The future of Australian property prices

[robots]

No,

Please show me anything that guarantees that house prices increase in line with inflation every year.

In fact, if it did we would not have the bubble we have now.

So in fact, a house growing at $20000 as in the example above, which through inference you support, the $20000 increase is chewed up by inflation, exactly the same as interest on the cash.

Because the VALUE of the house is maintained by capital gain (as is the value of the cash by interest on earnings), but the purchasing power of a house worth

$470000 after year 1 ($20000 capital growth on $450000)

is exactly the same as

$470000 in cash after year 1.

What you are obviously saying is that house prices will always outperform inflation, which is clearly wrong.

I know it is impossible for you to believe that cash can outperform property, but perhaps you were not alive during the last time it did, but as with other generation y and younger, you will see it one day, perhaps within the next couple of years ( or if you live in Brisbane or Hobart, perhaps last year)

hello,

and thats what many have been saying MW, property is just rolling along as it does, no bubble

just plenty of people who cant afford to buy a property because they spend there money on hookers, ipods, g, iphones, nitrous, cars etc

oh well

thankyou
professor robots

 

[againsthegrain]

just plenty of people who cant afford to buy a property because they spend there money on hookers, ipods, g, iphones, nitrous, cars etc

Don't forget most of those items are purchased on credit, and the trend is only increasing with the current generation. So who you going to offload your wooden castle onto when most people are spending on hookers?

 

[Tysonboss1]

No,

Please show me anything that guarantees that house prices increase in line with inflation every year.

In fact, if it did we would not have the bubble we have now.

So in fact, a house growing at $20000 as in the example above, which through inference you support, the $20000 increase is chewed up by inflation, exactly the same as interest on the cash.

Because the VALUE of the house is maintained by capital gain (as is the value of the cash by interest on earnings), but the purchasing power of a house worth

$470000 after year 1 ($20000 capital growth on $450000)

is exactly the same as

$470000 in cash after year 1.

What you are obviously saying is that house prices will always outperform inflation, which is clearly wrong.

I know it is impossible for you to believe that cash can outperform property, but perhaps you were not alive during the last time it did, but as with other generation y and younger, you will see it one day, perhaps within the next couple of years ( or if you live in Brisbane or Hobart, perhaps last year)

The way I look at Property investing is as if it is an inflation hedged bond. Meaning you can put say $300K into a property investment and over time the $300K will be protected from inflation, because any resulting inflation will put upward pressure on the price I can sell the house for and also inflation will increase the amount I can charge in rent.

However if you held the $300K as cash, the $300K capital will be steadily going down in value, and after tax you will only enough interest to keep pace with inflation.

So with the cash investment you would have to reinvest all earnings just to tread water, But with the property you can spend the rent left after rates and maintaince and still have your capital keep pace with inflation.

.

 

[robots]

Don't forget most of those items are purchased on credit, and the trend is only increasing with the current generation. So who you going to offload your wooden castle onto when most people are spending on hookers?

hello,

what the g dealer got an eftpos machine? amazing

thankyou
professor robots

 

[againsthegrain]

hello,

what the g dealer got an eftpos machine? amazing

thankyou
professor robots

brothels and car dealers do, amazing technology

 

[medicowallet]

However if you held the $300K as cash, the $300K capital will be steadily going down in value, and after tax you will only enough interest to keep pace with inflation.

So with the cash investment you would have to reinvest all earnings just to tread water, But with the property you can spend the rent left after rates and maintaince and still have your capital keep pace with inflation.

I am sorry you do not understand the concepts of opportunity cost and inflation.

I am also sorry you did not read my posts, because can you see anywhere where I said rent was to be included in our argument, the points I made, were in regards to capital growth in property vs interest on cash. Please, have a read again and see for yourself.

Stop using things which I clearly said, as rebuttals against my own argument.

You fail to take history into account at your own peril.
I will make a fortune during the bust, just as I did last time.

 

[medicowallet]

Don't forget most of those items are purchased on credit, and the trend is only increasing with the current generation. So who you going to offload your wooden castle onto when most people are spending on hookers?

Yes, the baby boomers are going to leave the younglings in a real mess.

Baby boomers, the most selfish, self interested generation in history (and too arrogant to see it)

 

[Tysonboss1]

I am also sorry you did not read my posts, because can you see anywhere where I said rent was to be included in our argument, the points I made, were in regards to capital growth in property vs interest on cash.

You fail to take history into account at your own peril.
I will make a fortune during the bust, just as I did last time.

If you don't want to include rent in your calculations then you should not be including interest. rent is to property what interest is to a cash investment.

 

[medicowallet]

If you don't want to include rent in your calculations then you should not be including interest.

I explained why I was not including rent.

If you do not want to read the content of my posts, then do not respond to them.

You just make yourself look foolish.

 

[Tysonboss1]

Fair enough there would be $350 in rent per week coming in, but there are also insurances, other outgoings, maintenence etc.

I explained why I was not including rent.

If you do not want to read the content of my posts, then do not respond to them.

You just make yourself look foolish.

The above is the only reasoning I saw on why you were not including rent and that reason is a complete laugh.

The costs you mentioned are less than 15% of the total rent collected, so you still have 85% of the rental return in which to include in your calculations.

It's quite simple, if you don't include rent then don't include interest, I am sorry but it is your calculations that look foolish.

 

[medicowallet]

The above is the only reasoning I saw on why you were not including rent and that reason is a complete laugh.

The costs you mentioned are less than 15% of the total rent collected, so you still have 85% of the rental return in which to include in your calculations.

It's quite simple, if you don't include rent then don't include interest, I am sorry but it is your calculations that look foolish.

No, I was actually also referring to this.

Note how I say exactly what you are saying in the sentence. I guess you also fail to recognise this, how convenient.

This stuff has been done to death in the thread before, and even though on historical returns, property outperforms cash, at the moment there is a clear case for arguments that short to medium term, even cash can be competitive with or outperform housing.

Obviously you are trying to save face, I understand that.

But clearly, as I explained, the interest on cash is more than the capital return that the op suggested.

Do you understand this? or do I have to spell it out in more simple terms for you?

Please do yourself a favour and read about opportunity cost and inflation. Also learn to concentrate when you read something, so that you actually address the topic in question, and don't invent something that does not exist.

And finally, when someone actually writes what you are arguing against them about, it makes you look foolish.

It's quite simple, if you don't include rent then don't include interest, I am sorry but it is your calculations that look foolish.

As I have said before, the goalposts were set by the op, I clarified it (acknowledging that rent makes a difference) and you go to change them so that it somehow supports your futile position.

That is quite indecent in the context of the discussion, considering the fact that I have stated on a few occasions that this is the case.

 

[medicowallet]

just plenty of people who cant afford to buy a property because they spend there money on hookers, ipods, g, iphones, nitrous, cars etc

oh well

thankyou
professor robots

Lucky you do things in moderation hey bots?

You also forgot to put train fares.

 

[Tysonboss1]

1, No, I was actually also referring to this.


2, But clearly, as I explained, the interest on cash is more than the capital return that the op suggested.

1,The part you were refering to does not mention rental returns at all.

2, I get what you are saying but what I am saying, But you are thinking about it in the wrong context.

You are using the cashflow (interest) of one investment example ( cash investment ) to argue that it is going to perform better against another investment example, but refusing to take the cashflow of the second investment into account, which in my view is dumb, and gives your analysis bogus results.

You are yet to give a sound reason to why when comparing the probable outcomes of investing in to differrent asset classes that you would use the cashflow from one in your results but ignore the cash flow from the second.

Interest on cash is not capital gain, it is cash flow, A cash investment has zero capital gain period, adding back the interest (net of taxes) is the same as adding back the rent net of taxes and outgoings.

 

[againsthegrain]

Hold on, the example that is being discussed, is the property paid out in full or currently being paid off while rented out?

Paying interest back to the bank on a property which would definately be negatively geared if purchased in the last 1 - 2 years would be another factor to take into account.

 

[Tysonboss1]

Hold on, the example that is being discussed, is the property paid out in full or currently being paid off while rented out?

Paying interest back to the bank on a property which would definately be negatively geared if purchased in the last 1 - 2 years would be another factor to take into account.

Leverage is a separate topic, again if you want to include leverage then you have to include it in the example of the cash investment, which would also be negatively geared.

I am talking about putting $300K into a property vs $300K into a cash investment.

With leverage the property would win hands down against a cash investment that uses the same leverage.

Property with 7% interest would be funded by - 4% rent cashflow + 3% Inflationary pressure on capital value + 2% growth in demand + cashflow would grow with inflation.

Cash investment with 7% interest being paid and 6% interest being earned would suffer- exponential decay of the capital from negative gearing and then exponential decay of value from inflation.

 

[Agentm]

hello,

and thats what many have been saying MW, property is just rolling along as it does, no bubble

just plenty of people who cant afford to buy a property because they spend there money on hookers, ipods, g, iphones, nitrous, cars etc

oh well

thankyou
professor robots

interesting that the top executives of the nation can see what everyone sees, a bubble, make recommendations to try and stem its impact, yet you cant see it robots..

any reason why?

 

[robots]

hello,

well done Tysonboss1 great explanations, true people's poet brother

thankyou
professor robots

 

[schnootle]

The way I look at Property investing is as if it is an inflation hedged bond. Meaning you can put say $300K into a property investment and over time the $300K will be protected from inflation, because any resulting inflation will put upward pressure on the price I can sell the house for and also inflation will increase the amount I can charge in rent.

However if you held the $300K as cash, the $300K capital will be steadily going down in value, and after tax you will only enough interest to keep pace with inflation.

So with the cash investment you would have to reinvest all earnings just to tread water, But with the property you can spend the rent left after rates and maintaince and still have your capital keep pace with inflation.

If you are happy to assume that prices are guaranteed to rise with inflation, that makes perfect sense. The argument would be no different with blue chip shares and spending the dividends, but are you happy to assume that share prices will always go up with inflation?.

 

[Tysonboss1]

If you are happy to assume that prices are guaranteed to rise with inflation, that makes perfect sense. The argument would be no different with blue chip shares and spending the dividends, but are you happy to assume that share prices will always go up with inflation?.

Offcourse there is going to be ups and downs in the property market, just as there is in the stockmarket. ( however volitility is alot less in property and the property market moves much slower)

Nothing is guaranteed in shorterm situations, I mean you can't guarantee that property will increase at exacty the inflation rate each year. But you can guarantee that over time, all else being equal even excluding population growth. property will rise with the rate of inflation.

Again with shares regarding inflation, If the share price is backed by solid longterm assets and the assets value and cashflow rise along with inflation then yes over time there would be growth in the shareprice purely from inflationary pressure outside any business growth.

 

[AlexG1]

interesting that the top executives of the nation can see what everyone sees, a bubble, make recommendations to try and stem its impact, yet you cant see it robots..

any reason why?

Hmm - A CGT on owner occupied dwellings..... That seems like a particularly bad idea to me - and I very much doubt it would ever fly politically.

Owning a PPOR is (I believe) a pretty important part of planning for life after work. It chops out the rental income from the equation for starters, and as many have pointed out hedges the cash involved against inflation. Many might choose to downsize - and why should they be taxed (again) on post-tax money that they put into a property. The purpose of that property is not to 'make money' but simply to live.... One could argue that it's a tax on the fundamental human rights article 25.

Back onto topic - I've certainly enjoyed listening to the informed opinions of many on this forum and I'm hopefully gaining an education from it . I've been considering putting money into an investment property, but I believe the timing at the moment is pretty bad for that - so I'll keep cash reserves in high interest accounts and invest in carefully chosen shares when the opportunities arise. Why shares? I believe there ARE bargain shares to be had and I don't need to borrow to buy them. I don't believe there are any bargain properties (or at least in my knowledge base there are not).

I certainly like the concept of property as a hedge against inflation, and I agree that over the long term it's more than likely to at least rise with inflation. Seems to me it's outstripped inflation by far too much at the moment and I do wonder where continued demand for these prices can come from given the amount of private debt in the country.

I personally have friends who are so leveraged into their house that when their car broke down, they didn't have the spare funds to get it fixed. Sure - it's an awesome place, but you need to have other things to live as well as a house... I know of a lot of people that are leveraged to the hilt - if they can't afford to fix a car, then they can't afford a hike in interest rates......

AlexG