All is well until tommorows online article

[FormerLurker]

Hey folks interesting article I came accross:

http://money.ninemsn.com.au/article.aspx?id=8104428

Seems alls well until someone writes something different tommorow - however this one rings true with me 20% increase over 3 years in a specific set of locations for valid reasons (I know I almost fainted to see something logical online as well).

 

[HomeBuyerStrike]

6.25% annualised wouldn't rock my boat personally. Demand deposit wouldn't fare much worse with negligible risk and zero hassle.

 

[BV]

Interesting read
thanks mate

 

[Corey Batt]

6.25% annualised wouldn't rock my boat personally. Demand deposit wouldn't fare much worse with negligible risk and zero hassle.

Whilst being negated by much higher taxation.

 

[HomeBuyerStrike]

Whilst being negated by much higher taxation.

I was already accounting for taxation. There is insufficient risk premium to compensate.

 

[tcocaro]

I actually attended this conference which was the source of this article and its a pitty like always its headline focuses on the 20% rate...

Regardless, to discount 6.25% by saying its the same as leaving your cash at the bank is silly. Its silly because the 6.25% return is calculated against a leveraged asset say 500k compared to solely investing the cash required to buy that same asset in a savings account i.e 10% or 50k meaning your dollar return is pittance so the comparison is just foolish. I suspect you know that but your just hell bent on re-affirming your own negative notions on property.

Further more this rate is a median rate which means you should in theory get it no matter what you buy (within reason).. so it therefore doesnt take into account "buying well" i.e. in suburbs that outperform the predicted rate or if you buy under-priced which should be the goals of any investor. So if 6.25% is considered a floor rate and by investing wisely you acheive just 2% more then this makes your comments seem even more the sillier.

I suspect my comments will fall on deaf ears so ill end by saying good luck with your strike, many takers?

6.25% annualised wouldn't rock my boat personally. Demand deposit wouldn't fare much worse with negligible risk and zero hassle.

 

[craigb]

Property investment , what a great game,

 

[HomeBuyerStrike]

Regardless, to discount 6.25% by saying its the same as leaving your cash at the bank is silly. Its silly because the 6.25% return is calculated against a leveraged asset say 500k compared to solely investing the cash required to buy that same asset in a savings account i.e 10% or 50k meaning your dollar return is pittance so the comparison is just foolish. I suspect you know that but your just hell bent on re-affirming your own negative notions on property.

Did you miss the part where I mentioned risk? I'm quite sure I mentioned it several times now.

Further more this rate is a median rate which means you should in theory get it no matter what you buy (within reason).. so it therefore doesnt take into account "buying well" i.e. in suburbs that outperform the predicted rate or if you buy under-priced which should be the goals of any investor. So if 6.25% is considered a floor rate and by investing wisely you acheive just 2% more then this makes your comments seem even more the sillier.

Median would imply that half of investors will get less than 20%

I suspect my comments will fall on deaf ears so ill end by saying good luck with your strike, many takers?

Seeing as I am the person here actively engaging with others I think you'd need to look closer to home for the cognitive dissonance issue. You also seem to have fundamentally misunderstood the concept of a Home Buyers Strike.

 

[lizzie]

just to use some round figures, and i'll ignore stamp duty, tax, buy/sell costs etc, and assume the rent covers the mortgage, just to keep it all simple.

say you had $50,000

you can put it in the bank at 6.25% and make $3,125/yr guaranteed before tax etc

or you can leverage a $250,000 property at 80% which, if it grew at 6.25%, would give you an increased value of $15,625 ... or the equivilent of 31.25%

so - 6.25% with no risk or 31.25% with minimal risk because you've done your homework?

i know which one i prefer.

 

[Ausprop]

and assume the rent covers the mortgage, just to keep it all simple.

and other holding costs? this is a gigantic assumption

and if the property flat lines for 10 years/ or drops in value for 3 years in a row? or gets trashed and the tenants skip town?

on the upside is the deflation of debt, probably your biggest earner of all

 

[HomeBuyerStrike]

just to use some round figures, and i'll ignore stamp duty, tax, buy/sell costs etc, and assume the rent covers the mortgage, just to keep it all simple.

Rent cover mortgage? Where? I'll invest myself.

Ausprop has covered your other assumptions.

 

[tcocaro]

No sorry you keeping getting everything wrong.

Median doesnt imply that half of "investors" will get less than 20% it means that half of the sales out there will have acheived less than 20% i.e. the house I live in now if i sell in 3 years I might only get 10% growth but I was never an investor to start with I was an owner occupier.

Risk? So you place property ownership as high risk? then with all do respect why are you on this forum. If you beleive the only investment that matches your risk profile is cash in the bank then there is nothing much more to discuss because you have literally picked the lowest risk investment and hence by definition the lowest return. Its amazing your trying to put forward some sort of argument that its ok to compare the returns in property to that of cash in the bank once risk is "priced in" - pretty amazing.

Good luck with your ING account.

Did you miss the part where I mentioned risk? I'm quite sure I mentioned it several times now.

Median would imply that half of investors will get less than 20%

Seeing as I am the person here actively engaging with others I think you'd need to look closer to home for the cognitive dissonance issue. You also seem to have fundamentally misunderstood the concept of a Home Buyers Strike.

 

[HomeBuyerStrike]

Median doesnt imply that half of "investors" will get less than 20% it means that half of the sales out there will have acheived less than 20% i.e. the house I live in now if i sell in 3 years I might only get 10% growth but I was never an investor to start with I was an owner occupier.

I was extrapolating the sales statistics to the general population. Am I the only person doing this? Is this only valid if it suits the bull perspective? Bulls are only too happy to extrapolate these statistics to their own properties regardless of whether they intend to sell in the period concerned.

Risk? So you place property ownership as high risk? then with all do respect why are you on this forum. If you beleive the only investment that matches your risk profile is cash in the bank then there is nothing much more to discuss because you have literally picked the lowest risk investment and hence by definition the lowest return. Its amazing your trying to put forward some sort of argument that its ok to compare the returns in property to that of cash in the bank once risk is "priced in" - pretty amazing.

The title on this forum is 'Property Market Economics', would you prefer that it were full of 'Yes Men' and you could indulge in group think. If you think it's healthy to block out any critical input then that's your own concern and you don't have to engage. I personally have an interest in property market economics the same as many here.

FYI, the demand deposit example was picked for illustrative purposes only. Comparing with another asset class would change the nature of the discourse and too easily go off-topic as regards 'Property Market Economics'. Sometimes it is necessary to consider the effects of other sectors on the property market but comparing directly to something with a known yield and negligible risk is simpler.

 

[tcocaro]

HomeBuyerStrike your understanding of median is factually incorrect its got nothing to do with ones views on prices going up or down.. median doesnt include only those sales made by "investors" it records ALL sales. All I did was point this out so no amount of chest beating you do will alter the fact your understanding of median SALES figures is wrong. Regardless what are you trying to suggest? That since ALL SALES dont eacheive 20% then its too risky for consideration..

In regards to the rest of your rambling you make little to no sense.. You used cash in your example but now your saying it was just used for "illustrative purposes?" ofcourse it was... you can make ANY investment look risky compared to cash in the bank... try using another investment option rather than cash to "illustrate your point" and see if your jibberish still holds up? Shares - NO, currency speculation - NO, gold perhaps? but then if you use gold my argument still holds true.. you cant leverage gold to buy more gold unless you trade via options which goes back to risk and ruins your little argument.

So please....

I was extrapolating the sales statistics to the general population. Am I the only person doing this? Is this only valid if it suits the bull perspective? Bulls are only too happy to extrapolate these statistics to their own properties regardless of whether they intend to sell in the period concerned.

The title on this forum is 'Property Market Economics', would you prefer that it were full of 'Yes Men' and you could indulge in group think. If you think it's healthy to block out any critical input then that's your own concern and you don't have to engage. I personally have an interest in property market economics the same as many here.

FYI, the demand deposit example was picked for illustrative purposes only. Comparing with another asset class would change the nature of the discourse and too easily go off-topic as regards 'Property Market Economics'. Sometimes it is necessary to consider the effects of other sectors on the property market but comparing directly to something with a known yield and negligible risk is simpler.

 

[dan c]

I was extrapolating the sales statistics to the general population. Am I the only person doing this? Is this only valid if it suits the bull perspective? Bulls are only too happy to extrapolate these statistics to their own properties regardless of whether they intend to sell in the period concerned.

The title on this forum is 'Property Market Economics', would you prefer that it were full of 'Yes Men' and you could indulge in group think. If you think it's healthy to block out any critical input then that's your own concern and you don't have to engage. I personally have an interest in property market economics the same as many here.

I agree, a group of 'yes men' is no good to anyone. Bu a 'no man' who hypothesises on obscure 'what ifs' as if they are fact, and doesn't understand what median means is not much good to anyone, either.

 

[HomeBuyerStrike]

HomeBuyerStrike your understanding of median is factually incorrect its got nothing to do with ones views on prices going up or down.. median doesnt include only those sales made by "investors" it records ALL sales. All I did was point this out so no amount of chest beating you do will alter the fact your understanding of median SALES figures is wrong. Regardless what are you trying to suggest? That since ALL SALES dont eacheive 20% then its too risky for consideration..

If you want to argue with the practice of extrapolating these forecasted gains in median prices across the population then I'd have to agree somewhat. Your misrepresenting my point completely. I said that capital gains of 6.25% are unattractive.

You also argued however that the 6.25% capital gain is a floor on gains for investors:

Further more this rate is a median rate which means you should in theory get it no matter what you buy (within reason).. so it therefore doesnt take into account "buying well" i.e. in suburbs that outperform the predicted rate or if you buy under-priced which should be the goals of any investor. So if 6.25% is considered a floor rate and by investing wisely you acheive just 2% more then this makes your comments seem even more the sillier.

Which is it?

In regards to the rest of your rambling you make little to no sense.. You used cash in your example but now your saying it was just used for "illustrative purposes?

Cashed is used to illustrate the opportunity cost comparisons that enlightened investors have to make. It is a common feature of decision making and also negotiations for enlightened investors. There is no need to revert to other investment types because clearly the risk/reward profile of demand deposits are far more attractive than property. No other example is necessary.

 

[HomeBuyerStrike]

I agree, a group of 'yes men' is no good to anyone. Bu a 'no man' who hypothesises on obscure 'what ifs' as if they are fact, and doesn't understand what median means is not much good to anyone, either.

There's plenty of people on here who hypothesise on the positive risks as if they are fact. I understand exactly what medians are, bulls want to extrapolate to suit themselves and then claim that other's extrapolations are false. For the record I am not representing hypotheses as fact, I'm expressing opinions I think that is clear from most of my posts. Some on here would be happy to take on board all the positive risks highlighted and block out any notion of negative risk, such is the nature of cognitive dissonance. I've highlighted in many posts that I entertain the idea that Australia's 'boom'/'bubble' could continue for decades. I don't think it's a likelihood but I'm open to the idea. Equally I entertain the idea that the market could go back to mid-nineties prices, which I don't think there are many here could entertain.

 

[Aaron Sice]

There's plenty of people on here who hypothesise on the positive risks as if they are fact. I understand exactly what medians are, bulls want to extrapolate to suit themselves and then claim that other's extrapolations are false.

anyone using medians for investing is gambling. it's like timing a car journey on speed limits - everyone forgets traffic lights.

anyone using medians for stats might as well quote wiki links as well - they would change monthly just the same.

FWIW - prices at mid 90s RE prices would also signal, comparitively

- very low AUD.
- low bond yields.
- low oil price.
- high gold price.
- high cash IRs.
- post deflationary environment following a hyperinflationary environment.

 

[HomeBuyerStrike]

anyone using medians for investing is gambling. it's like timing a car journey on speed limits - everyone forgets traffic lights.

anyone using medians for stats might as well quote wiki links as well - they would change monthly just the same.

I couldn't agree more. Given how people salivate over them though it seems to be the status quo.

FWIW - prices at mid 90s RE prices would also signal, comparitively

I entertain the possibility, it's not highly likely. Prices can overshoot irrationally on the way down in the same fashion they can overshoot on the way up. As you have pointed out yourself before, sentiment is a very important factor.

 

[Aaron Sice]

if you entertain every possibility, you would never invest. that's called "analysis paralysis"

risk mitigation (or minimisation) is a big part of inviesting.

if it's not likely to happen, chances are you shouldn't include it in your DD.

while not akin to an asteroid hitting earth, building "sale prices returning to 1990s levels" would see you unable to purchase a thing to make a quid out of 1990s prices.

so you need a sense of "normalisation" about your DD, and 1990's prices are not "normal".

find the trend, identify the trend, trade with the trend.