Don’t take offense so easily Jerry!
We’re all here to share and learn and I imagine I’m not the only one who would prefer that threads occasionally get bogged down with diverse views and a bit of detail rather than the standard.To your questions:
The price of land in Japan has fallen for 13 consecutive years (down 6% last year alone) and is now close to 1980 value in real terms. The nominal loss in value of house prices is 43% and commercial property 80%. Interest rates have been effectively 0% since 1999.Between 1989 and 1996, many parts of California saw median sale prices of houses drop 26% (although the average for the state was less, falling from around 220k to 183k if memory serves).
The UK had a similar situation from around 1990 to 1996, and oh yes, there was a ‘soft landing’ for the housing market in Australia too at around the same time.
I hope this has been informative.
Thanks for the reply Foundation.
So for properties to go up we don’t need salary increase accross the board. But rent increase means inflation increase hence salary also increase. Property price increase don’t increase inflation, only rent does?
I quess salary don’t have to go up by 75% for rents to go up by that much. Say rents go up by 50% but salary only 20% because other things don’t go up or just a little. Basically salary go up to cover inflation caused by housing cost? Maybe I am making it to complicated??this has been a good debate and if anything has been clarified it is that everyone has an opinion on whether shares are better than property, but i think ive made up my mind.
i dont have the cash to buy another decent property particularly when the market is a bit overheated and with all the taxes and add-on costs etc. there is also the risk that putting $350k into another single property is too risky now.
ive learnt that i can go into a share syndicate with about $200k and have it professionally managed. i’ll get exposure to a wide range of companies in order to dilute my risk, get the same negative gearing benefits plus some extra tax benefits, it will be far more liquid and will diversify me away from property.
ive talked to my mate and he has shown me a proposal that he has put together and this syndicate set-up will be run according to a model established in the US which outperformed the S&P over a 10 year period. it has quadrupled peoples money in 10 years.
im well aware that may not happen in the next 10 years but it is far more appealing than going into property again.
You can make money on shares. You can lose money on shares. You can make money on property. You can lose money on property.
No point comparing statistics from the broader market between asset classes. When you invest in shares you invest in one or a few. You don’t invest in the whole market (unless you invest in an index fund, even then that’s not the whole market). When you invest in property you invest in one or a few. You don’t invest in the whole market.
Therefore your personal experiences in either shares or property will reflect the particular investment decisions that you made at the time.
You can pull out statistics to support any theory that “shares” or “property” performs better than the other, but at the end of the day you don’t invest in “shares” or “property” over a generic timeframe, you invest in BHP, or AMP or whatever, and you invest in 17 XYZ Lane Cityville NSW 2049 or whatever property, so your returns will be related to that particular investment over the time period that you hold it for.
The returns from “shares” between 1910 and 1965 have nothing to do with YOUR returns from holding BHP between the dates of 17/06/2002 and 19/08/2004.
The returns from “property” between 1982 and 2003 have nothing to do with YOUR returns from buying 17 XYZ Lane Cityville NSW 2049 on 23/07/1992 and selling it on 02/03/1997.
So let’s hear what people invested in specifically, and how they did with it, rather than some vague statistics on “shares” or “property”.
whats the point of knowing specifically what someone made out of XYZ Street Cityville when i can never buy it?
someone can tell me they made 100% out of AMP shares and i can go buy some on the market if i feel like it.
youre not comparing apples with apples. no matter what someone tells me their property has grown by, i can never buy that specific property.
what utter rubbish your suggestion is that statistics are vague. statistics are facts, not like some unrealistic valuations a real estate agent gives when trying to flog a property. the beauty of the stockmarket is you know exactly what you are going to pay (or receive) when buying or selling shares.
think of it like this, if you buy into a small commercial property, that property can only be profitable and increase in value if the business going on inside the 4 walls is profitable. it is those businesses that we purchase on the stockmarket.
Chipper, I think you’ve missed my point totally. Don’t call my opinion rubbish. It’s not. I am not an idiot. I have worked hard all my life and I am educated and I listen to other people and learn what I can from them. So watch your language.
Try and get the drift of what I am trying to say FIRST.
Let me explain my “rubbish” to you. All I was trying to say was that there was no point pulling out statistics to try and prove that the generic term “shares” or “property” performed better. At the end of the day your personal investment performance will reflect the SPECIFIC shares or property you invested in, over the SPECIFIC time frame that you invested in them. So no point saying “shares” went up 60% over 1965 – 1982 and “property” only went up 43% over that period therefore “shares” are a better performing investment.
In fact your point was mostly pretty consistent with mine. So I guess you were calling your own opinion rubbish too?
There was a bit of venom in the earlier posts, with some saying shares are “better” and some saying property. I was just making the point that these generic terms don’t really reflect what YOU will make on YOUR investments specifically, therefore let’s stick to what people have done and how they’ve gone at it.
OK?
Rubbish indeed! Honestly, people these days are too ready have a knee jerk dismissal of other people’s ideas. Some at least.
I’m sure you’ll have a comeback for this. Fire away.
i hate to break it to you but there are no better results than property . How many shares can you leverage? why is it the banks give a higher lvr against any piece of crap property than against their own shares? not because they like risk! scenario 1 invest $40K and receive a return on a $400K property just 5% growth is $20K
or scenario 2 buy $120K and to acheive the same (forgetting tax benefits) you need 16.6% return and what about margin calls?
since 1982 only 38% of the asx 100 is still in existance , some have had take outs but a large % have gone bankrupt, that is the best 100 companies in australia… i think it is obvious i dont particularly like shares. i do have them and i have never come close to my property returns, because you cant beat a no money down deal . they are infinite returns. i could be ps 146 in 8 days and have the licence to invest your retirement fund and it would only cost $3800 and that is legal and that is what happens. these so called experts are the ones trading your money?i dont care about comparing apples , no offence chipper , i invest to make money and the word diversify means spread your risk because you are bound to lose. bankrupt properties dont exist
also is that property available at $150K in the gold coast because i would be interested?
Well here is my 2c worth.
I have negative geared for a number of years until now that is. After reading Steve McKnights 2 books I am an absolute convert to positive gearing and am now making the change.
I also have shares. Just to give you an idea, I have had Coles Myer shares for 5 years now and have made only 33% capital growth while the returns have been pityful. I have had NAB shares for 4 years and made about 10% capital growth. I have AAV shares (inc a merged company) and have lost 75% in 4 years.
Based on statistics a recession will come anytime in the next few years. Shares will just go down. Meanwhile if investing wisely, there will be many opportunities to add value in property regardless of the state of the economy. Just remember:-
Problem + solution = profit and returns can be very healthy indeed.
For my main investing income stream, its PROPERTY PROPERTY & PROPERTY.
Thanks
Tigeri hate to break it to you but there are no better results than property . How many shares can you leverage? why is it the banks give a higher lvr against any piece of crap property than against their own shares? not because they like risk!Banks will lend less against shares because the data avaiable on share valuations is far more transparent & accessibe than property valuations (this has as much to do with volume of sales, as other things). ie, you can’t get an accurate valuation for your property every day at the close of business, but you can with shares or managed funds. So banks actually make one of the typical investment erros we all make – being over confident that we actually know what we are talking about. Also, generally people feel more comfortable with property and see shares and some ‘mysterious’ investment. In reality, for all the main assest classes (property, shares, cash) the principles of researching and investing are the same. Also the banks lend more against property because they know people are more indoctrinated into repaying interest for 25-30yrs on property. Combine this with the fact that banks can only semi-accurately value a property every 12 months, and i guess it makes sense to me why they lend more for property. Share prices are much more fluid and you can easily value them each day – too much work for a bank when they can make same profit out of doing less work lending against property.
i do have them and i have never come close to my property returns, because you cant beat a no money down deal . they are infinite returns.I love the no money down argument…I have a mate who trades contracts for difference (CFDs) – they are like deposit bonds for property. The CFDs allow him to put $1000 down and ‘own’ $10K worth of shares. So when the value goes up by $500, he tells me he made a 50% return ($500/$1,000*100= 50%). I can barely stop laughing long enough to explain to him that he was ‘risking’ $10K regradless of what he ‘put down’. So his return to me was on 5% ($500/$10,000*100= 5%).
My point is that you can get great returns from all assest classes but you really have to understand what you invest in, whether it is property, shares, cash (or alternative assest classes). So, in response to mortifs oringinal post, I would argue that if mortifs understands shares, then borrowing against the property to invest in them would be a good investment decision (but I would go international shares at the moment rather than the ASX).[biggrin]
Originally posted by tony wpb:i hate to break it to you but there are no better results than property .
since 1982 only 38% of the asx 100 is still in existance , some have had take outs but a large % have gone bankrupt, that is the best 100 companies in australia
i could be ps 146 in 8 days and have the licence to invest your retirement fund and it would only cost $3800 and that is legal and that is what happens. these so called experts are the ones trading your money?i dont care about comparing apples , no offence chipper , i invest to make money and the word diversify means spread your risk because you are bound to lose. bankrupt properties dont exist
ill try to dissect your 3 main points calmly!
once again i will reiterate that it is an absolute fallacy to suggest that property gives you the greatest returns than any asset class.
while it is true that the sharemarket bounces around wildly and will crash every decade or so, the overall return from Australian and international shares (adding back the tax advantaged dividends) is greater than you get from property.
I accept the arguement that people are more comfortable with property because the agent doesmt stand outside your door every day and tell you what its worth – AND WE ALL KNOW WHAT AGENTS ARE LIKE WITH THEIR VALUATIONS!
As i said earlier, unless the business or economy taking place inside the walls of property is profitable, then the value of the property cannot go up. That is also true for residential property because if the borrower does not have the capacity to repay a mortgage then property prices begin to fall. This will happen when interest rates go up, unemployment figures worsen or that wonderful land tax really starts to bite.
THIS IS CALLED A “PROPERTY MARKET CRASH”.
Getting back to the “graphs” arguement, i suggest you overlay the entire performance of the Australian sharemarket (every stock) since day one, with that of the property market (every state, every sector) and you will see clearly that shares outperform. Now while i may not be able to buy into the new hot suburb for property, let alone buy an exposure to the entire property sector, i can buy an exposure to the entire Australian sharemarket via an Index Fund.
This MASSIVELY reduces my risk if i can tolerate the more apparent and see-through market fluctuations.
Just because the sharemarket might slide 20% in the next 12 months, doesnt stop CBA and Telstra and BHP making billions of profits each year that they pay to me in the form of a fully franked dividend and at a rate that grosses up to be more than my net rental income.
Your comment that only 38% of the top 100 companies from 1982 still exist today needs further research. while that may be true, your assertion that a large percentage have gone bust is ridiculous. I’ve spent the last week researching listed companies that made up the top 200 in 2000 and of those that no longer exist, only a few companies (eg: HIH and Pasminco)went bust. i’m well aware that OneTel and others have gone bust but the greater majority of your “missing” companies have been renamed, taken over, demerged or merged into new entities with the result being an exceptional return for shareholders.
If you can stomach the truth, it is the LISTED PROPERTY TRUSTS than have shrunk to a mere fraction of their pre ‘2000 numbers, primarily due to mismanagement, greedy property managers and the effects of worldwide recession during the early parts of the 21st century, 9/11 & SARS etc whereby fewer people are travelling let alone staying in ritzy expensive hotels or resorts.
In fact the listed property trust indexes have significantly underperformed the All Ords Index over the past 12 months which is usually seen as a prelude to the same thing happening in residential markets.
Your comment about being PS146 compliant in 8 days might well be true, but at least you are required to have some basic education in giving investment advice as opposed to what Real Estate Agents are required to have. I then challenge you to join a company and hand out financial advice with your PS146 accreditation. You will need at least a further 2 years experience before they even licence you.
What is so wrong about our laws here is that Financial Planners are buried in loads of compliance beaurocracy while the real estate agent can spout off at the mouth about how much your property is worth. Remember, the agent is contracted to sell specific properties whereas a financial planner decides what is appropriate then goes out into the market place and purchases it. There are things called “Open ended Managed Funds” whereby new assets are purchased on an ongoing basis ONLY when the money arrives. They dont sit in the display window with a “for sale” sign on them.
A classic example is Australian Capital Reserve who advertise some astronomical guaranteed rate of return for investors, and they clearly target it at older Australians with their fancy “rock solid” sounding name.
The truth is, they are 2 Parramatta based property developers hoping to build and sell property to pay back those guaranteed returns.
Why isn’t that fully disclosed on the TV advertisements?
Originally posted by tony wpb:i hate to break it to you but there are no better results than property .
That is utter BS. There are plenty of places to get a better return in the long term than shares. Back to Investing 101 for you![rolleyesanim]
How many shares can you leverage? why is it the banks give a higher lvr against any piece of crap property than against their own shares?I hear this BS all the time too. I can take a line of credit against my PPOR and invest it in shares just as easily as I can invest it in property, and yes, I can get a pretty high (70%) ‘leverage’ on a margin loan too.
not because they like risk! scenario 1 invest $40K and receive a return on a $400K property just 5% growth is $20Kor scenario 2 buy $120K and to acheive the same
Where is your scenario 3? What happens to highly leveraged ‘investors’ in a capital loss situation?
Just as Gains are amplified, so are losses. What’s more, the property market is subject to fluctuations. If an ‘investor’ maximises their LVR every time they have a paper CG, they will eventually have a massive capital loss. Let me repeat with a twist – that strategy will MAXIMISE their CAPITAL LOSS in a FALLING MARKET.
Yes, this applies also to shares, but very few people are stupid enough to use their house as security for a share margin loan…and what about margin calls?How good is your Australian financial history? Do some research into the NAB’s response to negative equity issues in the 1990s…
bankrupt properties dont existGo back to 1992 or forward to 2007 and revisit that statement – sure it will still defy grammatical convention and logic, but the underlying meaning will also be proven false…
For what it’s worth, I think the ASX prospects are broadly rather poor at present and would advise against overweighting shares.
And Chipper, thanks for a more logical, eloquent and timely explanation than I could muster.
Originally posted by tony wpb:bankrupt properties dont exist
i missed that final sentence, which proved to be the most laughable statement i’ve seen on this board since i signed up.
have you never heard of Austwide, OST, Heine, Estate Mortgage, Cambridge Credit, Walker Corporation?
did you never see the vacant development projects in the major cities or the empty office buildings in commercial real estate during the early 90’s?
if it wasnt for the likes of Armstrong Jones, IOOF and the government bailing out some of these companies then the real truth behind bankrupties in property would be a hotter topic.
Oh come now Chipper! Surely you are not comparing the recent real estate boom with that of the late 80s? Things are SOOO different this time around![ohno2]
the only difference is that inflation is not as high, but that is offset against the fact that neither are interest rates.
but, as they say in Tasmania… “it’s all relative”
This is a very interesting thread.
There have been many references to examples in the past that show good and bad results from both property and shares.
Both have potentially good returns and also possible downside risks.
Your risk assessment will determine what you can risk. If you are young……..you can take a chance that could well send you broke but also possibly land you a great winfall.
If you are close to retirement and have family that are dependant on your money to put food on the table, then you would not take any big chances.I think a lot of the heat in this thread arises as everyone wants to put their money into the best investment. A lot of the money to be invested may be the result of hard work, sweat, tears and sacrifice. The reason that you invest is to make more money to provide…a better life for yourself and those close to you.
So the fun question that is then presented to us all….is:
What should I invest in?
The answer will of course vary for every individual circumstance and there are many differing opinions out there.
I am no investing guru, but I would like to put in my 2 cents worth.
1. I think you first need to decide WHY you are investing?
………………..I want to live life to the fullest.2. Then I think you need to quantify what results you expect? ….for example i want enough passive income to replace my current working wages.
3. Decide what your risk profile is………….for example “i am a young single go-getter that is willing to take a moderate to high level of risk and am prepared to start from scratch all over again if I lose the lot”
4. Then formulate a plan that will reach this goal…………for example buy 20 cashflow positive investments in 2 years. …or…. buy 5 negatively geared properties and sell them when they have doubled in value and put cash into fixed interest term deposits.
5. Learn as much as you possibly can about a type of investment you think may fit your plan………….shares, property, multi level marketing, businesses,
6. Then find investments that may fit your plan and evaluate them.
The big key here and what I think this thread is all about is ……….How do you evaluate if a particular investment is the best?
I do not think that you can base this decision purely on past results like 30% return for the last year but have to consider a large number of diligence issues.
1. One of them is how this particular class has performed in the past? This is but a small part of evaluating an investment.
2. Is the market demand likely to increase/decrease?
3. What are all the potential risks that could affect value and/or cashflow. No tenants, housefires, company go bust or directors exposed for fraud,
4. How to mitigate these risks
5. Long term integrity? Building structural construction, is there a poor maintenance program in a manufacturing company? Are oil/coal reserves running out
6. Future possible legislation/tax changes that may hike up costs? like increased land taxes….. which probably affects shares just as much as companies have to pay more for the land they own. …….are tighter restriction on the safety testing of dolls for a toy company due for instance?
6. Has technology superseded the companies main product?
YADA, YADA , YADA on and on and on …..there are potentially hundreds of things.
…………Any decision to purchase an investment by looking at only one single part of an investment like “For the last few years this managed fund has made 30% return or whatever IS GAMBLING!!!!!![devil]
If you consider yourself an investor FIND OUT EVERY POSSIBLE DUE DILIGENCE ITEM AND RESEARCH IT!!!!!
Live, Learn and GrowLifexperience
…….then when you argue for one particular investment being better than another you will have some credibility.
If you repeatedly just reel off isolated examples to justify an investment as being better you have no credibility IMO.
Live, Learn and GrowLifexperience
I see your 2c and raise you 4c!
I think I agree with most everything you’ve said there Life X.However, one important thing you forgot to mention is the investment mechanism, and its impact on risk. Gearing / Leveraging for example. A prudent investor knows that the longer the bull run, the closer and bigger the bear, and therefore reduces leveraging over time in a rising market. To do the opposite is a folly, and always results in a loss. I challenge anyone to prove this point wrong.
I would also disagree with your view on past performance. I worry that far too many folk are prepared to give advice based their positive but very recent limited experience. I would urge them to remember that a paper profit is vastly different to a realised profit. Long term trends and averages are far more trustworthy than the advice of someone who has 6 years experience in a real estate boom.
When ‘yesterday’s capital gain’ is the only fundamental that matters, look out![cap]
Hi guys,
This is my first post so be gentle. I think this forum is great to pick up valuable info on IPs. I’m still relatively new to IPs but have in the very short time done found a little success compared to my previous experience with the share market. I was trying to pick stocks back in 99-01 during the tech hype. You’d be up $30-$40K in a week then give it all back and then some. I’ve learnt the hard way that unless you have inside information (which is illegal), its hard to outperform the index in the long term. You could try to profit from quick rallies or ranges but that just mean you’re a short term trader and you never win in the long run anyway unless you’re very disciplined in cutting losses. I work with some pretty good traders simply because theres no emotion and its not their money.
I think the sharemarket is toppish at the moment but I’m sure theres still value out there like our resource sector. If you’re going to start picking stocks, then research is the key. I suppose its the same as due diligence in IPs. Otherwise, buy an index fund (low fees) or margin lend STW (Streettracks ASX200 shares) or buy an instalment warrant over it.
Historically, returns on shares are a couple of %s higher but I still reckon leverage in property is the greatest. To make money in sharemarket, holding blue chips are safest but its like an income play so you want to throw in some growth stocks in there but LVRs on those are sometimes only around 50%. There are lots of products that provide both 100% gearing and protection but interest rates on those are very high. More suited to those on the TMR.
I think diversification is probably the key here. There are many alternative investments out there. A lot with capital protection and hedge fund style and also income not necessarily from property but in terms of leverage, nothing like property.
Someone mentoned o’seas shares. Now I haven’t done my research in terms of whether Asia, Europe or US is better in terms of value but I’m pretty certain for sure that you guys should consider averaging in on USD assets. Historically, the dollar trades around 0.67-0.73. If the asset doesn’t do as well, you’ll at least have the currency to maybe compensate. Obviously a double whammy if it keeps going up and your assets perform poorly.
I suppose I could ramble forever but seeing this is a property forum, have a good night.
Hi
Excuse my ignorance but how do you invest in the index fund. What sort of returns can one expect med to long term.
How much is a minimum investment.
Would investing in the index fund be a good retirement strategy.
Cheers
Stargazer
You must be logged in to reply to this topic. If you don't have an account, you can register here.
