Not at all! As stated as above, I believe that government intervention is a mistake, and that would apply to the sharemarket as well as property.

However, I believe the sharemarket is a different kettle of fish in that:

– ‘mum & dad investors’ tend to invest some or all of their savings and perhaps if they are not too risk averse a share loan / margin loan. They don’t in general stake the family home on the performance of a single asset class.

– speculation in shares may cause a stockmarket bubble, but young people can still find a way to buy into the stockmarket if they so desire. Not so with houses.

– the thrill & feeling of security associated with owning one’s house cannot be achieved by holding shares.

– a house price bubble and the accompanying over-investment is damaging to the economy in that it increases the money supply while lowering productivity*. Sure, it temporarily creates jobs and growth, but this is finite, and must come to an abrupt halt.
Over-investment in local companies on the other hand has very positive effects on productivity, so any adjustment has far less serious consequences.

Just a few thoughts. I’m more than happy to be corrected on any of the above, as it is only my own ideas, not expert opinion.
Cheers,
F.

*All this money being created out of thin air allows people to work less, retire earlier etc, without an increase in output or product. It also encourages investors to shift investments out of shares…

…and I’ll bet a large percentage of people struggling to save 20% deposit on their first home in Sydney are glad it is there!

So who is more deserving of having their desires met, the 28 year old earning below average wages and trying to save $80,000 deposit on his first house just an hour’s commute from his place of work in the city so that he feels secure enough to propose to his girlfriend and ‘have one for the the country’ who will hopefully grow up to earn a wage and pay enough taxes to support the pension of the baby boomers in their dying days?…

Or a baby boomer who already owns a PPOR and 3 investment properties and expects to retire this year at age 55 even though his/her super isn’t going to cover the 30 odd years s/he will live on average?
(incidentally current legislation has the young fella’s super locked up until age 60 at least so he’s already chained to the wheel for 5 years / 15% longer than the baby boomers!)

I personally believe that markets are largely able to balance themselves and that government intervention is a mistake, but they may have actually saved a few of the ‘greater fools’ from financial ruin with this tax. The real test will be whether they will remove the tax once house prices return to trend along with the affordability index….
I doubt it very much!

Can you give some examples of how you feel RE investment has been ‘hurt’? If you mean prices are falling as a result of less people buying property to rent out, I believe that was the goverment intention. They wanted to cool the market in the hope of retaining some of Sydney’s brightest youngsters who were being priced out of the chance to ever own their own homes unless they left the state. Admittedly, the adjustment would have occurred regardless of this additional tax, but I think the intention was good.[cap]

I think that was a rhetorical question? A) Because there are very few people buying and very many speculators trying to bail out/ cut their losses.

[thumbsup2]
I’d say it’s more than acceptable, I’d call it… savvy! Just remember that we have passed the peak of the market and if you are really serious about selling one house, buyers do actually set the CMV, not sellers. Don’t fall for the old trap of chasing the market down. It’s better to accept 10k off now than 50k off in 6 months.
I also share your dream of retiring with ocean views… matter of fact, I’ve got them now!

A couple of reasons; because it’s a tough slog, and because there are restrictions on resale of owner built houses. Finance is also difficult unless you can set up a line of credit using an existing security. If you can overcome these obstacles, you should do very well given that most builders in my area are currently quoting about 75% labour and 25% materials for construction of new dwellings![stun]

Good luck with whatever you decide.
F.

Wraps work well in a rising market because you are insured against wrappee default with the equity in the house. In a falling market the wrappee can just walk away if he/she gets uncomfortable with the figures, and the wrapper cops the capital loss. Very risky. Alternatively you could skew the contract even further in your favour, but don’t expect to be treated well by ACA / Today Tonight when you haul one of their ‘battlers’ through court to chase your loss…[cap]

If you sell an asset or save for the holiday, it will be your own money you are spending. If you ‘withdraw equity’ by extending one of your mortgages, you are simply using your perception of increased wealth to secure a larger mortgage. I remember the good old days when one of the main financial strategies involved decreasing your mortgage over time rather than increasing it…
But I seem to be in the minority on this topic, so knock yourself out.

Not in reidential or commercial real estate, that’s for darn sure![blink]

Hi Spanky,
I have used Melbourne data for two reasons; because I am familiar with the market and its last couple of cycles and because there is very little other reliable data to choose from.
Means & Averages are a meaningful way of illustrating my point & the very essence of statistics. Without such methods it is impossible to describe movements in large quantity of data.
So while I concede that some individual properties will fare better than the mean, this must be balanced by other poor performing properties. Also, the more exposure you have to the market and the longer the term of exposure, the closer you will achieve to the mean.

I’m interested in your thought that “averages are for average investors”. I absolutely agree with the statement, but it would appear to be at odds with Buy & Hold and more aligned with the simple Buy Low, Sell High strategy.
What would be, in your opinion, a good total return on an investment over the longer term, say 25 years?

Of course there are many economic, cultural and social differences, but my point was simple. Both Japan and Australia have seen ‘irrational exhuberance’ in their RE markets. Japan’s economy faltered and has been in the doldrums ever since, while Australia’s current position is looking increasingly shaky. Japanese house prices began to fall 13 years ago and are still falling; local prices have begun to fall and…

…would seem extremely optimistic.
For a more ‘relevant’ example, try the UK. Their market last peaked in 1989, and ten years later in 1999 median prices had only just surpassed their previous peak. This time around (both in AU and the UK) the bubble is even bigger and the result of the correction will be compounded by the all-time record debt bubble (including credit, home equity, personal loans & record ‘gearing’).

Can you direct me to another event during those 100 years when a single asset has demonstrated the ability to inflate by similar levels as property without fundamental support? With the current levels of gearing and ‘investors’ drawn from such wide-ranging financial backgrounds? What was that asset worth ten years later? ‘Considerably more’?

Between 1971 and 2004 the CPI adjusted median value of residential housing in Melbourne has averaged 1.9% per annum. The CPI figures are from the ABS and median house prices from the REIV. These figure is backed up by Macquarie University SoE research and financial commentators (reference http://www.google.com). What’s more, the 1.9% includes the recent boom, and will be lowered as the current soft landing / crash plays out. I’ll post the numbers if you so desire.

“House prices are a matter of opinion, whereas debt is real.” Merv King, BoE, 2004

Why would rents go up? Presumably these first time buyers are already renting, so their innability to buy will not increase demand for rental properties, especially given that there is an oversupply of rental property in many areas.

You seem to suggest that the value of these properties will remain high because such houses will not sell? Given that people value their houses by asking “how much could I sell it for if I was forced to sell now” in a rising market, surely the same valuation method should apply in a falling market?

…which was very fortunate for the government. Our economy appears to be trundling along quite well of late, but it is largely fuelled by the massive debt bubble of not just consumer debt (personal loans and credit) but mortgage debt also. Of course, debt must be repaid, so this is just delaying the almost inevitable…. Recession.

It sure is low. It could perhaps squeeze a little lower, but at some point, it must start to rise again, particularly as there is a limit to the amount of debt consumers can take on before they simply stop spending.

“Creative” = Desperate & Reckless.
100+% Loan = Instant Negative Equity.

My thoughts? We are headed for a period of rising unemployment, falling company profits, rising interest rates, falling house prices, falling US dollar value (and/or substantial US rate hikes forcing more local rate hikes), devalued AUD….
Oh, and record bankruptcies!

Cheers,
Foundation.

“House prices are a matter of opinion, whereas debt is real.” Merv King, BoE, 2004