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I understand the concepts and the power of compounding investment…
What i dont understand is how people will be able to afford property in 30 years time, on the basis of 8% average growth for 30 years, take Darwin as an example used before:
Annual Average Growth 8%
Annual Inflaction 4%Median price today is $385,000
Price in 10 yrs – $831,186
Price in 20 yrs – $1,794,468
Price in 30 yrs – $3,874,122Based on 4% inflation per year, the figures in todays dollars would look something like this (unless i have stuffed up the calcs)
Price in 10 yrs – $552,599
Price in 20 yrs – $793,159
Price in 30 yrs – $1,138,440Wages will increase which will provide some compensation, but I don't think it will be enough to cover the amount.
Loan Amount House in Darwin
Morgtage Payments on $385,000 @ 8% – P&I are: $2824 per monthLoan Amount House in Darwin @ 8% in 10 years
Morgtage Payments on $831,000 – P&I are: $6097 per monthHow can we afford to pay such high mortgages for property 10 years down the track?
If prices do rise to that level, and people can't afford it, more people will rent, but want rent can we afford? 5% Yield for a $831k property is $41550 a yea, or about $800 p/w for rent.
I cant see how the current trend of captial growth can continue for the next 30 years? Can anyone enlighten me?
From my calculations, the article stating Darwin prices to hit $8.36M in 30 years, based on 8% growth and median price of $385,000 is WRONG.
Based on 8% growth over 30 years, the price would be $3.87M, and after 40 years, $8.36M, after 100 years $846M,
If inflation is 4% per year for 30 years, at the risk of sounding like a moron asi have absolutely no qualifications in this field… from what i calculate, 4% inflation based over the next 30 years, would make this $3.87m property in Darwin, hypothetically worth $1.13m in todays currency.
Based on rent yields of say 4%, to rent this property would in todays dollars, be rented for $875 p/w.
Don't get me wrong, i just cant see how people will be be able to afford this unless wages increase dramatically or if inflation increases drastically.
If i change the inflation to 5%, the value of the property in 30 years in todays value is about $831k, still with a 4% yield, rented at $639pw, i'd argue it's still unaffordable for most people in todays market.
So what has to give?
Quite a number of things including:
Gippsland Water Recycling Water Plant
Expansion of the Australian Paper Mill at Maryvale
http://www.premier.vic.gov.au/newsroom/news_item_archive.asp?id=1110Clean Coal and Coal to Diesel Project
http://www.theage.com.au/news/national/secret-to-cheap-petrol-is-coal/2006/09/09/1157222384113.htmlhey guys,
sorry for the delay in replying, been flat out with work and stuff.
Traralgon is where this property is located.
I've driven through a couple of times when driving from melbourne to brisbane, and personally I wouldn't slow below 60 in Moree!
so in theory, if you were to get a 6 month settlement date, and then sell the property 6 months later (12 months total) you would get the 50% discount on CGT?
