Will property values double by 2017?

[Sunfish]

I don't know how many here subscribe to the Agora Publishing stable of newsletters. I do, and if I had to guess MBL is a new reader. I have only skimmed these threads but his assertions seem to come direct from their pages. Don't get me wrong.... Agora may well be proven right.

But I have read them for years and have learnt to be critical. If my assumption is correct that MBL is quoting them, he needs to take a step back, take a big breath and stop preaching. I too believe the investing strategies of some here are dangerous, especially when presented as models to latecomers. But I know I can do no more than occasionally present a reasoned argument.

MBL. No need to change your mind, just your attitude and presentation.

 

[mbl]

I don't know how many here subscribe to the Agora Publishing stable of newsletters. I do, and if I had to guess MBL is a new reader. I have only skimmed these threads but his assertions seem to come direct from their pages. Don't get me wrong.... Agora may well be proven right.

But I have read them for years and have learnt to be critical. If my assumption is correct that MBL is quoting them, he needs to take a step back, take a big breath and stop preaching. I too believe the investing strategies of some here are dangerous, especially when presented as models to latecomers. But I know I can do no more than occasionally present a reasoned argument.

MBL. No need to change your mind, just your attitude and presentation.

Sunfish.....I have not heard of them. A link would be nice.

cheers, MBL

 

[Sunfish]

Sunfish.....I have not heard of them. A link would be nice.

cheers, MBL

As News Ltd publishes under dozens of banners except News Ltd you may be reading them without knowing it. But as you already seem to be at risk of slitting your wrists (only half joking! ) I cannot add to your burden. Sorry.

Kind regards.... Fish.

 

[lowb]

Nullgadine's graphs are very interesting:

Regarding this graph: http://www.somersoft.com/forums/attachment.php?attachmentid=2385&d=1183099340

Is the Y axis change in cashflow per year?
Hm, negative cashflow, it means relatively less CF per year?

There are many affects on property... e.g. (1)credit as % of net income (2)demand and supply, (3)low liquidity of property, (3)strong economy, (4)interest rates, etc.

It's simplistic, but one does really wonder "historically, house prices have always doubled every N years" really holds? The basic premise in many property texts is that "every period has gone through similar booms and busts and the fundamentals of property don't change".

Hope to read more information. Even if property does do well, more information can enable one to increase yields (with a bit of luck)!

 

[BV]

Nullgadine's graphs are very interesting:

Regarding this graph: http://www.somersoft.com/forums/attachment.php?attachmentid=2385&d=1183099340

Is the Y axis change in cashflow per year?
Hm, negative cashflow, it means relatively less CF per year?
!

This graph IMO on it's own is meaningless, it should have come with an explanation
of what data is fed into every axis.
We don't know what assumptions the editor is making.
Does he assume that we continue to hold the same assets we have today
or that we buy more and how many?
Does he assume that we stop working at 55, 60, 65 years of age
and have no other household income?
Does it take into account that many people switch to part time work near or after retirement?
I know 2 guys at my work who retired, and came back as consultants working 2 days a week
for the same pay.
Also, where does the super come into this?
Cheers

 

[GoAnna!]

Lets meet back here in 10 years. That might be a quicker solution to the argument than this thread

 

[jingo]

Lets meet back here in 10 years. That might be a quicker solution to the argument than this thread

Great idea GoAnna! Let's do that and compare our figures then!

 

[Nullagine]

This graph IMO on it's own is meaningless, it should have come with an explanation
of what data is fed into every axis.
We don't know what assumptions the editor is making.
Does he assume that we continue to hold the same assets we have today
or that we buy more and how many?
Does he assume that we stop working at 55, 60, 65 years of age
and have no other household income?
Does it take into account that many people switch to part time work near or after retirement?
I know 2 guys at my work who retired, and came back as consultants working 2 days a week
for the same pay.
Also, where does the super come into this?
Cheers

You can draw these graphs yourself from publicly available data.

The first graph entitled "Aus Hubbert Curve Fit : Housing Borrowing to HouseHold Net Income" uses:

-----------------------
D02 LENDING AND CREDIT AGGREGATES>Credit, of which>Housing>(incl securitisations)
http://www.rba.gov.au/Statistics/Bulletin/D02hist.xls column L

divided by:

G12 GROSS DOMESTIC PRODUCT - INCOME COMPONENTS>Household income and outlays>Receipts>Total household income
http://www.rba.gov.au/Statistics/Bulletin/G12hist.xls column Q

(Both quantities expressed in [conveted to] in $ per year.)
----------------------

The ratio of Credit / Income is fitted with a Hubbert Curve (http://en.wikipedia.org/wiki/Hubbert_curve) using non-linear regression (minimization of the sum of squares of the difference between actual and predicted values) of the curve parameters:
Bottom: base of the curve
Height: top of curve minus base
Offset: year at which curve peaks
Stretch: half width of the curve at inflection point

The predicted values at each Year are calculated as:
=Bottom+(4*Height)*EXP((-Year+Offset)/Stretch)/((1+EXP((-Year+Offset)/Stretch))^2)

 

[Nullagine]

Nullgadine's graphs are very interesting:

Regarding this graph: http://www.somersoft.com/forums/attachment.php?attachmentid=2385&d=1183099340

Is the Y axis change in cashflow per year?
Hm, negative cashflow, it means relatively less CF per year?

There are many affects on property... e.g. (1)credit as % of net income (2)demand and supply, (3)low liquidity of property, (3)strong economy, (4)interest rates, etc.

It's simplistic, but one does really wonder "historically, house prices have always doubled every N years" really holds? The basic premise in many property texts is that "every period has gone through similar booms and busts and the fundamentals of property don't change".

Hope to read more information. Even if property does do well, more information can enable one to increase yields (with a bit of luck)!

The Y-axis is a ratio expressed as a percentage:
= 100* (Aus Total Housing CashFlow / Total Household Net Income)

The ratio avoids comparing yesterdays $s with todays as $ divided by $ is a dimensionless number.

The cashflow was neutral until around the late 1980s as money paid off mort-gates was recycled into newer mort-gages. Cashflow then became positive as more money flowed into households as a result of their borrowing money at a faster rate.

The graph attempts to show the consequence of a reduction in the debt to income ratio (of the first graph) upon cashflow. Cashflow goes negative as more is paid off mort-gages than is recycled into newer mort-gages.

It so happens that the peak and trough of the cashflow curve falls where the oldest baby boomers turn 58 and the youngest turn 58 - perhaps suggesting a demographic cause.

 

[Twitch]

Nullagine, interesting graphs, I really like the historic stuff.

The predictive stuff I'm highly sceptical about though.

For example, I don't believe the predicitve line in the 1890s chart, did someone draw that line in the 1870s/80s? If the line was drawn after the event it is not predicitive. Was the housing borrowing to net income prediction made before or after 1975??

It is not hard to construct a theory to "predict" all manner of things after the event. The true test of a theory is to make predictions before events unfold. If the theory successfully predicts these events and produces many more hits than misses than can be expected by chance, then it's got some cred.

cheers

 

[Harris]

MBL
Just started reading the thread and was flabergasted at the thought that you dont consider yourself to be a doomsdayer..!

I have never met any naysayer who would agree to be called one.. They all hide under the umbrella of being called a "realist".

I have just started reading your posts and aim to counter some of the very wrong and generalised theories you are using to prove your points.. like the following post

In US, over 16% of the lending market for property comprises of sub-prime.. Aus has less than 4.5% as of May 07.

How would you even remotely compare both..?

In US, sub-prime (low-doc) lending risk criteria in hey days in 2002-04 was severely compromised, unlike current lending crietria amongst majority of low-doc no-doc products in Australia.

I have seen many naysayers come and go on this forum... clearly remember the predictions (off the back of some strong data) by some forum members after 2002 peak predicting 50% erosion in property values and blood bath after such a huge prop cycle. None materialised and should not.

Most of those have stopped posting..!

Whilst a counter argument is healthy for the forum, running a scare campaign like you are off the back of some very flawed arguments is definitely not.

I aim to go through your posts and point out the irregularities as soon as I have some time.

Harris

Ben...plenty out there.......look them up..

Have a loom at America first (the sub prime mortgage crises).

And don't for a second think that what happens in America will not affect Oz. Oz ain't 'different' as many people want you to believe.

The fact that your investment is based on credit NOT tightening should have you worried.

Believe me, myself and my family went through 17% interest rates....and it was not pretty.

Your not gonna see the same interests rates......however a 2% difference in interests rates today will have the same affect as a 7% rise in 1990.....due to the bigger rise in housing values today.

 

[Nullagine]

Nullagine, interesting graphs, I really like the historic stuff.

The predictive stuff I'm highly sceptical about though.

For example, I don't believe the predicitve line in the 1890s chart, did someone draw that line in the 1870s/80s? If the line was drawn after the event it is not predicitive. Was the housing borrowing to net income prediction made before or after 1975??

It is not hard to construct a theory to "predict" all manner of things after the event. The true test of a theory is to make predictions before events unfold. If the theory successfully predicts these events and produces many more hits than misses than can be expected by chance, then it's got some cred.

cheers

Ta. The Hubbert Curve was fitted to the 1800's data by me in 2007 as an illustration of an actual Australian credit bubble and bust which, even with poor quality data, matches the Hubbert Curve well and was recognized by me only long after the event as a result of my considering what course the current credit bubble / boom may take in the future. The poor quality of or large variability in the data at the time may have made it impossible to see a pattern until well after the event.

Thus the Hubbert Curve fit to the current credit data is an attempt to predict. The data in hand, of better quality than the 1800's data, contains sufficient variability that the parameters describing the fitted Hubbert Curve have some variability whilst not invalidating the hypothesis that the data are well describesd by a Hubbert Curve. In particular, until well past the ascending (left) inflection point the parameters contain sufficient "slop" that an exponential curve may be statistically just as significant. However, an exponential curve implies that debt to income will become infinite. Using the patterns of debt to income from the past, infinite debt to income is exceedingly unlikely.

 

[twobobsworth]

Do I get a prize for the most viewed thread?

 

[Nullagine]

If the line was drawn after the event it is not predicitive.

Now I think I see from your perspective. The term "Predicted" in the graph legend is used in the statistical curve fitting sense - does the curve indicate the most likely Y-value for each X-value where the X-values are not neccessarily time.

The everyday use of the term predict refers to time as the X-value:
predict verb
To tell about or make known (future events) in advance, especially by means of special knowledge or inference: call, forecast, foretell, prognosticate, project. See foresight.

So in the 1800's graph, the curve attempts to "predict" the most likely value of debt to GDP at time X through interpolation while in the 2000's graph, the curve attempts to predict the future values of debt to income through extrapolation.

 

[Nullagine]

Do I get a prize for the most viewed thread?

I put two bob away in 1969. I'll see if I can find it.

 

[JIT]

Do I get a prize for the most viewed thread?

Sorry I think that prize went to Brenda Irwin with 31,880 views on a thread some time back.

GSJ

 

[A95]

This thread would probably take the prize as one of the worst...

Why so many otherwise 'smart' people bother to respond????

Is there any substance, facts, defined sources of data in any of mbl posts???

 

[Les]

G'day A95,

Why so many otherwise 'smart' people bother to respond????

Seems to me that nearly 80% responded by saying values will "probably" or "definitely" double in the next 10 years. It sounds like they were blowing a raspberry to mbl, wouldn't you think?

Regards,

 

[mbl]

I honestly hope, what I (and many other people) am predicting does not come true.

 

[mbl]

This thread would probably take the prize as one of the worst...

Why so many otherwise 'smart' people bother to respond????

Is there any substance, facts, defined sources of data in any of mbl posts???

BTW....did you even bother to read any of the links I posted ? Or are you to smug to do so ? Anything that goes against your 'predictions' is wrong is it ?