RBA Chief Unworried About House Prices: No bubble= Lower Interest Rates

[hobo-jo]

Some Mum and Dad investors can tolerate sideways movements in property, given the tax benefits of owning an IP.

But when people like Hobo Jo come here telling us that gold is what Mums and Dads need to "invest" in (because property is going to crash!) I really get upset.

So you have no problems with Mum/Dad investors gearing up at 20:1 to get into property, but God forbid they use some spare cash to pickup a couple of Gold bars for some protection against the mad policy some central banks are taking?

At a 95% lend property has to only fall 5% for ALL capital to be wiped out. Canberra almost dropped by that in the 3 months to January and Melbourne, Sydney, Brisbane and Perth have all dropped around 2.5% over the 3 months to January (RPData stats). You want to talk about the risks, how about considering the risk that property buyers face today, years of having to make up the difference between the rent and costs shortfall while being exposed to the most overpriced housing market in the world... oh but how could I forget, paying money every week to hold a property means I get a tax benefit yipee!

I don't know where you are getting the idea that I'm pushing Mum & Dad investors into Gold. In all honesty I think Mum & Dad investors with little time of their own to investigate investment options should either leave it in cash or pay someone to invest for them (e.g. a balanced financial planner).

For those that do get into Gold, I would suggest they do so without borrowing... in comparison to the usual way property is bought (e.g. highly leveraged) unleveraged Gold is a relatively safe option (in my opinion, for the short to medium term). It's worth noting that Gold priced in AUD peaked at the same time in 1980 but didn't have as large a fall as priced in USD.

Hobo Jo, I don't mean to offend or insult you.

clueless people, just like Hobo Jo.

Very kind of you to warn us about the impending crash in property Hobo. Now we know, thanks to you, its time to move on.......

I've been here 5 years so far and have no plans to go anywhere. I imagine I'll still be here in another 5 when the property market is looking to have bottomed/is representing fair value again and I'm once again be a buyer...

 

[meconium]

So you have no problems with Mum/Dad investors gearing up at 20:1 to get into property, but God forbid they use some spare cash to pickup a couple of Gold bars for some protection against the mad policy some central banks are taking?

At a 95% lend property has to only fall 5% for ALL capital to be wiped out. Canberra almost dropped by that in the 3 months to January and Melbourne, Sydney, Brisbane and Perth have all dropped around 2.5% over the 3 months to January (RPData stats).

Like most bullion speculators, you have a trading mindset. Nothing wrong with that. But most mum and dad investors are into buying and holding property, not flipping it as speculative people like you are apt to do. They also get tax advantages for owning property. What are the tax advantages of gold? None! Does gold pay rent or obtain annual rent rises? Obviously not.

Stop scaremongering - you are sounding like a broken record. The GFC happened almost 3 years ago and I still don't see the massive collapse that the d&g people predicted. The world hasn't ended. Interest rates are headed downwards soon and the future is brighter than some of the perpetually negative gits may want us to believe.

There's an increasing awareness that you are an opportunist Hobo and that you actually want ALL property to implode so you can get in on the cheap. Nice one mate. But keep dreaming. This isn't the USA. Don't expect the Australian market to collapse just because you wish it.

 

[Indifference]

Like most bullion speculators, you have a trading mindset. Nothing wrong with that. But most mum and dad investors are into buying and holding property, not flipping it as speculative people like you are apt to do. They also get tax advantages for owning property. What are the tax advantages of gold? None! Does gold pay rent or obtain annual rent rises? Obviously not.

Stop scaremongering - you are sounding like a broken record. The GFC happened almost 3 years ago and I still don't see the massive collapse that the d&g people predicted. The world hasn't ended. Interest rates are headed downwards soon and the future is brighter than some of the perpetually negative Prozac junkies may want us to believe.

There's an increasing awareness that you are an opportunist and that you actually want ALL property to implode so you can get in on the cheap. Nice one mate. But keep dreaming. This isn't the USA. Don't expect the Australian market to collapse just because you wish it.

Well, if most mum & dad investors are only drawn by the tax incentives, as you espouse, then they are just ignorant to the real world around them. I actually disagree with that, and think mum & dad investors are actually trying to do more than you give them credit for.

As for your consistent verbal assaults on other SSers, it is one of the worst displays of incivility I have seen here over the past 7 yrs. I implore you to direct that energy to the topic of discussion rather than degrading this forum. There are plenty of forums that welcome trolling, but SS has thankfully never been one of them.

 

[meconium]

Well, if most mum & dad investors are only drawn by the tax incentives, as you espouse, then they are just ignorant to the real world around them. I actually disagree with that, and think mum & dad investors are actually trying to do more than you give them credit for.

You are quoting me selectively. Tax advantages are just one of many reasons why mum and dad investors buy property. We both know it. Kindly stop trolling.

As for your consistent verbal assaults on other SSers, it is one of the worst displays of incivility I have seen here over the past 7 yrs. I implore you to direct that energy to the topic of discussion rather than degrading this forum. There are plenty of forums that welcome trolling, but SS has thankfully never been one of them.

It's only the d&g types and the let's-buy-bullion brigade that accuse me of verbal assaults. Mainly because they don't like what I say. Nobody accuses the d&g brigade of trolling when they repeatedly claim that the end of the world is nigh and that property is the worst asset class to be in. The d&g brigade's panicmongering is akin to someone shouting "fire" in a crowded cinema. Arguably legal, even if there is no fire. But hardly a nice thing to do.

Now, about my alleged "assaults on SSers". Well, I haven't called anyone names. I've merely challenged the d&g brigade to explain their reasons for blowing hot air into an already inflated bubble. If that is uncouth, I again express my contrition. Mea Culpa.

Indifference, we know your views about Silver. You are entitled to your opinion, even if this is a Property Forum. But is there any need to attack me, albeit eloquently, for having a differing view?

 

[zed_kid]

I will be waiting for the gold bubble to burst so I can buy in cheap... RARGHHHH! (needs a pirate smiley)

 

[meconium]

I will be waiting for the gold bubble to burst so I can buy in cheap... RARGHHHH! (needs a pirate smiley)

The smart contrarians got in back in 2000, when Mandela used his connections to secure an EU moratorium on central bank selling of gold. I'd love to see gold back to those levels......alas it won't be happening anytime soon. The madness is set to continue for a few months yet.

 

[Beebop]

Property values won't be going up any time soon. That much is for sure !

 

[VYBerlinaV8]

Property values won't be going up any time soon. That much is for sure !

What about medium or longer term? How long do you think property will stagnate for?

 

[investor2009]

Property bubble? Are you guys serious?
This just sounds absolutely ridiculous to me, It's funny how some people can actually believe anything they tell themselves.

Bye.

 

[Propertunity]

Property values won't be going up any time soon. That much is for sure !

There is nothing of the sort!!

Here's a capital growth chart that I ran up for a previous client just this morning. (I have deliberately left off the suburb name - but it is the Sydney area). And before you ask, yes, it contains sales data (including agent advised sales) up to 5 days ago (11/3/11).

Looks like it's still heading up to me. (Naturally he's happy with his purchase).

Of course there are some areas heading down and others trending sideways. But that is the same in ANY market at ANY time. The skill is in picking the areas going up.

 

[Trojan]

I once challenged the doomsayers like Hobo to a bet on this forum but the Mods, fearing anti-gaming laws, pulled the thread.

My challenge went something like this. I offered to pay the doomsayers $10,000 if the lowest quartile median of all Melb suburban property did not rise by 10% over the oncoming year; I also predicted much larger gains circ 20% for the lowest decile of all non-inner suburban Melb property.

Nobody rose to the challenge. In any case, according to the Mods, such bets are illegal and unenforceable.......pity, I'd love to take a few dollars out of the doomsayers pockets. Not that they'd have much to spare. Its a rare thing for them to put their money where their mouths are.

Don't bother betting him. He lost a bet to me but never paid up.

I bet him on www.overclockers.com.au
The bet was if median housing prices rise in 2010 according to the ABS, he would lose and if it falls, I would lose.
The bet was for $100 and changing signature to a link with "I was hopeless wrong about house prices, ask me how"

Still waiting for him to pay up but all he does is report all posts mentioning bet to moderators and gets them deleted.

 

[hobo-jo]

The bet was for $100 and changing signature to a link with "I was hopeless wrong about house prices, ask me how"

For the record, I added the sig and it was removed by an admin. The $100 was paid as per conditions set in the original post of the thread (to a charity of choice).

Really pathetic that you would signup just to post that.

Doesn't surprise me though. I would be pissed off and spiteful if my investments were going backwards as well. Have you seen the latest Sydney stats from RPData? Down 2.5% for the quarter to Jan, down 1.3% for Jan itself, only up 2.5% YOY, that doesn't even beat the inflation figures. Wish you'd gone with Gold at the start of 2010 like I suggested hey? We haven't seen you much around the OCAU housing thread, guess the reality of the market is too much for you to discuss sensibly.

 

[Ridin-High]

only up 2.5% YOY, that doesn't even beat the inflation figures.

Don't forget the income component which would probably be around 4% net.

= 6.5% total return thus beating inflation

 

[hobo-jo]

Don't forget the income component which would probably be around 4% net.
= 6.5% total return thus beating inflation

4% - council rates - property management - maintenance - insurance, etc
And that's assuming you own it unencumbered rather than paying 7% interest rates.

Best case scenario is a return lower than a term deposit.

 

[Ridin-High]

4% - council rates - property management - maintenance - insurance, etc
And that's assuming you own it unencumbered rather than paying 7% interest rates.

Best case scenario is a return lower than a term deposit.

Negative that was including all outgoings (5.5% gross minus 1.5% outgoings)

really a lower return then a TD?

Hypothetical.

- TD Paying 6% Interest
- $60k Cash
- 30% tax bracket

TD = $60,000 * 6% = $3600
After tax return = $2,520


- House with 4% Net yield
- 60k Cash deposit
- 15k in acquisition expenses
- 7.2% I/R on debt
- 30% Tax bracket
- $2,000 Depreciation allownace (2000*0.3)

Neg Geared Approx after tax + Depreciation = $3,852
300k increasing by 2.5% gives $7,500 minus 3,852 = $3,648

After tax Total return on Term Deposit = 4.2%
After tax profit on IP = 6.08%

So the above statement you made on a term deposit beating Resi IP over the year is false when you do the numbers. Their is pro's and cons with each investment vehicle

Regards,

RH

 

[hobo-jo]

Negative that was including all outgoings (5.5% gross minus 1.5% outgoings)

I'm sure you could find opportunities that returned 5.5%, but that's far above the average.

 

[eternit]

I'm sure you could find opportunities that returned 5.5%, but that's far above the average.

maybe the smart people are buying at above average return, what do you think?

 

[hobo-jo]

maybe the smart people are buying at above average return, what do you think?

I'm thinking the above average yielding properties probably had below average growth.

I'm thinking that the smart people were investing in higher growth/return assets than resi property.

 

[willair]

I'm thinking that the smart people were investing in higher growth/return assets than resi property.

That can also work both ways you only have too look at several areas in the inner southside of Brisbane where if you drive or walk 1-2 klms then there is sometimes adifference in over 200k in value,and another item with longterm help resi property is over the longer period you get a better idea on value,and all value is is what the next person is prepared to pay..

 

[Ridin-High]

I'm thinking the above average yielding properties probably had below average growth.

This i tend to agree with in general. I don't own any inner city property, but i agree it has performed better recently.

Hobo i'm completely clueless with gold (i'm being serious lol). Can you burrow against it? If so what LVR/Rates (I'm making an assumption you can only really burrow against gold stocks). And how do you determine fair value?

Regards,

RH