Property - Get in ASAP

[Clay Davis]

Japan timeline: 1980-2005
Other timeline: 1995-2005

Our collective bubble's bigger than the Japanese one - and our property is more relatively expensive than US and Britain.

 

[Perrin]

This real estate phenomenon never ceases to amaze me. Why many investors believe the propaganda of real estate agents (many with no tertiary qualifications) over many economists is gobsmacks me.

 

[utility]

This real estate phenomenon never ceases to amaze me. Why many investors believe the propaganda of real estate agents (many with no tertiary qualifications) over many economists is gobsmacks me.

A combination of greed, ignorance and stupidity.

 

[bunsen burner]

This real estate phenomenon never ceases to amaze me. Why many investors believe the propaganda of real estate agents (many with no tertiary qualifications) over many economists is gobsmacks me.

What amazes me is idiots like yourself. Over the long term Australian property almost always rises. It always rises faster than inflation and faster than interest rates offered by banks.

It's a no brainer. It's so f***ing simple, yet because every now and then there is a correction, halfwits like yourself spout these uneducated and ill found theories. I personally know 2 people who think the shit that you think. Both are poor and too stubbrn to admit they are wrong when the truth is staring them in the face (ie you poor from no investing, colleage wealthy from real estate).

The oly thing you got right is that estate agents aere dumb arses. Do you really think any half experienced investor listens to real estate agents?

 

[Borscht Mat]

What amazes me is idiots like yourself. Over the long term Australian property almost always rises. It always rises faster than inflation and faster than interest rates offered by banks.

It's a no brainer. It's so f***ing simple, yet because every now and then there is a correction, halfwits like yourself spout these uneducated and ill found theories. I personally know 2 people who think the shit that you think. Both are poor and too stubbrn to admit they are wrong when the truth is staring them in the face (ie you poor from no investing, colleage wealthy from real estate).

The oly thing you got right is that estate agents aere dumb arses. Do you really think any half experienced investor listens to real estate agents?

I often wonder how much this has been a post war situation driven by the baby-boomers. Japan has a signifcantly aging population and many similar countries have shrinking populations. This would have an interesting effect on property prices if Australian demographics went the same way. The basic driver of people needing places to live would break down. You would still get growth in areas based on trends, fashion etc but overall there could be a situation where prices on a whole fall.

We have had growth in the market for the last few decades but in a situation where a) the population has been growing, and b) the wealth of the population has been growing. Both of these could indeed change.

 

[medusala]

Grim picture you paint there, bunsen burner. Sounds like the symptoms of a mild form of Dutch disease. Sure it won't go the way of US and UK?

It was only mths ago people said the same in the UK

A number of countries have housing markets just as (or even more) overvalued than the US was.

 

[medusala]

What amazes me is idiots like yourself. Over the long term Australian property almost always rises. It always rises faster than inflation and faster than interest rates offered by banks.

IIRC after the last correction it took the median price 10 yrs to recover in Toorak

If your holding cost is net 3-4% a year then over 10 years you are looking at a sizeable loss in real terms with a similar scenario.

 

[bunsen burner]

We have had growth in the market for the last few decades

Try whole of last century.

but in a situation where a) the population has been growing, and b) the wealth of the population has been growing. Both of these could indeed change.

Not going to happen within next cycle of all major markets so it's a moot point. Stay out of the market because "sooner or later population MAY stop increasing" is the height of stupidity. ps I am not necessarily calling you stupid here.

 

[bunsen burner]

IIRC after the last correction it took the median price 10 yrs to recover in Toorak

If your holding cost is net 3-4% a year then over 10 years you are looking at a sizeable loss in real terms with a similar scenario.

Sounds like bullshit to me. Last correction was 5 or so years ago to my knowledge and to my knowledge Toorak got good growth in the last year. Whether my version is right or wrong (I haven't followed in closely), I find that hard to believe. Do you have any stats?

 

[utility]

Over the long term Australian property almost always rises.

Over the long-term shares outperform property (which outperform cash).

 

[bunsen burner]

Over the long-term shares outperform property (which outperform cash).

Never ceases to amaze me people who fall for this propaganda sold by finance agents.

I can make an equal case that property outperforms shares but fortunately for me I'm not stupid enough to believe it.

 

[Papa G]

I will stand by my original point. People are now allowed to borrow through their superannuation funds where previously they could not. It is already happening and will continue to gain momentum. Regardless if you think the property market is over priced, potentially opening up 3-4 million new investors in the property that were previously unable to acess the market will increase demand for property, therefore increase price - you have been warned!

 

[SolidTiger]

Here is an article in the Herald Sun today.

http://www.news.com.au/heraldsun/story/0,21985,23225513-662,00.html

But a total of $600,000 borrowed from people having trouble paying a mortgage does not seem to indicate a major problem to me. If it was $5 million then I would say there was a problem.

 

[Clay Davis]

What amazes me is idiots like yourself. Over the long term Australian property almost always rises. It always rises faster than inflation and faster than interest rates offered by banks.

There's no doubt that property prices rise long term. But buying now at what could quite well be the top of the cycle because you believe they'll keep rising in the short term is not smart investing. The fact is they don't always rise, year on year. Sometimes, the price falls. Sometimes, it takes a long time to recover from those falls.

I think people would do quite well to heed what is going on in other credit-driven anglosphere economies.

Other things will be interesting in the next few years - as baby boomers start retiring and dropping off, what happens to the market then with a massive demographic shift.

It's all very interesting. I'm young and I'm happy to save and wait for a few years.

 

[Clay Davis]

It was only mths ago people said the same in the UK

Not clear on what you're implying: they were saying the property would keep rising, or that it would begin to fall?

 

[bunsen burner]

IIRC after the last correction it took the median price 10 yrs to recover in Toorak

If your holding cost is net 3-4% a year then over 10 years you are looking at a sizeable loss in real terms with a similar scenario.

Toorak got 24% last year. Plus about 4 years ago it also got good growth. Yu're completely full of shit. Made it up, didn't you?

 

[bunsen burner]

There's no doubt that property prices rise long term.

Unfortunately there are people who just don't get this.

But buying now at what could quite well be the top of the cycle

Might be, might not be. But if you are always worried about this then you never get in the market. I know people who do this too.

because you believe they'll keep rising in the short term is not smart investing.

Not necessarily true.

The fact is they don't always rise, year on year.

Not sure what your point is here?

Sometimes, the price falls. Sometimes, it takes a long time to recover from those falls.

Thanks for that Capm.

Other things will be interesting in the next few years - as baby boomers start retiring and dropping off, what happens to the market then with a massive demographic shift.

It's all very interesting. I'm young and I'm happy to save and wait for a few years.

And you will eventually learn what I already know.

 

[Clay Davis]

Why so arrogant bunsen burner? Can't you have a discussion without being condescending?

You still haven't addressed my questions on why you think Australia isn't at risk of seeing property price falls as seen in the US and UK at the moment (and Spain and Ireland, and Japan for 20 years), so stop pretending you're an expert when it comes to investment.

Might be, might not be. But if you are always worried about this then you never get in the market.

You sound like you're trying to talk up the market. I'm not going to rush in when I don't feel I have enough cash in reserve, the interest rate outlook isn't great for borrwoing at the moment, and the global property market is in trouble. I think a lot of people feel the same.

And you will eventually learn what I already know.

And what is that?

My point is that there are worrying signs in much larger economies than Australia (http://www.telegraph.co.uk/money/main.jhtml?xml=/money/2008/02/18/ccview118.xml), and that we may not be immune from what is happening there. Do you agree or disagree with this? If you don't know, then why disagree with the statement that people should exercise caution when investing?

 

[HighettBomber]

Over the long-term shares outperform property (which outperform cash).

This is only true if you discount the cost of borrowing and also amount you can borrow against either. It is also only true if you compare the all ords against median growth in residential property prices and discount any development/renovation on the properties.

As people generally do not simply copy the all ords in their portfolio and very few people invest in property that matches the overall median this statement is simply not true in reality.

 

[Guido]

This is only true if you discount the cost of borrowing and also amount you can borrow against either.

It doesn't pretend to take that into account.

All it says is, when comaparing, say, $100K, invested for X long term time frame (10, 20, 50 years), shares typically outperform property by a couple of percentage points p.a..

It is also only true if you compare the all ords

It's not just the All-Ords - it holds true in most advanced western markets.

discount any development/renovation on the properties.

Nor would they take into account council/water rates, stamp duty, body corporate, land tax, replacing/repairing fittings and fixtures. In the end, the benefits vs drawbacks of each investment vehicle tend to balance each other out, hence, as a general rule across the whole market, when relying on quantitive, verifiable hard figures, most analysis comes to the conclusion that stocks tend to outperform property over the very long term. Of course it doesn't hold true in every situation.

But whether you're a fan boy of real estate or the stock market, the investment principle of risk v reward remains the same. Stocks (and company profits) are inherently more volatile, and hence have more downside/upside - houses can't become worthless overnight like stocks can, but neither can they multiply many times over their originial value in months - nor 1000s of times their value across decades.

As people generally do not simply copy the all ords in their portfolio and very few people invest in property that matches the overall median this statement is simply not true in reality.

Most people invest in a wide collection of blue chips/managed funds that, give or take a percentage point or two, generally track the market.

In the long term, most residential property will generally go up by "aroundabouts" what the median goes up. There's plenty of property that goes much better, but on the other side there's plenty of property out there which doesn't beat inflation by much at all across 10-30 years. Hence using median as a guide, which again, isn't meant to be 100% accurate in all cases, but is a reasonable tool to use for the sake of comparison.


And before you jump up and down, I should point out, other than a few grand in Telstra and a couple of managed funds, that I almost exclusively invest in real estate.

 

[bunsen burner]

Why so arrogant bunsen burner? Can't you have a discussion without being condescending?

Hilarious - from a guy who makes a point that "property prices do fall sometimes". The only possible reason you could have made that comment is you assumed people are stupid. And now when some gives a bit back you can't handle it?

You still haven't addressed my questions on why you think Australia isn't at risk of seeing property price falls as seen in the US and UK at the moment (and Spain and Ireland, and Japan for 20 years), so stop pretending you're an expert when it comes to investment.

I don't ever recall Austrlia isn't at risk. Of course it is. Once again you assume people are stupid. It's clear we're having different conversations here.

You sound like you're trying to talk up the market.

Whilst I know the risks are quite high at the moment, I also think that there are markets that will get good growth this year and/or for the next 5 years.


I'm not going to rush in when I don't feel I have enough cash in reserve, the interest rate outlook isn't great for borrwoing at the moment, and the global property market is in trouble. I think a lot of people feel the same.

And what is that?

There will be markets that rise more than a reasonable amount in the next few years. One day you will learn that there is almost always a market in this country doing something. And as long as you don't buy at the peak then you are pretty safe (assuming you can afford to service).

My point is that there are worrying signs in much larger economies than Australia (http://www.telegraph.co.uk/money/main.jhtml?xml=/money/2008/02/18/ccview118.xml), and that we may not be immune from what is happening there. Do you agree or disagree with this? If you don't know, then why disagree with the statement that people should exercise caution when investing?

I agree, but so what?

 

[bunsen burner]

All it says is, when comaparing, say, $100K, invested for X long term time frame (10, 20, 50 years), shares typically outperform property by a couple of percentage points p.a..

And if you think this stat is valid (obviously you do because you wouldn't have said it otherwise) then you don't really understand investing properly.

And who is "it"? Who is this authorative figure?

as a general rule across the whole market, when relying on quantitive, verifiable hard figures, most analysis comes to the conclusion that

Complete nonsense. There's as many real estate experts who claim the exact opposite. Nothing but one-eyed propaganda.

 

[Clay Davis]

Hilarious - from a guy who makes a point that "property prices do fall sometimes". The only possible reason you could have made that comment is you assumed people are stupid. And now when some gives a bit back you can't handle it?

I never assumed people were stupid. Thus far your argument has been that fearing falls in the short term is nothing to worry about as long term property always increase. The evidence at the moment is that this could be a very bad time to get in, property prices may be near peak. At least worse than any time in the past 10 years.

I agree, but so what?

When the thrust of the thread is "Get in ASAP", I think there is some room for people to question pollyanna statements in what is amounting to a very dodgy global economic climate. That's all.

 

[bunsen burner]

I never assumed people were stupid.

Of course you did. You pointed out the most blatant thing ever as if the people you were debating with weren't aware.

Thus far your argument has been that fearing falls in the short term is nothing to worry about as long term property always increase.

Pretty much - but obviously you try to stay away from peaks (and that isn't hard).

The evidence at the moment is that this could be a very bad time to get in,

There's just as much evidence to suggest the opposite too. I bet you thought the ame thing one year ago (because many did(m yet Adelaide and Melbourne have had big growth.

property prices may be near peak.

Peak of what? Peak forever? Or peak of cycle? You're going on like we've had some almighty boom and it's about to bust?

At least worse than any time in the past 10 years.

I suspect you truely don't understand property cycles.

When the thrust of the thread is "Get in ASAP", I think there is some room for people to question pollyanna statements in what is amounting to a very dodgy global economic climate. That's all.

And you don't think you're as bad with your "sky is falling" routine?

This whole "we're going to get smashed like Japan" is a very slim chance. I wouldn't rule it out but you can't let that deter you. Many people like you never get in the market because there is always doubt and always economists predicitng recesions and busts. And you know why the do it?

a) political reason such as the guy from your link
b) So they can go "hahaha I told you so! I picked it!" Well they can savour that moment whilst astute investors enjoy their millions.

Busts do happen, and money gets lost, but an astute investor will be able to absorb the loss or ride it out.

 

[HighettBomber]

Quote:
Originally Posted by HighettBomber
This is only true if you discount the cost of borrowing and also amount you can borrow against either.

It doesn't pretend to take that into account.

All it says is, when comaparing, say, $100K, invested for X long term time frame (10, 20, 50 years), shares typically outperform property by a couple of percentage points p.a..

It's a pretty important point that is not taken into account.

Quote:
discount any development/renovation on the properties.
Nor would they take into account council/water rates, stamp duty, body corporate, land tax, replacing/repairing fittings and fixtures. In the end, the benefits vs drawbacks of each investment vehicle tend to balance each other out, hence, as a general rule across the whole market, when relying on quantitive, verifiable hard figures, most analysis comes to the conclusion that stocks tend to outperform property over the very long term. Of course it doesn't hold true in every situation.

There is a pretty large dollar value difference between what can be acheived through renovating or developing compared to the cost associated with holding properties. The fact that you have direct control over property is a very large advantage.

The verifiable hard figures you speak of are basically just crap because median prices are a poor indicator of the performannce of property given that its all but impossible to have a property portfolio that mirrors the whole market.

In the long term, most residential property will generally go up by "aroundabouts" what the median goes up. There's plenty of property that goes much better, but on the other side there's plenty of property out there which doesn't beat inflation by much at all across 10-30 years. Hence using median as a guide, which again, isn't meant to be 100% accurate in all cases, but is a reasonable tool to use for the sake of comparison.

This is simply incorrect. Have a look at long term median price growth for individual suburbs, it is strongly skewed towards bayside and inner suburbs. Also as previously stated one of the major advantages of direct property is that it is possible to add value actively, this can multiply returns.

And before you jump up and down, I should point out, other than a few grand in Telstra and a couple of managed funds, that I almost exclusively invest in real estate.

I'm not going to jump up and down, I just know you are wrong. This is a topic that I feel quite strongly about however, as I believed shares were superior to property for quite a few years, because of the crap that is spouted by financial planners. This cost me a lot of money considering my returns have been in the order of 20 times greater from investing in property over a shorter period.