Property prospects.

[Former]

What is "normal"? Our European ancestors mostly had three-and-a-bit seasons, with summer appearing for 3 or 4 weeks if that.

 

[Bee]

I suppose 'normal' is what you are used to. So summer, spring, winter and autumn are normal to me.

 

[Docker_Brat]

Originally posted by Bee
But it is normal to have four seasons in a year. Not summer all year round.
Besides, think about what you are missing out on with a roaring log fire, a glass of wine and how romantic it all is.

You should be in real estate Bee.

I'm sold

 

[Zeke]

I'm with Bee.

People who have never lived in Tasmania cannot even begin to fathom the climate. Tasmania sees to have developed a reputation on the North Island that people seem to believe. Tasmania has one of the lowest rainfalls of any State in Australia, and is no where near as cold on average than Canberra.

I have family on the Sunshine Coast (QLD) and spend a fair bit of time up there - granted the weather is fantastic, but I seriously wouldn't want to live anywhere other than the little' Apple Isle'.

Please reserve you opinions untill you have actually spent some time down here!

 

[FIGJAM]

Originally posted by Rooboy 34
I don't know about that either. Sure if you want to pick specific areas and then compare them to the overall stock market, you will be right, but if you compare either the overall stock market to the overall property market, or specific shares to specific areas, then the stock market would be well ahead...

Then it's a misconception that you've all got to get out of your head.

If you buy a house (it's actually the land you're after) anywhere near civilisation in Melbourne, you will experience greater capital gain than on the stock market.

It's hard to measure and obviously me picking an example like Middle Park, might have you saying "That's just for that area", but in Middle Park in 1973, you could get a single storey, single fronted Victorian for $15,000.

They're now worth $450,000. That's 30 times in 30 years!

Whilst not all areas have gone up 30 times, it isn't that far from it!! The stock market would probably double in size value once every ten years (I'm not an expert on the stock market).

House prices went up 10% in Victoria in the last year...and this is the plateau!

In every hollywood movie you've ever seen, the rich guy's a movie star or a stock broker. It's a stigma that I think affects us, but never underestimate the humble house owner. By design, or by luck, they are sitting on the best investment of the lot of them.

Of course the rent & invest vs. mortgage is another thread altogether...

 

[Rooboy 34]

Originally posted by FIGJAM
It's hard to measure and obviously me picking an example like Middle Park, might have you saying "That's just for that area", but in Middle Park in 1973, you could get a single storey, single fronted Victorian for $15,000.

They're now worth $450,000. That's 30 times in 30 years!

Well if you are going to pick single examples, why not do the same for shares. If you bought shares in Unitract (UNI) when they floated last November, you would have paid 22c a share. They closed today at $2.66 - that's more than 12 times in less than 1 year. They have even been as high as $3.10.

Ventracor (VCR) were less than 20c 2 years ago - now they $2.70, thats close to 14 times in 2 years.

NAB are over $30. How much do you think they were back 30 years ago???

Property may get rental as shares pay dividends. But shares also have tax credits attached. Rental payments have agents commission deducted...

And also, how much interest have you paid on that mortgage over time. If you are living in the house, that interest is paid in after tax $$$ as well. So while your 30 times in 30 years looks good on the surface, maybe you should look into all the facts...

 

[FIGJAM]

Rooboy, short of doing a friggen thesis, I'll have no definitive proof of my thoughts (I've recently finished Uni and I ain't doing one).

Yes there are freak examples all over the stock market. It's what makes it so interesting! But I am talking averages here. Don't think Middle Park is a one off like the shares you mentioned...the growth has been not far behind it accross all established suburbs of Melbourne.

As for mortgage repayments, can you not get a loan to service a stock portfolio? What's the difference?? For the sake of the argument, let's say we had 100% capital.

I am an expert in property. It's my job and I don't know much about the stock market and how it's measured. What I do know is that blocks of residentially zoned dirt are a much underrated investment.

If someone can tell me how to measure the average capital rise in the stock market over 30 years, I think you'd be surprised at the results!!

 

[Bee]

Originally posted by FIGJAM
Rooboy, short of doing a friggen thesis, I'll have no definitive proof of my thoughts (I've recently finished Uni and I ain't doing one).

Yes there are freak examples all over the stock market. It's what makes it so interesting! But I am talking averages here. Don't think Middle Park is a one off like the shares you mentioned...the growth has been not far behind it accross all established suburbs of Melbourne.

As for mortgage repayments, can you not get a loan to service a stock portfolio? What's the difference?? For the sake of the argument, let's say we had 100% capital.

I am an expert in property. It's my job and I don't know much about the stock market and how it's measured. What I do know is that blocks of residentially zoned dirt are a much underrated investment.

If someone can tell me how to measure the average capital rise in the stock market over 30 years, I think you'd be surprised at the results!!

I am with you, Figgy. I am married to a financial analyst, and whilst I admit that all that stuff about 'futures' and 'GDP' etc., confuse me, I do know that he has always said the best investment you can make is real estate. Either an established dwelling or a block of land.
The proof of the pudding, as they say, is in the eating. He has invested quite a few times in real estate and always sold for a substantial profit.

 

[Rooboy 34]

Originally posted by FIGJAM
Rooboy, short of doing a friggen thesis, I'll have no definitive proof of my thoughts (I've recently finished Uni and I ain't doing one).

Don't worry - no thesis required

If someone can tell me how to measure the average capital rise in the stock market over 30 years, I think you'd be surprised at the results!!

According to the chart that I have in front of me produced by "Personal Investor Magazine", if you purchased $10,000 of shares in the same weighting as the ASX All Ordinaries in 1970, they would now be worth $268,143. That is close to 27 times. This is based on the overall market as a whole - not just one or two "freak" stocks. It also takes into account companies like Ansett, HIH & Harris Scarfe.

Bearing in mind that only the ultra-conservative would follow the weightings of the All Ords, there is infinite amounts that could have been made.

As for mortgage repayments, can you not get a loan to service a stock portfolio? What's the difference??

Yes you can get a loan to service a stock portfolio, and the interest on this loan is tax deductible. What's the difference you ask??? Well lets say that I'm a beginner and I intend to start a share portfolio that is fully geared. How much should I start with. Conservatively you might borrow $10K, maybe $20K. I guess that your cashflow and ability to service the costs of the loan is your only limitation. How many people do you know that have only borrowed $10K or $20K??? What I am trying to say is that it is a lot easier to get involved in the stock market than in property, so therefore this Middle Park property that has grown in value 30 times is unaffordable to a number of investors.

For the sake of the argument, let's say we had 100% capital.

Once again, how many people do you know who pay cash for property??? Sure it can and does happen, but I'd venture to say you'd be able to find more Freo Dockers supporters in Melbourne than people who have done this....

I am an expert in property. It's my job and I don't know much about the stock market and how it's measured. What I do know is that blocks of residentially zoned dirt are a much underrated investment.

I agree that funds invested in dirt is a good investment, and can never understand why people buy flats on the 2nd floor & above in apartment blocks. However I believe that more can be consistently made on the stockmarket over time...

 

[Rooboy 34]

Gees - speaking of thesis'...

 

[FIGJAM]

Originally posted by Rooboy 34
According to the chart that I have in front of me produced by "Personal Investor Magazine", if you purchased $10,000 of shares in the same weighting as the ASX All Ordinaries in 1970, they would now be worth $268,143. That is close to 27 times. This is based on the overall market as a whole - not just one or two "freak" stocks. It also takes into account companies like Ansett, HIH & Harris Scarfe.

Well if this is the case, then maybe I am wrong and I will eat some humble pie.

Like I said, I finished Uni last year and I don't have any investments as yet, as I've been making rent/food/alcohol money only. Things are about to change and I will be looking into things pretty heavily over the next couple of years (touch wood...ie. my head).

Maybe all we have found out is that Resi property and shares are both great in the long term.

The thing about all this is, I get confused as to why the likes of Macquarie Goodman specifically buy industrial property. On a good year, 10% return, but practically zero capital gain. Hmmm?!

Still it's interesting discussion!

GO PIES!!

 

[Rooboy 34]

Originally posted by FIGJAM
Maybe all we have found out is that Resi property and shares are both great in the long term.

Good residential property & good shares are good investments. Bad ones just lose you money...

If you want to make a quick investment though, you should invest your lifesavings on your beloved Magpies. They are looking the goods at the moment...

 

[Pornstar]

I saw a property quiz in the HS where they claimed that only 29% of people who invest in real estate make any money.

That is about as much detail as they went into on that particular tidbit of information, but it sounds a bit low to me. Does anyone know more about this statistic, and if so, can you elaborate?

 

[Rooboy 34]

Originally posted by Pornstar
I saw a property quiz in the HS where they claimed that only 29% of people who invest in real estate make any money.

That is about as much detail as they went into on that particular tidbit of information, but it sounds a bit low to me. Does anyone know more about this statistic, and if so, can you elaborate?

Without reading the article, I would suggest that the reason would be because the statistic would take into consideration all investments in property. There are 2 reasons to invest in property - personal reasons & investment reasons.

They say that the second worst thing you can do from a financial perspective is buy a house & live in it (with the worst thing being having a kid). When you buy a house, all the expenses are paid in after tax $$$. You also tend to spend extra $$$ on things such as buying a slightly more expensive hot water system, spending more on the garden etc. You also have interest on the mortgage as well as holding expenses such as council & water rates. Once all these costs are added up over the years, the chances of making a profit when selling are remote.

On the other hand though, if the property is bought for investment purposes, not only are the expenses tax deductible, but you also receive an income stream. The property may have been purchased in an area that is subject to large growth (as distinct from the family home which may have been purchased near work or schools) and so consequently a profit can be made.

The other huge costs of property are the entrance & exit costs. When buying property, you have to pay stamp duty on the purchase costs, loan establishment fees, maybe some R&M to get the house up to the standard you require as well as other incidentals. When selling, you will need to pay agents fees & commission, maybe bank charges to vary or cancel the loans, R&M to scrub the place up and then you may not get the price you are after due to holding costs being high. When all this is taken into consideration, I guess it is understandable that the % of people who make profits from property may not as high as expected...

 

[Vindaloo Mat]

Rooboy

a bit simplistic re the tax on owner ocupied property.

Yes the interest on a mortgage is not a tax deduction, but then the interest rate is pretty low and you can borrow up to 80 or even 95% of the value, without the prospect of a margin call.

If you have $50,000 this means you can buy an o.o. house worth $300,000 at a present interest rate of say 6%.

Try going to a bank with your $50,000 and ask for a loan to buy shares and see a) what the interest rate is b) what the margin calls are, c) how much they will lend you.

Conclusion : in comparing a loan for a house with a loan for shares you cannot just consider the tax deduction allowable (or not) for the interest.

Also, if you do not live in your own house then you rent....and this of course comes from your after tax income. So, one way or the other you need to spend your after tax income to put a roof over your head. You cannot live under a share certificate.

If you look at the history of the sharemarket you will see that so long as you keep your money in for more than 5 years the return is a compounding 12% over the past 50 years. It may be 11% or 13% depending on when you enter and when you leave but it does not vary anymore than that. This is an excellent return. You are right that it is an average....however saying that the returns by a more risky approach are "infinite" completely ignores the fact that for every person who on average makes more than 12% is someone else who makes less than 12%....that is why it is an average.

The same of course applies to property. I cannot say for certain, but I am sure that if you put your money in Dubbo vs Toorak the returns may have been different.

IMHO anyone who over the long term expects to outperform the market is fooling themselves.

 

[Vindaloo Mat]

Originally posted by Rooboy 34



According to the chart that I have in front of me produced by "Personal Investor Magazine", if you purchased $10,000 of shares in the same weighting as the ASX All Ordinaries in 1970, they would now be worth $268,143. That is close to 27 times. This is based on the overall market as a whole - not just one or two "freak" stocks. It also takes into account companies like Ansett, HIH & Harris Scarfe.

Bearing in mind that only the ultra-conservative would follow the weightings of the All Ords, there is infinite amounts that could have been made.

10,000 to 268,143 is a compound rate of 10.48% p.a. inflation at least for the past 18 years has been around 2.5% p.a. for a real return of about 8% a good return and about as good as it gets.

 

[Katthawk]

It's all well and good to talk about the prices of property going up and interest rates being steady but don't forget that the majority of property buyers are small income earners.

How many have had to return mortgages, reduce living expenses, not even have enough in bank accounts to save while the interest rates have been so poor.

It's all very well for those of us who can afford to pay 50 percent of a deposit or even the whole house price while those who can't, get stuck believing they can actually pay it all off while trying to maintain the so called living standard. (that is another argument entirely)

This is why buying a house is not always a good priority. The stockmarket requires less money for entry and there are always offset bargains available. You lot who deal in property often forget this. You have to have the market who have the money who either pay the lot up front or can pay without fear of debt.

Property is way overrated as an investment and it's shown by the large number of high rises which are being scaled back before they are actually built.

If I am wrong correct me, I am no expert. I just believe it is a lose/lose situation when you try and encourage a market which doesn't have the cash and cannot guarantee the amounts which property calls for these days.

 

[Docker_Brat]

Just scored +$5K in one day, thanks to a chainsaw and city views

I agree to an extent with Katt, these days the first home buyer has been driven out of the investment market, shares are presenting a better option at this time.

Property was the go a couple of years ago. If you got in with the first lot of first home buyers grants, you'd be laughing now.

 

[Pornstar]

I have investments in shares and 2 properties (a house and a block of land). All have their positives and negatives, but if i had to give one of them the boot it would be the house we rent out. The reason being it is such a drain on your funds. On top of the shortfall between your rent received and interest paid, the expenses you incur are:

council rates
water rates
maintenance
insurance
agents fees
body corporate (if applicable)

And that isn't even taking into account stamp duty. It takes a long time for an investment property to achieve positive gearing based on the long term rates of growth when all of the expenses are taken into consideration. You have 2 assets - the land and the house. The house is constantly depreciating, dragging down the gains made by the appreciation of the value of the land. And there isn't much flexibility. You can't sell part of your house, it's all or nothing. And when you do sell you are looking at 3-4 months before you actually receive the entire amount. The ideal property investment is a block of land that you can rent out.

With shares you only have to pay the shortfall between the dividends and the interest, but the advantage here is you can buy your shares just before they go ex-div, effectively receiving 6 months of revenue in advance, which you can earn a little bit of interest on to help even further. Makes a big difference to your cash flow situation. My portfolio is geared through margin lending and some people in this thread have mentioned margin calls. People who gear themselves to the extent that they have to make margin calls are a bit foolish IMO. Best to look historically at how far the shares you own have fallen in the past and make allowances for that when deciding how much to borrow.

 

[CattyBossDog]

I can't see property prices rising any time soon particularly those at the bottom of the market. It is just too unaffordable for first home buyers.

If it was all about money, I'd sell up now, invest in shares and rent in the docklands.

Best call over time I've seen on this site.

 

[Tormented Tiger]

We bought in Carina for $230k about the time this thread started. Today I think we're looking at $360K. Now we just heard that the area has been opened up for re-developement. Anybody know roughly what units are going for in the area.

Cheers.

Brought the family house in Northcote (Melb) for $100k in 1990. Todays market puts it at $500k+

 

[FIGJAM]

Best call over time I've seen on this site.

Did you get the thumbs the wrong way around??

The only thing I disagree with was living in Docklands. Too friggen windy!

 

[CattyBossDog]

Did you get the thumbs the wrong way around??

Oh yeah. It was a great call in hindsight.



Back to 2003:

I can't see property prices rising any time soon ...

If it was all about money, I'd sell up now ... and rent in the docklands.

 

[FIGJAM]

If he was really talented, he'd have sold up and bought more property in Albert Park and Port Melbourne!

T'was a good call though.

 

[Falchoon]

Define long term.

I'd back shares over the next 3-5 years.

Then back in to property

How'd I go?



On a personal note, I never did sell, as I said with a young family (not that I had one then, little fella was born in May 2004 so he must have been thereabouts).
but my house is probably worth the same +/- 10%

I did put some savings into BHP in May 2005, currently +65%