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    Originally posted by splosh:

    How about air? We all need it, they arent making any more of it.. so lets all love it and charge ever increasing prices for it and we’ll all be rich beyond our dreams. And our thinking with reagrd to the price of air will create a more equitable distribuition of wealth! Wonderful! [blink]

    I hear you, and I like the way you think. It would be better of course if we could first ensure that most of the air was in the hands of the Baby Boomer generation, because frankly, we can’t afford to pay the pensions and health-care that they feel they are entitled to. So if they hold most of the air before we create an air boom (or air-bubble if you like), they’ll end up exceeding the assets test and lose pension and health-care entitlements…. Of course they won’t be able to sell their air – they need somewhere to breathe after all, so we’ll have them TRAPPED! MuhawhaHAHA!

    I see only one potential flaw in your plan – what if they realise that their air-bubble is over-inflated? What if they fall out of love with air? What if the air-bubble bursts? What if they ran up hundreds of billions of dollars in debt to ‘fund their retirement’ through air-investing? What if they saw their air-wealth going up and p_ssed it against the wall – living large instead of saving dilligently for retirement? They’ll end up worse off than they were before, and will need more pension and health-care funding! What will we do then?

    Ah, I hear your whisper, “We’ll just tax the heck out of Gen’s X and Y!”.

    Oh good, good plan. Let’s proceed then.

    F.[cowboy]

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    And here’s another rip-snorter. It shows that in order for house prices to grow 7% pa, housing debt must grow by 15.7% pa. If you look at our current aggregate housing debt which is about to pass $800,000,000,000 then project this to grow by 15.7% per annum for a few years, perhaps a decade…[blink]

    http://img209.imageshack.us/img209/3779/houscreditvshousepricescq8.jpg

    Strangely, I very rarely see any mention of these kinds of analyses in newspaper commentaries, REIx reports, HIA, BIS etc…

    So either I’m looking at the data all wrong, or there is nothing to be concerned about.[blink] Or perhaps they don’t want to upset the bandwagon in case the music stops…

    I’d better point out that half of 2005, all of 2006, and 2007 were based on ‘projections’, the rest is real data (nominal, not CPI adjusted).

    F.[cowboy2]

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    Here’s a chart. It shows:

    Annual national GDP growth per year in 1970 dollars
    Annual national M3 growth per year in 1970 dollars
    And for interest sake, Melbourne house prices in 1970 dollars

    http://img213.imageshack.us/img213/4159/gdpdebthpi1970un9.jpg

    Spot the problem?

    (Hint 1 – We’re creating money more than twice as fast as we’re earning it.)
    (Hint 2 – Most of this new money is created as debt, implying lower future earnings.)
    (Hint 3 – The recent rapid growth in money supply over earnings is unprecedented in the last 40 years… actually, in the last 77 years, but I can’t back that up with data.)

    Sure I could have used gross aggregate wages, as in my last example, but the GDP/M3 relation is more widely accepted.

    F. [cowboy2]

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    Originally posted by JohnSmith:
    I would also add that it is Australians love of property that is helping to keep its population wealthy.

    I absolutely dispute this assertion.

    Let’s see:

    • Our wealth is dependant on our housing market.
    • The housing market is dependent on debt levels rising faster than income.

    Therefor our wealth is dependant on debt rising faster than income…[blink]

    Perhaps you could chang it to “our current perception of wealth is linked closely to our possession of real estate, and expectations for future capital gains from housing. However, this perceived wealth will eventually prove to be an illusion, a mirage that vanishes into the ether. Unfortunately, the debt will remain for generations, acting as a constant grinding drag against our economic performance and real sustained wealth..”[biggrin]

    Then I’d agree with you!

    F. [cowboy2]

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    Originally posted by celeste:

    So why worry

    In 1990, the average person earned $24,440 (ABS), the labour force was 7.9 million and the total mortgage debt was $78 billion.

    In 2006, the average person earns $42,500 (ABS), the labour force is 10.1 million and the total mortgage debt is $780 billion.

    At 16.35% in 1990 (and remember very few people actually paid more than 13%), the national Debt Servicing Ratio* (DSR) was 7% of pre-tax income.

    At 7.5% now, the DSR* has jumped to >13% of pre-tax income.

    ï‚· DSR does not include over $150(?) billion of personal debt and >$36 billion of credit-card debt which largely didn’t exist 15 years ago. DSR is calculated from the figures given, and differs from many other estimates.

    And then, to top it all off, it’s only been 2-3 years since prices jumped up so significantly. This means that even if house prices level off, total mortgage debt levels (and therefore DSR) will continue to climb for somewhere between 14-17 years.

    As DSR levels climb, the money used to service the debt is quarantined from it’s potential productive use as savings, investment of consumption, all of which add to our national economic well-being and GDP. Instead it is paid into the deep pockets of bankers, and half of it is sent directly off-shore to repay foreign borrowing by Australian financial institutions…

    Trust me, we are much worse off (individually AND as a country) today than we were in 1990. When the party music stops, we’re going to have a very long time to look back and think about where we went wrong.

    F. [cowboy2]

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    Originally posted by CanAm:
    Where do you get your numbers from?

    Australian Bureau of Statistics
    Cat. No. 6530.0 Household Expenditure Survey, Summary of Results
    The table is called:
    AGE OF REFERENCE PERSON, Household characteristics – Australia

    If I’m reading it right then ‘nothings really changed’ ??

    I think the first chart shows that there has been an across the board (age-wise) increase in both the proportion and numbers of home-owners (supporting GMH’s earlier statement). The implications of this depend on whether it is a temporary change / part of a cycle or whether it is representative of a sustainable, single change.

    The second chart is more interesting. The lower version shows how ownership changes over a typical lifespan. It also illustrates that in a age-demographically balanced society (equal number in each group), the demand for purchase would always be met by supply of sales.

    The top version of the second chart shows that short of a massive increase in immigration and/or a doubling of the birth-rate, this situation will soon be very unbalanced.

    F. [cowboy2]

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    Originally posted by tenorBb:

    If I sell an IP within one year of buying it, do I pay CG on selling?

    Only if your capital proceeds are greater than your cost base.

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    I’ve whipped up some graphs to help the discussion about home ownership proportions, future demand, etc.

    First a look at how home-ownership changed during the boom, both as a proportion of population and in total numbers:
    http://img217.imageshack.us/img217/7302/demorentownvm3.jpg

    Now a look at where we currently stand in terms of households, and future demand for rental and owned homes:
    http://img206.imageshack.us/img206/1851/demodemandwg5.jpg

    *Perpet_Rent = Perpetual renter – the 17% of the population who will never own. Rent_Asp_Own = Renting, but aspire to own eventually. Note that some of these people will not buy until quite late in life.

    I’ll be back later to post a few of my thoughts.

    Cheers, F. [cowboy2]

    <edit> I grabbed the wrong line for the first graph [blush2] – it’s bundled owners without a mortgage in with renters (thus the drop in owners aged 55+). The second chart is correct.

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    A good paint shop should be able to supply any number of small, shaped foam rollers that would get into the Vs. If you want to really make a neat finish, you could skim-coat (plaster) the top half to fill the gaps, put a chair-rail in and pain the lower part. I’ve seen it done very quickly and effectively.

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    Originally posted by mtsons:

    Property is the best though.
    Peter[headphone]

    Uncle Silvio ‘the Wolf’ Capella would disagree…[fear]

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    Originally posted by esnam:

    any1…
    hav…
    ur…
    u…
    ur…
    ur…
    u…
    ur …
    wouldnt …
    ? so…
    u…
    b…
    ? a…
    lil…
    ! a…
    lil…

    I think you need to read this:

    Book One

    Then this:

    Book Two

    Once you have read both volumes, please return and repeat your question.

    F.[cowboy2]

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    Ah damn! I missed that one, and it was a sitter…[laughing]

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    Interest rates may fall

    Wow, you really are quite the “glass half full” man, aren’t you? You’ve just described a country who’s economic condition could be optimisticly described as pre-cataclysmic, then casually say “ah, yes, but interest rates might fall.”

    I’m just having a jab. [wink]

    F.[cowboy2]

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    Start the next pyramid scheme:

    South-seas, railways, gold-leases, land-banks, Angora goats, Pyramid(c), Ostriches, Y2K, DotCom, Pawlonia, Westp…

    What’s next? It’s in your hands.

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    Start a cult. Tax-free too!

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    Write an irritatingly catchy, commercially friendly paint-by-numbers pop song and sell it to somebody who can actually sing*. Make royalties your friend.

    F. [cowboy2]

    * Best to avoid ‘idols’. Sure, the initial hit will do well regardless of quality, but you’re looking for royalties that continue to flow for… well, more than 11 days.

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    Back-bench politics

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    “You’re contracted to us to give us back a piece of the capital gain,” Martin says. “The piece of the capital gain is larger than the percentage [of the original value of the property] you borrowed. If you borrow, say, 50 per cent, you will owe us a bit more than 80 per cent of the capital gain. If you borrow 20 per cent, you will owe us 35 to 37 or 38 per cent of the capital gain.”

    Martin says Greenway expects most borrowers will opt to borrow about 25 to 30 per cent of the value of their home. This would mean handing over about 40 per cent to 50 per cent of the capital gain you achieve when the property is sold. It should be noted that if your property’s value were to fall or remain constant then the amount you’d repay would be limited to the amount you’d borrowed.

    In addition there is a “no negative equity” guarantee built into the mortgage, so even if you borrow up to the maximum allowed 50 per cent level the most you can possibly owe is the full value of your home.

    More here

    The negative equity bit is funny – “even if you borrow up to the maximum allowed 50 per cent level the most you can possibly owe is the full value of your home”. So if your house is worth <50% of the original price, you can sell and walk away without debt… except you’ve already lost your 50%!

    It sounds like the risk is freely handed to the borrower, and most of the profit, to Greenway.

    Playing by these rules, I’d rather a lender than borrower be (to paraphrase the ole bard)…

    F.[cowboy2]

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