NR,If that is the case then you are miles ahead of most in this site,and as we both know during any boom in any investment area from art to equities properties,Greed always overtakes Fear,i still cant see property drop in value by 50%,as long as the FHB'S free money stays in place and i think it will ,Mr Rudd is giving money away like there is a unlimuted supply somewhere down the road we are all going to pay for it,maybe you will have your property slump then when interest rates hit 10% and unemployment at above 11% in 2010..imho willair..Hi ffc;
When we sold in 2003 we got top dollar for the house. It was a record price per square foot in that street. We went from owning a liability into a commercial property that was putting money into our pocket. Just in cash flow alone we are miles ahead. The capital gain is a bonus and it doesn't matter when it drops by half later this year or next.
crisis=opportunity
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Hi ffc;
When we sold in 2003 we got top dollar for the house. It was a record price per square foot in that street. We went from owning a liability into a commercial property that was putting money into our pocket. Just in cash flow alone we are miles ahead. The capital gain is a bonus and it doesn't matter when it drops by half later this year or next.
How much personal debt do you have ffc? we have none
Don’t mind me, I’m just your average fiscal troglodyde going about my day. Yes – we still have some non-tax-deductible debt but it’s disappearing fast.
Sounds like you may have made a wise investment decision. I must admit, was a little suspicious that you might have sold out because rent was cheap and your house was ‘overpriced’ (such as your typical Steve Keen worshiper) only to stand on the sidelines and watch both rents and values increase markedly. It’s encouraging to hear that my suspicion was unfounded and you actually divested so as to invest in another nearby property asset.
I thought you might “red card” me for my post. Actually, I do not discount the possibility of receiving a government pension in the future. My wife and I already get all kinds of middle class welfare because (1) we have small children and (2) we claim negative gearing and depreciation allowances from our properties – reducing our taxable income. Perhaps such claims would sill be available when we’re of ‘retirement age’.
I digress.
Regards - Ben
There must be a very high inflation rate for that to happen so I doubt the property slump part...
Hi Ben;
We both know that shrouds don't have pockets, you can't take it with you. From your post not so many years ago we were in your position. You and we are not like 80% of the population. Some day you will have jealous friends and family telling you how lucky your are
Funny how the harder you work the luckier you get. Enjoy the journey your children are gone before you know it.interesting that you consider this welfare. No other business feels so grateful to not pay tax because they have made a loss. it wouldn't be easy to levy a tax on you for your adjusted income anyway because the cash wouldn't likely be there to pay it.
Perhaps this is the problem with resi investing... investors see losses as welfare instead of what they are - real losses.
I was a little ambiguous. We have been sent payments in the past few years under the guise of the Baby Bonus, Family Tax Benefit, Child Care Bonus, Rudmass Bonus. In some cases, we would have qualified because our taxable incomes were reduced through property related deductions.
Hi KYL;
Now that the big 4 have control again we will I believe eventually see a return to fatter bank margins. They use to charge in the 80's an extra 2% if the property was for investment rather than your PPOR.
I agree we all have different paths but as sophisticated investors your long term financial solvency has to be on a bedrock base.
Hi ffc;
When we sold in 2003 we got top dollar for the house. It was a record price per square foot in that street. We went from owning a liability into a commercial property that was putting money into our pocket. Just in cash flow alone we are miles ahead. The capital gain is a bonus and it doesn't matter when it drops by half later this year or next.
How much personal debt do you have ffc? we have none
NR
I found you went to an extreme and extreme. I do agree with some of your views on another thread. However, I found some of your posts just kind of "losers" thought. Obviously, you sold 5 years ago when the market just picked up and you missed the best 2-3 years. You had a sour grage to swallow and saw the market fall which gave you some comfort (your wife forgave you). I can not find any logic that Residential property is going to lose 50% (do not talk small mining town suddently the mining is closed). If that was the case, then Australia would not be existing and might be well bought by some other countries. For comercials, I do agree with you because of the low returns and the economic cricis.
I just found you went toooooooo extreme without logic
WillG, depends on what parameters NR places on the '40-50% drop.' In the past I believed he was indicating he believed excactly that - resi prop will fall 40% over the next year/two.
I'd be quite disappointed if he now watered down his argument to take into account all these variable like YM did back in his element.
Technically if you want to start including negative gearing losses, opportunity cost losses, inflation, blah blah blah then you could say a property that has gone from $200k to $220k in the last 4yrs ie. 10% increase - actually dropped 30%?!
I don't think that's what NR was originally referring to, although maybe that's what the argument will evolve to.
Hi Ben if the government is dumb enough to give you and your family a low income supplement why wouldn't you take it ? So much of that money goes back into the pokies.
If your smart you would take $1000 of that money for you and another $1000 for your wife and make an undeducted contribution to your super. You will both each then be eligable for an extra $1500 in your super under another government scheme to boost super of those on a small income
If your guilty about accepting undeserved charity you can donate some of your valuable time to your childrens school or community.
Your right Nifty I'm just a silly little twit who doesn't even own an outhouse to plop me backside on.
Don't know why you knobs just don't tick the ignore button if my posts so irritate you. Ok I'll do it for you. Have a nice life on the government pension ani
i can see what is unfolding. clearly. but i don't care, or worry, because there are MANY ways to circumnavigate the system and be financially independant of your J-O-B and build wealth in an abrasive environment such as this.
take Nathan for example. he sources CF+ properties. Buy one or two in your SMSF and the CF+ nature should pay down any erosion of value. one deal had him at nearly $180pw+ use that to pay down the debt further with weekly installments and away you go.
so you see, it's NOT all D&G. UE figures are rising because people aren't employing, but they're not firing much either. key point. Businesses are still starting up, just with the GM answering the calls instead of paying a young 20something to do it for them. another key point.
i see opportunity everywhere. i see corrections as a great time to think independantly, ignore the media and focus on your instincts.
NR,
it would seem that the reason that you would have us all fret about 40% - 50% property price drops is your concern about the banks calling in their loans as the LVR equation no longer stacks up.
Are you able to prove if the banks have sold up property owners, investors, en masse, just because their LVR's went up; I assumed they only sold up when the borrower was bankrupt or had missed quite a lot of payments?
A banker mate said to me once that the banks couldn't be bothered to sell up despite prices going down for a number of reasons:
1. banks already do their risk assessment at the time of lending the money (ie; residential 80%, commercial 70% and shares 50% to 70%);
2. in the event loan defaults go up, rather than selling up existing owners/investors, they merely take a forward looking view and recalibrate their lending practices (ie; cut out lo and no doc loans, tighten up their income assessments, not giving loans on what they perceive to be high risk assets, etc)
3. banks generally have it easy; they take deposits at 4% and then turn that money into 6% to a borrower; actually having to go out and pay cold hard cash to a bunch of valuers to start valuing suspect assets and then having to flog assets, yetch!! Most bankers want to do nothing more than frequent coffee shops, have corporate lunches, play fancy arbitrage games.
Cheers
Big Rog
TheAnalyst
Looks like you just got the NR “red card”. A successful LOE strategy might see you enjoy a very wealthy retirement and still qualify for the government pension.
When NR mentioned he sold the castle five years ago, I was thinking that I’d been wasting my time reading his contributions because it started to look like he might just be another doom’n’gloomer spreading bad news to justify an earlier decision to sell (or not buy) Australian property. There’s been many posters on Somersoft in recent months who fit this category but, fortunately, they can be pretty easy to spot so it’s easy to ignore them.
However, I’ll keep reading NR’s posts for the time being. He has set me straight on the investment reasons for selling his home and it appears that he can be excluded from the group that I refer to.
Ben
Looks like you just got the NR “red card”. A successful LOE strategy might see you enjoy a very wealthy retirement and still qualify for the government pension.
When NR mentioned he sold the castle five years ago, I was thinking that I’d been wasting my time reading his contributions because it started to look like he might just be another doom’n’gloomer spreading bad news to justify an earlier decision to sell (or not buy) Australian property. There’s been many posters on Somersoft in recent months who fit this category but, fortunately, they can be pretty easy to spot so it’s easy to ignore them.
However, I’ll keep reading NR’s posts for the time being. He has set me straight on the investment reasons for selling his home and it appears that he can be excluded from the group that I refer to.
Ben
Don't bank on that for 2 reasons: 1) existing eligibility criteria are already tough to disallow on the basis of assets 2) conditions will only toughen up to pay for budget deficits eg to include the PPOR in the assets threshold. Just a few days ago the IMF suggested cutting back on welfare to fund current budget deficits including pushing back the age of eligibility (to 70?).
Your right Nifty I'm just a silly little twit who doesn't even own an outhouse to plop me backside on.
Don't know why you knobs just don't tick the ignore button if my posts so irritate you. Ok I'll do it for you. Have a nice life on the government pension ani
I do not want to offend you but just found you went more than extreme --- then you lost all your other arguments. I like different views (I gave a lot on the forum) because they help me think from another standpoint. Comparing another post -- 10 years no capital growth to yours (50% down), I reckon, the 10y one is more convincing.
Todays reality is last year extremism
Lets have a look at my extreme views that is alluded by that section of Somersofters who believe that property is largely immune to financial firestorm that is engulfing the world.
Back in Febuary 2008 in a post on Somersoft on superannuation I borrowed the term soft depression which came from a book entitled "Financial Reckoning Day: Surviving the soft depression of the 21st century" by William Bonner published in 2003. I had forgotten where I picked up the term soft depression because I had read the book 5 years ago and still have it on my book shelf.
I view this prediction as my most extreme because in Feb 2008 none of the gang of seven on wall street had failed.... yet. I knew it was coming because I had ignored the mainstream press and was following the subprime debacle on the internet since July 2007. The world wide depression is now a fact, some will play games and try to call it a world wide recession
My next extreme view was that a crisis in liquidity would occur and I explained that it would become difficult to borrow money. This has also occurred but in Australia as far as home borrowings has been delayed by the Government guarantee on deposits that stemmed a panic run on banks as the economic storm clouds developed in December 2008. All large development programs where large amounts of capital have been requirred like Victoria's desalination plant are now unlikely to proceed. The restriction on property borrowings to date has been only on the margins. As the financial crisis really bites in 2009 and 2010 this is what is going to bring so many over extended property investors to grief.
My third most exteme view was the stock market crash and I gave a time frame of six weeks which one poster described as a very brave call. It took seven weeks for the crash to occur. After the event in one of the exchanges I had with the legion of critics was; Well if your so smart "why didn't you short the market" Again that to me reveals not the thoughts of an investor but a smart @ss speculator whose mindset will ensure they retire on a government pension.
My fourth most exteme view was that the reserve interest rates would drop to 2%. This was way back in July 2008 when rates were still going up. I was laughed at and and told that if this came true it would negate my other extreme views and that with those rates would mean they would be able to gear up even more, ignoring the reality of the liquidity squeeze
The fifth and on this board most extreme view is that residential property prices are to drop 40-50% . This is really the only area that is yet to play out but the first signs of this have been in the wealthier suburbs such as Brighton.
Some have tried to say that I have falsely changed the time frame which when you go back and read the posts was always going to lag a year or more behind the equity crash.
Finally my call that a goal of 30% gearing has generated almost as much heat as the 40-50% collapse in residential real estate values. For those who have just started their property journey this I recognise is a tough ask. If it is not achievable immediately then you should have a written plan to achieve it over the next five years. You may not increase your net worth over the five year period but you will ensure your on the ground floor with enough asset backing to pick up the shattered portfolio's of others who have not been as prudent.
Lets have a look at my extreme views that is alluded by that section of Somersofters who believe that property is largely immune to financial firestorm that is engulfing the world.
Back in Febuary 2008 in a post on Somersoft on superannuation I borrowed the term soft depression which came from a book entitled "Financial Reckoning Day: Surviving the soft depression of the 21st century" by William Bonner published in 2003. I had forgotten where I picked up the term soft depression because I had read the book 5 years ago and still have it on my book shelf.
I view this prediction as my most extreme because in Feb 2008 none of the gang of seven on wall street had failed.... yet. I knew it was coming because I had ignored the mainstream press and was following the subprime debacle on the internet since July 2007. The world wide depression is now a fact, some will play games and try to call it a world wide recession
My next extreme view was that a crisis in liquidity would occur and I explained that it would become difficult to borrow money. This has also occurred but in Australia as far as home borrowings has been delayed by the Government guarantee on deposits that stemmed a panic run on banks as the economic storm clouds developed in December 2008. All large development programs where large amounts of capital have been requirred like Victoria's desalination plant are now unlikely to proceed. The restriction on property borrowings to date has been only on the margins. As the financial crisis really bites in 2009 and 2010 this is what is going to bring so many over extended property investors to grief.
My third most exteme view was the stock market crash and I gave a time frame of six weeks which one poster described as a very brave call. It took seven weeks for the crash to occur. After the event in one of the exchanges I had with the legion of critics was; Well if your so smart "why didn't you short the market"
Again that to me reveals not the thoughts of an investor but a smart @ss speculator whose mindset will ensure they retire on a government pension.My fourth most exteme view was that the reserve interest rates would drop to 2%. This was way back in July 2008 when rates were still going up. I was laughed at and and told that if this came true it would negate my other extreme views and that with those rates would mean they would be able to gear up even more, ignoring the reality of the liquidity squeeze
The fifth and on this board most extreme view is that residential property prices are to drop 40-50% . This is really the only area that is yet to play out but the first signs of this have been in the wealthier suburbs such as Brighton.
Some have tried to say that I have falsely changed the time frame which when you go back and read the posts was always going to lag a year or more behind the equity crash.
Finally my call that a goal of 30% gearing has generated almost as much heat as the 40-50% collapse in residential real estate values. For those who have just started their property journey this I recognise is a tough ask. If it is not achievable immediately then you should have a written plan to achieve it over the next five years. You may not increase your net worth over the five year period but you will ensure your on the ground floor with enough asset backing to pick up the shattered portfolio's of others who have not been as prudent.
sobering stuff NR. pretty hard for most investors that were at 60-80% LVR to reduce to 30% when values have dropped - a lot of property out there would be sitting at close to 100% or more if the property was put to the market to be sold within say 21 days.
the market in Perth seems quite strong now and possibly strengthening. It has had a hammering tho - some top end stuff off 40% or more already. A riverfront home in Dalkeith went under the hammer on Saturday for $2.9m... complete with views. Oh to be cashed up!
the market in Perth seems quite strong now and possibly strengthening. It has had a hammering tho - some top end stuff off 40% or more already. A riverfront home in Dalkeith went under the hammer on Saturday for $2.9m... complete with views. Oh to be cashed up!
Residential property prices are to rise 10%. This is yet to play out but the first signs of this have been in the less wealthy first home buyer areas.
