BearTrap

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132 posts in this topic

House prices to increase by a bit less than inflation.

congratulations.. you realize house prices shall not crash !

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congratulations.. you realize house prices shall not crash !

House price growth of 2% BELOW (say 1% and 3% or 2% and 4%) is a loss of 18% over 10 yearsin relative terms.

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The rise with inflation one really revolves around what interest rates do as to whether the bulls "win" or the "bears". If interest rates go below inflation then rises with inflation are fine and remember they do have to take out rent too.

The upshot is I am afraid if I could be sure houses would rise with inflation from here I would buy one tommorrow. Trouble is I don't believe that houses will remain at these levels either nominally and certainly not in real terms beyond 2010.

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Rising under inflation for an extended period of time is the nastiest of the scenarios for the average joe.

They still THINK their house is going up but really the value is slowly being eroded. Gives them a false sense of security.

Your average joe can't even work out that if they buy a house for $450,000 and sell it a couple of years later for $500,000 they haven't made $50,000. In fact, after stamp duty, mortgage insurance, REA commission on sale, mortgage break fees and a couple of years of paying anything up to $30,000 in interest they've actually made a loss, and with those figures - it can be a considerable loss. But on paper its a profit!

Well that is the whole point, if there is a certain amount of money that must be "paid back" to future generations then we just pay it back across everyone and across ages.

Works out reasonably fair as those that took the most money from the future pay the most back to the future. But it is not done in a crippling surprise way. People will have 10 or 20 years to figure it out and gradually get themselves adjusted to the new reality.

As a bonus it shouldn't affect the rest of the economic activity that much. PI's are not significant tax contributors so if they lose all their money no real biggie. A crash in small business activity on the other hand i pretty messy for everyone as unemployment spikes and so on.

I would rather see 20 years of house dropping 2 or 3% in real terms. For the PPOR it is not really an issue because if they all go up or down you just pay fees to swap similar houses really. It affects upgraders / downgraders but I don't really give a sh*t about supporting those people. Up and down are both "aspirational" and I don't see why I should hope others dreams come out good.

Unless the dream is slow grinding boredom.

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congratulations.. you realize house prices shall not crash !

Congratulations, your lack of math skills shows why my plan works perfectly. If what I hope for happens property is the worst investment you can make as you don't even get a decent loss for writeoff like a complete share crash can give you.

The idea is that the people banking on capital gains will be bled dry slowly to repay the FHBG and the handouts and everything. The good thing is that the repayments will be slow and you won't notice them, in point of fact you will happily pay them thinking you are making money.

Actually I suspect you don't have much in the market and so it won't actually affect you much at all. I am guessing a portfolio of maybe 1.1 or 1.2 by recent valuation and leverage running at about the 95 mark. My plan would let you out easily enough. If you did it soon enough you might even get out about even in real numbers.

As someone that is so pro-property why not post your portfolio? You never have I don't think. How do we know you aren't pump and dump? You certainly come across as one of the more primitive ones from a stock forum.

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The rise with inflation one really revolves around what interest rates do as to whether the bulls "win" or the "bears". If interest rates go below inflation then rises with inflation are fine and remember they do have to take out rent too.

For interest rates to be below inflation it would (with the current RBA stated plans) require low inflation and an economic environment which the RBA was attempting to stimulate. For this to occur over a significant period (say 10 years) I suspect you would be in a long grinding stagnation of house prices :)

The days of capital growth for Sydney properties stopped about 7 years ago. Now property investment is all about guaranteeing yourself a (well paid) job as a maintenance guy. People that want that job will do well as has been the case for decades.

The upshot is I am afraid if I could be sure houses would rise with inflation from here I would buy one tommorrow. Trouble is I don't believe that houses will remain at these levels either nominally and certainly not in real terms beyond 2010.

Now you are talking PPOR right? Different story altogether as who really cares if your PPOR goes up or down? Most should prefer down obviously (lower rates, insurance, obvious implications for economic climate etc).

Just try and avoid the high leverage if you think you'll lose your income.

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well the GFC2 has just hit and rudd blew all his shot in the 1st wave.

i dont see many more $8B a time handouts to banks to support the mortgage market.

i dont see stay at home mortgage renegers sittingg on unpaid bills while the tax payer foots the bill.

i dont see to da moon. i see blood on the streets.

hope you enjoyed ya bubble.

when i said blood and streets, i mean red texta over house prices.

im not the sort to look forward to death and violence.

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Now you are talking PPOR right? Different story altogether as who really cares if your PPOR goes up or down? Most should prefer down obviously (lower rates, insurance, obvious implications for economic climate etc).

Hah, you haven't had a house long enough to know the awful truth. The slackarse council at my old house left my house the same value for about 5 years straight on the rates notices before they sent out the valuer general, who knocked on my door and admitted that the ratings were "a bit out of date".

However, every one of those 5 years they put the rates up. I pay about the same for both properties with houses on (haven't got my first rate notice for the vacant lot yet - apparently they and SAWater do them in a batch at the end of the financial year), but get vastly more services in one council area than the other.

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Hah, you haven't had a house long enough to know the awful truth. The slackarse council at my old house left my house the same value for about 5 years straight on the rates notices before they sent out the valuer general, who knocked on my door and admitted that the ratings were "a bit out of date".

However, every one of those 5 years they put the rates up. I pay about the same for both properties with houses on (haven't got my first rate notice for the vacant lot yet - apparently they and SAWater do them in a batch at the end of the financial year), but get vastly more services in one council area than the other.

Oh I read about people requesting rates re-evaluation as their values had gone down so I assumed it was possible.

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Actually I suspect you don't have much in the market and so it won't actually affect you much at all. I am guessing a portfolio of maybe 1.1 or 1.2 by recent valuation and leverage running at about the 95 mark. My plan would let you out easily enough. If you did it soon enough you might even get out about even in real numbers.

I already posted details on credit crunch this week. You are wrong.

The days of capital growth for Sydney properties stopped about 7 years ago

2007.. 10 pc capital growth

2009.. 21 pc capital growth

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Oh I read about people requesting rates re-evaluation as their values had gone down so I assumed it was possible.

Yup, sometimes councils get greedy and you can get it re-assessed. Its the valuer-general who does it, not the council, but the council is certainly free to jack up the valuer-general's figure every year. My value here goes up by around 10% every year but to their credit, the rates are holding fairly steady.

I paid them $2700ish a few months back in 'contributions' anyway so they still get their cut. Another fee that varies by council ...

Should get some of the old coots from my old town on here. One guy was complaining the year they actually put the values up that he bought his house for $10,000 back in 1990something, and his rates had always said $6,000, and now it said $15,000! The horror! His house is a 1br colourbond kit house.

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I already posted details on credit crunch this week. You are wrong.

Care to repeat them? I don't read that forum.

2007.. 10 pc capital growth

2009.. 21 pc capital growth

Residential real estate is not really something amenable to HFT though is it.

If you wanted single year gains to be important in any way, shape or form you need to look at much higher than 10% on even a 1 million dollar place. As you have no CGT exemption, buying and selling costs and opportunity cost.

So be realistic. What is your trading period? 5 years? indefinite?

Find a, say, 5 year period with decent returns and then you can tell me you bought at the beginning of that. I won't check, honest. Oh by the way, when you find a good 5 year period to claim is the one you bought in you will want compare it to a couple of other options (that is the opportunity cost comparison) because sure eggs is eggs you will have a few other people comparing and pointing out you would have done better investing some other equity class.

But I am sure you will find one 5 year period where Residential Property was good. Otherwise you'll have to claim you are a smarter PI than the rest. Which is also fine, I am sure there are smart PI's out there making money even now.

That argument does make property just another investment class though, not a magic one where you buy anything you see because it is guaranteed to rise. Which I believe is your argument currently[1].

I suspect when you do this exercise you might actually start to doubt the capital gains being a good long term plan in Sydney.

[1] If you believe differently, i.e. you believe people have to actually be smart, do research and manage their RE investment portfolio carefully to make money in the RE investment game you can say so. I believe it to be true. Might actually make you look like a normal member (and I don't mean a 6" penis) if you were to have vaguely realistic views on various investment classes.

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Oh I read about people requesting rates re-evaluation as their values had gone down so I assumed it was possible.

I've successfully argued for a reduction in the rated value of a property before.

Rates have still gone up massively over the last 5 years though. We pay more here in the sticks on average than the uber-wealthy residents of Stonnington in Melbourne. But then, our shire lost $21 million in the US MBS debacle so I guess they need the money. :rolleyes:

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For interest rates to be below inflation it would (with the current RBA stated plans) require low inflation and an economic environment which the RBA was attempting to stimulate. For this to occur over a significant period (say 10 years) I suspect you would be in a long grinding stagnation of house prices :)

The days of capital growth for Sydney properties stopped about 7 years ago. Now property investment is all about guaranteeing yourself a (well paid) job as a maintenance guy. People that want that job will do well as has been the case for decades.

I am not setting out to be bullish, here but interest rates can be below inflation rates or more likely very close to them and it does not have to be when inflation is contained either. Occurs when inflation breaks out like in the 80s. Real negative interest rates are fantastic for owners of debt. Trouble with Australias debt levels if we got inflation of 10% plus like the 80s, I dont reckon we could have any hope of supporting mortgage rates of 13 or 14%? By year 3 or 4 as the inflation works its way through, sure but their would be an awful lot of pain in between, yr2 for example would see your wages up by 20 to 30% and mortgage rates up by 100%.

Now you are talking PPOR right? Different story altogether as who really cares if your PPOR goes up or down? Most should prefer down obviously (lower rates, insurance, obvious implications for economic climate etc).

Just try and avoid the high leverage if you think you'll lose your income.

Yes I am just talking PPOR, but in truth tor I have not bought a PPOR because I think they are not a good asset class, of course I would be happy with my own home. It was originally because I could not afford one right back in 2003 living in Sydney (Thank christ I could not afford one) but then when I could afford one I no longer wanted one. And when I say afford I still mean with substantial debt but manageable, same repayments as my rent payments for now.

So if I bought one I am afraid I would not be real happy to have it drop in value even if it meant my rates dropped. As you point out I suppose in the short term it makes no difference at all if the movement is Australia wide, but it would hurt. But as I said above movements with the CPI from here say 3 or 4% per annum and mortgage rates of say 7 or 8% per annum means the difference is only 4% per annum or about rental yields. Again I must stress I am not saying people should buy cause I dont think house prices will track inflation! Just telling it how it is if house prices do track inflation, which is my "worst case scenario" by me holding out.

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So if I bought one I am afraid I would not be real happy to have it drop in value even if it meant my rates dropped.

All of mine I bought for way under half of what they are currently worth (although one took 7 years to get to this point) so I'm not fussed. If the property market gets so bad that really nice houses in passably decent areas are worth < $50k or rents drop below $100pw then there's some much deeper problems than just property prices. Especially if wages fall to match.

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Care to repeat them? I don't read that forum.

a response from Beartrap via PM:

Hello mr Tor.. I write a very long detail reply to your questions.. admins deleted it.. I write this again & it is deleted again !

I shall not write this for 3rd time.. this is censoring me & wasting my posting time..

If you wish to ask me this on "credit crunch" fourm I shall be 100 pc happy to reply there..

possible you shall even vreate "recipe" thead in credit crucnh "off topic" forum & I shall post my family beef curry recipe !

I shall not post this here.. people are hostile & censoring my postings..

i shall consider no longer be posting in this S&S forum.. IMHO this censorship is killing this forum..

Oh don't hold your breath for me to join over there.

Oh and as I get notifications of new posts I would have seen your reply if you had posted it. Therefore I know you did not in fact post a reply. This may have been because you forgot to hit post or for some other reason but I can tell you it didn't get committed to the database, which effectively means you are either lying or something went wrong at your end.

The fact that you didn't include this information in your private message to me makes me wonder about your motives in the private message.

If you are indeed lying to me you should probably try and think through your lies before you tell me them.

Honestly I can't say I will be sad to see you go, you have never once engaged me in anything remotely like intelligent discussion and instead duck and weave when I point out obvious flaws in your logic.

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a response from Beartrap via PM:

BearTrap, on 21 May 2010 - 12:17 PM, said:

Hello mr Tor.. I write a very long detail reply to your questions.. admins deleted it.. I write this again & it is deleted again !

I shall not write this for 3rd time.. this is censoring me & wasting my posting time..

If you wish to ask me this on "credit crunch" fourm I shall be 100 pc happy to reply there..

possible you shall even vreate "recipe" thead in credit crucnh "off topic" forum & I shall post my family beef curry recipe !

I shall not post this here.. people are hostile & censoring my postings..

i shall consider no longer be posting in this S&S forum.. IMHO this censorship is killing this forum..

Oh don't hold your breath for me to join over there.

Oh and as I get notifications of new posts I would have seen your reply if you had posted it. Therefore I know you did not in fact post a reply. This may have been because you forgot to hit post or for some other reason but I can tell you it didn't get committed to the database, which effectively means you are either lying or something went wrong at your end.

The fact that you didn't include this information in your private message to me makes me wonder about your motives in the private message.

If you are indeed lying to me you should probably try and think through your lies before you tell me them.

Honestly I can't say I will be sad to see you go, you have never once engaged me in anything remotely like intelligent discussion and instead duck and weave when I point out obvious flaws in your logic.

it was 2 posting below this one..

http://www.simplesus...dpost__p__22496

it got deleted 2 times.. you do not believe me ? I shall consider this your problem.. no mine.. good bye !

admins can advise if they deleted my 2 postings.. I never lie mr Tor !

possible censors shall delete & edit this posting too.. like they do allmy postings.. so I send you this already by personal msg too..

Edited by BearTrap
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Funny, there's no long and detailed replies in the trash. Just a couple of one liners.

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Funny, there's no long and detailed replies in the trash. Just a couple of one liners.

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Funny, there's no long and detailed replies in the trash. Just a couple of one liners.

Yeah I knew that already from my notifications. No surprise Bear Trap has yet ever respond to any of my questions in any way that would indicate intelligent discourse. Shame he is leaving and we won't see him ever again.

<raised eyebrow>

or will we

</raised eyebrow>

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it was 2 posting below this one..

http://www.simplesus...dpost__p__22496

it got deleted 2 times.. you do not believe me ? I shall consider this your problem.. no mine.. good bye !

admins can advise if they deleted my 2 postings.. I never lie mr Tor !

possible censors shall delete & edit this posting too.. like they do allmy postings.. so I send you this already by personal msg too..

Rumpled Elf has stated he never replied. I never saw any replies in detail this AM. Tor received no response notification.

After this:

I never lie mr Tor !

He has shown his true colours.

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Ms Elf admitted my postings got deleted.. IMHO before this they get edited & detail remove ! Shall admins admit they delete details fom my postinge please ?

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Haven't you left yet?

RE has assured us that your claimed posts DO NOT EXIST as they apparently go to another sub forum.

You have been found to be a liar and a bullsh*t artist (a liar on your post and a BS on your leaving).

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Ms Elf admitted my postings got deleted.. IMHO before this they get edited & detail remove ! Shall admins admit they delete details fom my postinge please ?

Is this your new way of avoiding answering my questions? Claiming you did in a detailed manner and then someone deleted them?

You didn't. You claim never to lie but you are still here after saying you are leaving.

So you do lie.

If you have the detailed answer to my question post it, post a link to the place where you say it is or PM it.

Don't wank on and on about how some other people are preventing you from posting it.

You have never answered any of my questions.

You still haven't.

It would be easy to so so if you were not a liar.

ergo you are a liar, now go get your f*cking shinebox.

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Haven't you left yet?

RE has assured us that your claimed posts DO NOT EXIST as they apparently go to another sub forum.

You have been found to be a liar and a bullsh*t artist (a liar on your post and a BS on your leaving).

Que ? who cares which "sub forum" they get deleted & edited in.. this happen in all sub forums here ! Ms elf confirmed they get deleted.. you are 100 pc liar.. not me !

BTW.. I did not say I shall leave.. I say I shall consider it ! you & tor shall apologize for lying please ?

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