The future of Australian property prices

[Value Collector]

What would Warren Buffet know about RE?



http://www.news.com.au/finance/mone...way-shareholders/story-e6frfmdr-1226836794534

He does like Real Estate as a class, his main problem is price, He says its hard to find real estate investments at a price that would excite him.

 

[trainspotter]

He does like Real Estate as a class, his main problem is price, He says its hard to find real estate investments at a price that would excite him.

Sorry ... I must have missed this emoticon ...

He also said this "focus on what an investment will produce, not its price"

 

[Wysiwyg]

He also said this "focus on what an investment will produce, not its price"

He outlasts everyone in the market. While everyone is "dancing in and out of the market", he is looking at accumulating business certainties. Far sighted he surely is though I wonder if he is addicted to 'more'. How much is enough?

 

[tigerboi]

Smartest property investor is my GF she
Bought a 1 bed unit at balmain in 1983
For $47,000 sold it last year for $415,000
Put it into the 5 bed home at camden worth
$440,000.
She paid balmain off in 10 years by paying
The high interest in the recession we had
To have, she kept paying the high payments
After interest rates came down & it was
Paid off real quick.smart girl...tb

 

[Klogg]

"focus on what an investment will produce, not its price"

An asset isn't a good purchase at any price - i.e. Value is a function of price.
For example, you wouldn't pay $1.20 for a $1 note, but you'd definitely pay 80c.

He's simply stating that one should focus on the productive output of the asset and not on price fluctuations - the quote has been taken out of context.

 

[Vixs]

He outlasts everyone in the market. While everyone is "dancing in and out of the market", he is looking at accumulating business certainties. Far sighted he surely is though I wonder if he is addicted to 'more'. How much is enough?

He's doing his job. There's never enough when you're a fund manager, it's your job to create more.

 

[sydboy007]

Smartest property investor is my GF she
Bought a 1 bed unit at balmain in 1983
For $47,000 sold it last year for $415,000
Put it into the 5 bed home at camden worth
$440,000.
She paid balmain off in 10 years by paying
The high interest in the recession we had
To have, she kept paying the high payments
After interest rates came down & it was
Paid off real quick.smart girl...tb

$47K of '83 dollars was $147K of 2013 dollars.

How much did the starta fees and council rates cost over the 30 years?

How much interest + management fees did she pay?

How much did the insurance cost?

How much maintenance and renovations costs did she pay?

Probably doesn't look like such a great annual return once you factor in inflation and holding costs.

 

[sydboy007]

He outlasts everyone in the market. While everyone is "dancing in and out of the market", he is looking at accumulating business certainties. Far sighted he surely is though I wonder if he is addicted to 'more'. How much is enough?

He's handing a billion a year of his wealth to the Bill and belinda Gates foundation with the proviso it has to be spent
in that year.

He lives in the house he bought with his wife in the 50s, drives some bog standard car and wears off the rack suits. He seems pretty grounded for one of the richest men in the world.

I can't honestly say I'd be living such a sedate lifestyle if I had his $$$

 

[Mrmagoo]

Smartest property investor is my GF she
Bought a 1 bed unit at balmain in 1983
For $47,000 sold it last year for $415,000
Put it into the 5 bed home at camden worth
$440,000.
She paid balmain off in 10 years by paying
The high interest in the recession we had
To have, she kept paying the high payments
After interest rates came down & it was
Paid off real quick.smart girl...tb

Don't know how smart you would need to be to buy property as nuthing but a twinkle in your mothers eye.

 

[Value Collector]

Sorry ... I must have missed this emoticon ...

He also said this "focus on what an investment will produce, not its price"

Yes, focus on what the investment will produce, as this is where you should aim to generate your profit, rather than hoping the price goes up next week, etc.

But price is an extremely important factor for buffet, not in the sense that he cares about where the price goes the week after he bought, but the price has to be low enough to justify the investment.

 

[Value Collector]

He outlasts everyone in the market. While everyone is "dancing in and out of the market", he is looking at accumulating business certainties. Far sighted he surely is though I wonder if he is addicted to 'more'. How much is enough?

He says he enjoys the process of investing, like an ongoing puzzle that needs solving, its not about money for him ( except that $$$ is his game points) he has already given away the bulk of his fortune to charity.

 

[Value Collector]

$47K of '83 dollars was $147K of 2013 dollars.

How much did the starta fees and council rates cost over the 30 years?

How much interest + management fees did she pay?

How much did the insurance cost?

How much maintenance and renovations costs did she pay?

Probably doesn't look like such a great annual return once you factor in inflation and holding costs.

Those costs wouldn't be deducted from your capital gain, you would have paid for them with the annual rent you were earning ( or saving if you lived in it)

I constantly see people make similar comments on this thread, its like everyone forgets to add in the rent.

As soon as somebody says they have made a $x capital gain, people say you have to factor in all the annual costs against that gain, but if your going to factor in those annual costs, then you have to add in the 100's of thousands of $$$ of rent earned over that time.

 

[qldfrog]

True, but it may not be that positive and there is the opportunity cost:
you should indeed added both these costs and incomes and then compare these on cash return or if braver on the asx200.
then it becomes meaningful.
but I also agree that it is a much better outcome than having bought a new luxury car!!!!

In any case, I would be surprised if this was not a good outcome considering how overpriced the oz market is for real estate..
causes have been dioscussed ad nauseum here

 

[AAA]

In any case, I would be surprised if this was not a good outcome considering how overpriced the oz market is for real estate..
causes have been dioscussed ad nauseum here

I'm ofter bemused from discussions such as this with the same people stating that the total long term returns fron RE investment are crap whilst at the same time property is expensive.

 

[Value Collector]

True, but it may not be that positive and there is the opportunity cost:
you should indeed added both these costs and incomes and then compare these on cash return or if braver on the asx200.
then it becomes meaningful.
but I also agree that it is a much better outcome than having bought a new luxury car!!!!

In any case, I would be surprised if this was not a good outcome considering how overpriced the oz market is for real estate..
causes have been dioscussed ad nauseum here

people also make the same mistake in the gold thread,

They compare the price of gold increases from 2000 to present to the price of the asx 200 index over that time, without factoring in the dividends, which gives a phony outcome.

But a property will generally produce a lot more rent than the annual costs, I would be surprised if a landlord on average had to outlay more than 25% of rent received to cover all costs including maintance.

 

[sydboy007]

Those costs wouldn't be deducted from your capital gain, you would have paid for them with the annual rent you were earning ( or saving if you lived in it)

I constantly see people make similar comments on this thread, its like everyone forgets to add in the rent.

As soon as somebody says they have made a $x capital gain, people say you have to factor in all the annual costs against that gain, but if your going to factor in those annual costs, then you have to add in the 100's of thousands of $$$ of rent earned over that time.

You need to account for al costs and income to show what the true ROI was.

Just saying I bought at X in 83 and sold for Y in 2013 isn't very informative. It's what most do when talking about housing. Ignoring inflation over such a long time frame is not good.

I doubt the rent would have totalled to hundreds of thousands over the 30 years, even adjusting for inflation.

 

[sydboy007]

people also make the same mistake in the gold thread,

They compare the price of gold increases from 2000 to present to the price of the asx 200 index over that time, without factoring in the dividends, which gives a phony outcome.

But a property will generally produce a lot more rent than the annual costs, I would be surprised if a landlord on average had to outlay more than 25% of rent received to cover all costs including maintance.

then explain the below graph, or is interest something else than a cost??

 

[trainspotter]

You need to account for al costs and income to show what the true ROI was.

Just saying I bought at X in 83 and sold for Y in 2013 isn't very informative. It's what most do when talking about housing. Ignoring inflation over such a long time frame is not good.

I doubt the rent would have totalled to hundreds of thousands over the 30 years, even adjusting for inflation.

Oh really? Sept Qtr 1999 average rent was $230 per week for Sydney. There is 150k PLUS before I even begin to look further into this rash statement of yours. If housing is such a sh1te investment and there is no gain to be had WHY OH WHY is it SOOOOOOOOOOOOOOOO expensive and people are still making money out of it?

The most recent Census data shows us that of those homes occupied, 29.6% are rented (investment properties). Based on this data, if we assume that without the private sector building homes for investment purposes, the public sector would have to account for 29.6% of all dwelling approvals to cover those in rental accommodation. Over the past 12 months this would have equated to 43,684 dwelling approvals. If we also consider that the median home price across Australia as at October 2012 was $386,000, and if the Government had to buy the land and build 43,684 homes, this would cost the Government of the day $16,861,900,480 based on the number of approvals and the median home price.

http://blog.rpdata.com/2012/12/negative-gearing-and-its-impact-on-the-housing-market/

P.S. Yes you can negative gear shares a swell !!

 

[Wysiwyg]

Considering the total price paid for the dwelling -- Initial price + interest paid for the term of the loan + council rates paid for the duration of hold + maintenance required for the duration of hold + renovation/improvement to the dwelling over the duration of hold + utility services (gas, electricity, water, telephone, internet) + inflation.

However, income producing and capital gaining investment property is another thing.

Additionally, all other properties have increased in price so buying again will take around the same money as received from previous sale.

 

[Value Collector]

You need to account for al costs and income to show what the true ROI was.

Just saying I bought at X in 83 and sold for Y in 2013 isn't very informative. It's what most do when talking about housing. Ignoring inflation over such a long time frame is not good.

I doubt the rent would have totalled to hundreds of thousands over the 30 years, even adjusting for inflation.

Yes, correct. But generally people he don't factor in the income at all.

How much do you think 30years of rent would be? and don't forget to compound it, because the rent would be earning interest.