only partly agree with this.

If people, young people, were prepared to just block out all the other cr@p they're being fed these days...all the temptations of advertising, all the messages of fear being fed by the media, and all the other temptations like drugs and other peer group pressures...and managed to put their heads down and their bums up and focus on preparing themselves for subsequent stages of life, I think you'll find that in this day and age the old Oprah Winfrey saying will still ring true for them:

"luck is opportunity meeting preparation"

The news story for many years now has been, "skilled labour shortage". All people had to do was become "skilled labour" and they'd be on their very own version of easy street.

 

[Mofra]

At 8% for a 3 month term cash is guaranteed to return about double inflation right now - looking alot better than shares or property that are on average giving negative returns BEFORE people are foolhardy enough to increase the loss through 10%+ interest borrowings.

8% gross return: take out 46.5% tax on earnings leaves you with 4.28% return.
Underlying inflation ~ 4.1%. Real rate of return 0.18% before deflation of underlying cash security is taken into account.

Not my choice of investment, but each to their own.

 

[theasxgorilla]

8% gross return: take out 46.5% tax on earnings leaves you with 4.28% return.
Underlying inflation ~ 4.1%. Real rate of return 0.18% before deflation of underlying cash security is taken into account.

Not my choice of investment, but each to their own.

Yep...and even as a foreign resident you can't avoid the capital gains tax like you can if you were buying and selling property, shares etc.

 

[CAFA1234]

Im not doubting that we are, and not for a second, but just cause we have another resource boom doesnt mean we should discredit the fact that we have increasing household debt with increasing unemployment, inflation and interest rates.

And when we talk about housing prices, people arnt talking about mining towns which house a small portion of Australia's total employment. Like I said, you will get areas of high growth, but the majority can be negative

I think everyone should read this. You might be surprised.

Andy - your attachment presents some 'views' as facts. I tend to agree with much of what you have posted but to mix up views within a number of facts is misleading to say the least my friend.

 

[CAFA1234]

Yep...and even as a foreign resident you can't avoid the capital gains tax like you can if you were buying and selling property, shares etc.

Mr Gorilla - pray, tell me how you avoid CGT when selling property & Shares.

I'd like to know how to avoid this tax as well, as I'm sure would many others.

Spill the Kool Aid quickly as the end of year will soon be upon us.