Insure against house price declines?
- Thread starter Sean
- Start date
Heck, I'll insure you myself for a priceHow much are you willing to pay and for exactly what protection?
cool. I'll give you $5K pa to protect against a loss of up to, say, $250K on sale of each part of the subdivided property, value-adjusted for development improvements. Estimator's value now at today's prices vs estimated value in 1 year. You will have to be prepared to fork out up to $250K on a property downturn however for your $5K.
Just remember Westfield America finalised their insurance for the WTC in June 2001, and counted 2 separate terrorist attacks in Sept 01 at $3.5 billion each, pocketing $7bn. (With remarkable foresight, they included specific new clauses against terrorist attack.) That's some downside...
It appears that large-scale developers in Australia like to hedge against the downside by a process of land-banking and restricting supply of new dwellings, by the way, something I can't do...
Sean
Now you are getting the idea of specuvesting. It is where you are paid a premium (profit) for taking some risk (potential or actual loss). The greater the reward usually the greater the potential loss should everything go belly up.
Nothing is a given and no "investment" is absolutely guaranteed.
Good luck with your development.
Cheers
Shane
Now you are getting the idea of specuvesting. It is where you are paid a premium (profit) for taking some risk (potential or actual loss). The greater the reward usually the greater the potential loss should everything go belly up.
Nothing is a given and no "investment" is absolutely guaranteed.
Good luck with your development.
Cheers
Shane
Sorry, but $5k premium doesn't cut it. That's an implied volatility of about 9.5%.
I reckon you'd be looking at between $20 and $40k pa (20-30% IV), for someone to bother taking on the risk.
btw, limiting the protection to $250k would make little difference to the insurance premium. Having the insurance 'cut in' at a lower price than current value, say $450k, might (roughly) cut the insurance in half though.
I reckon you'd be looking at between $20 and $40k pa (20-30% IV), for someone to bother taking on the risk.
btw, limiting the protection to $250k would make little difference to the insurance premium. Having the insurance 'cut in' at a lower price than current value, say $450k, might (roughly) cut the insurance in half though.
Sorry mate, I'm not personally in a position to be able to do anything - I was kinda leading you on I doubt you'd be too happy to have me default on you if you claimed
btw, all I've done is use a put option calculator, if you want to play around with figures yourself. Same thing as insurance basically. Helpful to have something other than wild guesses to go by!
Interesting that this sort of thing is readily available for shares, but not houses (that I know of). I guess it is the known value (and history), and uniform specs of shares that make it easier and hence more common.
I doubt you'd be too happy to have me default on you if you claimed btw, all I've done is use a put option calculator, if you want to play around with figures yourself. Same thing as insurance basically. Helpful to have something other than wild guesses to go by!
Interesting that this sort of thing is readily available for shares, but not houses (that I know of). I guess it is the known value (and history), and uniform specs of shares that make it easier and hence more common.
See this thread.
You need to get out more, and talk to a few different agents. I just don't understand why some folk who post on here think that we all think houses cannot go down. Just so that you know, we do know this, many of us have lived through it more than once, but have still made fantastic gains in spite of it.
hmm, yes, that's like the Case-Shiller index that was derived in the US. Unfortunately, I need insurance for a specific property I want to transact.
hmm, that's funny, it doesn't seem to matter how many RE agents I talk to, they all say it only ever goes up. Can't understand it. It must be true. I didn't say SSers always say it, now did I? Only REAs... who make fantastic gains called commissions when they always repeat the same line...
I was going to ask you to find 1 reputable person online that said that - but if they said it they wouldnt be reputable
Ah but as an investor I am very flexible in what I buy, I don't need to buy number 2 Fred St. I can broaden my search and look for deals that meet my criteria, I don't need to buy today or next week.
The only time this would impact people is if they are a business looking at buying a property in a specific location, eg a franchise business that needs to stay in the franchise area, and would like a property on a main road, this limits your selection, and means you are not an investor, you become a business / company looking for premisies which is completely different to investing.
PPOR buyers could be similar, often they pick a suburb and have a price limit some would even have a street or house they like. Not investors.
I think you need to expand on your logic cause I really don't understand the logic behind your arguments.
Cheers
Graeme
would you care to expand on this? Why such a big deal about this one building on a bit of land?
There could be other options, use the combined knowledge here to help and see if someone can give you a bit of advice or a suggestion you haven't thought of.
Regards
Graeme
SEAN!
Good news!
http://www.theage.com.au/news/business/house-value-dips-covered/2005/09/29/1127804608011.html
( found via : http://www.somersoft.com/forums/showthread.php?t=22518 )
Good luck!
Good news!
http://www.theage.com.au/news/business/house-value-dips-covered/2005/09/29/1127804608011.html
( found via : http://www.somersoft.com/forums/showthread.php?t=22518 )
Good luck!
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