Forum Replies Created
- Originally posted by yack:
So dont compare owning BHP shares to owning property. Why not look at Telstra eh
Ok, sure… ~8% dividend yield… vs residential real estate…
~4% Canberra
<4% Adelaide, Perth, Brisbane, Melbourne
<3% Sydney
[blink]
I guess it’s all about how you look at it!
Cheers, F.[cowboy2]Originally posted by Marisa:Hi Foundation, as far as comparing wages – Melbourne versus Perth etc. etc. , I am really not interested.
You can analysis it to death and nothing wrong with that, but it aint gonna change a dam thing over here.So do you believe that:
a) Wage rises are not the primary driver of property prices over the long term (if not wages then what? How are people paying for these houses?)
or
b) Wage rises are the primary driver of property price increases over the long term, but are currently irrellevent because of the minerals boom. (BHP buying up all the houses?)
or
c) Wages are irrellevant because currently people are able to finance housing investment from capital gains on existing houses. (That sounds a little like a pyramid…)I know which one I’m betting on. And you’re right, it aint gonna change a damn thing. When the froth blows off Perth’s bubble, it’ll be the people with the highest debt as a proportion of their wage who will bleed the worst.
Cheers, F.[cowboy2]Originally posted by Marisa:I am not sure whether we need to be too concerned about median price of Melbourne etc., I think its irrelevant in terms of Perth market.
I’m not so sure about this. The average wage in Perth is still well behind Melbourne, despite rising 8.4 percent during 2005 (Melbourne around 6%).
I am only interested in what is driving Perth/WA market upBy which I assume you mean the ‘resources boom’? I dispute that this is the main driving factor. I would argue that, once again, it is past ‘capital gains’ enabling ‘investors’ to pay well over the odds for houses with the expectation of further capital gains in excess of holding costs. Yes, the rising cost of minerals has led to increased investment and development, leading to higher incomes and employment levels, but remember that once mines come ‘on-line’ the demand for labour is significantly reduced. Also, I can’t see that an 8% increase in wages, coupled with a 75,000 increase in population should lead to 20% increases in house prices.
So it looks like the same old story. Sure you can make money speculating, just be sure not to end up in the same position as thousands of Sydney & Melbourne folk (and very soon QLD) who are currently holding negative net portfolios (ie the value of their debt exceeds the value of their assets).Cheers, F.[cowboy2]
(Hard work never killed anyone, buy hey why take a chance)
[/quote]Originally posted by Forklift:My question is: To “rein in” or “put a halt” to rising inflation, why is it only, or mostly, the mortgagees that are forced to ‘foot the bill’? Surely there must be other ways of stopping the rise of, or bringing back down, the inflation rate without always making what I can only guess is approx. 50% of the population pay for it. (Yes, I know I am speaking in broad terms but I think you get what I mean?).
It always seems to me that the home-owner/mortgagee is the “patsy”!
And my statement is that I find this to be highly discriminatory that, on the whole, a minority is made to carry the burden.Nope. you’re putting the cart before the horse, I’m afraid. These mortgage holders are the ones (largely) responsible for the inflation in the first place! Borrowing money is inflationary, because our banking system effectively creates new money every time a new loan is created. Somewhere up the chain (the vendor or the vendor’s vendor etc), this money leaks out into the broader economy, increasing demand for consumer goods.
So how can the Reserve Bank control the rate at which the money supply expands? By lowering demand for these (inflationary) loans. And this is done by raising the cost (interest) of the new money.Cheers, F.[cowboy2]
… and NSW prices appear to have passed their low point and are on the up again! See attached graph:
Linked Here
Oh, no they’re not. The rate of price falls is just starting to accelerate!
Cheers, F.[cowboy2]A few more:
Q: What’s yellow and smells like bananas?
A: Monkey vomit!Q: What did the zero say to the eight?
A: Nice belt!Q: How do you catch a rare bird?
A: U-nique up on it…F.[cowboy2]
^ = “to the power of”
x^2 = x * x = x squared
x^3 = x * x * x = x cubed
x^y is found on the windows calculator, or you can just use the notation I originally posted if you have Excel, MS Works or OpenOffice.Cheers, F.[cowboy2]
Originally posted by Nigel Kibel:The problem with many people on this forum is they forget what it is like to be inexperienced.
Hmm, nope, I remember being naive, gullible and losing money to scams… never to the tune of $1000+ per day though!
F.[cowboy2]… that’s an interesting way to look at the housing finance figures. It’s totally different to my view though – I may have time to explain later. Remember though, interest rates are a blunt tool to control various forms of inflation, none of which include house prices in their basket. I’d look to oil prices etc before I looked at housing finance… up to AU$89 per barrell again today.
I agree with AmandaBS – 0.5%, but for the year, not the first half. This is far from certain though. I think we are going to see some very big economic news from the US this year, and if the political tensions with Iran escalate, all bets are off for the future of the world economy let alone the interest rates for a small island country at the *rse end of the world.
Cheers, F.[cowboy2]You’re welcome! Save yourself the price of the book – the quote I got was directly from http://www.Wikipedia.org (my bad for not referencing it), which is just one of many great net resources I use almost every day. Saves me having to think, you see!
Cheers, F.[cowboy2]
Compound annual growth rate (CAGR) is one method of assessing the average growth of a value over time. To calculate CAGR, one must solve the equation:E = B(1 + r)^T
where E denotes ending value, B denotes beginning value, and T denotes the time passed in years. The value of r that solves the equation is the percentage annual growth rate.
Using the same terminology to solve for r, the formula looks like this:
r = (E /
^(1 / T) − 1So in your example the answer is 6.8 odd:
r = (2.69)^(0.066….) – 1= 0.06823
F.[cowboy2]
Ah yes, the power of compound interest…
Yes, if an asset returns a greater rate of capital growth than the interest rate on borrowings, of course you’re going to be best off to leverage yourself to the gills to get as much of that asset as you can.
Good luck with that then, a capital idea. I’m well put in my place!
F.[cowboy2]
Nats,
I understand your point, but would suggest that:
a) This only applies to the very few house buyers to whom repayments on the cheapest house are stretching their ability to live comfortably (and these people really would be better off in almost all scenarios – particularly at the tail end of a boom – renting and saving the difference between rent & mortgage repayments).
b) Most people’s potential earnings will rise proportionally faster than house price affordability falls. This has been the case historically with the exception of a couple of bubble-frenzies and is almost certain to be the case in the future.An example of my point from a previous thread:
I would suggest you give serious consideration to the price you are prepared to pay for a PPOR. The difference between buying something cheaper and paying it off over 10-15 years and stretching until you can’t afford to make significant additional payments over 30 years is enormous.For example 2 couples, both with a maximum weekly accomodation budget of $320 are buying PPORs. The first couple buys:
$150k over 15 years
$312 p/w repayment
$93,000 total interest paymentsThe second couple buys:
$205k over 30 years
$317 p/w repayment
$289,000 total interest payments
both scenarios assume constant 7.07% IR.After 15 years the first couple have finished paying off their PPOR and start saving or investing their $312p/w.
After 30 years, the second couple has paid off their house, spending a total of $494k.
Meanwhile the first couple have paid off their house for $243k and also invested a further $243k (or at 6% compounding, $395k).Which would you rather be?
Cheers, F.[cowboy2]
Originally posted by mcubed:It is just funny when people say that put ‘extra’ repayments in there.
I mean all I have is my wage so what do they mean by extra repayments? apart from getting money from shares, family, lotto (how lucky is that!) do they mean, after paying the minimum one week they may decided to live offf baked beans for a week and pay another couple of hundred?I don’t understand why anybody would purchase a property if they could only afford the minimum repayments. Borrowing a little less and putting the difference into repaying additional capital would see them quids & years ahead in next to no time. Plug a couple of example figures into an online mortgage calculator and the point will become very clear.
Cheers, F.
Sorry Mr Qlds, I was just kidding… should’ve used a [biggrin] or 3! I agree with property WA – don’t pay for software and data feeds (available free)/ systems (free and or bogus) /seminars etc.
The suggestion that actual trading is better than paper trading is based on experience. Paper trading can be useful, but it does not expose you to the emotional/psychological forces. Small actual trades do. As for the ASX200, I believe many are currently overvalued and better picks can be found elsewhere. ^*Opinion only*^… but then I sold a bunch (about half) of my [junior miner] GDR shares on Tuesday for a tidy 30% profit in a month. (Bought .205 on 17/11, sold .260 & .270) Minus trading costs and CGT. Not enough to replace my 9to5, but handy, fun & educational.No need for papertrading – just get yourself an online service such as E*Trade, chuck a few grand in and make a few small trades – see how it works, feels and get to know how you react to the contrasting forces of fear/greed/gut/advice etc. I guarantee, it won’t be what you expect. Be sure to use conditional orders to limit your inevitable losses at this point. With small share parcels (say $2k), the costs of buying and selling will often outweigh your gains, but it’s a small price for hands-on learning.
Also have a read of WayneL’s Trading Pages. Well written, focussing on trading psychology.
I’d avoid managed funds as much of the market is overpriced (IMO), and most have some exposure to property/trusts. Pick a couple of areas you expect to do well, then search for a share that you like, using technical analysis or fundamental analysis or a hot-tip or a gut-feel or a combination.
Be sure to read financial papers / websites or magazines for a range of views & news.Good Luck!
F.[cowboy2]The above should be assumed to be general advice and nothing more than that. No consideration was given to the specific needs of Mr/Mrs Badgers_R_Us. I am not licensed to give financial advice and have only limited (though rewarding) experience in share trading. I’m not about to give up my day job…
Speak to a licensed financial advisor if you require (Expensive & Biased) advice tailored to (Leave you destitute and with a multitude of) specific needs.Originally posted by troynbec:The owner is looking for $390,000.
We believe <snip> we could sell both properties for $350,000 each.
What have I missed that is so obvious???
If you were looking to purchase, and were faced with 3 choices:
– Purchase a 3 bed house on 850m^2 & renovate for a total of $415,000.
or
– Purchase a 2 bed unit on ~400m^2 for $350,000
or
– Purchase a 3 bed house on ~400m^2 for $350,000
Which would you choose?
By going ahead with your plans and assumed prices, you’re betting that buyers will go for the second or third option. I just can’t see why anybody would. If I was a buyer, I might consider option 2 or 3 if they were 40% less than option 1, but not at 16% cheaper. Catch my drift? I think you’re being overly optimistic. Perhaps speak to an independant valuer (no, not a real estate agent) about a realistic resale on the subdivided/developed properties.Cheers, F.[cowboy2]
Originally posted by Don and Liz:Another question. If we are out of property in years of flat and negative real growth where is our money. What strategies have the forum member adopted. Let’s not get one tracked. Property is not the only investment vehicle.
Well, in answer to that question, my alternative investment vehicles are doing nicely. Gold is up 33% since the start of the year, about +10% in a month. Silver up about 25% for the year and ~10% for the month. Managed Aus share fund up 20% in 7 months (selling today). BHP did nicely for me, sold at +15% clear. Gold shares are volatile (I took a hit on LHG last week, but it’s bouncing back nicely so I’m holding), GDR sitting at about 12% and 7%. I took my profits from oil shares when crude dropped below $60. I’m still a long-term oil bull, but am waiting a and watching… I think palladium might be worth a punt – I wanted to start accumulating at <$250, but was nearly fully committed and try not to risk borrowed capital.
My losers for the year have been IFM, GGY and GLI – the first two I was stopped out at -10% plus trading costs, the last was not performing as well as I expected in the face of a rising gold price – I guess they were too cautious and not transparent enough for me. I roughly broke even on that one. Meanwhile, house asking prices have continued to rise slowly in the coastal town where my beach shack is located (but the more expensive ones have been on the market for 12-18 months+), and fallen around 10% where the ‘big’ house is.Cheers, F.[cowboy2]
Sorry Dazzling, I’ve only got Melbourne residential data from back when I could access ABS for free. Plus some I was sent claimint to be official REIV stuff.
Don & Liz,
There is something very fishy about those numbers. Here’s why:Year _ API Mag _ ABS Data_ REIV Data
1970 _ 11,800 __ ~12,000 _ ~17,000
1980 _ 40,800 ___ 39,500 __ 55,000
1990 _ 140,000 _ 131,000 _ 182,000
2000 _ 241,000 _ 191,000 _ 266,000
2005 _ 363,000 _*309,000 _ 363,000* March quarter – June not yet available.
Now I can’t absolutely vouch that either the ABS or the REIV will back my figures, but what appears to have happened is that whoever did the API report has crossed from one set of data to the other at some point. This exagerates the ‘growth factor’. Let’s see how they compare:
API Mag_ – 10.3%pa
ABS Data – 9.7%pa
REIV Dat – 9.2%paOk, so it doesn’t look like a lot of difference, but compounded over 35 years that’s nearly a 50% difference in equity between 1st and 3rd place. It also puts a bit of a question mark against my ‘REIV’ data because there’s no way in hell they’d endorse figures that looked worse than the official ABS ones… although I guess it’s just the final number that counts, and $363k looks a lot richer than $309k.
Anyway, this is all nit-picking and rambling.
Yes, if you’d bought 10 houses back in 1970 and not lost the lot when interest rates hit the high teens in ’82, 86 & ’89 (Ok, so I don’t remember the first two, but I’m told it happened, yet was so dwarfed by ’89/’90 that everyone’s forgotten about them), you’d be doing pretty nicely for yourself about now. Of course the banks wouldn’t have let you buy 10 houses in 1970 unless you brought an enormous chunk of real cash to secure the loan. Think 30 or 40%, and ‘equity’ didn’t count the way it does now.Anyway, I wouldn’t want to have my shirt riding on the ‘good bit’ of the last 30 years, because you can’t have the sugar without the medicine. The reason house prices rose considerably during the 70s and 80s was one and the same with wage increases and high interest rates – inflation. You can’t have the one without the other. The last few years, of course have been something different altogether – namely, madness.
Oh, and inflation.So, by all means, if Mr(?) O’Rourke wants us all to go out and buy a house now, hold it until 2020 and have an asset worth $2 Million if in Melb or $2.7 Million in Sydney, he should at least tell us to expect interest rates to average above 10% and to hit the high teens (an extra $600 to $700pw) at least 3 or 4 times before then. And he should be advising us to budget for $7.00+ petrol. And the average wage earner will be earning over $250,000 a year (nearly $150/hr). He should tell us all this just to put things into perspective.
But he won’t. He’ll only use the numbers that appeal to the ‘greed’ factor. Fear and reality have no place when you’re ramping something this hard!
Cheers, F.[cowboy2]
…and a second point on this matter, for those of you who believe that buying at or near the peak of a bubble is irrelevant in the face of “O’Rourke”‘s 12 percent growth factor, here are some facts.
– The Melbourne housing market hit a previous peak in 1990 with a median price of $182k (source REIV). If this value is compounded at 12%pa, current median prices in Melbourne should be $998,000.
– Prior to 1990, the Melbourne housing market hit a peak in 1974 with a median price of $35.5k (source REIV). If this value is compounded at 12%pa, current median prices in Melbourne should be $1,190,000.Obviously, neither situation is even close to the mark.
From the 1974 peak to the 2004 peak, the actual rate of compounding appreciation was close to 8%. Inflation during this time averaged 6.7%pa, so the real rate of housing ‘growth factor’ is a little over 1% for the period.
From the 1990 peak to the 2004 peak, the actual rate of compounding appreciation was almost exactly 5%. Inflation during this time averaged 3.2%pa, so the real rate of housing ‘growth factor’ is under 2% for the period.Now we need to remember another couple of important points:
1) Prior to the boom of the late 1980s, house prices always returned to their trend in relation to wages (Around 4.2x annual wage in Sydney, 3.9x in Melbourne).
2) House prices in most parts of Australia have peaked for this cycle and are falling either in nominal prices, real prices (ie rising slower than inflation) or both. If you were to do the above calculations from the peak of one boom to the trough of a future cycle, things get decidedly ugly.Hope this has provided some lunchtime food for thought.
Cheers, F.[cowboy2]
^(1 / T) − 1
