This is a mobile optimized page that loads fast, if you want to load the real page, click this text.

The future of Australian property prices

Jump to new

The income stream is very safe, The tenant pays weekly and you are in control so there is no risk of a company director slashing dividends.

the rent will also increase over time atleast in pace with inflation and the capital you have invested will also increase atleast with inflation.

So if you were to compare putting $300K into a rental property Vs $300K into a term deposit, over time the rental will perform better due to the fact assets increase with inflation so your weekly income and the capital value is protected where as with the term deposit invested capital and income remain the same and steadily lose buying power.
 

To know the true return on investment you would have to know the cashflow return it has received over time.

You can't tell whether an investment was viable based solely on it's capital gain. It may have been returning an income steam of 10% being a commericial property.

Now if I owned a piece of real estate that was returning 10%p/a in rent that increased with inflation, while my invested capital was keeping pace with inflation I would consider that a great investment.
 
Safest of all income stream investments are Treasury CPI indexed bonds.

http://www.aofm.gov.au/content/statistics/transactional_data.asp

These like any other investment can become overpriced.

Would you accept a yield of 2.7% on such a bond ?
 
Tysonboss1 said:
To be honest I don't know much about the product.

However I think I would rather accept a little bit more market risk and double my yield to 5.25%.
Click to expand...

Since 2006 gold is up 200% and there are a lot of other investements that have done much better. To have a family home and own it is an entirely different matter. However in the wonderful rise of property over the last few years and the leveage of cheap money it has been excellent but as it begins to turn sour, those who thought they had a great deal in the furture could be very quickly disappointed and in quick sand.
 

Oh yes, please print more money. That would make inflation rise, and with that, interest rates will rise.
 
Go into a bank and try and borrow some money. First words out of their mouth is "Do you own your own home?" ... residential security ... wins hands down. 60% Low Doc loans ... no income man ... but I have a green title. Banks will lend. I have cash and shares ... not interested. Sell them and put DEPOSIT into RRE and bingo ....... Utopia .... manna from heaven. Banks give you the money. Hello?
 

That is misleading, and the kind of misrepresentation you tend to get from people who don't understand why this is so. I am sure you do and are framing your argument for the sake of your position.

Banks like to hold mortgages over houses for the money that they lend you as it is easy to sell if you go broke. Cash on the other hand is poor security for a loan, as it can be transferred.

Banks would lend 100% LVR for cash if they could have a mortgage over it, so it is actually the mortgage, and not the asset class which offers the bank security.
 
UBIQUITOUS said:
You're right Bill, property will not crash over 2 weeks, but over a much longer period. Remind us how well property performed from 1989-1999.
Click to expand...
I honestly don't know why you even asked me this question, we all know house prices went up during that time. Maybe you just wanted to give me some homework.

In 1989 average house prices were 162k and in 1999 they were 219k and that is from a Government source. You may click this link here to check.
 

Attachments

  • ScreenShot021.jpg
    37.3 KB · Views: 0
Spot on Tyson, I own in a unit in Sydney and I have no mortgage on it. I pull $420 per week rent from it. In the 6 Months I have been renting it out the unit has gone up 30k in price. The capital gain is a bonus and unexpected and I won't be selling this investment any time soon.
 


I am sure you are a very good Doctor but a lousy analyst. In what way was this misleading? Banks do not take mortgages over cash or shares. FULL STOP. They take mortgages over houses, green title, commercial property, strata title, farm land, dirt, bricks and mortar ... ad infinitum.

Not the asset class that offers the bank security, it is the mortgage? WTF ... no seriously WTF? The mortgage is worthless without the asset class medicowallet. Now before everyone gets on their high horse and says BUT what about chattel mortgages over plant and equipment and motor vehicles etc blah blah bloody blah this is the case of course. Remember we are talking about what the banks would lend against. Homes or cash. Homes win hands down.
 
Trainspotter, spot on.....and another wee hint why the banks dont want your term deposit as security for a mortgage......they need to maximise their earnings, and require an asset that increases with inflation over time....
or to put it another way....that does not devalue..
cause rather than house prices going up as the 'crowd' understands.....its the reverse....the devaluation of the dollar...that is behind it....

thats why the banks prefer to lend over other asset classes, or risk it with derivatives, anything but reliance on your cash deposit to generate a return...
cause the cash deposit keeps losing its value, bit by bit, every day, and has less buying power against inflation...
most home loans have an average life of about 15 years....thats when people pay them out....not the initial 25-30 years as the contract states...
so if a bank expects to lend against an asset that covers a decade or more, it really wants to be able to recover any debt on a current dollar basis after inflation...
it will not get that security from cash...cash will be worth less than half the value after 15 years....
 
trainspotter said:
Go into a bank and try and borrow some money. First words out of their mouth is "Do you own your own home?"
Click to expand...

Yep,

That's why property is the collateral of choice for funding the dream, the fact that it’s not marked to market daily is a bonus, LVR is harder to track and the banks hold the title so it’s win win .

Stock can be used as collateral but generally used to fund more stock not the dream. A lot easier to hedge but max LVR can’t be exceeded.

Whatever rocks your boat I guess.
 
trainspotter said:
Go into a bank and try and borrow some money. First words out of their mouth is "Do you own your own home?"
... residential security ... wins hands down.
Click to expand...

cutz said:
Yep,

That's why property is the collateral of choice for funding the dream
Click to expand...

All very true of course but what else is there. :dunno: the big run up in profits for the Aussie banks over the last 25 years has been mostly due to housing and the increasing price of housing.

I mean its not like the banks could expect borrowers to have Bullion deposits or some sort of royalty income...our modern banking system is built around borrowing for housing and the only realistic collateral for that is property/housing.
 
trainspotter said:
Banks do not take mortgages over cash or shares. FULL STOP.
Click to expand...

Not 100% accurate. Banks will take a "cash security bond" and lend 100% against cash.
Normally the funds are placed into a fixed deposit account - and is controlled by the bank, so you have no access to the money.
It is not commonly used because you earn about 3% on the cash but pay about 8% on the loan - so you are -5%, it doesnt often make sense.

When I was in the bank though we used it when the cash holder and the borrower were not the same person/company. As an example there was a partnership developing some land, and one of the partners was very cashed up. We put his money on deposit, and lent to the partnership. If the development fell over, he would lose his money. If the development succeeded (which it did) he kept his cash seperate to the partnership.

There are many different forms of secuirty which banks use. After cash - residential security is the most common form, and provides the highest LVR.

Cheers
I82
 

Banks WILL lend against cash and shares. But, you are right they do not take mortgages over them. With cash, they will simply freeze the cash deposit to stop you paying it out. With shares, not sure how it works as have never got a margin loan. But they regularly check you are below you maximum LVR. If not, and you do not put up cash, BANG, there go your shares
 
OK OK OK ...... I might have fudged the FULL STOP bit. YES banks will take a "lien" over cash and shares. My big sorry to all and sundry. BUT they will freeze the asset so therefore it is no longer liguid. Reduced LVR as well I might add (correct me if I am wrong gooner) When you propose to lend from a banks point of view then residetial real estate WINS hands down. Up to 95% I believe. 60% on commercial. 30% chattel mortgage over stock, plant and equipment yadda yadda yadda.

Bwahahahahahaaaaa ... no wait .... Bawaahahahahaahaha ... Me thinks robots has got it right. No funny money going on here ! Real estate is the only TRUE economy when it comes to lending.
 

Have a read of what I posted.

The reason banks will lend vs a house is because they have a mortgage over it and you cannot sell it without their approval.

Cash can be shunted around and that is the reason why they do not lend against it as freely.

Banks would prefer cash over property any day as it is a face value asset, which carries no transaction costs and has no time delay.

In all they don't care about it being a house. All they care about is their control over their new asset (mortgage = they have control)
 

So therefore you are in agreeance with me that the asset is more important than the mortgage? After all I am using your words for asset to mortgage control from a banks point of view.

You wrote "Banks would lend 100% LVR for cash if they could have a mortgage over it, so it is actually the mortgage, and not the asset class which offers the bank security."

So which is it Doctor?
 

NO

You obviously cannot understand what I am saying. The asset does not matter, it is the fact that the bank mortgages it readily that matters. As long as the bank has rights to the asset, it does not matter what it is, and as a previous poster outlined, you can get 100% LVR for cash. This confirms your original post misleading.

Banks need to approve sale of a car under finance.

So are you saying that a car is a good investment?

Diagnosis: myopia

It is easier to get a loan against a house, but that does not make a house a better asset to take a loan out against, just more convenient.
 
You must log in or register to reply here.

Similar threads

3
Future of $100,000 overland tourer Aussie lifestyle and the EV era
2
Replies
21
Views
2K
qldfrog
A
The future of Astraya
2 3
Replies
45
Views
8K
SirRumpole
Ultimate Acronym List (UAL)
Replies
0
Views
5K
Dividend
A
Factors affecting property prices
Replies
3
Views
11K
Space Invader101
Australia's own Ponzi scheme: the property market
Replies
4
Views
5K
Glen48
Menu
Log in
Register
Cookies are required to use this site. You must accept them to continue using the site. Learn more...