From: Always Learning
I have a question about any natural limits to Capital gains.
We live in reality, we live in a capitalist society. The profits of companies have a big effect on the stock market and wages/bonuses paid to employees. Wages and stock values represent "reality", unless interest rates fall (like recent history), surely the value of even blue ribbon suburbs cannot rise beyond the reality of the market for any sustained period.
I was told by a Sydney North Shore agent, prices will probably rise 10% a year as they have done for the last 10 years ("as safe a Mosman houses"). For me such an "idea" is extremely attractive, if I buy then hold, $3M worth of property ( ignoring the problem of 4% negative cash flow $120K/year and resulting finance problems). As mentioned in a previous post at 10% growth in about 7.6 years prices mathematically should have doubled, I could sell 1/2 my now $6M portfolio and live of the other 1/2 now worth $3M. Is this foolish speculation, or is it a real option that people are using? Is it really possible for the best suburbs to appreciate significantly above the stock and wage market over the long term and grow by 10% per year over a long period? I realize that in real life there are spurts of lower and higher growth, but is the "principle" correct?
Without doubling the money in the economic system and unless wages and/or profits of companies have doubled, how could the future renters or purchasers of the hypothetical "Mosman" house get the money to buy or rent it ?
This is not a question of "is Mosman or north shore a good place to invest", but a much larger "big" picture question. The link between high demand (property in a good area) and economic engine to generate the money to buy such expensive property, IMO these two forces must be linked in some manner.
In the past 7~10 years suburbs with top capital gains have doubled or better, without a doubling of the economy is it possible to double again and again every 7 years?. Capital gains at 10% but economy growing at 3%, can it last forever?
Glenn
<table border="0" cellpadding="0" cellspacing="0" >
<tr>
<td rowspan="4">
</td>
<td colspan="2" align="center">
<p align="left"> Investment Laws</td>
</tr>
<tr>
<td align="right" >1st Law:</td>
<td>"What ever you don't invest you forfeit."</td>
</tr>
<tr>
<td align="right">2nd Law:</td>
<td>"What ever you reap is what you've sown"</td>
</tr>
<tr>
<td> </td>
<td><p align="right">Jim Rohn;</td>
</tr>
</table>
I have a question about any natural limits to Capital gains.
We live in reality, we live in a capitalist society. The profits of companies have a big effect on the stock market and wages/bonuses paid to employees. Wages and stock values represent "reality", unless interest rates fall (like recent history), surely the value of even blue ribbon suburbs cannot rise beyond the reality of the market for any sustained period.
I was told by a Sydney North Shore agent, prices will probably rise 10% a year as they have done for the last 10 years ("as safe a Mosman houses"). For me such an "idea" is extremely attractive, if I buy then hold, $3M worth of property ( ignoring the problem of 4% negative cash flow $120K/year and resulting finance problems). As mentioned in a previous post at 10% growth in about 7.6 years prices mathematically should have doubled, I could sell 1/2 my now $6M portfolio and live of the other 1/2 now worth $3M. Is this foolish speculation, or is it a real option that people are using? Is it really possible for the best suburbs to appreciate significantly above the stock and wage market over the long term and grow by 10% per year over a long period? I realize that in real life there are spurts of lower and higher growth, but is the "principle" correct?
Without doubling the money in the economic system and unless wages and/or profits of companies have doubled, how could the future renters or purchasers of the hypothetical "Mosman" house get the money to buy or rent it ?
This is not a question of "is Mosman or north shore a good place to invest", but a much larger "big" picture question. The link between high demand (property in a good area) and economic engine to generate the money to buy such expensive property, IMO these two forces must be linked in some manner.
In the past 7~10 years suburbs with top capital gains have doubled or better, without a doubling of the economy is it possible to double again and again every 7 years?. Capital gains at 10% but economy growing at 3%, can it last forever?
Glenn
<table border="0" cellpadding="0" cellspacing="0" >
<tr>
<td rowspan="4">
</td>
<td colspan="2" align="center">
<p align="left"> Investment Laws</td>
</tr>
<tr>
<td align="right" >1st Law:</td>
<td>"What ever you don't invest you forfeit."</td>
</tr>
<tr>
<td align="right">2nd Law:</td>
<td>"What ever you reap is what you've sown"</td>
</tr>
<tr>
<td> </td>
<td><p align="right">Jim Rohn;</td>
</tr>
</table>
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