Bayview.. There are far more investment options out there outside 'property'. I know that, but many people keep advocating cash RIGHT NOW. I'm saying it's not the best option. It's the safest option for sure, but if you know what you are doing, an investor can make money in any market. For the unsophisticated investors, then cash is probably the best thing for them to do. You are right though, I do push property, because I've done well, and continue to do well with it, despite the recent climate, and this is a property investing forum.
Property is not a be all end all investment, infact you will find property will struggle over the next few years as people loose their jobs, and bank finance drys up. Again; you're generalising. If you read my post, I did say on a deal to deal basis. To group all property in the D&G basket is not a very sophisticated mindset. Having said that, I would not be buying a neg geared property with an LVR over 80% in the next 12 months, and it would need to be pos cashflowed, unless you are a very high income earner who wants to minimise some tax. A dumb mindset in my opinion.
We all know property is overvalued, and people are streatched to buy it, property is a pyramid scheme which rely's on people constantly coming in at the bottom pushing up prices. Not all property is bought by FHB's. Many are trade-ups by well-off middle aged people, many are trade downs by retirees. These buyers are less price sensitive. You're generalising again.
Once the supply of people dries up, then property will fall in value. In some areas, this is true. Some areas are losing population, hence less demand, prices drop. Other areas are increasing in population, so demand is constant unless credit is cut off. This will limit activity for sure.
Look at what happened in the US? Each state has recorded property value falls over the last 12 months. Not entirely true. When I was in L.A during the last 3 years, there were areas like Watts which were scuzzville, which were being bought out by cashed-up Mexican labourers. This suburb was booming while many parts of L.A were going backwards. Again; look at the deal by deal basis. A standard 3 x 2 house in an average suburb, in the bottom third of the price range, in a good location will pretty much never drop in value because this is the pricepoint that most people can afford to buy and/or rent.
Cash has proven to be king, paying as high as 8.5%PA until recently, and your capital was preserved. Not so with shares, and property. I guess my $1,000 example is capital being preserved. In my case, my returns over the last 12 months were much better than this, and I didn't buy anything. All rents went up more than 15%, and the cap growth was more than 5% - in some cases more than 10%.
And if you only judge a investment according to its tax benefits, then your investing for the wrong reasons. I didn't mention tax benefits, but now that YOU have, it's another factor into the scenario that makes property better than cash, all day long.
You can buy a great cash business, great cash flow, but high tax paid on its profits... cash in your pocket is better than having complex cash draining investments like property. Having owned a business for most of my working life, and just bought another one, I can tell you that running a business is the best tax effective investment there is. Maybe not the safest investment there is of course.
Also, you say property is cash draining. This is the mindset of a neg cashflow investor - which I'm not.
It is quite possible to purchase property that is pos cashflow after tax from day one.
