The future of Australian property prices

[robots]

hello,

three weeks, alls going well

might see if can extend it to 15yrs, hehehehehehehehehe

thankyou
robots

 

[TOBAB]

I have made my position clear on NG. Now a quick question to the ASF people who want to play around with the tax laws: What is your definition of NG? And what is your take on simply gearing?

 

[satanoperca]

hello,

three weeks, alls going well

might see if can extend it to 15yrs, hehehehehehehehehe

thankyou
robots

Congratulations.

If you make it to four, I will shout ya at the local, need some exercise on the bike.

:alcohol::alcohol::alcohol::alcohol:

 

[MR.]

I would never consider losing 10k let alone 100k

Different circumstances perhaps? If property happened to fall just a percent or two there goes your 10k just in one property alone, you didn’t even get to consider the loss.

our debt equates to 17% of our assets....meaning the other side of the argument is 83% net assets....or equity....

Valued on current property prices which have tripled.

of course I would never dream of paying 500k's or more for a property with 400k debt.....all mine were below 300ks....
I may have to pay 500k's in the future....but it would be with substantial equity and a loan of 200k or less.....my portfolio value would be reflecting similar values for houses at that time...

So you would enter the current $500k market with 60% equity for the purchase and with even more equity in you other properties. That could equate to higher than 90% equity in your investment properties as a total. That’s a pretty safe bet! Perhaps you don't have any other income, now days which is fair enough.

my time frame is around 30 years....so I dont care if there is a hiccup in the short term, or now and agaIn....the long term is my goal....then I will pass most of it onto my children, and family as required..... .

Good on you, a hiccup or two in the future is not going to affect you very much with your current leverage. Your time frame is around 30 years but the bottom of your post states you “hold for 10 years or the mv reaches my sell figure” Perhaps there is no real reason for you to sell at all.

you should be more concerned with govt debt, being imposed on all of us now, to be repaid in taxes in the future, versus the home buyer debt market

Yes it affects us all, from the tenants in our houses, to maintaining property prices.

No, Keen did a lot more than just "highlight indebtedness". He was swanning all over the mainstream media in mid/late 2008 - newspapers, TV (60 minutes, 7:30 report, Lateline), telling Australian's to sell their houses now before values fell by 40% in the next year or two.

Exactly, he did a superb job discouraging buyers at the time. Needless to say, what I think of him now, when he claims sometime in the next fifteen years property will fall by 40%. Ha ! Is that after another 40% rise?

By the way, does everyone know that Prof Keen starts his walk from Canberra to Mt Kosciusko today??? The one where because of the bet he lost he has to wear a T-shirt that says "I was hopelessly wrong on house prices, ask me how!"

Seems like an appropriate day to bag the guy to me.

 

[MR.]

I have made my position clear on NG.

So you did! I don't imagine gov' doing anything with NG. It will upset the apple cart alright!

Just put NG on new houses only and be done with it. Existing arrangements still to be met though!

All properties will fall a bit, they'd come back though! Tax savings in place for new land lords in new houses and by the time the years pass no capital loss. Not my fault people entered into the prop' market when the tenants return is just 3-4% and leverage is in excess to Kincella.

 

[kincella]

you have to sell to realise a loss.....a temporary book loss means little...in the greater scheme of things.....like most property people...we just leave it to sit there and simmer a bit longer...until the market turns...

no reason to sell, no intention of selling in the shorter term.....however I may consider it down the track, when it has tripled in value again......
when I may decide to cash it in .....in order to buy a new car, take a holiday, splurge it on the family etc......
since I am holding several properties ,the idea of giving up one is a possibility, for an extreme event....

the portfolio is my retirement fund...I am in charge, manager, no worries about the govnuts coming in and changing rules, force me into pension mode etc...

I know awhile back the kids thought all the boomers would be cashing in their IP's as they retired, and leave it stuck in a cash deposit.....
that would be the worst possible advice or action for a retiree...
all my boomer mates, intend to hold, just live off the rentals....which should keep pace with inflation and the CPI....unlike the deposits, which stagnate against inflation...
so we have no intention of selling, and will probably pick up a couple more bargains to hold for the long term....
its boring I know....but gives one time to get a life, and do other things

ps I still have a good professional income, coming in to keep my mind in top condition, although I no longer work full time...the escalation in the rental income has afforded me the opportunity to reduce my working hours....much earlier than I anticipated......
so for example today, I went on a shopping spree, picked up some lovely bargains on offer for the family....
then I need to take some time off in the next few weeks, to chill out.....before the next financial year consumes my time again.
All that hard work in the earlier days well and truly pays off....
cheers
ps about the signature..... ie the ten year plan for pay day....sometimes it comes within 3 years....one should have a minimum 10 year plan, then review the plan after that time frame , to check that it still fits the criteria.

 

[UBIQUITOUS]

I have made my position clear on NG. Now a quick question to the ASF people who want to play around with the tax laws: What is your definition of NG? And what is your take on simply gearing?

TOBAB, the vast majority of NGers don't know exactly how it works. They don't even question the logic in it being the only business model in existence where losing money is the name of the game, just to save tax.

What they also don't know is that there are opportunities which are no more risky which can give way more than 10% a year.

Can't lose with bricks and mortar? Well try negative equity and the very strong likelihood now of eventual bankruptcy.

 

[robots]

you have to sell to realise a loss.....a temporary book loss means little...in the greater scheme of things.....like most property people...we just leave it to sit there and simmer a bit longer...until the market turns...

no reason to sell, no intention of selling in the shorter term.....however I may consider it down the track, when it has tripled in value again......
when I may decide to cash it in .....in order to buy a new car, take a holiday, splurge it on the family etc......
since I am holding several properties ,the idea of giving up one is a possibility, for an extreme event....

the portfolio is my retirement fund...I am in charge, manager, no worries about the govnuts coming in and changing rules, force me into pension mode etc...

I know awhile back the kids thought all the boomers would be cashing in their IP's as they retired, and leave it stuck in a cash deposit.....
that would be the worst possible advice or action for a retiree...
all my boomer mates, intend to hold, just live off the rentals....which should keep pace with inflation and the CPI....unlike the deposits, which stagnate against inflation...
so we have no intention of selling, and will probably pick up a couple more bargains to hold for the long term....
its boring I know....but gives one time to get a life, and do other things

ps I still have a good professional income, coming in to keep my mind in top condition, although I no longer work full time...the escalation in the rental income has afforded me the opportunity to reduce my working hours....much earlier than I anticipated......
so for example today, I went on a shopping spree, picked up some lovely bargains on offer for the family....
then I need to take some time off in the next few weeks, to chill out.....before the next financial year consumes my time again.
All that hard work in the earlier days well and truly pays off....
cheers
ps about the signature..... ie the ten year plan for pay day....sometimes it comes within 3 years....one should have a minimum 10 year plan, then review the plan after that time frame , to check that it still fits the criteria.

hello,

great post Kincella, hehehehe thats right every boomer was going to offload all their properties and cause a crash

just fabulous the thoughts many come out with, i like it boring too Kincella, plain old vanilla style real estate investment, slow & steady

with the tenant nibbling away at the principle, and presto 20yrs have passed and we are LARGE

thankyou
robots
ASF Investor of the Year 2005,06,07,08,09,10

 

[drsmith]

My favourite graphs.

Under what economic environment is the rise in interest payments (relative to household disposable income) and household gearing measures sustainable ?

 

[kincella]

on the contrary....all those 30% PI people know exactly how it works, its quite simple really,,,,first couple of years it may be negative, showing a loss which is offset against other taxable income.... then as the years roll on, the capital on the loan is reduced, the interest cost reduces accordingly, the rental income increases and before you know it, its postively geared and showing a profit.....

oh, and lurking in the background is the capital growth.....just because I use a figure of 10% does not mean thats the best one can do.....last year in 2009 there were plenty of suburbs that grew 30-40%.....bingo in just one year.....
bit like feeding plants on a regular basis, after awhile...a sudden spurt of green shoots and growth appears...
most investors never see the line some of you doomsdayers take.......
its when the same investors takes off into the risky world of margin loans, and borrowing to fund depreciating assets, that brings them down....
not the PI investment....
look at storm investors, hocked their PPOR to the hilt, handed the money over to some shonks to invest in shares...or whatever risky plans....
there are plenty of Bernie Maddoffs and Storm type people out there to relieve you of your money...

at the opposite side of the fence, there is plenty of data to prove the house price growth...year in year out.....just 1986 to 2006...prices went from 80,000 to 400,000.....what is it now after the GFC.....450k's or 540k's

I guess you could not get your mind around an investment that has shown capital growth of 700-800% in 8 years, and returns a decent annual income, the original loan is miniscule compared to the asset growth......
its only returning a 5 figure sum atm, but it wont be long and it will be a 6 figure return.....that is just one example.....in my portfolio......

the others are the boring estimated 10% growth babies.....they do not require attention on a daily basis.....just normal nurturing and attention a couple of times a year...

 

[MR.]

you have to sell to realise a loss

Although not a realized loss really, I bet many stock owners wished they did something sooner than to see their "loss" in paper absorb half of their holdings!

like most property people...we just leave it to sit there and simmer a bit longer...until the market turns...

Which could be many years......

the escalation in the rental income has afforded me the opportunity to reduce my working hours....much earlier than I anticipated......
so for example today, I went on a shopping spree, picked up some lovely bargains on offer for the family....
then I need to take some time off in the next few weeks, to chill out.....before the next financial year consumes my time again.

Ha Ha Ha, Thanks for explaining what a "reduction in working hour’s means". You enjoy this kind of talk! ? ........ Clearly you explain how great your investments have been, so should I/we be envious of you? ....... You have also explained the expense in a 500k house and you'd need equity of in excess of 60% "if" you enter this market now....... Poor form really.........

 

[MR.]

While I do not agree with all of Keens statements, he certainly has made me aware that RE does not make the world go round but debt does.

Cheers

I do like Keen pointing out the debt levels in housing. I underestimated how stupid people can be with low interest rates and maybe that was his down fall as well.

ASF Investor of the Year 2005,06,07,08,09,10

I like that. Should drop the "10" though, stick it back up at the end of the year.

 

[kincella]

MR methinks you would just rather argue any point than take notice of the other side....you dont seem to get it...
smiths chart shows housing debt 30% with total debt 20% but the ref to those numbers is missing..., the chart I put up clearly showed it was below 20%
most of you that are against property have been raving on for yonks about how much debt property people are sitting on.....so it all must come crashing down
even 30% debt means 70% equity or asset...the other side of the coin...
this 20-30% is a far cry from what you guys have been perpetuating, and more in line with my own facts and figures

you guys go on about how can a fhb afford to buy a house at 540k....so prices must come crashing down.....well if the fhb is stupid enough to believe he can afford to pay the interest on a 400k plus loan....than he deserves to lose....that is a high risk play....and assuming he is on the low double income household....
I suggested I would not take on a debt of more than 200 k's...thats where the difference lies.....a debt of 200ks is manageable for me.....regardless of how much money I earn or how much cash I have....I would never take on what I deem a higher risk...
I dont expect anyone to be envious....it is just an example of my low risk approach to investing.....for all the other readers out there...who are looking for information and options in the property market

 

[UBIQUITOUS]

well if the fhb is stupid enough to believe he can afford to pay the interest on a 400k plus loan....than he deserves to lose....that is a high risk play....and assuming he is on the low double income household....

well if the property speculator is stupid enough to believe that capital gains can be achieved from a neverending supply of people who can afford to pay the interest on a 400k plus loan....then he deserves to lose....that is a high risk play....


well if the property speculator is stupid enough to believe that tenants will keep on paying whatever landlords demand...then he deserves to lose....that is a high risk play....

 

[MR.]

Kincella, 20-30% housing debt as an average is not a far cry from what I/we have been perpetuating. Individual investor/owners with higher leverage are the concern! As you point out as well.

Nothing wrong with your leverage levels! What would happen if everyone else did similar! If everyone now took on your suggested leverage, property is going to stagnate for more than a while! You are just relying on others stupidity to fuel your further gains in the short to medium term.

Your past gains are examples of what is going to happen again in the future, but not for a long while unless interest rates are going to go down.

There really is little argument!

 

[kincella]

those graphs tell the full story....on the whole the population has a low debt, and high equity.....so what if there is an individual sprinkled here and there that is not in that situration.....its certainly not going to affect the bulk of the population...
nor of house prices
there are figures for a potential .06% home owners at risk...that is not even 1%...just over half of 1%...how that will impact on the other 99%

good luck with your arguments of a half of a % making much difference

 

[drsmith]

The graphs are from the RBA's latest financial stability review. They demonstrate the extent to which debt has fuelled money supply and hence real estate.

An economic shock, when it comes, will be magnified as a consequence of this.

 

[Dowdy]

those graphs tell the full story....on the whole the population has a low debt, and high equity.....so what if there is an individual sprinkled here and there that is not in that situration.....its certainly not going to affect the bulk of the population...
nor of house prices
there are figures for a potential .06% home owners at risk...that is not even 1%...just over half of 1%...how that will impact on the other 99%

good luck with your arguments of a half of a % making much difference

Well, subprime loans in the USA made up only a small proportion of the market and look how that ended

 

[kincella]

you guys are funny...USA and subprime and throw away the keys, 30,000 cities in the US...more than 3/4 are just big country towns hundreds of miles away from nothing, gun toting hill billies.....who shoot anything and anyone
you may as well compare it with Africa.....90% dont have a job, a mobile phone, a bank card, or the internet.....
but good luck with waiting for the housing crash

 

[Dowdy]

you guys are funny...USA and subprime and throw away the keys, 30,000 cities in the US...more than 3/4 are just big country towns hundreds of miles away from nothing, gun toting hill billies.....who shoot anything and anyone
you may as well compare it with Africa.....90% dont have a job, a mobile phone, a bank card, or the internet.....
but good luck with waiting for the housing crash

You want to rephrase that.

All i understood was good luck with waiting for the housing crash