Latest Residex Report - Housing markets move solidly into positive territory

[Shadow]

You need to do some research on the various definitions of recession.

I am using the normal definition, as preferred by government, media, and the majority of people around the world.

But sure, it's not hard to come up with your own preferred less common definitions of recession if that's what you need to do in order to prove me wrong. That's what the gloomers resorted to after I was proved right (where prior to that point, the normal definition had been considered good enough).

 

[yieldmatters]

I am using the normal definition, as preferred by government, media, and the majority of people around the world.

It is preferred by the media and idiot politicians mainly. The USA (the largest economy in the world) doesn't use it. Neither do many economists.

But who cares really? It's beside the point. I only chime in because I dislike instant experts - it's a common trait among I.T. people and engineers.

 

[Shadow]

But despite Shadow's fantasies even the government can't hold something up

What fantasies? The property market is 'holding up'. That is a fact. The government stimulus has helped of course, as have the interest rate cuts. But those are normal actions taken during a downturn. There is nothing 'artificial' about something that happens normally as a part of every business cycle.

that is fundamentally unsustainable

Everything is fundamentally unsustainable, including the earth's orbit around the sun. What's your point?

If house prices crash by 95% in 200 years time, then you can claim vindication - prices will have been proven to be unsustainable. Won't be much use to anybody here though.

Clearly property prices won't crash during this cycle. They are rising at the moment. Of course house prices can go up and down. I am on record as saying I expect a correction in the future, just not as part of this cycle. The fundamentals don't line up for a crash during this cycle.

- eventually it will just bring down the government with it.

Do you realise that every dollar the government uses to stimulate the housing sector, has a massive multiplier effect and returns much more money back to the government and economy than they put in - think stamp duty, taxes on development, higher employment and sales for the construction industry, real estate industry, home furnishing stores, banks and brokers etc.

But your position now is that the government stimulus for the housing sector will 'bring down the government'. Really? How so? That sounds like an assertion one of those 'instant experts' would make.

 

[BayView]

- Many properties are now cashflow positive.

How do you figure this, Shadow?
Interest rates are - at best - 5% curently. Most rent yields are around 5-6% in suburban areas.
Fctor in holding costs, management fees, as well as repairs and maintenance and vacancies (allow 2 weeks per year as an average) and 20% of the rent is gone.
You'll get some back in the tax return I guess, but still....

- Cheaper to buy than rent in many suburbs.

As above with the rent return versus interest rates.
Add to that - tenants aren't responsible for rates, building insurance, bank charges on loans, maintenance.
Homeowners are responsible for all that, and there are no tax breaks.
Also, they have to at some point pay off the Principal of the loan as well - even more outgoings.

Rent is still cheaper, but doesn't increase wealth in the long term like owning a house will.

However, it's been proven that the renter who invests the difference between the rent and the home ownership costs will be better off financially in the longer term.

But most renters never do it.

 

[Shadow]

How do you figure this, Shadow?
Interest rates are - at best - 5% curently. Most rent yields are around 5-6% in suburban areas. Factor in holding costs, management fees, as well as repairs and maintenance and vacancies

I'm on 4.91% variable with Westpac. The average yield for Sydney is 5% but many suburbs have properties yielding 7-8%. Factor in 10-20% equity (from initial deposit or paying down existing debt). Also factor in building/plant depreciation rebates (which pretty much balance out the repairs/management/maintenance costs), and it's not so difficult to find cashflow positive properties. I think quite a few people on Somersoft have said that they are already cashflow positive.

However, it's been proven that the renter who invests the difference between the rent and the home ownership costs will be better off financially in the longer term.

That could be true in certain circumstances but would depend how great the cost difference is and what the renter invests in. Safer to have a fully paid off PPOR upon retirement, rather than still having to fund (ever increasing) rent payments with no steady income to rely on, or relying on income from Super considering what happened over the past year.

 

[boz]

Do you realise that every dollar the government uses to stimulate the housing sector, has a massive multiplier effect and returns much more money back to the government and economy than they put in - think stamp duty, taxes on development, higher employment and sales for the construction industry, real estate industry, home furnishing stores, banks and brokers etc.

But your position now is that the government stimulus for the housing sector will 'bring down the government'. Really? How so? That sounds like an assertion one of those 'instant experts' would make.

Interesting point,
there are several things with a multiplier effect, about the government money to stimulate housing doesn't have the multiplier effect simply because it just is enough to keep current employment/production, private debt at steady levels, I don't believe those increased money put into housing have more GDP stimulus then the previous years, for sure is valid the other way around and without those money there would be a leveraged reduction on the housing activity with a negative leverage effect on GDP.
Another very important factor with big leverage effect is commodity demand and prices.
Also when government take on more and more debt the leverage effect of those money is progressively reduced to eventually a point where any extra money would have no effect. I attach a chart showing the effect on USA GDP data

Actually you can see when at recession the line come up again, I think if we get a big enough recession the line would go to a much more healthy level.

I agree that the government is at risk as you can get to a point that society (or part of it) can't tollerate amount of money above certain levels given to the housing industry or homeowners. ALso another risk is how those homebuyer pushed into buying a home by government will react if they'll end up not affording the loans anymore or their home value would plunge. But I am sure this won't happen for quite sometimes (but in my opinion the government would be better off going to election this year and not next year)

 

[BayView]

I'm on 4.91% variable with Westpac.

Yeah, I was 4.94% (with CBA) until yesterday. 5.14% today.

How's yours after the others followed? Any change?

 

[Shadow]

Yeah, I was 4.94% (with CBA) until yesterday. 5.14% today.

How's yours after the others followed? Any change?

So far only CBA has increased the variable rate, but CBA were at least 0.1% below the others to begin with anyway, so the increase just brought them more in line with the other banks. Westpac SVR is 5.81%, and I get a 0.9% discount = 4.91%.

 

[Token Funder]

I am using the normal definition, as preferred by government, media, and the majority of people around the world.

But sure, it's not hard to come up with your own preferred less common definitions of recession if that's what you need to do in order to prove me wrong. That's what the gloomers resorted to after I was proved right (where prior to that point, the normal definition had been considered good enough).

Horse.
Water.
Et cetera

 

[yieldmatters]

Do you realise that every dollar the government uses to stimulate the housing sector, has a massive multiplier effect and returns much more money back to the government and economy than they put in - think stamp duty, taxes on development, higher employment and sales for the construction industry, real estate industry, home furnishing stores, banks and brokers etc.

But your position now is that the government stimulus for the housing sector will 'bring down the government'. Really? How so? That sounds like an assertion one of those 'instant experts' would make.

Do you realise what I do for a living?

 

[Shadow]

Do you realise what I do for a living?

No idea. Why?

 

[Hdb]

Do you realise what I do for a living?

Investment/Financial consultant?

How has your performance been in these turbulent times? Made heaps for your clients and yourself?

 

[Shadow]

Do you realise what I do for a living?

So... were you planning to enlighten me?

Also, you said above that the government stimulus for the housing sector will 'bring down the government'. Can you give a brief overview of how you see this playing out? (You avoided that question when I asked it before, in post number 23).

 

[chilliaa]

Do you realise what I do for a living?

well since you have been on this site since 2007,
and you have constantly said that property investment in this current cycle doesnt stack up, yet you have never given ALTERNATIVE asset classes with specific details as to why they should be purchased,

let me start thinking:
speculative guesses:
*armchair academia land
*professional blogger based on armchair theories with limited real world experience

 

[JIT]

Do you realise what I do for a living?

I thought you were an economist, or at least had a Masters in Economics? Maybe a professor in economics or a teacher/academic? Or maybe working in the private sector? Any other guesses?

 

[freddie]

Do you realise what I do for a living?

Well, at the top of the page of this forum it reads "Property Investors Forum". You're quite active and spend quite a lot of time here so I assume you must be an actual or prospective Property Investor. Why else would you post here?

Are you looking here to help you identify the right time to become a PI? Maybe you're waiting for Brisbane property to crash below 2005 levels (when you sold to rent) and then you'll become a PI.

 

[The Fence]

Do you realise what I do for a living?

No....so out with it.... and then kindly abscond please as you are not contributing anything real or constructive but argument for arguments sake....you never have and you never will....

As evidenced in this thread, housing markest have proven to be moving solidly into positive territory after the usuall downturn in the cycle...just accept it will ya..and move on....sheeesh!

 

[DavidMc]

Speaking of which - http://business.theage.com.au/business/home-prices-to-edge-up-despite-job-losses-20090625-cxq3.html

 

[HiEquity]

However, it's been proven that the renter who invests the difference between the rent and the home ownership costs will be better off financially in the longer term.

But most renters never do it.

I'm amazed you've gotten away with that one so long BayView! Proven! In every case? Wish I knew that before I bought a PPOR on a 10% deposit and watched it almost triple in value in five years... sold tax free as well!

I would love to know what I could have invested that 10% deposit in to give me that much upside...

 

[JIT]

I'm amazed you've gotten away with that one so long BayView! Proven! In every case? Wish I knew that before I bought a PPOR on a 10% deposit and watched it almost triple in value in five years... sold tax free as well!

I would love to know what I could have invested that 10% deposit in to give me that much upside...

Couldn't you have rented a place to live in and bought two IP's at 5% deposit each with same value each as your PPOR...?