House prices to stagnate for 'years'

[theasxgorilla]

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.

This is the bright side...hmmm. Please let us know if someone ever gives you the power to make important decisions! And be careful what you say about Joe Blow...he's the boss around here

 

[numbercruncher]

lol, Ive toyed with the idea of pursuing a career of important decision making , but figured someone from the new wold order would bump me off before i even managed to crawl out of the basement window!


Despite what you said about Joe Blow, I think hes a top bloke

 

[Fleeta]

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

Thanks ASX.G - love your blog by the way, makes me want to go to Sweden again!

The house was in Moonee Ponds, to the north of Melbourne.

I agree with your comments on not being able to make good properties cash flow positive. I did the maths on mine and we would have had a rental yield of 3.4%!! Pretty pathetic hey. Assume this is after tax due to negative gearing benefits, at the moment you can get 6.7% interest, which is around 3.9% after tax depending on where you sit.

I'm taking the proceeds from my house and putting into high yielding, fully franked stocks. If I can get an average of 4.5% fully franked, then any capital gains are a bonus.

However, with the CGT exemption on principle residence, it makes no sense to rent does it....

BTW, I will be as rich as a baby boomer in about 20-30 years when my parents kick the bucket....now just to stop them from spending it all in the meantime!

 

[numbercruncher]

Great little piece on 60 minutes tonight about the mortgage madness .....

In the following Peter Overton demonstrates how cushy his baby boomer parents copped it back in the day ....

PETER OVERTON: Just to show you how crazy it has all got, how tough it is to afford a home these days, this is the street I grew up in. In the late '60s, my parents bought their house for $15,000. That was about three times the average salary. Now, the average Australian house price is $420,000. That's nearly 10 times the average wage. But no matter how hard it gets, we're obsessed with owning our own home ”” whatever the cost.

http://sixtyminutes.ninemsn.com.au/article.aspx?id=289100


The story went on to support one of my many arguments with this "house price boom" and that is that its sucking soooo much money out of other areas of the economy, the people in the article where saying how at the end of there month they have like 100 bucks or less left over .... crazy .... ie/ less money sent on Entertainment, shopping, holidays etc etc etc ....

Gov better hope the Mining boom never wobbles!


How did the sales go this w/end Robots ? Break anymore records ?

 

[robots]

hello,

yes another big weekend, 85% clearance rate, with around 100 more properties on sale as opposed to same time last year

bumper prices for all, looks as though a lot coming on for spring but general concensus is that demand will pick them up with ease

I say good if people dont spend as much money on entertainment, Harvery Normans, restaurants, holidays etc

its only the start of the affordability crisis here in Aus, all being part of the world economy which aus entered seriously 6-7 years ago

thankyou

robots

 

[numbercruncher]

Heya Robots!

Thanks for your reply, glad too hear you had another rip snorter!

Well thatll be good news for all those folks on 60 minutes tonight, instead of foreclosure they can sell up and reap the Profit$!

So you say its only the beginning of this "affordability" crisis, thats at 10 x Income, whats your tip for the future 20 x income ? Multi generational mortgages? Or maybe average wages will jump substantially keeping the multiples down? (giggles at that idea) Maybe theyll slash Interest rates to coincide with price rises to keep around the 10x multiple?


Thankyou.


ps those people who are in the Business of entertainment, Harvery Normans, restaurants, holidays etc might disagree with you, but who knows as long as their house prices go up they will perhaps look the other way

 

[wayneL]

its only the start of the affordability crisis here in Aus, all being part of the world economy which aus entered seriously 6-7 years ago

A startling incongruence in the two parts of this statement.

 

[robots]

hello,

absurd, no way

thankyou

robots

 

[wayneL]

hello,

absurd, no way

thankyou

robots

I said incongruent, not absurd.

 

[toothfairy]

How did the sales go this w/end Robots ? Break anymore records ?

I am quite surprised for someone so actively debating about the trends of real estate prices on this thread is not actively following sales every week.
It is readily available on newspapers, probably just slightly more reliable sources than "60 minutes".
I keep track of prices for years but I still do not predict. I can only tell price history.

 

[numbercruncher]

..... probably just slightly more reliable sources than "60 minutes".

LMAO

 

[Mofra]

It is readily available on newspapers, probably just slightly more reliable sources than "60 minutes".

Quite a number of properties were sold on auction day Saturday, but many were after failing to reach reserve and had to be negotiated with either the highest vendor (or in two cases I know of in Nth Carlton, Melb) with whoever walked in the door after the sole bid in each was a vendor bid.

REIV window dressing doesn't fool everyone, especially those of us in the industry

 

[theasxgorilla]

REIV window dressing doesn't fool everyone, especially those of us in the industry

...and hopefully those selling houses don't tell those in the industry what they paid for them...lest the salesperson let the stats and not the market determine their belief as to the potential selling price.

 

[numbercruncher]

Our American cousins arnt having much luck with there surefire bricks n mortar Investments ....

S&P Says Housing Prices Fell in 2Q by Steepest Rate Since Its Index Was Started in 1987


NEW YORK (AP) -- U.S. home prices fell 3.2 percent in the second quarter, the steepest rate of decline since Standard & Poor's began its nationwide housing index in 1987, the research group said Tuesday.

The decline in home prices around the nation shows no evidence of a market recovery anytime soon, one of the architects of the index said.

http://biz.yahoo.com/ap/070828/home_price_index.html?.v=10


Imagine the same result say in Melbourne in a 3 month period , buy a House 440k ( -3.2pc 14k, -stamp duty 20k , - realty comission to sell 15k , - Interest, conveyancing etc 10k , = 54k loss ouchers.

Hell you just need that 440k house to rise 10pc just to break even ..

Lets hope it doesnt happen here hey, after all when did we ever follow US market trends ?

 

[KIWIKARLOS]

the difference in aus is that we dont have the huge inventories of unsold properties and very limited space to build new houses.
Rents are huge at the moment and will prob only go higher so still good for investing. That said i dont think propoerty is a good investment in any case compared to historic returns from the stock market.

In Sydney there are units and townhouses going up everywhere and houses don't seem to be sitting there for long before been snapped up but im located about 5 mins east of parramatta so I'm not sure how the further out suburbs are doing.

In my opinion we won't see a boom again for a long time but unless there is some serious land opened up for development or a major economic event we will rise between 1-5 % PA in most areas for the next few years

 

[Sean K]

Our American cousins arnt having much luck with there surefire bricks n mortar Investments ....

Lets hope it doesnt happen here hey, after all when did we ever follow US market trends ?

NC, please humour me for a moment.

I am trying to understand your interest in this thread.

Do you own a house?
Do your friends or family own a house?
Do you own shares or units in any Australian real estate entities with interests anywhere?
Are you projecting a downtrend in the Australian the housing market?
Are we headed to a bottom?
Are you thinking of investing in the housing market when you think there is a bottom?
Are you trying to convince us to sell our houses and move into rental?

I am very confused as to your intent in this thread, other than to spell gloom and doom.

 

[explod]

NC, please humour me for a moment.

I am trying to understand your interest in this thread.

Do you own a house?
Do your friends or family own a house?
Do you own shares or units in any Australian real estate entities with interests anywhere?
Are you projecting a downtrend in the Australian the housing market?
Are we headed to a bottom?
Are you thinking of investing in the housing market when you think there is a bottom?
Are you trying to convince us to sell our houses and move into rental?

I am very confused as to your intent in this thread, other than to spell gloom and doom.

Sometimes there is a fine line between gloom and doom and reality. Some want to see the light and some dont'.

Matters are absolutely dreadful for ordinary Americans as things are panning out and unfortunately some of it will rub off.

 

[numbercruncher]

NC, please humour me for a moment.

Sure

I am trying to understand your interest in this thread.

ok

Do you own a house?

No

Do your friends or family own a house?

Yes

Do you own shares or units in any Australian real estate entities with interests anywhere?

Yes

Are you projecting a downtrend in the Australian the housing market?

Have i not been clear on that ? Yes

Are we headed to a bottom?

One day

Are you thinking of investing in the housing market when you think there is a bottom?

Maybe , Maybe not

Are you trying to convince us to sell our houses and move into rental?

No

I am very confused as to your intent in this thread, other than to spell gloom and doom.

For the most part im adding publicly available information about a segment of the financial market that imho is operating outside any Historical norms. I cant find anything positive to add in the overall picture, In individual markets i can though

Hope this humoured you

 

[Kathmandu]

Something tells me Number cruncher spends a lot of time over at GHPCF. and trolling on other sites as well.

Dave

 

[numbercruncher]

Something tells me Number cruncher spends a lot of time over at GHPCF. and trolling on other sites as well.

Dave

lollercoaster Davo since when is presenting links and personal opinions on a subject trolling ?

Something tells me that Davo is fretting that his little piece of Queensland mango farm wont return his projected 50pc.

If you guys think Housing prices at 10x plus Earning ratios is good buying, well go ahead knock yourselfs out, Im basically showing its detachment from any time in history.

ps. whats GHPCF ?