And a median house price on mars of 20m
Aussie Housing Market Snapshot
- Thread starter Shadow
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And a median house price on mars of 20m
His graph is sleight of hand anyway. He conveniently forgets that property pays a yield while gold just sits there consuming holding costs.
So the real return on property is much higher than shown in the chart.
And before hobo tries to tell us that property incurs interest costs... so does gold if you borrow to buy it. A fair comparison of returns must be based on the same leverage for each asset class.
When house prices fell a little bit from mid-2010 to mid-2012, property investors were still receiving rent each week (or avoiding having to pay rent in the case of a PPOR). Whereas for those holding gold, not only has gold crashed 40% from the peak, it has also provided zero yield during that time, and those who were silly enough to sell their homes to buy gold are also forking out rent each month.
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They're both pretty bad. The only thing that matters is how much your house has gone up by.
Not surprising when a house in Mt Druitt can sell for $780k.
See page 27 of Sunday telegraph ....go 2770!!!
Again you are being disingenuous, here is a post of your acknowledgement that it was a 15 year prediction in early 2009:
http://somersoft.com/forums/showpost.php?p=528268&postcount=97
And even if it had been 2010 when he changed/clarified it (it was actually much earlier) that's still not "a few years".
18 months down the track and it's still not a boom (mean reversion at best). Won't even admit when you are wrong
More important is how an investor usually holds the asset. A majority of property investors are negatively geared (at least as of latest tax stats), a majority of physical Gold owners do so without leverage.
More important again is recognizing a Ponzi scheme (like buying bullion)that relies on the greater fool concept and market sentiment to increase the price. Compare to PI, where you can
- Buy under market value
- Rent it out
- Have a family
- Shelter you from the rain
- Rezone and add value
- Make alterations and add value
value - borrow 95% of the value....etc
Suggest you read up on the definitions of a ponzi scheme as you clearly don't know what one is: http://en.wikipedia.org/wiki/Ponzi_scheme
Gold can be a monetary asset, a store of value over the long term, an insurance asset, it's not bought with the expectation it will provide a yield. The closest asset to Gold in purpose is cash. You could argue that cash provides a return via interest rates, but it also comes with risk (you are lending your cash to the bank) where as Gold comes without the same form of counterparty risk.
P.S. If you continue to believe that Gold is a "ponzi" (just because the price is being bid by those prepared to pay more), then how does that differ to Iron Ore which has seen a more substantial rise over the last 10-15 years? By your way of definition a lot of Australia's wealth built over the commodity boom is just based on a giant ponzi scheme.
2009? Yes, that was another change he made. He switched to 15 years after it was obvious it was never going to happen within a few years as he first predicted in 2008...
'there's no point in paying a mortgage on an asset that is going to fall by 40 per cent or so in the next few years'
Not sure what you mean? His prediction was a 40% fall within a few years of 2008. By 2010 when prices had risen another 20% instead of falling, it was pretty clear this prediction had failed.
The boom hasn't peaked yet, sure. But it has begun. Note that I said the boom would begin by the end of 2011 - i.e. that would be the first stage of the boom.18 months down the track and it's still not a boom (mean reversion at best). Won't even admit when you are wrong
All booms begin with the first uptick, and this current boom kicked off with that first uptick in early 2012, so I was a month or two out. I don't expect it to peak for another few years.
That's irrelevant. If you have X amount of money to invest then you can either buy X amount or gold or property, or you can leverage up to buy 2X or 3X etc worth of gold or property.
The amount of leverage you choose is irrelevant to the underlying performance of the asset class itself.
If we follow your silly logic, then we could say that in the past year Sydney property has grown by 60% because many investors are 90% leveraged.
So based on someone who leveraged property 20x (95% LVR) in early 2010 vs Gold, who has come out on top?
What about the same calculation since 2005 when you started buying Sydney property?
Good point, the gold price has been more of a bubble, which is similar to a Ponzi sceheme as its been an ever-rising price because buyers bid more because prices are rising.
Certainly, the “greater fool” theory certainly applies to the gold price as with a ponzi scheme, the price exceeds the intrinsic value and as you would know, the 12% PA YOY increase for the last decade certainly reeks of a bubble!
Sydney property is up approx. 35% since 2005, so very rough calculations, somebody leveraged at 20x would see approx 700% return on the 5% capital they put in themselves. This is assuming neutral gearing on average over that period - i.e. rent covers interest (they would probably have been negatively geared some of the time and positively geared during the low interest periods post-GFC). But obviously gold would still have come out on top (if you could have found someone to lend you money to buy it at 95% leverage - unlikely), but that's because during the dates selected, gold was rising very fast into an unsustainable bubble. However that bubble has now burst, while property prices are continuing their long slow march upwards.
Gold was a winner up until two years ago, but it has quickly become a dog.
Anyway, none of this changes the fact that your original chart misrepresents the performance of each asset class by ignoring the yield on property.
Or the significant transactions costs associated with both buying and selling property.
Or the management costs associated with renting an investment property through an agency.
Or the ongoing costs of an asset which requires constant maintenance.
Or the ongoing council fees, water charges, levys, taxes & insurances.
Or allowance for periods of time when the property may not be leased.
Or the land tax associated with some properties depending on your existing holdings.
Or the costs to vault/insure the Gold.
You are right there are some short comings to the chart, but the same could be said of the charts you post. Not every chart can be all-encompassing.
What matters as I always say though is how much $$$ you made. Because arguing things like leverage is all theoratical anyway. You probably can't leverage 95% to get in to gold without having your position closed out over the years.
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