House prices to stagnate for 'years'

[WaySolid]

Residex house price trading data for Brisbane in 2007.

My personal estimate was 10% growth in 3br houses in my postcode over the first half of 2007, seems to be about the same averaged over Brisbane from these stats.

31/01/2007 H Brisbane 9.73522 0.11%
28/02/2007 H Brisbane 9.78018 0.46%
31/03/2007 H Brisbane 9.91202 1.35%
30/04/2007 H Brisbane 10.2146 3.05%
31/05/2007 H Brisbane 10.2276 0.13%
30-Jun-07 H Brisbane 10.5122 2.78%
31-Jul-07 H Brisbane 10.7711 2.46%

 

[theasxgorilla]

I'll give you some more realistic returns from my experience. Melbourne, 2 bedroom house, 7kms from CBD.

Purchased - Jan 04 - $430k
Sold - July 07 - $519k
Return = 21% or 8% per annum
Take out costs in (stamp duty) and out (commission), more like 5% per annum. Basically lived rent free for 2.5 years (recovered interest costs)

Would you call that booming prices - I think not. Property is still 'fairly' priced I think.

If it wasn't for the Principal residence CGT exemption, it wouldn't have made sense to buy.

Finally, someone provides a solid example!

You are right with everything you say here Fleeta. The tax,the purchase costs, the selling costs...all need to be considered in a property deal and all tend to conspire to screw you out of profits. All are reasons why many property investors say: never sell. Drawdown on the equity you've accumulated or collatoralise against another purchase, but never sell. Although, you've identified one of two ways to solve this problem. One, CGT exception for primary place of residence. Or two, hold for over 12 months and get a CGT discount of 50%.

Is anyone bothering to keep track of the tax brackets these days??? You now have to be earning over $150,000 AUD a year to get into the top tax bracket. Lets say you're a slightly above average Joe and you make $75k a year. If you sold an investment property after 12 months and made $100k cap gain you would pay a tax at a rate of 21% on your gains. If you were a bit of a high roller and managed to make $150k a year you'd still only pay 23.5%. None of these figures take into account the tax benefits of negative gearing or depreciation on investment properties, so you can assume on the sum of things these rates will go down even further.

Still seems like a lot of tax to pay on a deal? But over on other threads people are scrambling for solutions to their share market tax problems with answers like, "I'll incorporate and get the 30% company tax rate"...it's all relative...< 20% tax ain't that bad. Maybe you take a long holiday the year you sell your house in Australia...hmmm. Perhaps you can get your tax down to 15% that way, and a free holiday. Its not just about money accumulation, we've all got to live as the years pass by.

I only wonder which area of Melbourne 7kms from the CBD...and also notice you bought in Jan 04...prices were generally flat or falling in Melb into late 04, so if you bought then instead you would have fared better since you would have got a greater %age increase and have had less holding time hence less interest payments.

Imagine you said to someone they could live for rent free in their own house for 2.5 years...what kind of leg-up might that provide the average person in life?? "Hey, your rent is going to be taken care of for 2.5 years, do you think you can save $x for investing in the sharemarket or starting a business or going on an overseas holiday without having to come back with maxed-out credit cards???

Those days of the late 90's where you could buy a run down shack, slap on a coat of paint and sell for double are gone. But you don't need to hit home runs to make it worth it...looks like you just proved that property is still a viable way to get ahead. All you need is a further 10, 15 or perhaps 20 years of smart decisions and you'll be as wealthy as a baby boomer

ASX.G

 

[Flying Fish]

Finally, someone provides a solid example!

You are right with everything you say here Fleeta. The tax,the purchase costs, the selling costs...all need to be considered in a property deal and all tend to conspire to screw you out of profits. All are reasons why many property investors say: never sell. Drawdown on the equity you've accumulated or collatoralise against another purchase, but never sell. Although, you've identified one of two ways to solve this problem. One, CGT exception for primary place of residence. Or two, hold for over 12 months and get a CGT discount of 50%.

Is anyone bothering to keep track of the tax brackets these days??? You now have to be earning over $150,000 AUD a year to get into the top tax bracket. Lets say you're a slightly above average Joe and you make $75k a year. If you sold an investment property after 12 months and made $100k cap gain you would pay a tax at a rate of 21% on your gains. If you were a bit of a high roller and managed to make $150k a year you'd still only pay 23.5%. None of these figures take into account the tax benefits of negative gearing or depreciation on investment properties, so you can assume on the sum of things these rates will go down even further.

Still seems like a lot of tax to pay on a deal? But over on other threads people are scrambling for solutions to their share market tax problems with answers like, "I'll incorporate and get the 30% company tax rate"...it's all relative...< 20% tax ain't that bad. Maybe you take a long holiday the year you sell your house in Australia...hmmm. Perhaps you can get your tax down to 15% that way, and a free holiday. Its not just about money accumulation, we've all got to live as the years pass by.

I only wonder which area of Melbourne 7kms from the CBD...and also notice you bought in Jan 04...prices were generally flat or falling in Melb into late 04, so if you bought then instead you would have fared better since you would have got a greater %age increase and have had less holding time hence less interest payments.

Imagine you said to someone they could live for rent free in their own house for 2.5 years...what kind of leg-up might that provide the average person in life?? "Hey, your rent is going to be taken care of for 2.5 years, do you think you can save $x for investing in the sharemarket or starting a business or going on an overseas holiday without having to come back with maxed-out credit cards???

Those days of the late 90's where you could buy a run down shack, slap on a coat of paint and sell for double are gone. But you don't need to hit home runs to make it worth it...looks like you just proved that property is still a viable way to get ahead. All you need is a further 10, 15 or perhaps 20 years of smart decisions and you'll be as wealthy as a baby boomer

ASX.G

Most baby boomers i know, are not all that r9ich, they just like to spend money to give the appearance

 

[wayneL]

I could have put this in any number of threads as it affects a lot of things, but this as good a place as any:

FWIW

Market corrections are coming.

Jim Rogers
Founder of the Rogers Raw Materials Index

We've had the worst bubble in credit we've ever had in American history. As the bubble got bigger and bigger, it spread to emerging markets and leveraged buyouts and all sorts of things. And it hasn't been cleaned out yet. I don't think you can have a bubble like this and clean it out in six months or even a year. It has always taken longer.

Look at homebuilders, for instance. Historically, when an industry goes through a retrenchment like this, you have two or three big companies going bankrupt and most of the companies in the industry losing money for a year or two or three. Well, we haven't gotten anywhere near that in the homebuilding business, so I think that bottom is a long way off. As far as the credit bubble, we have another several months, if not more, of mortgages that are going to reset and people who are going to find themselves with even higher monthly payments. There are many, many more losses to come, most of which we won't know about for weeks or months.

Normally you have markets go down 10% or so every couple of years. We haven't had a 10% correction in the stock market in nearly five years. I don't know if this is the beginning of it, but we've got a lot of corrections coming. It wouldn't surprise me to see a little bounce--say if a central bank cuts rates. But that will just lead to the markets falling further late this year or next year. It would be better for the market, it would be better for investors, and it would be better for the world if we went ahead and cleaned out the system. If they do cut rates in the U.S., it would be pure madness. Because the market's down 7% or 8% from an all-time high? My gosh, what's that going to say about the dollar? What's that going to say to foreign creditors? What's that going to say about inflation? The Federal Reserve was not founded to bail out Bear Stearns or a few hedge funds. It was founded to keep a stable currency and maintain its value.

I have been and continue to be short the investment banks and the commercial banks. If they bounce up, I'll probably short more. I'm certainly not buying anything. The market's only down 8%. I don't consider that a buying opportunity. The things that I'm short, some people probably think are buying opportunities, but I don't. I've been short the banks for close to a year, and for a while it was not fun. But I added to my positions, and now it's a lot of fun.

 

[numbercruncher]

Economic pressure boosts personal bankruptcy filings
By PAUL WENSKE
The Kansas City Star
Economic pressure on many U.S. families ”” including in Missouri and Kansas ”” is boosting personal bankruptcy filings, despite a change in the law intended to reduce them.

Filings by consumers with debt increased more than 48 percent to 391,105 for the first six months of 2007, compared with 263,660 filed in the first half of 2006, according to new data from the Administrative Office of the U.S. Courts.

http://www.kansascity.com/business/story/236639.html


You can easily envision how this tally will soar further in the next 6 months considering there has been gridlock in Credit Markets already and massive tightening of the standards to get loans or refinance not to mention much higher Interest rates for non conforming borrowers(and lenders) ....

Agreeing with Jim Rogers here shorting US financials has to be the best most logical and fun bet around atm!

 

[theasxgorilla]

Agreeing with Jim Rogers here shorting US financials has to be the best most logical and fun bet around atm!

Indeed, for some it's hard to beat the satisfaction of winning when others are known to be losing.

 

[numbercruncher]

Indeed, for some it's hard to beat the satisfaction of winning when others are known to be losing.

Hence why sport is the most popular passtime in the world i guess ?

 

[theasxgorilla]

Hence why sport is the most popular passtime in the world i guess ?

That's clever, I never thought of that. You could be onto something there...if only the stakes were a little higher...not coming home with the cup and forfeiting the entry fees is is one thing...but not coming home 'cos you lost that too.

 

[numbercruncher]

hehe and there's plenty losing their houses it seems .....

Sometimes i wonder if the US administration was expecting alot of this, its worth reading the "New Bankruptcy Law which went into effect on Oct 17, 2005"

http://www.creditinfocenter.com/bankruptcy/NewBankruptcyLaws.shtml

The credit card industry has spent untold millions in lobbying fees and donations to Congressional "re-election" funds to ensure the legislation would pass.

It should also be noted that the new bankruptcy laws leave in important loophole which benefit only the wealthy: the homestead provisions and the Asset Trusts.

 

[professor_frink]

hehe and theres plenty losing there houses it seems .....

It's great that you find that funny numbercruncher. Hopefully there will be quite a few people laughing at any misfortune you have in the future.

 

[theasxgorilla]

Sometimes i wonder if the US administration was expecting alot of this, its worth reading the "New Bankruptcy Law which went into effect on Oct 17, 2005"

To say expecting it kind of infers that the politicians are nasty people, and I like to believe that there are a number of them (even in America) that are actually there for the good they can do. But I did blog on this exact topic recently and called it "debt to equity". To me it's the name of the game (and has been for a very long time, but now more than ever things are getting out of balance) and this is another element which props up the institutions of the wealthy by making it harder for those screwed by debt to get off the hook. Knowing this, what do you do?

 

[numbercruncher]

It's great that you find that funny numbercruncher. Hopefully there will be quite a few people laughing at any misfortune you have in the future.

I didnt quite mean that how you took it.

There no misfortune in this, just the biggest scam in financial history as far as i can see. I say good on people for walking away from these homes, worth less than what they paid for them and bought under fraudulent circumstances for the better part.

But anyhow ask yourself why they are losing there homes, it was armies of crooked mortgage brokers backed by wall street sharks that repackaged this scam as a sure fire investment . And thats before we even start on the Fed who facilitated this monster bubble of all monster bubbles with low interest rates.


There always comes a time to pay the piper and if it seems like its too good to be true then it probably is (ie/ Houses rising in value 10pc a month what a joke)

So the more i think about it i do think its funny, hilarious infact.

 

[numbercruncher]

Knowing this, what do you do?

You refer to that dusty old book ...


"Neither Borrower nor lender be"

 

[theasxgorilla]

There always comes a time to pay the piper and if it seems like its too good to be true then it probably is (ie/ Houses rising in value 10pc a month what a joke)

So the more i think about it i do think its funny, hilarious infact.

Geez numbercruncher...how old are you? Do you live in a real society or are you holed up in someones basement somewhere with painted over windows???

I think you are missing the perspective of the bigger picture.

 

[Kathmandu]

Geez numbercruncher...how old are you? Do you live in a real society or are you holed up in someones basement somewhere with painted over windows???

I think you are missing the perspective of the bigger picture.

Bring out the Gimp.

Dave

 

[numbercruncher]

Well Gorilla i just dont get it then.

Explain it to me because it sure doesnt make much sense, lend people money on an ARM knowing full well they cant afford repayments when reset time comes, the borrower buys it under the pretext that house prices rise forever and interest rates will "never" go up and if they do they just sell and make squillions, wall street then packages the mortgage as an awesome aaa bond and suckers come from all over to buy them. And im spost to fee l sorry for someone in this equation ?


On a local level Average wages cant buy average homes anymore, prices according to posters here show houses rising more every year than average after tax incomes. Houses cost more of peoples incomes now than they did during 18pc interest times. And whilst some of us say this is unsustainable and destined to end in tears , im told im missing the perspective of the bigger picture, i dont get it ....

Please explain this bigger picture.

 

[numbercruncher]

Bring out the Gimp.

Dave

Hows that fishing shack coming along Davo? any miners snapped it up yet?

 

[Kathmandu]

Hows that fishing shack coming along Davo? any miners snapped it up yet?

Be a few months yet before I put it up for sale, but thanks for asking.

Dave

 

[theasxgorilla]

Please explain this bigger picture.

Take a look around, there is enough to go around. And while you're at it you might take time to notice that not everyone is as smart as you are and some of the people caught up in this situation also didn't see the big picture and only wanted what they were told they could have; a place of their own to live.

 

[numbercruncher]

Take a look around, there is enough to go around. And while you're at it you might take time to notice that not everyone is as smart as you are and some of the people caught up in this situation also didn't see the big picture and only wanted what they were told they could have; a place of their own to live.

I prefer to look on the bright side, out of every Joe Blow loser in this fiasco there will be a joe blow winner, ok the guy who got sucked in as the last aboard the scam loses, but not much, he didnt have much in the first place, probably not even a deposit, just a dream that never was.

The winners are the people who next own the houses after forclosure, or anyone needing a home for that matter, house prices in the US have dropped considerably, all of a sudden making them affordable again for the masses.

Good result.And itll clean up the risky overleveraged credit market, hopefully in an orderly fashion.

Thanks for the chat though Gorilla, i always respect opinions from all angles, Ill just never surrender my own opinion even (if Im in the minority seat) is all