After The Bomb Went Off
- Thread starter Andrew_A
- Start date
as qazzzzz says- Spann and Trump have made a lot out of teaching others, in one way or another.Peter 147 said:The First Bruce sums it up. Too many variables.
Also, with due respect to property gurus, teachers, etc.. out there BUT......
if I had a system/program/knowledge that I was so confident would make me rich in the future, (essentially a crystal ball) would I be selling it, to all, for $40 bucks? Would you?
Kerry Packer & Rupert Murdoch don't write books on "my secrets to making money!!!!" There a reason?
Regards, Peter 147
With respect to Peter (and I'm on record as having a lot of respect for him)- by teaching what he knows, he's also generated for himself (possibly quite unintentionally- or not) income in other ways:
.People like Peter have contributed a huge amount of interest in the residential housing market- which has in turn contributed a lot to the boom
.His stuff on options has probably increaed the size of the options market by a very big amount
.Selling associated products- software, real estate, share broking (though the last two were not a part of what he did when I did his courses)
thefirstbruce said:
At the risk of taking this post off track, can I take issue with this, and ask others to comment.
This is often an argument used by people who promote shares, and one in particular springs to mind, Peter Thornhill, who I really admire.
The argument seems to go along the lines of investing in residential property doesn't add much to the longer term output of Australia, but investing in shares is providing capital to clever people to develop companies that will over the long term produce something that is needed (?) and create jobs, foreign income from exports etc etc.
Fair enough on the face of it.
But i've been wondering what the proponents of this argument think of investing in share options, derivatives, futures (that are timebound) and the like. To me, this is like placing a bet on a horse race, and doesn't add capital to the listed company to grow and expand.
Does anyone know the ratio of investments in issued shares (ie actual capital) versus investments in other vehicles that trade on the movements of the actual shares?
GarryK
Bruce and Gary raise interesting points on our role as investors in society.
Do we do something useful or is it merely papershuffling that does not create real wealth in society? And if it's only the latter, can we feel good about the income and wealth that we accrue?*
As property investors buying fairly modest houses and units that most people can afford to rent, we are providing a service to our tenants that fulfills a basic need.
If it wasn't for us tenants would either have to buy their own homes, stay with rellies or camp out. Even if they can afford to buy they might not wish to because they don't intend staying in the area for long, may soon have a family and require a larger home or find that they can't affordably buy a place in the area in which they wish to live.
Thus like a supermarket or a clothes shop, we are a service industry providing a basic necessity. We don't earn export dollars or substitute for imports, but then neither does the local GP!
We take risks like paying out holding costs the tenants don't (eg rates and insurance) and may sustain negative cashflows in exchange for capital growth in the longer term. If you can transform your properties to make them worth more, you make even more money. If your customers agree and are willing to pay more for something that better meets their needs, your wealth has increased.
As property investors we get an inner glow that we are providing housing for X people and fulfilling an important social function.
I don't see the same social benefit in buying and selling secondhand shares as the market transcends the underlying reason for shares existing in the first place (ie to raise capital).
This is not to deny that exchange is important (if people didn't buy & sell shares we have no market and people would be stuck with their shares for life) but I don't see the direct social role function as with rental property. I don't know about others motives for investing, but this is one of the attractions of something as direct as a basic commodity such as residential property.
On the other hand, venture capital and investing in start-up companies is immensely important as Bruce mentions. But once the initial capital has been raised then it's only of indirect benefit, unless there are future further capital raisings.
Regards, Peter
(*) I deliberately refrain from calling this process 'wealth creation', a phrase I believe is overused. To me sitting on a house and watching it appreciate is not 'wealth creation'. Whereas renovating it would be, as would advances in science or providing a new service people want.
Do we do something useful or is it merely papershuffling that does not create real wealth in society? And if it's only the latter, can we feel good about the income and wealth that we accrue?*
As property investors buying fairly modest houses and units that most people can afford to rent, we are providing a service to our tenants that fulfills a basic need.
If it wasn't for us tenants would either have to buy their own homes, stay with rellies or camp out. Even if they can afford to buy they might not wish to because they don't intend staying in the area for long, may soon have a family and require a larger home or find that they can't affordably buy a place in the area in which they wish to live.
Thus like a supermarket or a clothes shop, we are a service industry providing a basic necessity. We don't earn export dollars or substitute for imports, but then neither does the local GP!
We take risks like paying out holding costs the tenants don't (eg rates and insurance) and may sustain negative cashflows in exchange for capital growth in the longer term. If you can transform your properties to make them worth more, you make even more money. If your customers agree and are willing to pay more for something that better meets their needs, your wealth has increased.
As property investors we get an inner glow that we are providing housing for X people and fulfilling an important social function.
I don't see the same social benefit in buying and selling secondhand shares as the market transcends the underlying reason for shares existing in the first place (ie to raise capital).
This is not to deny that exchange is important (if people didn't buy & sell shares we have no market and people would be stuck with their shares for life) but I don't see the direct social role function as with rental property. I don't know about others motives for investing, but this is one of the attractions of something as direct as a basic commodity such as residential property.
On the other hand, venture capital and investing in start-up companies is immensely important as Bruce mentions. But once the initial capital has been raised then it's only of indirect benefit, unless there are future further capital raisings.
Regards, Peter
(*) I deliberately refrain from calling this process 'wealth creation', a phrase I believe is overused. To me sitting on a house and watching it appreciate is not 'wealth creation'. Whereas renovating it would be, as would advances in science or providing a new service people want.
Hi all,
I have to agree with Peter and Garry here.
Assume the following
You buy a new investment property near a uni, that is rented out to foreign students. Investment=foreign income.
You buy a new share in a mining company that sells coal to China
Investment = foreign income.
You could argue that most property investment is not for foreign income, but you could also argue that all mining is not for foreign income.
I think it a spurious argument that residential property does not add to the economy.
bye
I have to agree with Peter and Garry here.
Assume the following
You buy a new investment property near a uni, that is rented out to foreign students. Investment=foreign income.
You buy a new share in a mining company that sells coal to China
Investment = foreign income.
You could argue that most property investment is not for foreign income, but you could also argue that all mining is not for foreign income.
I think it a spurious argument that residential property does not add to the economy.
bye
Looks like the predictions in the first post are reasonably on track for completion
I just bumped this thread as I recently noted the Kingswood and Commodore examples had been borrowed by a certain Australian property author for use in their recent book.
I take it you mean the prices reaching 2030 levels as printed by Barry Pickering rather than the Kingswood making a comeback in 20 years?
Just a thought and discussion provoker bump of this thread by me, hopefully people get some thinking value out of it.
Running a few figures through my compound calculator was interesting however. I get these...
2000: Barry says 180k for a house
2010: Say 450k (Brisbane) would be a reasonable figure
2030: 2.7 million...
2000 to 2030 (180k to 2.7 million) = compound growth of 9.45% over 30 years (30 periods)
2000 to 2010 (180k to 450k) = compound growth of 9.6% over 10 years (10 periods)
Interesting
i love when people argue that there's "no way" income could be that high.
if i told the forum in 2000 when i was earning $23kpa that i would be on 10 times that before the decade was out, everyone would have laughed in my face.
yet here i am.
if i'd have said in 2003 that my unit, bought for $60k, would be worth 5x that before the decade was out, again, i woulda been laughed outta here.
but it happens - why? because the intrinsic value of money changes as more of it is in circulation - that is, both inflation and commercial collusion-by-default.
a $30k house 20 years ago is not the same as a $30k house today.
a $30k car 20 years ago is not the same as a $30k car today.
a $30k pa job 20 years ago is not the same as a $30k pa job today.
projections are NOT relative to today.
if i told the forum in 2000 when i was earning $23kpa that i would be on 10 times that before the decade was out, everyone would have laughed in my face.
yet here i am.
if i'd have said in 2003 that my unit, bought for $60k, would be worth 5x that before the decade was out, again, i woulda been laughed outta here.
but it happens - why? because the intrinsic value of money changes as more of it is in circulation - that is, both inflation and commercial collusion-by-default.
a $30k house 20 years ago is not the same as a $30k house today.
a $30k car 20 years ago is not the same as a $30k car today.
a $30k pa job 20 years ago is not the same as a $30k pa job today.
projections are NOT relative to today.
Interesting thought. Would you mind expanding on this a bit for the benefit of the less educated like me? I understand the idea of inflation (I think), but is there more to the story? Thanks.
it's more to do with commercial collusion-by-default.
what does that mean?
well, one BP servo bumps up price as per the "cycle" of petrol pricesrolleyes:...honestly...). the BP down the road is in it's lower phase, but raises them the very next day.
their profit is more, the other's is the same.
oil prices have been as low as $38USD/b and as high as $147USD/b. the aussie dollar was low at the high, medium at the low and high at the medium.
yet our prices remain relatively unchanged at the bowser.
that's commercial collusion-by-default. "if so-and-so ain't dropping their prices, then neither will i". it's not illegal to have that attitude - it's a mentality that comes about when times are bad but people are still buying - "emergency greed" i call it- to hoard as much as possible while you can.
if we were staring down the barrel of a recession/depression then we would have seen bowser prices under 90c a litre by now - where they should be according to the price of oil/dollar.
http://www.warwickhughes.com/petrol/
so - this isn't a debate about oil. it's a debate about commercial collusion-by-default. CCBD is a little theory floating around that explans how regional areas can experience more or less inflation than average ON TOP OF average inflation.
still not convinced? one word - Karratha - CCBD pushing prices up above and beyond what one expects to be unreasonable.
what does that mean?
well, one BP servo bumps up price as per the "cycle" of petrol prices
rolleyes:...honestly...). the BP down the road is in it's lower phase, but raises them the very next day.their profit is more, the other's is the same.
oil prices have been as low as $38USD/b and as high as $147USD/b. the aussie dollar was low at the high, medium at the low and high at the medium.
yet our prices remain relatively unchanged at the bowser.
that's commercial collusion-by-default. "if so-and-so ain't dropping their prices, then neither will i". it's not illegal to have that attitude - it's a mentality that comes about when times are bad but people are still buying - "emergency greed" i call it- to hoard as much as possible while you can.
if we were staring down the barrel of a recession/depression then we would have seen bowser prices under 90c a litre by now - where they should be according to the price of oil/dollar.
http://www.warwickhughes.com/petrol/
so - this isn't a debate about oil. it's a debate about commercial collusion-by-default. CCBD is a little theory floating around that explans how regional areas can experience more or less inflation than average ON TOP OF average inflation.
still not convinced? one word - Karratha - CCBD pushing prices up above and beyond what one expects to be unreasonable.
Looking at Barry's figures, he predicted that between 2000 and 2030 house prices and wages would rise at around 9.5% per annum, as other posters have pointed out.
What actually appears to have happened is that house prices have risen as he predicted, but in a low inflation environment where wages have increased at around 4% per annum.
So over the past decade:
Barry pegs the average house price to 4.5 times salary. Assuming that's the long term trend, then prices in 2010 should be around $270K, and around $600K in 2030. In effect, we've had thirteen years of house price inflation brought forward.
What actually appears to have happened is that house prices have risen as he predicted, but in a low inflation environment where wages have increased at around 4% per annum.
So over the past decade:
- Wages increased 1.5x times, from $40K to $60K.
- House prices increased 2.5x, from $180K to $450K.
- The house price to income ratio has increased from 4.5 to 7.5 times.
- The average salary will be $135K.
- The average house price will be $2.8 million.
- The house price to income ratio will be around 21 times.
Barry pegs the average house price to 4.5 times salary. Assuming that's the long term trend, then prices in 2010 should be around $270K, and around $600K in 2030. In effect, we've had thirteen years of house price inflation brought forward.
