Property - Get in ASAP

[medusala]

yes but looking at rent yields they wont be attractive again until yields reach say 6%, hence the limited supply of them (due to their unattractiveness) will force the rents up until yields do reach that level, at which point investors will find it attractive again, supply will increase, yields will slowly fall again etc etc. it's simple demand-supply economics to me.

I think equilibrium will be reached via combo of higher rents and lower prices.

Unless prices fall a jump from 4% to 6% yields implies a very big increase in rents.

 

[NBULTY]

As opposed to the letter I receive from Super company yesterday to explain how they've buggered up with investing 15% of my super in Centro stocks?

I haven't seen house prices get wiped off the face of the earth!

You have the final say on where your super funds are invested Tim, stop blaming other people, do some research and invest where you want your money invested or run your own fund. Simple really

 

[Tim the Toolman]

Simple for 15 million Australians to all of a sudden become financial planners or stockbrokers?

What planet are you on? If I was going to SMSF I would've studied economics at uni rather than marketing wouldn't have I?

To think that we all should be buying our own shares is like allowing corey the police equipment to disperse his own party!

 

[bunsen burner]

That is correct. See graph that someone else reproduced.

There has been at least one cycle in the Melbourne market since then. Therefore you are wrong. Why is it so hard to admit?

And before you say "look at the graph" - that's not a graph of the Mebourne property market.

 

[NBULTY]

Simple for 15 million Australians to all of a sudden become financial planners or stockbrokers?

What planet are you on? If I was going to SMSF I would've studied economics at uni rather than marketing wouldn't have I?

To think that we all should be buying our own shares is like allowing corey the police equipment to disperse his own party!

I wasn't talking to 15 million australians, I was talking to you. You could at least look at your super funds investment offerings and make a choice for yourself, or is that a little too hard for a marketing genius like you? Your probably one of the millions of investors in the 'default' investment option of your fund, because your too LAZY to do a little research yourself.

 

[Tim the Toolman]

And I would know, what, about shares investments? Am I now going to instruct financial planners. Perhaps I should start telling the doctor how to remove my appendix whilst I'm at it?

 

[Moo]

I wasn't talking to 15 million australians, I was talking to you. You could at least look at your super funds investment offerings and make a choice for yourself, or is that a little too hard for a marketing genius like you? Your probably one of the millions of investors in the 'default' investment option of your fund, because your too LAZY to do a little research yourself.

With such a nice attitude - I am guessing you work at the counter of my bank or at the door of a nightclub?

 

[NBULTY]

With such a nice attitude - I am guessing you work at the counter of my bank or at the door of a nightclub?

Not trying to be nasty, just tired of people not taking resposnibility for their OWN money. If you dont have the time, visit a financial planner, get a friend or family member to recommend one (as most are hopeless anyway), but do some research yourself and ask some questions

 

[whythelongface]

Not trying to be nasty, just tired of people not taking resposnibility for their OWN money. If you dont have the time, visit a financial planner, get a friend or family member to recommend one (as most are hopeless anyway), but do some research yourself and ask some questions

Isn't that what Tim the Toolman is suggesting. He is leaving it in the hands of the experts be they superannuation providers or financial advisors.

 

[acker]

Whats wrong with splitting your mortgage between variable and fixed.

How you perceive the market going or the amount of risk you are comfortable should determine the split percentages.

Sure you can go to mortgage advisor's/brokers and pay some fees. But is it really such a big thing to screw 0.25-0.35 % out of the lender and pay the third party a fee.

I would think it is a bigger issue to organize your fixed versus variable exposure to what you are happy with.

 

[Tim the Toolman]

Isn't that what Tim the Toolman is suggesting. He is leaving it in the hands of the experts be they superannuation providers or financial advisors.

Thank you, that's exactly what I'm saying.

I still get a quiet chill up my spine when I see these so-called experts do their share analysis in the finance pages every week and most of them lose their money yet keep on harping how great shares are?

 

[nokiacasio]

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).

According to http://www.jenman.com.au/news_alert.php?id=90 average house prices in Sydney in 1890 was $1,446.

According to http://www.smh.com.au/news/National/Sydneys-median-house-price-505000/2005/02/21/1108834709151.html average house prices in Sydney in 2005 was $505,000.

Do the math and it turns out to be 5.22 per cent growth per year on average. If inflation doesn't beat that, interest repayments will.

Same results were found in the Netherlands and the US.

"Piet Eichholtz studied records on home sales in Amsterdam's premier Herengracht neighborhood from 1628 to 1973 and found an inflation-adjusted return of 0.2%. There were periods of rising prices and periods of falling prices, but not a continuous march upward with spectacular returns."

Source: http://www.fool.com/personal-finance/home/2007/05/18/the-worst-investment-ever.aspx

"Robert Shiller, a Yale economist and author of 'Irrational Exuberance,' which predicted the stock price collapse in 2000, has recently turned his eye to house prices. Between 1890 and 2004 he finds that real house returns would've been zero if not for two brief periods: one immediately following World War II and another since about 2000. (More on them in a moment.) Even if we include these periods houses returned just 0.4% a year, he says."

Source: http://www.smartmoney.com/home/living/?story=rent

All this doesn't mean you can't make money from property. You certainly can by exploiting short-term mania.

 

[Clay Davis]

Nice find, nokiacasio.

And I agree with your last point. I'm not so concerned with the ins-and-outs of investing at the moment, what interests me is whether the Australian property market, now, is overvalued. My suspicion is that it is.

I can't stop coming back to Japan and America. I don't believe Australia's real estate market is any different than most other modern countries, hence I think their experiences over the past 20 years can be compared to ours.

First, Japan - or more specifically the greater Tokyo metro area.

Tokyo has a gross product around the same USD value as Australia's GDP. The value of Tokyo's real estate is around 1.5 trillion USD. Australia's real estate (dwellings only) is valued at 3.6 trillion USD. Is Australia's real estate market overvalued compared to Tokyo?

You might say "for the price you pay for an apartment in Tokyo you can get a house in Sydney". That doesn't matter.

If you take the average person, you'll find they will spend a fixed proportion of their income on accomodating themselves each year. Spread this across a city or country, and this amount represents the demand in the market, hence the value of real estate in the market.

Since Australia and Tokyo have similar GDPs, but Tokyo real estate as a whole is valued at less than the entire Australian real estate market, we can say that a person in Tokyo spends less of their income on real estate.

If Australia is the norm, then the Tokyo market is undervalued. Otherwise, Australia as a whole is overvalued.

 

[Clay Davis]

Now on to America. They're having a property bust, right?

I'm a big fan of comparing asset values to GDP. GDP is still the best economic indicator for wealth creation, even though it is a crude measure in some regards. Can a major asset class run ahead of GDP growth long term? What do we get if we normalise asset prices against GDP?

US real estate value against GDP 1925-2006

The 50% mark is the midpoint (it doesn't represent the real estate worth relative to GDP). If the curve tracks the 50% line, that means house prices have grown at the same rate as GDP growth. And from the graph we can generally tell that it has stayed near this fixed, long-term ratio.

So what about recently?

From 1988-2006.

Real estate prices have generally tracked ahead of GDP growth, with a large spurt recently that is just now beginning to turn back - the bubble.

So what about Australia?

From 1988-2006.

Unfortunately, I don't have data available from before 1988, but this tells us that real estate values have been growing much faster than our economy.

The question is - is this sustainable, or do we have a bubble that's ready to pop?

 

[HighettBomber]

According to http://www.jenman.com.au/news_alert.php?id=90 average house prices in Sydney in 1890 was $1,446.

According to http://www.smh.com.au/news/National/...834709151.html average house prices in Sydney in 2005 was $505,000.

Do the math and it turns out to be 5.22 per cent growth per year on average. If inflation doesn't beat that, interest repayments will.

That is an incredibly poor use of statistics. There was basically no difference in consumer proces between 1850 and 1910, and if you use 1860 as the start point there was no difference until almost 1950, thanks to factors such as the world wars, the great depression and the world and individual country economies being totally different to today. It is not until the end of the second world war that inflation became a consitant factor in the economy, prior to this there were years of inflation and others of deflation.

You either have to take all this into account or use some point post WW2 to get an accurate return.

 

[bunsen burner]

According to http://www.jenman.com.au/news_alert.php?id=90 average house prices in Sydney in 1890 was $1,446.

According to http://www.smh.com.au/news/National/Sydneys-median-house-price-505000/2005/02/21/1108834709151.html average house prices in Sydney in 2005 was $505,000.

Do the math and it turns out to be 5.22 per cent growth per year on average. If inflation doesn't beat that, interest repayments will.

Same results were found in the Netherlands and the US.

"Piet Eichholtz studied records on home sales in Amsterdam's premier Herengracht neighborhood from 1628 to 1973 and found an inflation-adjusted return of 0.2%. There were periods of rising prices and periods of falling prices, but not a continuous march upward with spectacular returns."

Source: http://www.fool.com/personal-finance/home/2007/05/18/the-worst-investment-ever.aspx

"Robert Shiller, a Yale economist and author of 'Irrational Exuberance,' which predicted the stock price collapse in 2000, has recently turned his eye to house prices. Between 1890 and 2004 he finds that real house returns would've been zero if not for two brief periods: one immediately following World War II and another since about 2000. (More on them in a moment.) Even if we include these periods houses returned just 0.4% a year, he says."

Source: http://www.smartmoney.com/home/living/?story=rent

All this doesn't mean you can't make money from property. You certainly can by exploiting short-term mania.

1 major flaw in your post:

Neil Jenman.

Apart from his good book "Real Estate Mistakes", everything else he talks about is rubbish. Been to one of his seminars - he spruiks that negative gearing is a bad idea. He also spruiks that you should nebver ever under any circumstances sign a contract.

He's a nut job.

 

[bunsen burner]

If Australia is the norm, then the Tokyo market is undervalued. Otherwise, Australia as a whole is overvalued.

All due respect but that is silly logic. Not saying that it isn't necessarily over valued, just saying the reasoning you used to get there is majorly flawed.

Supply and demand holds much more sway than what housing affordability in Japan is.

You are aware than in Sydney there is a housing shortage don't you? Just how is the price going to go down (unless interest rates sky rocket to 12% or above)?

 

[bunsen burner]

The question is - is this sustainable, or do we have a bubble that's ready to pop?

There's always people like you around analysing this, analysing that, and whilst you're doing it there's always markets within Australia that are moving.

 

[Clay Davis]

That is an incredibly poor use of statistics. There was basically no difference in consumer proces between 1850 and 1910, and if you use 1860 as the start point there was no difference until almost 1950, thanks to factors such as the world wars, the great depression and the world and individual country economies being totally different to today. It is not until the end of the second world war that inflation became a consitant factor in the economy, prior to this there were years of inflation and others of deflation.

You either have to take all this into account or use some point post WW2 to get an accurate return.

Post WW2 is the same. In fact, until the late 80s, property growth trended below GDP growth. It wasn't until the finance industry was deregulated that property started to trend above normal growth. The concern for me is whether the credit boom post-deregulation has reached the end of its tether.

 

[Clay Davis]

There's always people like you around analysing this, analysing that, and whilst you're doing it there's always markets within Australia that are moving.

Of course, but the entire market interests me and I want to know as much as I can before I commit. If I'm wrong I'll come on here and admit it. But I refuse to make my first major financial commitment during a period of massive financial uncertainty. We're seeing speculative property bubbles world wide unwind in drastic measures. And when you compare Australia's market to others in the world, it looks as if ours may be overvalued. I could be wrong.

To be honest, I hope I'm wrong. I want to invest now, have my own place, settle in, start making serious money. But I'm not prepared for that kind of exposure in the current climate.

And quite frankly, what I'm reading about the current climate, scares me. Even mild mannered bulls are saying "this is bad".

Anyway, good luck to all the property investors. You can still make money during a bear market.

 

[medusala]

T

And before you say "look at the graph" - that's not a graph of the Mebourne property market.

I said Toorak. Thats the closest council I could find

Its not a bad proxy.

Not really hard to grasp.

 

[bunsen burner]

I said Toorak. Thats the closest council I could find

Its not a bad proxy.

Not really hard to grasp.

You said "The last time Toorak had a boom it didn't recover for 10/15 years". Then you showed me a graph of the Australian property market and pointed to a period in the 80s.

Clearly you are wrong as Toorak had a boom in 2002ish and last year. Why is it so hard for you to admit you're wrong? Talk it up all you want, but the fact is, everyone reading this knows you're wrong.

 

[bunsen burner]

Of course, but the entire market interests me and I want to know as much as I can before I commit. If I'm wrong I'll come on here and admit it. But I refuse to make my first major financial commitment during a period of massive financial uncertainty. We're seeing speculative property bubbles world wide unwind in drastic measures. And when you compare Australia's market to others in the world, it looks as if ours may be overvalued. I could be wrong.

To be honest, I hope I'm wrong. I want to invest now, have my own place, settle in, start making serious money. But I'm not prepared for that kind of exposure in the current climate.

And quite frankly, what I'm reading about the current climate, scares me. Even mild mannered bulls are saying "this is bad".

Anyway, good luck to all the property investors. You can still make money during a bear market.

I don't have a problem with this view point. I do have a problem with some of the stuff you have said previously.

 

[Deej]

Well I've done some homework on this, spoken to 2 different (both very well qualified) financial advisors as well as a few people in the ATO, and it appears you can't use your super to invest in any old property that takes your fancy and which requires the involvement of an interested party at settlement. ie.finance.

It might further change in the future, but in a nutshell this recent change in legislation was not designed to let people access their super to buy any old investment property.

 

[Papa G]

Well I've done some homework on this, spoken to 2 different (both very well qualified) financial advisors as well as a few people in the ATO, and it appears you can't use your super to invest in any old property that takes your fancy and which requires the involvement of an interested party at settlement. ie.finance.

It might further change in the future, but in a nutshell this recent change in legislation was not designed to let people access their super to buy any old investment property.

Deej, I reckon what you are proposing in another thread, i.e. your SMSF buying out your personal share of your warehouse will work. Although in it's infancy, I believe Macquarie have already developed a product that will do it.