generational housing problem

[rastus2]

Ah, so that's where they come from. I just added them all to my ignore list. I enjoy intelligent debate as much as anyone, but they don't seem to be interested in that. They simply can't understand that I really wouldn't care if house prices dropped 20%: rents are poised to increase quickly if prices fall. Or they can't accept the fact that someone who does what they are so viscerally against can actually succeed even during the (inevitable, and I didn't need them to tell me that) downturn. I see plenty of these people in daily life: just because they failed means they attack anyone who succeeds. Not a pleasant way to live.
Alex

Please excuse my ignorance.. but how would rent rises be likely if house prices drop by 20% ?

I would have thought that yields (on new sales) would rise by the price drops, which would make it even less likely that rents would rise...

I don't care either way (we own our house pretty much outright), but don't see the logic of that conclusion.

If house prices rise by another 20 % then I would expect rents to rise... yields would need to improve from their low base right now in many (most ?) areas.

 

[yo yo ma]

He actually enjoys nursing and doesn't do it just for the (pittance of ) money... odd isn't it ? (and, I suspect, because he can talk some of the staff into joining his employment Agency which takes on Nurses... who knows, perhaps he gets some business out of potential mortgages that way too..)

Probably a good back up plan too, in case anything goes wrong with the business... He can then easily get back into the loop, without having to do additional training (by keeping his nursing registration current.) The networking would be a big plus, as he would definitely get some business out of it. He is able to keep his superannuation going by doing a certain amount of shifts (different depending on each state but in Qld you have to do 2 shifts every 3 months)... this also keeps the insurances (life/ TPD etc) going with it. A bit of extra cash & not really a pittance if you work a couple of Sundays (12 hour shift) with the 75% loading... With his IP & shares structured currectly he could minimise his tax or even pay none! Smart guy a lot like myself really
Steve

 

[rastus2]

Probably a good back up plan too, in case anything goes wrong with the business... He can then easily get back into the loop, without having to do additional training (by keeping his nursing registration current.) The networking would be a big plus, as he would definitely get some business out of it. He is able to keep his superannuation going by doing a certain amount of shifts (different depending on each state but in Qld you have to do 2 shifts every 3 months)... this also keeps the insurances (life/ TPD etc) going with it. A bit of extra cash & not really a pittance if you work a couple of Sundays (12 hour shift) with the 75% loading... With his IP & shares structured currectly he could minimise his tax or even pay none! Smart guy a lot like myself really
Steve

Yes, he is a pretty smart chap... although I have doubts his loans business will survive the next 12 months if things get ugly.

The employment agency will, no doubt, be his main income stream as getting nurses in his area of specialty (Cardiac Catheter Lab, Cardiac Theatres and Emergency Department) is quite difficult for hospitals ... many nurses are going locum and getting twice/three time the upfront pay... he just gets a nice cut out of that.

The effort to get to that stage of financial freedom came at a high price for his family life, but as he says, nothing comes without cost.

 

[alexlee]

I can't understand why they think they are protected from any downturn in the housing or any other sector of the economy - its not like rents will go down or anything...

Quite. During 2000 - 2003 in sydney, rents were flat or falling. I remember seeing 4 week rent free periods. Which is exactly what you'd expect in a market where there is a lot of investor demand and therefore supply of IPs. From 2003 - 2007 the market was flat, so investor demand fell. As a result, you have a smaller supply of IPs, but our population is still growing, so rents went up.

If the market crashes, investor demand is going to dry up. No new IPs will be built, and the resulting recession is likely to hurt demand by owner occupiers. Result? Reduction in supply of IPs, rents go up.
Alex

 

[DavidMc]

So why does the myth of 'house prices double every 10 years' keep itself alive ?

Because as long as records have existed that is the long term average. This goes back almost 1000 years in the Domesday book in England. Have a read yourself http://www.domesdaybook.co.uk/.

 

[yo yo ma]

Yes, he is a pretty smart chap... although I have doubts his loans business will survive the next 12 months if things get ugly.

Usually quieter around school holidays when the private hospitals stop surgery as the doctors take their holidays. Less work then so it can make it difficult for staff retention & consequently, his bottom line. With his other business, maybe he was able to lock in the interest rates before the rise.

The employment agency will, no doubt, be his main income stream as getting nurses in his area of specialty (Cardiac Catheter Lab, Cardiac Theatres and Emergency Department) is quite difficult for hospitals ... many nurses are going locum and getting twice/three time the upfront pay... he just gets a nice cut out of that.

Very true... finding critical care nurses with experience is difficult & they get paid more through the private system. Hopefully for him, the demand will continue & he has the supply.

The effort to get to that stage of financial freedom came at a high price for his family life, but as he says, nothing comes without cost.

Another reason he is still working, to meet more females?. Seriously, it is tough but a bit of short term pain can work out as long term gain, if the family can handle it. Difficult to get the right balance in your business/ personal life... Maybe the cost is worth it for him?
Steve

 

[rastus2]

Probably a good back up plan too, in case anything goes wrong with the business... He can then easily get back into the loop, without having to do additional training (by keeping his nursing registration current.) The networking would be a big plus, as he would definitely get some business out of it. He is able to keep his superannuation going by doing a certain amount of shifts (different depending on each state but in Qld you have to do 2 shifts every 3 months)... this also keeps the insurances (life/ TPD etc) going with it. A bit of extra cash & not really a pittance if you work a couple of Sundays (12 hour shift) with the 75% loading... With his IP & shares structured currectly he could minimise his tax or even pay none! Smart guy a lot like myself really
Steve

Because as long as records have existed that is the long term average. This goes back almost 1000 years in the Domesday book in England. Have a read yourself http://www.domesdaybook.co.uk/.

ok. so what you are saying is that if I looked at the price of a house in England right now... and then went back 10 years, it would be 1/2 the price... then 20 it would be 1/4, etc till I got to (lets say 500 years) and it would have been 1/1125899906842620 the price ?

Oh please.. I'm happy to be corrected on the maths (or fact) below... but In my honest opinion this is a myth ...

Lets just stop at 200 years ago.. the price of that same house in England would have been 1/1,048,576 of today's price. (2 x 2 for 19 times)

So a 10 (Pound) house 200 years ago is now worth about 1,048,576
times more or .. 10,485,760 Pounds... (give or take a pound)

----------------------------

I believe that the myth exists because the house prices in the last 50 yours have certainly shown a trend that allows people to assume it... go back further and the theory falls apart.

Will the 10 year doubling continue... possibly, but for it to happen a lot of other things must also happen... including hyperinflation.
Do house prices ALWAYS double every 10 years... no.. usually they don't.. but recently they have.

Caveat: buy in a prime location (location, location), and you will be more likely to see more money in 10 years than if you don't... the rich always seem to have money for premo position

 

[HiredGoon]

Because as long as records have existed that is the long term average. This goes back almost 1000 years in the Domesday book in England. Have a read yourself http://www.domesdaybook.co.uk/.

(sorry to come back but we were laughing at you on our bear forums and I had to come over here and tease you in person)

That book was done after the norman invasion so ~1066. 2007-1066 = 941

Assuming a house cost 1 pound.

Compounding rate = 7.2%, to double in 10 years:

(1.072) ^ 10 = 2.00

1 pound compounding at 7.2% for 941 years would have the average house price in britain at 25,899,597,848,577,797,093,773,578,491

People lend you muppets money?

 

[Dazz]

Assuming a house cost 1 pound.

....assuming.....

People lend you muppets money?

I quite fancy being labelled a muppet. Ta very much.

 

[HiredGoon]

....assuming.....

Ok, lets assume it was ONE PENNY.

Prices for ONE HOUSE (a 1000 year old hovel from the middle ages) would now "only" be:

258,995,978,485,777,970,937,735,784 pounds

whereas GDP _FOR_ALL_OF_BRITAIN_ in 2006 was:

1,930,000,000,000 pounds

You guys are so bad at maths it makes me laugh. You have mathematical proof that your ridiculous claim of house prices doubling every 10 years is wrong, but you still cling to it.

The only reason you *think* they do that you only look back 1 lifetime and that period saw the western world borrow huge amounts of money to push prices up above wage inflation. Eventually we as a society will not be able to afford to borrow any more money. The longer our debt levels keep going up faster than incomes to bid up non-productive assets the *worse* it will be when we stop. We HAVE to stop eventually. You just can't see it because oyu extrapolate trends without looking at the big picture.

 

[Dazz]

Excellent work HG. Your maths do you proud.

As I said previously, pop me in the muppet brigade....

 

[WinstonWolfe]

Could any of the economists clarify something for me.

It seems to me growth in the total pool of Australian property might be better understood by simplifying Australia into a single entity and analysing its income, expenditure, borrowings, and investments. Therefore, the following might be the limiters of asset price growth, whether real or inflationary.

Income Sources

- Australia's GDP (income)
debt serviceability would always seem to have a ceiling placed on it by the income of the nation. And GDP should reflect the effects of population change such as migration or an aging population.

- Foreign Earnt Income
such as owning dividend yielding overseas stocks


Interest on Foreign Liablities

Australia's Foreign Debt and Foreign Investment in Australia
I am unsure whether foreign money lent to lenders such as RAMs and Bluestone is foreign debt or foreign investment.



Foreign Ownership Percentage
Increases in foreign ownership for Australian property could still push prices, in the face of stagnant local demand.


Cost of Debt
- extending loan terms from say 30 years to 50 years.
- local interest rates and the rate to borrow foreign funds.


I am trying to simplify in my own mind what limitations there are on asset inflation and the above is the best I can do today.

 

[topcropper]

1 pound compounding at 7.2% for 941 years would have the average house price in britain at 25,899,597,848,577,797,093,773,578,491

People lend you muppets money?

So was 1 pound enough to buy a house 941 years ago? Was a pound a unit of money then? I would have thought gold would have been the currency, or maybe grain or milk or eggs, but then I've got no idea.

Interesting thread anyway. I'm not saying anyone here is right or wrong.

See ya's.

 

[DavidMc]

The only reason you *think* they do that you only look back 1 lifetime and that period saw the western world borrow huge amounts of money to push prices up above wage inflation. Eventually we as a society will not be able to afford to borrow any more money. The longer our debt levels keep going up faster than incomes to bid up non-productive assets the *worse* it will be when we stop. We HAVE to stop eventually. You just can't see it because oyu extrapolate trends without looking at the big picture.

So what exactly are you saying?

 

[BoatBoy]

1066 AD (941 years ago)

I have visions of a well dressed chapie on horseback (landlord) with a castle in the background (PPOR) riding through a village of peasant's (tenants) collecting rent.

And the difference is ?????

Could be wrong, maybe watched too much "Monty Python"

Dave

 

[HiredGoon]

I have visions of a well dressed chapie on horseback (landlord) with a castle in the background (PPOR) riding through a village of peasant's (tenants) collecting rent.

And the difference is ?????

That landlord didn't pay out money each week for the tenant to stay on his property.

 

[HiredGoon]

So what exactly are you saying?

1. If you say that property doubles every 10 years is a fact, you are a liar.

2. Unsustainable trends can't go on forever.

 

[willair]

1. If you say that property doubles every 10 years is a fact, you are a liar.

2. Unsustainable trends can't go on forever.

HG,you are right again,in Brisbane from my experience some have gone from
50k in 2000 to 425k in june this year when i had everything valued, but
don't tell anyone next thing we will have another property boom..
So even when all the prices drop 50% next week it will be your turn to buy

willair..

 

[AlmostBob]

How do all these fiscal gurus determine that trends that have continued for several centuries,
our latest house is not worth 140 pounds 3 shilllings any more (1807),
are unsustainable.

3 pounds of sour grapes please Mr Fruiterer

 

[yo yo ma]

1. If you say that property doubles every 10 years is a fact, you are a liar.

2. Unsustainable trends can't go on forever.

1) Agree but who is saying that every property doubles every 10 years? No-one on here that I know of... If you do, please quote them. Some areas will more than double, some will go up a bit & some will fall in price. It depends on the market & what stage it is up to.

2) The trend is your friend... I will give you an example of a trend:
Last Friday night, the Melbourne Storm were playing the Parramatta Eels in Melbourne... Melbourne ($1.42 fav) have won 27 out of their past 28 matches when playing at home. Although I thought the eels were an outside chance ($2.75), I wasn't going to back them because of the trend. Melbourne won 14-10 & I doubled up but lost on the Roosters ($1.85) v Titan ($1.95) today. I'll live & learn hey. That's the trend for you mate, I am happy to take an educated punt on it. If you aren't then don't.
Steve