Your maths is based on 7 years, we are discussing ten years.
Funny how you go for the dream figures and then insult the proven patterns.
Your whistling had nothing to do with me, sure thing, but was more directed and Jo, which still leads me to the same conclusion of what you can do with it.
Future, Humbug!
Byronent
Adelaide SABryonent,
Let it go; it’s obvious why Foundation is trying so desparately to “myth bust” the 10 year property doubling theory, and if it means ridiculing anyone who disagrees with him along the way then let him do it. I have invited him to PM me with his queries directly but he has chosen not to and that in itself speaks volumes.
Cheers,
Jo
Forget PM’s… Keep this one out in the open public forum… I’d like to see where this one is going to end up!
“Making mistakes is just another another tool for learning.”
Has anyone actually bothered to read the research paper that was posted?
The gist of the whole thing can be found in the summary (as posted by foundation amongst all the quotes):
There were significant housing price booms from 1971 to 1974, from 1979 to 1981, from 1987 to 1989, and from 1996 through to 2003. After each of the first three booms, real prices tended to fall.
However, in the long run real price rises outstripped falls. Consequently, real house prices rose by about 180 per cent between 1970 and 2003. Allowing for hous ing improvements, real prices rose by more like about 100 per cent over this period. However, both estimates give an exaggerated view of real price increases if, as we expect, there is a real house price downturn post 2003.It’s not actually refuting the fact that property prices have doubled every x years. It just says that if you factor in inflation and a whole bunch of other reasons, the real rise in house prices is a lot less rosier than we would think.
Foundation, by titling this topic with the words “Myth Buster”, you’ve seem to upset a few people on this board. Perhaps if you used the original title of the research paper it would have attracted less flames.
Nobleone,
The invitation to PM was not to continue the debate re validity of the research paper, but to give Foundation the opportunity to attack me in any way he cared to without involving anyone else as has been the case.
O’Sienna,
I am aware of what the paper reported; I have read it thoroughly. I understand that it does not dispute the “doubling” theory per se, but rather gives an account of research data for house prices between 1970-2003. On the whole I don’t disagree with aspects of the paper, but like ANY research study its findings are not free of disparities.
I agree the thread title was perhaps not the best choice, however, the handling of topic has far outweighed any real value it could have been afforded, had some maturity been demonstrated by its insitgator.[blush2]
Cheers,
Jo
Originally posted by Monopoly:Example 1:
Bought PPOR in 1981 for 27K
(turned into IP after 2 years)
Sold it in 1990 for 550KBought IP in 1993 for 175K
Sold in 2002 for 925KJo
Hi Jo.
In regards to the above 2 examples, would you mind sharing where these properties were and did you do a lot of work, i.e repairs and/or reno’s, on them.
Thanx
MartyHi Maximus,
No problem; only to happy to accommodate.
Example 1:
Property paid 27K (Brunswick, Victoria) market value at the time was approx. 50K but got a great price from the original owner (long story). It was a large house on a double block of land.
Lived in it as my PPOR for 2 years then rented it out to “the tenants from Hell” which trashed and then torched it, hence had to be rebuilt (almost completely) however after spending considerable money (approx. 60K) on restorations the old girl was returned to her former glory, and even became heritage listed (after I sold it) [glum2]
Independent Market valuation in 1990 = 470K
Auction reserve = 480K
Sold at Auction = $549,500Example 2:
Property paid 175K (Black Rock, Vic) run down terrace (deceased estate). Market valuation a week after settlement (1993) was 255K!!! Spent approx. 75K on renovations.
Independent Market valuation in 2002 = 830K
Auction reserve = 840K
Sold at Auction = $925,000Cheers,
Jo
Originally posted by foundation:Today’s Myth: House prices double every 10 years on average (equally applies to the ‘double every 7 years’ myth).
Which 10 (or 7) year period are you talking about? Where are the start and end points of the periods of time?
For example: there are 128 suburbs in Perth that have 30 year statistical median price data.
Every one of those 128 suburbs had a growth rate that at least met the 10 year rule.
Over the last 20 years the statistical group grew out to 163 suburbs. Of these all but 4 met the 10 year to double rule.
Even in the last 10 years (which included the flat mid nineties) the strike rate was 57% of suburbs achieving the 10 year rule.
As a broadbrushed statement – of those that didn’t the greater number were the newer, more distant suburbs from the city centre.
And of course then you get into the ‘median’issue – which reflects only the mid point and doesn’t account for suburbs and/or streets within suburbs that do better/worse than average.
The only real way to measure property growth is to do it on a house by house measurement. And on this note I can quote one of previous properties in Perth which almost tripled in value in the 12 year period 1985 – 1997.
Derek
[email protected]Property investment advice and researched property in quality locations available.
thanks for the great substance derek.
It just goes to prove my point.
Choose well and your returns are there.
So to ends this thread for me.
Byronent
Adelaide SAHi Derek,
Another top post as always. I must admit I’m a little surprised only 57% of the suburbs in your survey had achieved the double in 10 years ‘rule’ over the last 10 years.Now with the data you have at hand, might I with all due respect enquire whether you believe that ‘House prices on average (will) double every 10 years’ over next ten, twenty and fifty years?
Thanks again,
F.[cap]Originally posted by foundation:Hi Derek,
Another top post as always. I must admit I’m a little surprised only 57% of the suburbs in your survey had achieved the double in 10 years ‘rule’ over the last 10 years.Now with the data you have at hand, might I with all due respect enquire whether you believe that ‘House prices on average (will) double every 10 years’ over next ten, twenty and fifty years?
Thanks again,
F.[cap]Excellent “baiting” Foundation; typical troll behaviour; entice the victim into a false sense of admiration only to challenge and/or verbally abuse.
http://en.wikipedia.org/wiki/Internet_troll
See definition:
Internet troll
From Wikipedia, the free encyclopedia.
An internet troll is a person who sends duplicitous messages hoping to get angry responses, or a message sent by such a person. The term derives from the phrase “trolling for newbies” and ultimately from trolling for fish; it first appeared on Usenet. The term is frequently abused to slander opponents in heated debates and is frequently misapplied to those who are ignorant of etiquette.Trolling is often described as an online version of the breaching experiment, where social boundaries and rules of etiquette are broken. Self-proclaimed trolls often style themselves as Devil’s Advocates or gadflies or culture jammers, challenging the dominant discourse and assumptions of the forum they are trolling in an attempt to subvert and introduce different ways of thinking. Detractors who value etiquette claim that true Devil’s Advocates generally identify themselves as such for the sake of etiquette, whereas trolls often consider etiquette to be something worth trolling in order to fight groupthink.
Trolls are sometimes caricatured as socially inept. This is often due to the fundamental attribution error, as it is impossible to know the real traits of an individual solely from their online discourse. Indeed, since intentional trolls are alleged to knowingly flout social boundaries, it is difficult to typecast them as socially inept since they have arguably proven adept at their goal
[blink][blink]
Wow. I’m sorry for offending you Ms Monopoly. I have tried to be straight down the line with all my posts, including the one to Derek. I have a great deal of respect for the man as his posts are generally very interesting and considered, as I had for you until the last couple of days. While we obviously have differing views on the future and the best way to tackle it in regards to property investing, duplicity is hardly my style.Let’s get back to the sharing shall we?[blush2]
Cheers, F.[cap]So any dissenter to the mainstream of thought is now called a troll??
I don’t see foundation as a troll at all.
Let there be balance!! Yin and Yang!! Pro & Con!!
Cheers
Originally posted by foundation:Another top post as always. I must admit I’m a little surprised only 57% of the suburbs in your survey had achieved the double in 10 years ‘rule’ over the last 10 years.
That there was ‘only’ 57% meeting the 10 years is not a surprise to those who know the Perth market. From memory our ‘flat period’ was a little more elongated than a number of other cities.
Which then comes to my initial point – where do you start and finish the 10 years?
In some respects this issue is a critical point as if the stats had started counting back from the end of 2004 the last 10 years would look rosier. The 10 year chunks from my earlier post counted back from the end of 2003 (or possibly March quarter 2004) – when the next lot of 30 years stats are updated and published I would be more than happy (May 2004) to do a similar analysis based on a different 30 years as a means of comparison.
Now with the data you have at hand, might I with all due respect enquire whether you believe that ‘House prices on average (will) double every 10 years’ over next ten, twenty and fifty years?
Thanks again,
Who knows – but I am confident in saying you will better off investing in well chosen and researched property than not investing in property in the same periodDerek
[email protected]Property investment advice and researched property in quality locations available.
Originally posted by Derek:Quote:Originally posted by foundation:The only real way to measure property growth is to do it on a house by house measurement. And on this note I can quote one of previous properties in Perth which almost tripled in value in the 12 year period 1985 – 1997.
I might add that had we held on for a further six years (to 2003) we would have seen the property increase in value by approximately 5 times – N.B using medians as a ‘guide only’ here.
Why did we sell?
Used the profits to build large home (as distinct from house) overlooking the southern ocean.
Derek
[email protected]Property investment advice and researched property in quality locations available.
Originally posted by foundation:[blink][blink]
Wow. I’m sorry for offending you Ms Monopoly. I have tried to be straight down the line with all my posts, including the one to Derek. I have a great deal of respect for the man as his posts are generally very interesting and considered, as I had for you until the last couple of days. While we obviously have differing views on the future and the best way to tackle it in regards to property investing, duplicity is hardly my style.Let’s get back to the sharing shall we?[blush2]
Cheers, F.[cap]Nice try Foundation,
But you will have to excuse me if I don’t buy into your flattery for either myself and/or Derek as this is typical of your posts until there is an opposing view then sweet is soured in record speed!!!
You have not offended me in the slightest, although I am disappointed in your lack of concern for and disrespect for other people’s views.
I neither care nor want your approval/respect. I will be sipping on my latte while you are still analysing data and trying to figure out where you went wrong!!!
Originally posted by wayneL:So any dissenter to the mainstream of thought is now called a troll??
I don’t see foundation as a troll at all.
Let there be balance!! Yin and Yang!! Pro & Con!!
Cheers
No Wayne, not every post(er) is a troll and debate is fine IMO, however when the poster “baits” “provokes” and “manipulates” in order to flame then this is typical of troll behaviour and it is only a matter of time before the harmony in the forum is disrupted to the point that people who generally get along well are arguing unnecessarily. It has not got to that yet, but IF Foundation were to debate in a mature manner without twisting information and challenging people on simple things like their beliefs, then he is A TROLL.
I believe in a healthy debate, but I do not believe in DISRESPECTING another’s right to their opinion by challenging it to the point of being insulting!!
Cheers,
Jo
Um, you will no doubt discount me a troll-supporter now, because I agree with Foundation’s posts. But I honestly don’t see a single personal jab in any of his replies, whilst you are flatly undermining his integrity! [blush2] I was taught that the best demonstration of maturity was to walk away from an unnecessary conflict, i.e. ignore the thread.
Back on topic, the nominal 180% increase over 33 years concurs with doubling every 10 years. 2.8^1/33 = 1.031, so 3.1% above say 4% inflation, which is 7.1%, this would double every 10 years. Quick in your head calculation is the 72 rule; 72/return = time to double so in this case 72/7.1 ~ 10y. Please note this is a linear approximation to an exponential, so it only works within a sensible range, say 5-15%.
So there we have it, over the last 33 years, prices have doubled every 10 years. But I would like to finish on a point for consideration:
What would the result be if the range were 1970-2000? The data has been been significantly affected by just a short 3 year period. InterestingAnd to further make that point I found the following http://smbtn.com/books/gb85.pdf , please look at page 85, which is for the US RE market. Now imagine it’s 1935; what would someone who extrapolates from only the last 30 years conclude? Oh but this time it’s different? Like tech was a new paradigm? Also the compound rate of return is 6.5% over 95 years which is 12 years to double. But the last 30 years have had lower inflation, so this 6.5% over 95 is quite inferior to the 7.1% (as approximated above) of the last 30.
I don’t mean to discourage investment, because the only sure way to fail is not to try. However, if we can discuss this rationally we can come to some conclusions that benefit all of us?
Oh seems, that wasn’t the final point… as for the, “I’m better than avereage”, I don’t doubt it!!! I am seroius!!! But the problem is you will be X standard deviations from the mean. So by adjusting the mean, your returns are still affected.
Lunch time here (PST), ciao, peace [blush2] get enough war from Fox thanks, when i can’t flick fast enough
Huzzah! I think you’re onto something here superman![smiling]
Professor Abelson’s report title, content and the passage I lifted were all focussed on real house prices (as in, adjusted for inflation) whereas we can only assume the quotes must have referred to nominal house prices! Kudos also to Derek and OSienna for alluding to this difference.So let us look at the data I have on hand for Melbourne:
Year – Median HP
1971 – 18,643
1981 – 61,217
1991 – 176,696
2001 – 313,043
2004*- 366,0001971 – 18,643
1978 – 52,313
1985 – 104,626
1992 – 173,913
1999 – 243,478
2004*- 366,000Thanks to the REIV for the stats.
What stands out in these tables is that during the 70s and 80s median house prices more than doubled every ten years in Melbourne, but despite the record recent boom, this trend has not continued. Why? What has changed? What does this mean for the future?
My guess would be (and this speaks to the crux of the issue), that house prices are not a function of time. I honestly believe that house values (and selling prices) are in no way changed by the passing of time, (except for the ‘wear and tear’ factor).
I believe the factor that causes house values and prices to increase is inflation.
What happens if we adjust ten thousand dollars by CPI each year over the same period?
1971 – 10,000
1981 – 26,245
1991 – 58,055
2001 – 74,021
2004*- 83,3211971 – 10,000
1978 – 20,101
1985 – 37,782
1992 – 61,132
1999 – 70,328
2004*- 83,321Thanks to the RBA for the stats (Melbourne CPI)
Once again we find that during the 70s and 80s the CPI measure of inflation more than doubled every ten years, but more recently this trend has not continued!
So perhaps it is misleading to look at history and state:
‘House prices have doubled every ten years on average’
and definitely misleading to state:
‘House prices double every ten years on average’ (given the implied future prediction of this statement, and honestly what would be the point of writing it if not to imply that this is an ongoing trend?)While on the other hand, the following statement is both true and avoids the inference that nominal house prices will continue to double every ten years indefinitely:
‘During the 70s and 80s inflation roughly doubled every ten years and house prices adjusted accordingly’
What is more, somebody who is giving financial advice to others (even on a www forum) would be well advised to add as a caveat:
‘However, inflation has long been in a slowing trend, therefore it is unlikely that house prices will double at the same rate in the future.’Cheers,
F.[cap]PS – nice work on the mathematics! I’ll have to put in some more time to understand all that!
http://www.asx.com.au/about/pdf/TowersPerrin2003.pdf
Next edition of death by web reference!
So whose figures are right? Don’t ask me I have no idea…[confused2]
You must be logged in to reply to this topic. If you don't have an account, you can register here.
