Market forces should be dictating the direction of investments
4. Never allow SMSF to purchase residential property.
You don't, you just leave people alone to buy what they want.I guess my point is this, how do you bridge the gap between rich investor bidding on his 10th property with money to burn and the FHB with 2 kids, bidding on his first house?
Big news, coming from NAB imo.
Reading a lot of the comments on various property articles lately suggests there is carnage out there, and it only hasn't been reflected in property indexes because sellers haven't adjusted expectations downwards yet. But the falling clearance rates since mid 2010 suggest buyers aren't willing to pay 7 - 8 times earnings for a home. Could more 'bearish' mainstream articles like these cause a flood of negative gearers rushing to the exit?
What constitutes "sound investment policy" is a matter of some debate and not under examination here. Yes you can invest in undervalued businesses that are trading at a discount to valuation for the purpose of achieving a "margin of safety".Sound investment policy does not change over time, Infact those that think it does are destined to get severely burnt (the are the ones saying "it's different this time") the most recent crash was yet another example of how even 30 years after his death grahams teaching would have saved millions of people from losing their life savings, if they had just put his teaching into practice.
To me having a contrarian view of what is printed in "mainstream" media has generally been of great benefit in the successful pursuit of increasing my financial wealth.
Stocks go up, stocks go down as do property prices. Investing in them requires sound investment decisions and in the case of property in particular long term thinking and planning. So many regard investment as a "quick buck' and get burnt accordingly.
The more the talk of impending doom the more I know it is getting close to the time to buy. When the taxi driver starts giving me stocks tips and the market and media is full of (overley) positive hype, I know it is getting near the time to sell.
I don't really understand what the exact question you are asking me is.
As I said before pe is price to earning ratio,
Are you asking how you calculate the pe on property or what a a fair pe is to expect when purchasing.
Actually notable doomsayers who were not mainstream media (like Peter Schiff) in the U.S. called the housing crash and GFC there. The financial media (CNBC and such) didn't see it coming. The warning signs were there for those willing to examine the data and evidence. Keeping you head buried in the housing bubble quicksand will not serve you well. The evidence for an impending correction is mounting for those who chose to listen.Anyone making a decision to start "rushing for the exit", or panic selling any investment not just property, based on a bankers view or anyones (in particular the media) for that matter is doomed to financial failure.
I am certain that the millions of property investors in the U.S., Ireland, U.K., Japan etc. also thought property was solid long term investment. Unfortunately they were wrong.Stocks go up, stocks go down as do property prices. Investing in them requires sound investment decisions and in the case of property in particular long term thinking and planning. So many regard investment as a "quick buck' and get burnt accordingly.
Go for it, catch the falling knife, someone needs to buy on the way down to cushion the fall.The more the talk of impending doom the more I know it is getting close to the time to buy.
I am asking what is the current price (or current value) to earnings ratio of residential property.
hello,
http://www.theage.com.au/business/inflation-rate-drops-to-decade-low-20110125-1a3if.html
oh well, not looking good againstthegrain for another rise brother,
look its just the way it goes, life is a funny journey, ups and downs but you just have to plod along
the great thing about Australia still plenty of opportunity, perhaps if you save and work a bit harder your position may change, get a promotion, dont be a slacker
thankyou
professor robots
The only tax on capital profit should be on realisation (CGT) and that should reward long term investment as noted earlier. Ken Henry though does not agree, preferring to tax "what cannot be moved" in the form land taxes as well. This though strikes me as a soft option. Isn't it better to deal with holes in income tax net to make that tax base more robust ?Can some body explain why they believe a tax based on asset value would be better than a tax based on earnings.
After all any tax must be paid from earnings, so shouldn't it be based on earnings?
I think focusing on negative gearing as the evil of all evil's in relation to property investing is a bit silly, after all it's only a temperary situation generally.
Today I was listening to the news on the radio and they said that it was forecast that property would go down Australia Wide about (wait for it) .5% this year. That is not a typo they said .5% Big Deal! My rent keeps coming in, my tenant is on a 12 Month lease, my property is walking distance to beaches, transport, supermarkets, clubs and pubs. To me a drop in price more than 20% would make me reconsider my position only because I would have to start looking to buy up again.
What happened 4 years ago? They said subprime will come to Australia? It didn't.
Then The GFC came 2 years + ago and they said Australian property will crash, it didn't.
Some idiots were saying fiat currency was a thing of the past and a new gold standard would come, it didn't.
So while we are at it how many people on this forum are predicting Australian property crashes of 40% like that Professor Keen said would happen? Put your signature to that to that if you are game.
See ya got to go check prices on realestate.com, I might be lucky to see a .5% reduction.
if you want an idea of a certain market you can you can just work it out based on median price to median annual rent. this can give you a gross yield to price ratio.
However since your probably not going to be investing in a redsidential index fund then market wide statistics are much less important. so it is best to work it out on each indiviual property. to work it out i normally use this calculation.
Gross annual rent - 20% (rates, matainance etc.) = estimated net earnings
Purchase price (or current value) / estimated earnings = P/E ratio
A P/E of less than 22.5 is desireable, less than 20 prefered.
yeh technically thats a fudged PE then, cos borrowing costs will turn that PE ratio to absolute ****, most likely negative. SO unless ur buying properties 100% in cash, im afraid its not a good calculation.
Also in property you refer to cap rates and Years Purchase, not PE. Essentially the same tho
I dont know where you think this supposed demand is coming from, we are at real risk from an unemployment > real estate led recession. Not saying its 100% going to happen but you would have to have rocks in your head to think prices can continue to go up higher than the rate of real wages growth.
What constitutes "sound investment policy" is a matter of some debate and not under examination here. Yes you can invest in undervalued businesses that are trading at a discount to valuation for the purpose of achieving a "margin of safety".
But as I stated before, and you have yet to refute, "thorough analysis" (however that is interpreted) is not a guarantee of safety of principle or return on investment but a part of the due dilligence process in assessing an investment. Hence, defining the term "investment operation" the way Graham does is faulty logic IMO.
Also in property you refer to cap rates and Years Purchase, not PE. Essentially the same tho
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