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Can Australian home prices keep rising?

February 1st, 2010 · Greg Atkinson · 914 Comments

Back in the 2008/2009 when home prices in parts of Europe and the United States were tumbling there were plenty of “experts” saying Australian house prices would also come crashing down. But alas the residential property market remained fairly robust during the global financial crisis and the experts who predicted a crash in property prices were wrong.

But the question we need to ask ourselves now is: can Australian home prices really keep rising?

Of course the answer to this question will depend on if we are talking about a time period of one month, one year or ten years. We also need to remember that the further we try to look ahead and forecast how house prices will perform, the less likely we are to be right. (unless we are very vague about our forecasts, a trick used by plenty of market commentators and self anointed financial gurus)

As it stands today we know that generally speaking average house prices across Australia have held up fairly well and even risen over the last coupe of years. Some luxury homes and developments have not fared so well, but the home price data appears to indicate that most home owners have come through the last few years in fairly good shape.

Many property investors however did not make it through the last few years in good shape and quite a few high flying Gold Coast property developers saw their little empires collapse similar to what happened back in the 1990’s.

So although it appears on the surface that the Australian residential property market looks bullet proof, the fact is that there have been some areas where prices have fallen and even dare I say it, crashed.

As a result a little heat has been taken out of the housing market and since many property developers have been finding the going tough, the supply of new housing has also been slowed.

But the demand for housing has held up fairly well, thanks largely to lower interest rates, continued high immigration and the money made available via the first home buyers grant.

Now if Australia were an economic island where money grew on trees then property prices would continue to rise, but what we need to take into account the following:

  • that much of the money we use to fund our lives in Australia is borrowed offshore and that Australia does not control how much interest needs to be paid on this debt.
  • that the RBA is focused on fighting on inflation and therefore interest rates will probably remain at current levels or creep higher this year.
  • that people can only afford to pay so much for housing. (i.e. there is not an endless amount of money sloshing around)

Back in September I wrote that I thought home prices in Australia would fall by around 10% in the next 12 months and at present my short term residential property market outlook remains pretty much the same.

I am not suggesting there will be a crash in the housing market, but rather I simply don’t see how prices will keep rising in 2010 as interest rates go up and with the first home buyers grant back down to “normal levels”.

As for the long term outlook for the housing market the simple truth is that nobody has a clue. There are simply too many variables to take into account not only within the Australian economy, but across the global economy as a whole.

We have no way of knowing what measures governments may take to address problems they see with the housing market. How would a massive increase in public housing for example affect property prices? Or perhaps steps will be taken to release more land for housing and/or existing areas will be rezoned to allow higher density dwellings to be constructed?

In addition we need to be careful when we make the assumption that a rising population will support house prices because this is not entirely correct. If people moving to Australia for example cannot find good paying jobs then house prices may actually fall.ย  People alone don’t make house prices go up, because at the end of the day prices are driven by the interaction of buyers and sellers, and the buyers need money. (plenty of it)

If Australia does not become more productive over the next decade or so then it is quite possible house prices will remain flat or even trend downwards. I am not saying this will happen, but what I am trying to highlight is that the long term trend of house prices heading upwards is not set in stone. An ever increasing population alone does not guarantee an economy will keep growing or that house prices will keep rising.

When you think about it, for Australian home prices to keep rising over say the next 10 years or so then we need to have a growing population and an economy that is able to keep growing while also creating new well-paying jobs. This might sound easy to do, but in practice it is quite tough to achieve.

Perhaps if the Chinese economy keeps growing then we have little to worry about in Australia, but there is also plenty of room for the Australian economy to contract if things don’t work out quite the way most people seem to assumed they will.

As I have written before, it has been over a decade since the last recession in Australia and many people in the workforce today with mortgages have never experienced an economic downturn.

The chances are that many of these people are also unprepared for a few lean years so the next recession in Australia could have a more severe impact on the housing market than would otherwise be the case.

Over the next 12 months or so I expect house prices to ease back (around 10-15%) and remain fairly subdued for maybe 18-24 months. I am aware that there is apparently a housing shortage (although I am not sure it is quite as large as commonly reported) but I just can’t see where the extra money will come from to keep pushing prices up.

Over the longer term (say 5 years plus) I believe it is almost impossible to make an accurate forecast, the best we can do as investors is make assumptions and adjust our outlook as conditions change. I know this does not sound particularly insightful, but it is simply the reality as I see it.

But perhaps I have everything backwards? Maybe house prices will rise in the short term and enter a period of long term decline? Or could Australia become a nation of people who prefer to rent and live without the life-long burden of a mortgage? If so how would that impact house prices?

Then again maybe prices will rise in 2010 and keep heading upwards for decades? Maybe the GFC has just spooked me a little and I am starting to see asset bubbles where they don’t exist?

Anyway I certainly don’t have all the answers so I invite readers to share with readers of this blog and myself their view of how the housing market will fare over the short and long terms and if needed, set me straight on a few things!

Over to you…..


914 responses so far ↓

  • 1 Scott Murray // Feb 2, 2010 at 5:19 am

    Anyone interested in housing costs internationally and
    particularly in Australia should look at
    http://www.demographia.com/dhi.pdf

    It is an excellent comparison of housing costs
    across the Anglo-sphere.

    Unsurprisingly Australia is the most expensive
    country out of New Zealand, Ireland, UK, USA and Canada
    on all measures.

  • 2 Biker Pete // Feb 2, 2010 at 9:41 am

    Greg A: “But the question we need to ask ourselves now is: can Australian home prices really keep rising?”

    My wife’s parents in Vancouver recently sold a home for which they’d paid C$33,000.00, for C$1.8 million. We all laughed about it, because if anyone had suggested this might be the outcome, they’d have had them committed! ๐Ÿ™‚

    House prices will continue to rise… here and in countries like Canada, where resources are immense. That’s not to say the young will be able to live in cities like Melbourne, Sydney, Vancouver or Victoria (BC)… unless they have a foot in the door, now. Not much new there. At 25 I could not afford to buy in Perth and had to move to a far-flung satellite town, where I _could_ afford to buy.

    We bought our current main property twenty years ago. It’s worth 7.7 times what we paid for it at last valuation. When we bought it, a colleague suggested it would soon be worth _twice_ what we paid for it. Despite both being optimists, we rejected the suggestion after the dinner party was over and everyone had left.

    The idea that house prices will crash offers hope to the impatient. Maybe a lotto ticket offers similar hope… . ๐Ÿ˜‰

  • 3 Greg Atkinson // Feb 2, 2010 at 10:00 am

    Hi Biker, I am not a housing crash sort of guy but I do worry that everyone seems to think the commodities boom will go on forever. 20 years ago for example BHP was pretty much a dud stock and mining was not “sexy”. It is quite possible that once again supply will creep up again and that many commodities prices will stay subdued for many years.

    What we also appear to forget is that Canada and Australia are not the only nations with huge natural resources. As I have mentioned before the Chinese have been very active in Africa simply because they are trying to tap into the huge supply of minerals there. Russia now exports more oil than Saudia Arabia, Mongolia has potentially the largest untapped reserves of Uranium and even in Australia much of our natural resources are being sold off not by Australian companies, but foreign joint ventures.

    So is the future bright for Australia or are we just not seeing the warning signs? Have years of growth made us all a little complacent? Do we expect house prices to keep rising simply because they always have?

  • 4 Biker Pete // Feb 2, 2010 at 10:36 am

    Your points are taken, Greg. I myself warned my wife to sell her Liberian Iron Ore stocks before Lang Hancock developed his mines in WA’s north. They fell from $18 to $2 within ten months. Her grandfather, one of the founders of the company, would have been rolling in his grave. Yes, resource sources shift… .

    If the global crash deepens, I know two people who might lose real money in the sharemarket… .
    My son, who has money in both shares and property, might learn a very important message about the continuity, safety and comfort of rental income. (Don’t wish that scenario on either of you, BTW!)

    We enjoy property. After three decades, we know more about it than any other form of investment. We’ve made a lot of money from it… and within eighteen months expect to fully retire… and expand our travel. If property falls, we’ll buy… . ๐Ÿ™‚

  • 5 Ralph // Feb 2, 2010 at 3:20 pm

    I think it could go either way at the moment. We see from recent reports that lending figures slumped 47% since September 2009.

    Mortgage Index

    And then there is the issue of first home owners grants subsiding. And then we have hysterical property investors wailing that increased rates are making them nervous. That says it all – these guys are pleading for government intervention.

    The RBA is obviously worried because it left rates on hold this month. My feeling is that if the government doesn’t chime in with more ‘free money’, then it’s hard to see that there won’t be falls. On the other hand, the government must be sorely tempted to step in again. If they do, that seals the deal – they signal that property is a protected asset class and the notion that Australian real estate really is different will be proven correct.

  • 6 Ralph // Feb 2, 2010 at 3:21 pm

    oops. Bad use of links. Sorry.

  • 7 Biker Pete // Feb 2, 2010 at 3:29 pm

    “The notion that Australian real estate really is different will be proven correct.”

    Again.

  • 8 Greg Atkinson // Feb 2, 2010 at 4:28 pm

    Yes Ralph, I reckon the RBA is definitely worried. The best outcome now would be to let the housing market cool a little and thus avoid a bubble, but if the government steps in again then things could get very nasty. BTW Never mind the link problem, all fixed now.

  • 9 Ralph // Feb 3, 2010 at 8:38 am

    Greg, thanks for fixing the link.

    Biker Pete – are you saying your confidence in ever increasing property prices is at least partially based on the assumption that the government will continue to intervene to bail out the housing market if prices fall?

  • 10 Biker Pete // Feb 3, 2010 at 8:42 am

    Ralph, are you suggesting that a ‘keensian’ event will cause property markets to crash across Australia, to the tune of 40%?

  • 11 Ralph // Feb 3, 2010 at 10:53 am

    Not necessarily. And I never said anything about 40% either. Absent further government intervention, it’s likely that prices will cool a little this year.

    I just have my doubts that there is enough energy left in the housing market to sustain ongoing price increases. As much as I can see, increasing house prices is reliant on increasing credit. And mortgage finance now appears to be decreasing. As well as the AFG press release, the ABS housing finance figures also show a decrease in number of dwellings purchased and the purchase value of those dwellings, as at Nov 09.

    ABS housing finance figures

    As I see it, the appetite for purchasing houses has weakened. Unless there is a sudden reversal of that trend, this will, over time, flow through to lower house prices. How could it not?

    Of course, if the government pumps more cash into the housing market, the RBA keeps rates where they are and/or the banks opeain the credit taps again, perhaps house prices will continue to soar.

  • 12 Greg Atkinson // Feb 3, 2010 at 11:21 am

    I tend to agree with Ralph. There is only so much money around and a lot of it was wiped out by margins call etc. back in 2008/2009. Of course new wealth should be created in the years ahead but I think (?) we all agree that the housing market was supported by lower interest rates and the FHBG/FHOG last year so isn’t the likely outcome in 2010 a flattish or slightly lower finish for house prices?

  • 13 Biker Pete // Feb 3, 2010 at 11:37 am

    I realise you’ve sold your apartment, Greg. Hope you did well.

    Personally, I think there’s much more money about than most of us realise… . Heard a figure this morning which I very much doubt… 130,000 millionaires in Oz. It could easily be treble that. A million now has as much status as $100K used to have.

    Back in the eighties, realtors reeled when we sold off numerous properties at prices they could never have imagined when they sold them to us, a few years before. Older, wiser, wealthier men than us, they were incredulous when they realised how much we’d made. I’m not saying we’ll see that happening soon, but it will happen. Don’t need it to happen, but it would be fun… ! We’re happy to cover costs and make a good income! ๐Ÿ™‚

  • 14 Ralph // Feb 3, 2010 at 11:58 am

    I guess we’ll see, won’t we? All the numbers available at the moment point to house prices being on the edge of taking a turn downwards.

    The RBA is clearly worried, hence the lack of a rate rise. Unless the government comes in with more stimulus and/or the banks decide to return to crazy credit, there simply isn’t the credit growth to push house prices higher. And being an election year, I wouldn’t put it past Rudd trying some more stimulus – but wouldn’t Abbott have a field day with him? Doesn’t mean K Rudd won’t get desperate and do it anyway. There may even be a sudden influx of migrants – all of them ready to buy a house immediately.

    Now those things might well occur and I’ll have egg on my face. But at this stage, that’s all I can imagine could fuel this further. As to the size of the falls – that’s anyone’s guess.

  • 15 Biker Pete // Feb 3, 2010 at 12:14 pm

    “I guess weโ€™ll see, wonโ€™t we?”

    With due respect, I’ve read that comment scores of times during the last two years, Ralph.

    In my view, the RBA saw the present slow in construction as extremely dangerous to:

    a. the construction industry

    b. employment

    c. the tax base

    d. increasing accommodation demand, as our population rises

    e. rents rising due to d.)

    I may be giving the RBA credit far too much wisdom here, but I doubt it. We’re enjoying having great leverage with building companies right now, due to the construction slowdown.

    If Labor picks up a recommendation of the KHR in regard to tax relief for _all_ mortgages, nothing Abbott could do, other than match that election promise, could prevent him being a passing blip on the radar. We live in interesting times!:)

  • 16 Biker Pete // Feb 3, 2010 at 1:25 pm

    And further to the point made about the property market(s):
    (‘s’ underlined )

    http://www.watoday.com.au/business/the-gaps-big–and-its-getting-bigger-20100202-nazr.html

    Which state are you in, Ralph?

  • 17 Ralph // Feb 3, 2010 at 2:43 pm

    That’s true, Pete, there are many markets, each with its own characteristics and movements. I’m in SA, but I don’t doubt that WA is rebounding again. In that case, if you’re property investments are doing well, I’m pleased for you.

    Nevertheless, property prices in general can’t continue to increase without a commensurate increase in credit. And we have credible data available to suggest that credit is more scarce. So I think a cooling off of property prices is inevitable.

    Of course, the government could try all manner of policy tweaks to keep house prices high. But given the current direction of lending figures, that’s what will be required – government intervention.

  • 18 Biker Pete // Feb 3, 2010 at 2:57 pm

    Credit may be scarce in SA, but banks approached by young couples on $200K per year (miners, tradies, etc) don’t seem to be knocking anyone back.

    At the same time, _investors_ here may have pulled back. Being counter-cyclical we’re building as many as we can… five last year, two this year.

    Perhaps you’re right, east coast markets may cool. If so, I think it will be a very temporary cooling, if projections for Australia’s population growth are even half true… .
    The current direction of lending figures can’t last, you know.
    Mortgages are a very large part of Australian bank business…
    as WestPac is now remembering, to its dismay.

  • 19 Greg Atkinson // Feb 4, 2010 at 9:19 am

    Yes Biker I sold my apartment, but this has more to do with the fact that I am up here in Japan now as opposed to any attempt to try and time the housing market.

    As for the availability of money, I think we need to appreciate that the housing market in Australia is supported by the overseas borrowing of our banks. In other words, we do not have the funds in Australia to support our own mortgage market, it is in fact supported by money borrowed offshore.

    So in a simple sense, we actually don’t have the money to support the housing market at current levels, but we have borrowed against our future because we figure we can pay it all back (and the interest) based on what the nation should earn in the decades ahead.

    I am not trying to suggest that this may drive prices up or down, I simply wish to highlight that a lot of the money in the housing market is not “Australia’s” as such.

    A couple of years ago I would not have worried about this much, but the GFC has wiped out a lot of the funds available for borrowing across the globe, so I wonder how more money we can actually bring into Australia to keep fuelling or mortgage market at reasonable interest rates?

  • 20 Biker Pete // Feb 4, 2010 at 9:31 am

    I accept that you’re correct about the borrowing overseas aspect, Greg. Certainly we have borrowed against our future, but not to the same extent as the Brits or Yanks…!

    It’s likely that we’ll continue to bring in money while our interest rates are so much higher than those in the UK, US, Canada and Europe. That _may_ slow after July.

    WAToday has a report 4/02/’10 claiming our state is “…leading the housing recovery…” based on recent block sales, up 67% in the area we’re investing in. That figure surprised us. It may be speculative; or it may suggest an awful lot of building is about to occur here. What is interesting too, is that prices of those lots are up 26% on what we paid a year ago for a couple of _outstanding blocks with water views._

    Hope the major building companies haven’t read this report. It may affect our negotiations for the next two projects… !

  • 21 Biker Pete // Feb 4, 2010 at 9:36 am

    And further, from PerthNow, 10/02/’10:
    http://www.perthnow.com.au/business/boddington-gold-mine-to-eclipse-kalgoorlie-super-pit/story-e6frg2qc-1225826377222

    Hellzapoppin’!

  • 22 Greg Atkinson // Feb 4, 2010 at 10:12 am

    Biker Pete I guess get back to the problem we have talked about a few times and that is there is no true Australian housing market as such. If people have the money and the local economy is doing well than house prices there are likely to do better than say in NSW where the economy is in a bad way. Conditions can vary so much from one location to another, hence the reason it is so hard for anyone to accurately predict where the market is going.

    I have not gone bearish regarding property as investment by the way, I would simply describe my mood a cautious. (and this goes for most Australian stocks as well by the way)

  • 23 Biker Pete // Feb 4, 2010 at 11:23 am

    Greg: “I would simply describe my mood as cautious. (and this goes for most Australian stocks as well by the way)”

    You should have a talk with our son, Greg… ! ๐Ÿ™‚

  • 24 Greg Atkinson // Feb 4, 2010 at 12:17 pm

    Maybe Biker ๐Ÿ™‚ I just worry that the economic mood in Australia is just a little too far away from the global economic reality. The BDI is now well below 3000 and that suggests to me that maybe China is easing up on it’s commodities buying and whatever stockpiling was going on is coming to an end.

    It seems most G20 nations are cautious about the economic outlook ahead expect Australia. Maybe Australia is a wonderfully lucky country and the GFC will hardly land a punch on our economy, or maybe we are wandering into an ambush totally unprepared?

  • 25 Ralph // Feb 4, 2010 at 1:12 pm

    Hi again,
    I’m starting to think that we could be in for a rate CUT in the next month or two!

    I’ve already provided links to credible sources of information about decreasing housing finance. I think that alone was enough for Glenn Stevens to $hit his pants and keep rates on hold. Based on that alone, I think we can conclude that we’ll see a fall in house prices barring some other intervention.

    However, Greece is broke and looking for a bailout, we have a ‘surprise’ fall in Aus retail spending in December and there are reports that China is going to keep loose monetary policy and fiscal stimulus.

    In that context, I reckon Glenn ‘Brown Undies’ Stevens would be $hitting himself about possible falls in house prices and won’t be keen to raise rates any time soon. If anything, I reckon the chance of further stimulus and a cut in rates just becomes bigger. If so, you could be right Pete. The government & RBA together might just be able to pull this off with house prices continuing to go up.

  • 26 Greg Atkinson // Feb 4, 2010 at 2:01 pm

    Ralph I think the data you provide shows that the housing market is cooling on the back of higher interest rates/removal the extra grant money.

    Last year as you might know I said the RBA would raise rates too far/too quickly just as they did in 2008. Now they are starting to look indecisive and a little lost, this has spooked the markets and it means I was probably right and they did jump too early.

    So what’s next? Well if Chinese demand for commodities comes back to what I would call normal levels then we might see some real pain in the Oz economy because we seem to be geared up for an endless boom. Australia appears for example, appears to be the only G20 nation that is expecting pre-GFC conditions to return quickly.

    I just don’t get where this idea or over-confidence is coming from? We seem to have factored into our thinking that the Chinese economy can never grow by less that 8-10& per year. Is this realistic and great long term planning or just foolish optimism?

  • 27 Ralph // Feb 4, 2010 at 2:45 pm

    Good observation, the RBA is looking lost and uncertain. Those green shoots look like they’re starting to wilt!

    But you raise the big questions re China. There’s every reason to be doubtful of China and yet Australia has jumped 100% on the China bandwagon.

    These days Australia doesn’t even pretent to be a multi-faceted economy – we mine resources and export them to China (and a few other places). And when we’re not doing that, we’re selling overpriced houses, which is tightly coupled with the China success story.

    I don’t think there is a plan B. Plan A looks so shiny and lustrous that there’s no need to even consider anything else. And the alternative to Plan A (China saves us) is so unpalatable that it’s easier just to concentrate on the riches that China will bring and worry about the rest later.

  • 28 Biker Pete // Feb 4, 2010 at 4:48 pm

    Greg, it’s not just China. WA has immense deals going forward with Korea and Japan, too. And goldmines are going gangbusters.
    (Now _that_ smells like a bubble…! ๐Ÿ™‚ )

    Ralph: “…weโ€™re selling overpriced houses… ” Well, YES and NO. Maybe on the east coast, particularly in the major cities. We can build a 4X2X2 in a good area for $420K. Cinema, A/C, etc.
    Selling it would fetch $450K max. Hardly overpriced in our view.
    Try to build a home like that for much under $430K. (You can’t.)
    WA is still dirt cheap… maybe ‘sand’ cheap, if you like… .

  • 29 Ned S // Feb 4, 2010 at 5:31 pm

    It’s a bit hard to get too panicked about a country that’s reserves are now $2.4 trillion surely?

    http://www.bloomberg.com/apps/news?pid=20601089&sid=at7RtqkhdSaU

  • 30 Biker Pete // Feb 4, 2010 at 5:59 pm

    Buys one helluva lot of stimulus, Ned! ๐Ÿ™‚ Y’know, with a population four times greater than that of the US, China’s domestic markets present as much future promise as her current export markets do. China is probably placed where the US was back in 1890, in terms of current vs future growth.

    And her interest rates are much higher than ours. Hardly looks like the malpractice which led to the GFC. The Chinese would probably shoot miscreants who caused a similar mess in China. And who could blame them?!!

    Greg’s point re China’s interest in African resources is worth consideration. The political and economic effects of China resourcing her metal, uranium and other fuel from Africa, might shake us about a little.

    (Aussies will still need shelter, he mused, happily… . ๐Ÿ˜‰ )

  • 31 Ned S // Feb 4, 2010 at 6:38 pm

    Greg has convinced me of the potential of the Asian region.

    Your point about China’s domestic markets is well taken. They’ve obviously figured out that what they’ve been doing to date has been helping others live beyond their means.

    So fully expect we’ll see them move away from that model and towards more internal consumption.

    Africa? Yes, seems there’s always risk of one sort or another out there. ๐Ÿ™‚

  • 32 Ned S // Feb 4, 2010 at 8:27 pm

    I found the following from the demographia link interesting:

    “The True Housing Crisis: Lack of Affordable Land:

    As has been noted above, the extraordinary increase in land costs has been the principal driver of higher house prices. The National Housing Council State of Supply Report indicates that Australia?s plandriven (more prescriptive regulation) urban development at the micro-scale level takes from 6.25 to 14.5 years for residential land to be designated for development to the completion of the first houses. By comparison, the same process could as little as one year on the fringe of urban areas with demand-driven processes (more responsive regulation), in the United States. Further, before prescriptive
    regulation policies (urban consolidation) were adopted in Australia, the process tended to take from 1 to 1.5 years in what was then a demand-driven process.

    The long process in a plan-driven market provides land sellers and buyers with reliable information
    on where development will occur and, as a result, tends to significantly raise the price of land. This virtually eliminates any supply of affordable land and makes housing affordability an unrealizable goal.

    State (and even federal) authorities may claim that there is sufficient โ€œyears of supplyโ€ of land for building new houses, in dismissing calls for additional land release. โ€œYears of supplyโ€ is a meaningless measure. Plan-driven regulation skews land prices upward, making it impossible to
    produce housing that is affordable, regardless of the how many years of land supply is available.

    The only genuine measure of scarcity or abundance is price. The problem is that there is not a
    sufficient supply of affordable land, because of the market distortions created by urban
    consolidation.

    These land price increases have been avoided in more responsively regulated markets where the
    process of building new housing is driven by the preferences of consumers.”

    http://www.demographia.com/dhi.pdf (Given above by Scott Murray) – page 26 –

    Wonder if the various levels of Oz government are likely to get their acts together on land supply anytime soon. It’s an interesting one politically. In that the commonwealth seems to be the ones that wear the fallout from it – Due to people tying interest rates to them (rightly or wrongly). Whereas the real issues are way more at the state and local government levels.

  • 33 Biker Pete // Feb 4, 2010 at 8:45 pm

    There’s also the issue of development costs, too, Ned. Twenty two years ago we considered the purchase of sixteen acres within 200m of a nice swimming beach. A gift, we thought. Knowing nothing about development costs, we approached a reputable financial advisor to seek specifics. Once we had the figures we didn’t just walk away, we ran. It was cheaper to buy blocks very much closer to the ocean than develop our own… .

    The two cheapies we picked up during the recent lull had been held by the developer for a year… one held solely on a $500.00 deposit. It was on hold for a 457, whose stay was declined.
    The other was an enigma, a great lot which just didn’t move. I doubt the developer made a cent on either block. His new stuff is now much further out, with no views… and far more expensive.

  • 34 Ned S // Feb 5, 2010 at 12:17 am

    It’s quite clear that government understands the issue, when the likes of Tanya Plibersek says:

    “We are not building enough homes each year. We need to improve our systems, our planning and development systems.

    We need to make sure that we have got enough affordable land to build on, both in green fields areas and in fill sites over the next two decades, and we need to look, as they suggest, at expanding our regional centres.”

    http://www.abc.net.au/news/stories/2009/11/24/2752254.htm

    But considering that (as per my previous comment) “urban development at the micro-scale level takes from 6.25 to 14.5 years for residential land to be designated for development to the completion of the first houses”, the issue is entrenched – As developers have already bought and presumably paid very high prices for land that won’t even come on line for 6 years and more (with very significant development costs also to be added as you say.) Plus the holding costs over such lengthy periods.

    I can see why governments aren’t rushing to change things – Those are lengthy timeframes to be messing with. Make any radical changes to policies to get more land released quickly and I fully imagine they’d throw the whole land development industry into choas. With potentially unhappy consequences for the banks that are funding them. As well as seriously disturbing existing housing prices – Either up or down, just depending on what the outcome of the chaos was.

    When I initially read Plibersek’s comment about needing to make sure we have got enough affordable land to build on over the next two decades, I passed over it as a being population growth related. But in hindsight, I’m wondering if the “next two decades” bit might be more an indication of the timeframe they reckon they’d like to see any major changes happen over.

    In that light, I recalled that Rudd had signaled the commonwealth would play a greater role in capital cities’ planning:

    http://www.theage.com.au/national/rudd-touts-plan-for-better-cities-20091027-hj22.html

    One of the 8 key points is that “Land release should be arranged to meet the housing needs of a growing population and keep homes affordable.”

    But he’s talking about population growth out to 2049. And says “With Australia facing rapid growth in the decades ahead, the time has now come for the Australian Government to take a much greater national responsibility for improving the long-term planning of our major cities”

    All something of a case of let’s hasten towards affordable housing slowly perhaps?

  • 35 Biker Pete // Feb 5, 2010 at 7:09 am

    All salient points, Ned.

    The bears despise partnerships between state governments and developers, but in WA these tend to actually ‘work’. (Defining what ‘work’ actually means here is problematic. Some would contend it’s not working!)

    We watch these partnerships very carefully, since they impact on us as land buyers. For the last few years we’ve noticed that:

    * New subdivisions (say three) are planned and created by a developer who has 50/50 state government backing;

    * The three, D1, D2 and D3, are in different stages of completion, near regional centres;

    * D1 is ‘completed’ and put on the market. If it sells briskly, work is expedited on the second project. If it’s slow to sell (and we’ve experienced _that_ for a year) work seems to crawl to a halt on the other two developments…

    * Consider the logic here: nothing is selling. We are not making a profit. Subdivision D1 may be perceived as a failure.
    Wind back the other two until sales lift. There’s also a possibility that the ‘partners’ need profit from D1, before D2 and D3 proceed.

    * Meanwhile D4 and D5, developments in which large tracts which have already been purchased by the ‘partners’ are put on complete hold. State government agrees. The cost of holding developed land which isn’t selling is just too great. Media criticism of sales figures for D1 doesn’t help… !

    Now we know that governments, working alone, are not themselves ideal developers(!) A federal plan which proposed hugely-subsidised subdivisions might not only lose billions, but result in few sales, particularly during troughs like the one we’ve just experienced. And such developments are likely to be even more far-flung than the current ones. Once landowners see government as the potential buyer, the price skyrockets. Governments have very deep pockets, right?

    “All something of a case of letโ€™s hasten towards affordable housing slowly perhaps?”

    Or, “Jeez, all this is just too bloody hard! Let’s fix the climate instead!!!” ๐Ÿ™‚

  • 36 Biker Pete // Feb 5, 2010 at 9:04 am

    http://www.watoday.com.au/business/markets/construction-strongest-in-two-years-20100205-ngw5.html

    Last rush of the FHBs?!

  • 37 Ralph // Feb 5, 2010 at 9:16 am

    Interesting discussion, Ned & Pete. Of course the release of land is a very significant element in the house price issue. And as your comments have revealed, it’s riddled with red tape and government intervention.

    I have no doubt that governments of all persuation will continue to keep their fingers in the pie while talking out of the corners of their mouths and making it more efficient. The vested interest of governments in this arena is massive, so I don’t expect any real change, short of a revolt from the people.

    I note that the ACT government in its land release strategy documents (I’m looking to move from Adelaide to Canberra in late 2010) explicitly states that it endeavours to release new land to ‘meet the market’. It also talks of something like ‘the market being able to absorb future supply’ etc etc. So they are very much oriented to dribbling out land in small enough quantities to keep prices bubbling upwards. I haven’t read very widely on land release and/or development practices, but it’s pretty clear that release of land is a significant weapon in the armoury of governments in keeping house prices where they want them.

  • 38 Biker Pete // Feb 5, 2010 at 10:01 am

    “…they are very much oriented to dribbling out land in small enough quantities to keep prices bubbling upwards…”

    That’s one perception, Ralph. Another is that government is reluctant to go it alone; and frankly, I don’t blame them. Our own investigation indicated that property development itself is very big bucks… very high risk… and the delayed pay-off for effort simply isn’t worth it unless you’re as immense as Mirvac, Satterley, Peet, or Stockland. Quite a few of the smaller players went bust in the last two years.

    Where would you rather put your investment dollar than in property, Ralph? ๐Ÿ˜‰

  • 39 Greg Atkinson // Feb 5, 2010 at 10:05 am

    A while back I read that Alice Springs had problem with the lack of land available for housing..can you believe it? I can’t remember where the article was posted but the general thrust of the story was that there is of course plenty of land, but the process to get the land ready for housing was a nightmare. (which I think Ned & Biker Pete would agree with)

    As for resources, yes South Korea and Japan buy our stuff as well but as I have written about before these countries are also looking hard for other suppliers.

    Back during the height of the commodities boom I expressed the view that our big mining companies may have overplayed their hand when they were forcing massive price rises onto China, Japan, South Korea. All buyer/supplier cycles turn and we may just find the power shifting back towards the buyer in which case it may be payback time for the likes of BHP/RIO.

    Also remember the Gorgon Gas project is not ours as such, we will in fact be buying the gas back from a foreign joint venture even for use in Australia. See: http://www.shareswatch.com.au/blog/opinion/lng-billions-is-australia-getting-a-good-deal-gorgon-project/

    Finally China does have massive foreign reserves (as does Japan by the way) so I am not expecting them to go under anytime soon, but I do expect the Chinese economy to cool which won’t be so bad for China, but may knock around confidence in Australia quite a bit.

    As I write stocks are heading down again and this shows just how nervous everyone is about the global economy…how long will Australia be an island of economic confidence I wonder?

  • 40 Greg Atkinson // Feb 5, 2010 at 10:10 am

    Well I wrote too soon, I just noticed an article on Bloomberg where the RBA Gov sounds as bullish as ever. http://www.bloomberg.com/apps/news?pid=20601087&sid=aMAf78Pviwlw&pos=1

    He seems to be a lone voice now amongst the G-20 nations. He is either really smart and has his finger on the pulse or he has lost the plot.

  • 41 Anon // Feb 5, 2010 at 11:30 am

    I smell blood on the streets…my blood! lol
    Greg are you taking any nibbles yet or are you waiting for the dust to settle.
    I nibbled abit and my nibbler got nibbelated. Such is the way of dip buying in downtrends ๐Ÿ˜‰
    I think commodities and cyclicals might be in trouble.

    Remember above is not advice, only commentary – seek financial freedom and bankruptcy from your local financial advisor ๐Ÿ˜‰

  • 42 Greg Atkinson // Feb 5, 2010 at 12:22 pm

    Anon – I have been pretty inactive for a while as I have been cautious about the commodities sector since late last year. There is simply too much news spinning around now from Toyota vehicle recalls to naughty Bank of America executives and this just makes everyone nervous. To make matters worse China and the U.S are at odds again over the value of the Chinese currency, the Dalai Lama & Taiwan so the geopolitical environment is not great either.

    Thank goodness the weekend is coming up!

  • 43 Biker Pete // Feb 5, 2010 at 12:32 pm

    “Thank goodness the weekend is coming up!”

    -You think the punters will have any fingernails by Monday, Greg?

  • 44 Ned S // Feb 5, 2010 at 1:42 pm

    Yes Anon, while I don’t think any of us would suggest that Aussie housing is risk free at the moment, I do find it of some comfort to only have to check the market twice a day rather than twice a minute. ๐Ÿ™‚

  • 45 Ned S // Feb 5, 2010 at 3:36 pm

    I read an article last night that reckons it’s all Glenn Stevens fault for not putting his crumby little interest rate up a measly 0.25% – Seems the theory is that Oz is the canary in the coal mine and that the RBA knows what it’s doing!

    If so, the death threats from every other central banker in the world since might explain his recent happy face comments perhaps??? ๐Ÿ™‚

    Oz housing – Well, while I reckon it’s pretty pricey, I at least suspect I’ve been slowly gaining an understanding of why that is so. And can continue to keep an eye out for some changes that might affect it.

    As to investing generally, it seems to be very much a matter of personal preference as to which pig wearing lipstick one reckons is cutest at the moment.

  • 46 Biker Pete // Feb 5, 2010 at 3:54 pm

    Watching the missus reconfigure the next project each evening, I’m impressed with how much enjoyment she gets from the exercise, Ned. I really can’t think of any other asset class that provides as much excitement as watching the ‘tangible’ progress of something we’ve planned and negotiated from the ground up.

    Only ever made pocket money from shares, but I imagine there’s some excitement watching large amounts of money accumulate in stocks. My mother-in-law’s admonition to her daughter, being the grandchild of a major punter: “Don’t marry a broker… rags to riches… and back to rags again…!” may have reduced the field a little… . ๐Ÿ˜‰

  • 47 Ned S // Feb 5, 2010 at 4:51 pm

    I derive pleasure from “improving” a property Biker. Or having taken a hand in seeing one where there once wasn’t.

    While I don’t trade stocks, because I know I’d be WAY out of my depth, I do take an interest in them. I followed the DJIA action this morning. And found it fascinating – But must admit the thought did flick through my mind, Ned, you’re a dill – A huge amount of what you’re watching is just computer programs trading against each other.

    That’s probably an unkind assessment made by the ill-informed though. And hey, even if it’s not, and one can beat the computers, then I’m all for it!

    Usually – As I worked with a bloke in the dot com days, who got all stressed and threw in his job because it interfered with his ability to follow the markets and trade. I met him again after – He’d dropped $400k if I recall correctly. But could inform me that things were still OK – As a very close relative had died and left him $200k or somesuch.

    Suspect one has to have an appropriate “personality type” for the game – And that maybe he didn’t? Although I certainly didn’t feel to suggest that to him!

    Each to their own … ๐Ÿ™‚

  • 48 Biker Pete // Feb 5, 2010 at 7:00 pm

    My son’s share trading technique bothers me. Here’s what he does:

    1.) Buys Indexed Funds;

    2.) Sells them (high) just before dividends are due to be paid(!)

    3.) Buys more IFs (more cheaply) after dividends have been paid.

    His reasoning is that he has insufficient tax claims to justify taking profits.

    To me, that seems a little crazy… .

    What do others here think? I realise that this is a property blog, but I’m troubled by what seems to me a pretty questionable strategy in such turbulent times… .

  • 49 Anon // Feb 6, 2010 at 3:50 am

    Yeah Pete I dont understand that technique either.
    But I think everyone is different and you have to do what works for you. I prefer value investing. If I tried to do that share trading stuff your son is doing i’d be bankrupt in a few months lol. To be honest I think its basically gambling…statistically only a very few can make money and then even fewer can hold those gains over several years.

    Like Greg my timing is very bad, and most traders to get good gains use severe leverage. So bad timing and leverage would be a disaster. I read about many ppl who make a killing over many years and then blow up eventually. It seems to be a repeating pattern in that industry.
    The thing that works for me is sector rotation and concentration on big bets and going in with the intention of holding for a longtime or until it nolonger looks like a good longterm play (3-5 years).

  • 50 Anon // Feb 6, 2010 at 8:37 am

    “There is simply too much news spinning around now from Toyota vehicle recalls to naughty Bank of America executives and this just makes everyone nervous.”

    Yes, but its bound to go the other way soon. You know the media – as soon as the public get used to bad news, they want to sell newspapers – so they print/spin the reverse ;).

    I would love to buy some Toyota. But I feel its still overpriced given uncertainties in the continuity of demand over the next 12 months. I’d assume alot of people would put off new car purchases given fear of peak oil/debts/economy/job security.
    I think Toyota might make a killing over the next decade or so from the pent up demand from electric cars. Problem is when will they be affordable enough. Took Plasma/lcd screens a good 5 years before people could really afford them and get the volumes through.

    Remember above not advice, only commentary — see a financial advisor for decision making/info.

  • 51 Greg Atkinson // Feb 6, 2010 at 8:58 am

    Biker your son is following a strategy that some traders reckon is a way to beat the market but it is risky of course and relies on the stocks doing pretty much what you think they will, i.e come down after the ex-dividend date.

    The problem is that to make some decent returns (in dollar terms) you need to put quite a bit of money on the table (and some traders even borrow to do this) so as you can imagine, if the market moves against you things can get a bit nasty.

    Personally I am not a trading type of guy. But I did do the maths once regarding this type of trading and it just didn’t make much sense to me when you factor in tax, broker costs and risk. (especially is you are using a margin loan)

  • 52 Greg Atkinson // Feb 6, 2010 at 9:04 am

    An interesting article today in the Sydney Morning Herald today about the problems Australian will face as the population expands.
    Australia 2050 is a future we can’t afford

    When you read articles like this it is hard to see how house prices could fall over the longer term? But maybe we are all missing something?

  • 53 Biker Pete // Feb 6, 2010 at 10:09 am

    Thanks for the feedback on the Indexed Funds strategy, Anon & Greg. He’s using cash (his own) and his plan is very, very long term, buying during periods whenever the ASX falls significantly.

    As you’ve noted, Greg, banking on a fall directly after dividends are paid _is_ gambling, but unless the whole ASX _mostly_ climbs very rapidly immediately after dividend payment, he should be OK, over the long term doing this… (!?!)

    Who knows? I’ll watch and learn… !

  • 54 Biker Pete // Feb 6, 2010 at 10:28 am

    “When you read articles like this it is hard to see how house prices could fall over the longer term? But maybe we are all missing something?”

    Consider that 2050 is four decades away, Greg. I know we’ll see some ‘plateaus’ in property values in that period. We’ve been through three in 32 years, counting last year’s. It’s a little early to know if the most recent flat period will be followed by a major surge, as has happened after the two other plateaus. “This time it’s different!” has been shouted sufficiently enough to make even the bulls a little cautious. Perhaps what’s different this time is we have a very active, concerted team of cheerleaders screaming for the death of property markets. It’s a new phenomonen, audible/visible on ABC radio, TV, the internet and newsprint. If that lobby is even 10% effective, it does undermine confidence in property, both as a home and an asset.

    My personal view is that if the cheerleaders actually walk the talk, their retirement will be no bed of roses, unless they’re regularly socking their after-rent cash into other successful assets, every fortnight… !

  • 55 Ned S // Feb 6, 2010 at 11:28 am

    Re the Future we can’t afford: It just might give us a sufficient population base that some home grown industry will start to look attractive again? It may also make some reservations I’ve been harbouring in relation to QLD’s “North Coast” (the bit just north of Brisbane that is) becoming a retirement village for boomers that will go into decline as the boomers die off, look overblown. I’ve had reservations about regional areas for a long time now. But reviewing that in light of the report, Townsville was the immediate thought that popped into this Queenslander’s mind. I’ll think about that some more.

    Stocks – Yep, I’ll keep watching also – And appreciated the feedback on Biker’s question as well.

  • 56 Ned S // Feb 6, 2010 at 12:14 pm

    The We wanna crash crowd have some frustrating ways. In particular their apparent inability to help themselves by making any attempt to come to grips with the fact that they just mightn’t get what they want.

    And it isn’t rocket science – I mightn’t know much; But I have figured out that every investment strategy has risks. And they are damn good things to take into account.

  • 57 Senator13 // Feb 6, 2010 at 12:35 pm

    Good points Ned.

    I think as long as Government drip release land, projected population figures are going up and not down and suburbs continue to have fixed boarders basic supply and demand suggests that land and housing will continue to be in demand so the price should go up (or at least not crash).

    I think a lot of people get hung up on the boosted first home owners grant. It has only been around a few years and people that utilised it will be in the minority of home owners. If people are selling today and have had their house for 10 years and they have to drop the price by 10% to get it sold then in most cases they would still be making a very healthy gain on what they paid for it.

    Credit card debt and other loans are at very high levels and is obviously a major risk and might tip people over the edge when mortgage rates go back up. But I donโ€™t think that tipping point is just around the corner.

    I donโ€™t think it is a bad thing if prices remain steady for a little while, I doubt they will overheat in the near term and I think it is unlikely they are going to โ€œcrashโ€. If it was going to โ€œcrashโ€ I think it would have already happenedโ€ฆ? Just because you want something to happen does not make it so.

  • 58 Ned S // Feb 6, 2010 at 12:43 pm

    I mentioned elsewhere that I’ve been fiddling with some house plans. They each include 2 * 3 BR self contained areas plus a 1 BR “granny flat”.

    I that light I note the following:

    “Mr Simpson argues that Sydney’s housing shortage could be easily remedied by ensuring that every house or unit has two kitchens and two bathrooms so that it can be used by more than one family or individual.”

    http://www.smh.com.au/national/a-day-in-the-life-of-sydney-in-40-years-20100205-niqs.html

  • 59 Biker Pete // Feb 6, 2010 at 12:45 pm

    “The We wanna crash crowd have some frustrating ways.”

    It’s the rage which is most interesting, Ned.

    * Guru promises ‘debt slaves’ half price houses;
    * Half price houses fail to fall from the sky;
    * Anger directed at FHBs, investors, gov’t… but not at…
    * Guru who promised half price houses.

    Amplifying that rage may be the recognition that the FHOGs may have been a really helpful step into a modest first home.

    Further amping it may be the possibility that rates _may_ have peaked this year! (Who can tell?!)

    I still think there are a lot of BB retirees with vast wealth, ready to commit to housing investment. Many of us plan to live at least three more decades, so we need something as tangible as property to supply an income. Many of us saw friends’ Super incinerate last year. Interest, taxed once past $48K per couple, isn’t going to cut it; decent annuities don’t exist; gold returns no fortnightly dividend… .
    Who ya gonna call?! ๐Ÿ™‚

  • 60 Biker Pete // Feb 6, 2010 at 1:09 pm

    They each include 2 * 3 BR self contained areas plus a 1 BR โ€œgranny flatโ€.

    Good thinking, Ned. It’s likely that the regulations will change, to accommodate this kind of thinking… .

    Five years ago the missus convinced me we should build one with a similar layout, but with four very self-contained bedrooms (each with phone, TV, internet, keyed doorlocks, etc.)

    A fifth ‘guest room’ became quite immense, when the grano worker poured too large a pad. The builder simply wore the cost of a larger home! A large home cinema also resulted… .

    Her thinking was that this would be an ideal ‘student accommodation’ project, in a regional centre with a uni closeby. Demand however has been so great for this ‘upspec’-ed house, that we’ve never needed to take up the student option.

    Those who scoff at property as an investment might be a little surprised at how this one rose in value despite the recent plateau: $270K total to build, including land; and valued at $580K recently.

  • 61 Greg Atkinson // Feb 6, 2010 at 1:28 pm

    There is no doubt we have enough room to house more people in Australia. If they can squeeze around 50 million people into the greater Tokyo area then we can get 35 million into Australia ๐Ÿ™‚

    But can we keep growing the economy in such a way that will allow us to keep squeezing in people while at the same time increasing individual wealth?

    Remember money is needed to keep pushing up house prices up, so my concern is that if the Australian economy was mismanaged, then we could get into a nasty situation where there was less wealth and more people. I am not questioning the need for housing or it’s desirability as an asset class, but rather trying to focus the home price debate on something that is rarely raised: i.e the supply and availability of money.

    So could our economy even been mis-managed? Well have a look at NSW for example…that is proof that state governments can mess up a state economy even during a period of national economic growth?

    Now at a national level we are seeing the government rack up debt and apparently they haven’t finished spending yet. Worse still I can’t see how most of this spending is going to help raise productivity at all.

    So I wonder what impact a carbon tax and a few revenue raising changes via the Henry tax review (needed to pat down the debt) would have on the average household?

    Just thinking out loud here..so please feel free to jump in and tell me I have nothing to worry about ๐Ÿ™‚

  • 62 Ned S // Feb 6, 2010 at 1:48 pm

    I’d positioned myself in expectation of a correction Senator. Nothing too radical. 15% to 20% maybe was my call. So had/have some cash on hand. And if we got a slightly belated little one I still wouldn’t be heartbroken.

    But irrespective, we get what market forces give us. With government pretty obviously being a bigger player in those market forces than I’d taken into account at the time. (Geez, I sound like Prof Keen explaining why he’s now “homeless”! ๐Ÿ™‚ )

    It doesn’t seem to be looking that great for getting tax breaks on money in savings accounts Biker. But who’s to really know eh? :

    http://www.smh.com.au/business/foreign-cash-needed-to-pay-for-roads-and-schools-20100205-nikv.html

    As to the multiple living area houses, the local council staff are very keen to let me know that a “granny flat” can’t be rented out. (I didn’t have the heart to break it to them that I was looking at 3 seperate living areas rather than just two. ๐Ÿ™‚ )

    But that’s fine, I figure things might change. And in the interim a bit of spare capacity in a dwelling doesn’t seem to be a particular burden to most Aussies. Heck, I even read somewhere that some tenants have been known to sublet part of their accommodation when the lease doesn’t specifically prohibit them from doing so? ๐Ÿ˜‰

  • 63 Ned S // Feb 6, 2010 at 2:08 pm

    The longer term just could sound OK if one is already here and has/gets a head start on the game so to speak. Providing government goesn’t get too efficient at levelling us out with taxes.

    So like I said above, it’s pretty much a matter of pick which pig wearing lipstick looks cutest maybe? Given all sorts of things – Including what asset class one figures they are most suited personally to dabble in. But Yep, there’s plenty of risks! ๐Ÿ™‚

  • 64 Biker Pete // Feb 6, 2010 at 2:17 pm

    Subletting happens all the time. We wrote a ‘no sublet’ clause into all our rental conditions, after we discovered one couple flying international students in from Europe and more-than- covering their fortnightly rental payments from short-stay accommodation in those self-contained rooms I mentioned…!

    Point is that the shire had no idea it was happening. We did wonder what was going on when we saw different young women there all the time. Maybe they weren’t _students!_ ๐Ÿ™‚

  • 65 Ned S // Feb 6, 2010 at 2:41 pm

    That “risk” could be passing high if each bedroom had it’s own ensuite I imagine Biker.

    Just what sort of movies exactly did you say they were showing in that oversized cinema room again? ๐Ÿ™‚

  • 66 Ned S // Feb 6, 2010 at 2:57 pm

    When I was considerably younger and immensely more naive (about 18 months ago! ๐Ÿ™‚ ) I sent Tanya Plibersek an email telling her I reckoned it could be handy if the Oz government encouraged the construction of granny flats and suchlike in main residence type housing by making negative gearing and CGT optional for homeowners who built and then rented out spare capacity.

    She wrote back to assure me they’d think about it! ๐Ÿ˜‰

  • 67 Biker Pete // Feb 6, 2010 at 4:32 pm

    Well, the house does have three bathrooms, Ned! ๐Ÿ˜‰

    (We bought just two blocks at the time. Should have bought the whole street, but that would have been overkill. I recall, with some mirth, that the locals thought $68K for a 650m2 block was paying just a little too much… . It makes me wonder if, in 2015, we’ll look back with regret for not picking up a dozen or so at $160K each… !)

    One of our tenants, who bought homes in the Pilbara is laughing. His two homes there are increasing in value $2,000 per week”*. He rents our beach house for a quarter of the rent per week he’s getting on one house up there.

    Gotta laugh!!~ ๐Ÿ™‚

    p. 16, The West Australian, Sat., 6th Feb., 2010.

  • 68 Ned S // Feb 6, 2010 at 5:51 pm

    If I didn’t need the rent Biker, it probably make sense to just buy land and be done with it. Although in the Pilbara I’d want a house on it! ๐Ÿ™‚

  • 69 Biker Pete // Feb 6, 2010 at 6:26 pm

    Think he paid just under $800K for each of them a few years back. Much higher risk, but much better return, in my view.

    I also wrote to Tanya Plibersek, about two years ago, Ned, using a format taken directly from a property bear’s website (Brett of Geocities). Brett was a Keensian disciple, who faded after the Lost Bet debacle. I believe he may have removed his Form Letter shortly after I advocated, online, that those who opposed his Glorious Property Crash, use the format themselves, to promote a very different view! ๐Ÿ™‚

    My suggestions to TP were promoting the Shared Equity Scheme, which actually works _against_ investors like us; but which represents far better value than the Homewest government housing system, with its huge maintenance and repair costs. (We’re in the next niche up, anyway… .)

    I too received a polite, personally-signed response, noting that my views were being considered.

    I’ve no doubt that we will see a raft of government-backed housing developments in W.A.’s regions. We don’t feel at all threatened by these projects. We can’t see how we’ll meet the rising housing demand _without_ such initiatives… .

  • 70 Ned S // Feb 6, 2010 at 7:45 pm

    Good heavens – The above may have been better posted over here? :

    http://www.shareswatch.com.au/blog/stockmarket/a-stock-market-correction-some-panic-and-nervous-investors/

    But I suspect it has relevance in both places. So please DEFINITELY DON’T trouble yourself with it Greg. I’ll duplicate the comment.

  • 71 Ned S // Feb 6, 2010 at 8:41 pm

    I’m highly suspicious of astute stock market traders with a deflationary bent popping up out of the woodwork at the moment mate.
    As a pretty smelly one from elsewhere seemed quite keen to lure GA into a chat on Oz stocks quite recently. And any indication he’s a grub who’d rather chat behind a bloke’s back than to his face, does compound my suspicion.

    Let’s just say my European bulldust detector is turned on.

  • 72 Greg Atkinson // Feb 6, 2010 at 10:19 pm

    BTW Biker do you think there are still some undiscovered real estate gems over in the West or are they getting tougher to find?

  • 73 Biker Pete // Feb 6, 2010 at 10:53 pm

    I guess the short answer to that one is that we’re not currently buying, Greg. That’s partly because we’re holding two good blocks at present.. and because the only niche we can see that’s really a bargain is above our ‘rental’ limit of $450K. Around $700K there’s good buying still… but you won’t get as much rent as from two $350K homes. (Four of our homes are over the $450K limit. They’re really only making money because we paid far less than that for them.)

    Apartments within 1 km of the city centre still seem great buying, in our view. One suburb in that zone (Highgate) appreciated 40% last year. I’ve given up ‘pushing’ Son#1 to buy something around $400K to live in. He lives right on the water, in a unit for which there’d be no change from a $mil… and he’s happy, so I don’t push it. I suspect that unit is worth well over twice what the owners paid.

    Friends who bought two Perth units off-the-plan two years ago are laughing… getting $600.00 each per week, for a $400K (X2) investment. We should have picked up at least _one_ of those at the same time… . Sigh~

  • 74 Ned S // Feb 7, 2010 at 6:53 pm

    Steve Keen doing a bit of navel gazing as to if his approach to economics should turn out to be somewhat less than complete/wrong, then just who might be right:

    http://www.switzer.com.au/the-experts/steve-keen-economy-expert/its-hard-being-a-bear-part-six-good-alternative-theory/

    It starts off: “If the economy does in fact recover from the Global Financial Crisisโ€”without private debt levels once again rising relative to GDPโ€”then my approach to economics will be proven wrong.”

  • 75 Biker Pete // Feb 7, 2010 at 10:36 pm

    A kind of roundabout way of saying “Look I was wrong… but see how _smart_ I am?!” (Criminally invalid research… .)

    I preferred the debate between Lennon and McCartney, along the lines of “I am the Walras!” “No, I really am the Walras!!!”

    Keen will be remembered forever as the prophet of doom who got it terribly, terribly wrong. He put _one_ house up as surety. I’ll put up eleven… . (Nearly twelve…! ๐Ÿ™‚ )

  • 76 Ned S // Feb 7, 2010 at 11:20 pm

    I thought you’d be impressed! ๐Ÿ™‚

    Course he’s an academic – So he gets paid regardless of whether he’s right or wrong. With the idea being that once enough of them have suggested all the wrong ideas, one of them just might figure out a right idea.

    Got to admit, I’m glad I was making some property decisions in early 2008 before I’d ever heard of Steve Keen – Hey, I figured they were a bit toppy. But I did need one to live in and I’d finally got enough back in my super fund to buy one there as well after the dot com debacle – And what the heck, the cheapies I was buying weren’t likely to drop more than 10%. Though I’d revised that to 15% to 20% by late 2008.

    And I’d kept some cash for the bit of a dip I was expecting anyway. But the bloody things went UP!!! Jeez – Whatever happened to the idea of having normal boring old business cycles? ๐Ÿ™‚ ๐Ÿ™‚ ๐Ÿ™‚

  • 77 Greg Atkinson // Feb 8, 2010 at 10:15 am

    Goodness me, Steve Keen can really rattle on complete with diagrams! The problem I see with his approach is that he is an economist, but thinks he is something else.

    If he really believed 50% of what he says he would quit his safe day job and put his theories to the test with real money. But he doesn’t of course, he is just like the financial journalists who reckon they say the GFC coming but alas they never made any money from their great wisdom and still toil away behind a desk working for “the man”.

    Anyone who reckons they saw the GFC coming and is not on a yacht drinking cocktails with little umbrellas in them has a credibility issue in my opinion ๐Ÿ˜‰

  • 78 Ned S // Feb 8, 2010 at 11:10 am

    I still feel sorry for the Yank hedge fund operator I’d been following who’d been squawking “subprime, disaster, short” for a few years before it hit. And then when it did, the guv said you aren’t allowed to be short our banks when their stock prices are going down mate! He gave up in disgust and sent his clients’ money back.

    But he’d been squawking bullion too, so got out of it with his shirt still on his back I guess. Plus he was obviously both versatile and mentally tough, as he flipped his whole strategy around and was in going long real hot on the heels of the March 2009 bottom – He definitely wasn’t enjoying it – And inclined to the view it was a bear market rally is my recollection; But either way he figured he needed to be in on it.

    At the moment he isn’t too confident of anything much – And says so. But does still incline to the view that the Fed will eventually cook up inflation in the US.

    http://articles.moneycentral.msn.com/Investing/ContrarianChronicles/confused-so-are-the-markets.aspx

  • 79 CEC AUST // Feb 8, 2010 at 12:27 pm

    Citizens Electoral Council of Australia
    Media Release 2nd of February 2010
    Craig Isherwoodโ€š National Secretary
    PO Box 376โ€š COBURGโ€š VIC 3058
    Phone: 03 9354 0544 Fax: 03 9354 0166
    Email: cec@cecaust.com.au
    Website: http://www.cecaust.com.au

    Property hype signals next wave of crash
    Media hype about skyrocketing house prices is calculated to lead more lambs to the slaughter, when almost half of the 135,000 suckers conned by Kevin Rudd into taking out a mortgage last year are already struggling to make payments.

    The Rudd Governmentโ€™s $21,000 first homebuyerโ€™s grant, now expired, made housing more unaffordable, by driving the property market up to record highs; increased the average first homebuyerโ€™s mortgage by more than double the amount of the grant; and exploded Australiaโ€™s household debt to equal the national GDP.

    Now, coinciding with the end of the first homebuyerโ€™s grant, the media has started hyping the property market, playing up the 18.5 per cent jump in Melbourneโ€™s median house price last year, and trumpeting forecasts of million dollar average house prices within ten years.

    Meanwhile, a Fujitsu Consulting survey has revealed 45 per cent of first homebuyers from the past 18 months are either in โ€œmortgage stressโ€, and using credit cards to meet obligations, or in โ€œsevere mortgage stressโ€ and are missing payments.

    Future interest rate rises, and job losses, will drive many more homeowners into crisis, which in turn will collapse the property bubble, wiping out millions of individuals, as well as Australiaโ€™s entire banking system.

    (All of Australiaโ€™s banks were technically bankrupt in October 2008, squeezed between $643 billion in foreign debt, and falling domestic property prices which raised the spectre of negative equityโ€”properties worth less than the mortgages. However, the Rudd government didnโ€™t reorganise the bankrupt system, but, at the banksโ€™ request, covered it over, by guaranteeing their foreign debt, and extending the first homebuyerโ€™s grant, to reinflate the property bubble.)

    Citizens Electoral Council leader Craig Isherwood today declared the only solution is the CECโ€™s Homeowners and Bank Protection Bill (HBPB).

    โ€œWe canโ€™t keep creating more debt to save the bankrupt financial system,โ€ Mr Isherwood said. โ€œWe must reorganise it, using the HBPB.

    โ€œThe Governmentโ€™s responsibility is the common good of the peopleโ€”not propping up housing bubbles and bankrupt banks.

    โ€œInstead of protecting the people, the governmentโ€”and the mediaโ€”are shysters preying on suckers, to feed them to the banks.โ€

    The CEC National Secretary explained, โ€œThe HBPB will keep families in their homes, while putting the banks through bankruptcy reorganisation, which involves: sorting through their debts and cancelling the bad ones; writing off their unpayable derivatives obligations; and restructuring their mortgages.

    โ€œBecause this wasnโ€™t done when we first proposed it in August 2007, we have created a lot more debt, and are now in an even bigger mess.

    โ€œAny more debt will trigger a hyperinflationary meltdown, so now the HBPB is our only choice.โ€

    For more information go to http://www.cecaust.com.au/hbpa

  • 80 Biker Pete // Feb 8, 2010 at 1:27 pm

    Greg: “I see with his approach is that he is an economist, but thinks he is something else.”

    Well, for a while there, at least when the cameras were running, he came across as though he thought himself a minor deity. What a fall to then become Australia’s most infamous tenant… . ๐Ÿ˜‰

  • 81 Ned S // Feb 8, 2010 at 2:04 pm

    While I did enjoy his blind men and the elephant analogy, the thought did flick through my mind that he just could be being a bit charitable to himself in suggesting the bit he’s got hold of might be either the leg or the trunk. ๐Ÿ™‚

  • 82 Biker Pete // Feb 8, 2010 at 9:25 pm

    I see you’re scoring a lot higher in the DRA rating stakes these days, Ned. Something must have changed there. Maybe the flow is _away_ from the crazy bears… . ๐Ÿ˜‰

  • 83 Ned S // Feb 8, 2010 at 10:31 pm

    Most of my DRA comments of late were seek and reveal type stuff on a London sewage impurity mate – Didn’t pay much attention to who thought what. Hasn’t done a lot of good over there that I can see though? Just one more case of While you can lead a horse to water, you can’t make it drink I guess. So the poison is still there. With the little cartoon characters etc congratulating the real people over their great posts etc.

    But I fulfilled my moral responsibility to the adult financial bloggers of Oz – So be the rest of it on their own heads … ๐Ÿ™‚

    I did just see DD is trying his hand at a bit of revisionist stuff – Sort of along the lines of Auschwitz never happened – I’m naughty – I couldn’t let that one pass! ๐Ÿ˜‰

  • 84 Ned S // Feb 8, 2010 at 11:02 pm

    It’s one of the things that I LOVE about the old soviet type Russkies Biker – They have fairly high tolerance levels for unpleasant truths. Backed up by an ability to laugh at themselves.

    Never struck a mob with such a similar sense of humour to what I grew up with here.

    Oz doesn’t have that same sense of humour any longer from what I can see. I suspect we’re the poorer for it. But I’m damn sure that those who don’t have it, disagree MOST vehemently! ๐Ÿ™‚

  • 85 Biker Pete // Feb 9, 2010 at 8:14 am

    “…a bit of revisionist stuff…”

    Well, if it’s good enough for Keen…!

  • 86 Biker Pete // Feb 9, 2010 at 10:07 am

    For a glimpse of a dog’s breakfast (CEC):

    http://www.abc.net.au/pm/stories/s344262.htm

  • 87 Ned S // Feb 9, 2010 at 10:49 am

    CEC media release – Appears their homepage has a picture of Barack Obama on it wearing a Hitler moustache? :

    http://www.cecaust.com.au/

    So I can only assume all their media releases are totally unbiased and apolitical statements made without any hint of an underlying agenda. ๐Ÿ™‚ ๐Ÿ™‚ ๐Ÿ™‚

    The phrase “lunatic asylum” comes to mind at the moment Greg. With one of the inmates quite possibly having a nasty streak.

    If Biker has no objections, would you be prepared to forward my email address to him – Just as a one off favour to two blokes who I believe both hold you in high regard and have always dealt with you both openly and honestly?

    I could just publish my email address here of course. But under the circumstances I don’t actually feel to do that.

  • 88 Ned S // Feb 9, 2010 at 11:34 am

    Righto – Cheers mate.

    Gawd, Barack Obama with a Hitler moustache! ๐Ÿ™‚ It’s one of the many great beauties of free speech of course – Let them say what they think so one knows what they are thinking! ๐Ÿ™‚ ๐Ÿ™‚ ๐Ÿ™‚

  • 89 Gary // Feb 9, 2010 at 8:47 pm

    It seems the public in general feel house prices can only ever go upwards. But actually this does not mean property is a good investmentfor the average owner-occupier since how can they really benefit unless they sell and live in a tent?

  • 90 Biker Pete // Feb 9, 2010 at 8:59 pm

    Well, Gary… can you name another investment which meets a major human need… and which, at sale, incurs no Capital Gains Tax? Don’t get me wrong… I don’t mind you renting at all… you’re paying off our properties for us in return for shelter.

    Now a smart cookie… a _really_ quick fella (to paraphrase The GyroCaptain) could have taken the $21K FHOG, lived in the house for six months… then rented the house to someone else. There must be thousands of FHBs already providing this service to tenants by now.

    I realise the economic benefits of doing just that may escape you; as they do most bears. Not my job to convince you. Your choices are your own… and we depend on tenants for our comfortable retirement… .

  • 91 Ned S // Feb 10, 2010 at 5:01 pm

    A mate of mine who has travelled very extensively once commented to me that lots of Europeans seemed happy enough to rent. He passed the comment that he thought it gave them more disposable income to spend on lifestyle related activities. A lot of it is very much a matter of personal preference and choice perhaps?

    But I wouldn’t want to be Aussie looking at going into retirement anytime soon without a debt free home!

    Though such things can change in time I imagine? If that’s the norm in another 30 years for example, then I guess the system will have changed/been changed to enable people to cope. Course if I had kids in that situation, I’m old fashioned and risk averse enough, that I’m real sure I’d still be singing some sort of “Hymn to home ownership” to them.

    Saw your post elsewhere on the good prof Biker – Yes, basing one’s financial future on the assumption that any particular school of economic thought may be “right” seems like it’s an inherently risky strategy to me – Given that the art still appears to have a few things to come to grips with … His haemmoroids are playing up again doc – Do you reckon we should bleed him? Or feed him a some powdered toad toe nails? Or stick him with a pin? ๐Ÿ™‚

    I thought “Judy Rodgers” comment was a bit of good fun – She reckons what he did should be “punishable” … I figure it would be good to educate people that allowing free speech has its potential downsides as well as upsides! ๐Ÿ™‚

  • 92 Greg Atkinson // Feb 11, 2010 at 8:59 am

    I think Gary has a point but we need to separate home ownership for investing in property.

    If we are talking about investing then there are of course other assets which can match property in terms of performance. Mining is one area that quite obviously has made a lot of people wealthy and does meet our basic human needs. No mines, no houses.

    What is often missed when people compare property to shares is the cost of holding property. Yes you can get rent from property but you may need to cover strata fees, land taxes (in some cases), loan expenses, water rates and of course pay tax on the rent. With shares you can generally sit on them and they cost you nothing to hold.

    Then we have transaction costs like stamp duty and agents fees, although people can market their own home and keep costs down.

    Of course when you sell your family home there is no CGT and so there is potentially a lot of gain/profit but the what? If you buy another place to live in then the chances are that property has also been creeping up over the years? You don’t generally make money from selling your home and buying the identical home next door.

    So what Gary says does make sense in that an owner/occupier might see his home appreciate in value, but relative to the overall market it may actually not be rising much at all.

    So maybe home prices can keep rising, but in relative terms the average owner/occupier is no better off?

  • 93 Biker Pete // Feb 11, 2010 at 9:18 am

    Greg: “Mining is one area that quite obviously has made a lot of people wealthy and does meet our basic human needs.”

    Well, I’ll have to add ‘mining’ to the pyramid of Maslow’s hierarchy of needs, Greg. Probably between ‘food’ and ‘shelter’, I would think(?) ๐Ÿ˜‰

    Your comment: “If you buy another place to live in then the chances are that property has also been _creeping up_ over the years?” answers the question: “Can Australian home prices keep rising?” The chances are _high._ In the past, Aussies sold and upgraded every five years. My own parents did so every two years, until they bought the farm. (Actually they ‘bought the farm’ well after they bought the farm.)

    You ask: “..in relative terms the average owner/occupier is no better off?” I’d argue that in upgrading, the owner may be far better off… better home, better area… if he/she buys and sells well. In financial terms, Ned’s comment: “I wouldnโ€™t want to be an Aussie looking at going into retirement anytime soon without a debt free home!” is highly relevant. So is his remark in reference to Keen’s culpability…. .

  • 94 Ned S // Feb 11, 2010 at 2:14 pm

    The downgrade option for an older owner occupier is certainly a handy one.

    I doubt one would have to look too hard to find examples where a prospective retiree who’d bought a place maybe 10 km from a major city centre to be as close as they could afford to be to work 20 years ago perhaps, couldn’t sell and move another 15 or 20 km further out (with being close to work not being an issue anymore), and get just as functionally servicable a home, if not better, and have a couple of hundred thousand in cash to show for the move.

  • 95 Biker Pete // Feb 11, 2010 at 2:23 pm

    Excellent point, Ned.

    We have friends in Perth who bought into a highly desirable Perth suburb a little over twelve years ago. Their property is now worth five times what they paid. Retiring, they’re downsizing and will have around $700K more in the kitty after the switch… .

    No CGT, either! ๐Ÿ™‚

  • 96 Ned S // Feb 12, 2010 at 12:34 am

    The deeper one digs on some things, the more interesting they get. Keen says he sees himself as part of the “Circuitist” school in my previous link re same.

    Link to Wiki article on Circuitism follows:

    http://en.wikipedia.org/wiki/Monetary_circuit_theory

    I note the quote from same:

    “While the verbal description of circuitism has attracted interest, it has proven difficult to model mathematically. Initial efforts to model the monetary circuit proved problematic, with models exhibiting a number of unexpected and undesired properties โ€“ money disappearing immediately, for instance. These problem go by such names as:

    * Losses in Circuit
    * Destruction of Money
    * Dilemma of profit

    Australian economist Steve Keen ascribes these difficulties to inappropriate use of general equilibrium methods, hence implicitly static or steady state, while he considers circuitism essentially dynamic, and thus advocates instead the use of the dynamic methods of differential equations or difference equations, producing circuitist models that do not have the shortcomings of earlier attempts.[citation needed]”

    Yes, we ARE definitely dealing with a “science” that still appears to be a bit rubbery! ๐Ÿ™‚

  • 97 Biker Pete // Feb 12, 2010 at 7:59 am

    “…models exhibiting a number of unexpected and undesired properties โ€“ money disappearing immediately, for instance.”

    Probably into rent, Ned. ๐Ÿ™‚

    Wasn’t Keen’s own home valued 7% higher a year after he sold it?

    Sounds like he modelled ‘destruction of money’ and the ‘dilemma of profit’ quite successfully.

  • 98 George // Feb 12, 2010 at 11:22 am

    All well and good, the arguments made here sound quite plausible and sensible in light of recent history and trends – maybe property prices will hold up ok, for a while longer. The problem is, in technical analysis terms, we are facing powerful economic cycles/waves whose magnitude (in time) measure up to 5 times the lifespan of the average reader here.
    The recent run on property, stock market and commodities (2009) was fuelled by stimulus money (debt) which in turn led to currency devaluations. This was a weak attempt at resurrecting inflation (growth), in a longer term deflationary cycle.
    On fundamentals, if you were a business (like Australia), could you afford to risk your entire future on one good client alone (China)? This is financial dependence, which is fine as long as the client is well and good and demand remains high for your product (resources). What happens when demand drops? What happens when the Chinese bubble bursts? What if unemployment rises? Interest rates rise? Any of these factors could hurt property prices in Australia significantly.
    In the last 10-15 years property gains in Australia have blown out higher (in real terms) than food, energy, wages or anything else measuring inflation/cost-of-living. The increase has been so great, so rapid, that most analysts would agree that it is due for a similarly severe correction/crash. The higher and faster the rise, the lower and faster the decline. Most other countries experienced property gains more slowly, over time, and are now going through a longer down wave. When Australian property prices drop, it will occur swiftly and severely – likely 25-50% in a matter of months. High unemployment coupled with high interest rates would sound the death knell in the property market. Foreign investment too will wane as global deflation issues take hold, further dampening local property demand. I am out of property and shares, and would not even consider investing in either before 2012 at earliest.
    The only factors that could really push property prices higher now are:
    *Lower interest rates
    *Higher wages
    *Government intervention – stimulus, rebates, etc.
    *Increased foreign property investment
    All these seem highly unlikely.

  • 99 Biker Pete // Feb 12, 2010 at 12:01 pm

    More ‘if’s than we’re used to, even among bears…

    “…it will occur swiftly and severely – likely 25-50% in a matter of months… “

  • 100 Anon // Feb 12, 2010 at 12:11 pm

    Hey George, great comment. Nice rational arguments, but I dont agree with the 50% housing declines. I think if we have a 50% drop most people will be working at mcdonalds =) !
    Atm i’m bearish property but the media are in full force about a property bubble. That cant be good for the bears lol. If we followed what the media said in our investments we’d all be bankrupt.
    Perhaps there will be result somewhere in between what the bears and bulls say. But there does need to be a catalyst to cause a severe house price drop and statistically it is rare to have a black swan/and or recessionary environment so soon after “recovering” from a severe financial panic/economic crash.

    Remember above is not advice, just commentary, see a registered competent financial advisor for info/decisions ๐Ÿ˜‰

  • 101 Greg Atkinson // Feb 12, 2010 at 12:14 pm

    George you make some very good points and I agree very much with your point about Australia being too focused on China. We seem to rely on China for our economic growth but then at times do as much as we can to annoy the Chinese government, it is a strange relationship.

    I do think we have got to the stage in Australia where we are only planning for the good times. For example the Government is racking up a large amount of debt because they assume that our economy will recover strongly and that this debt will not cause a major problem. Sounds like a dangerous approach to me.

    It seems this type of planning has also moved across to households where despite a global trend towards reducing private and corporate debt, Australian’s are merrily still willing to take on large mortgages and plunge into home ownership, even if the home they buy is larger than they need. Is this healthy for the economy I wonder?

  • 102 Anon // Feb 12, 2010 at 12:45 pm

    “The higher and faster the rise, the lower and faster the decline”

    Thats not always true. Go look at Walmart ๐Ÿ˜‰

    “I am out of property and shares, and would not even consider investing in either before 2012 at earliest.”

    The problem with that strategy is noone can time the market perfectly. Statistically very few can outperform the buy and holders over the longterm.
    The main people who have proven timing can work on a consistent basis are quality hedgefunds. But they always remain invested regardless of how bearish they are.

    “Foreign investment too will wane as global deflation issues take hold, further dampening local property demand.’

    I agree wtih this. When the carry trade unwinds, there will be a massive outflow of money smashing our assets in the process and decreasing the value of the dollar. Its an eventuality that the US, UK, EUR and JAP will raise rates meaningfully.

    Remember above is not advice, just commentary, see a registered competent financial advisor for info/decisions

  • 103 George // Feb 12, 2010 at 12:52 pm

    Biker Pete: Care to actually _pick_ a month…
    Take your pick mate, global economic downturn should run to at least 2012.
    Anon: …statistically it is rare to have a black swan/and or recessionary environment so soon after โ€œrecoveringโ€ from a severe financial panic/economic crash.
    A “black swan” by definition defies statistics, and is a totally unforeseen event. As for the “recovery”, just wait a few more weeks/months and see if it still looks like one.
    Greg Atkinson: I do think we have got to the stage in Australia where we are only planning for the good times. For example the Government is racking up a large amount of debt because they assume that our economy will recover strongly and that this debt will not cause a major problem. Sounds like a dangerous approach to me…
    Thankyou for your comment and refreshing website, not too many Australian commentators like to face reality these days. Your cautiously balanced approach to issues is a bit more realistic than the BS being fed to us through aussie mainstream media. Yes, Government racking up enormous debt with reckless spending, plus people still piling into property on huge mortgages, credit, etc while global conditions remain dubious, puts Australia into a very fragile and potentially dangerous situation. Hence my concern for a probable explosive crash here before too long. Property prices are robbing the economy of liquidity and will stifle any chance of a lasting recovery, as people have less money to spend.

  • 104 Anon // Feb 12, 2010 at 1:10 pm

    “A โ€œblack swanโ€ by definition defies statistics, and is a totally unforeseen event”

    Yes that was mentioned in the book “The Black Swan” by Nassim Nicholas Taleb.
    But I was mentioning the fact its rare to have black swan “type” events so soon after such a huge downturn. But that doesn’t mean a black swan couldn’t occur tommorrow etc. This is purely based on past history which as we know doesn’t always mean it wont happen going forwards.
    George may I ask when you exited shares? Did you manage to get some of the recent bull run or did you stay on the sidelines?

    Remember above is not advice, just commentary, see a registered competent financial advisor for info/decisions

  • 105 Greg Atkinson // Feb 12, 2010 at 1:11 pm

    George I am cautious because I see caution all around me up here in Japan. When I speak to business contacts the mood is more of relief in that things did not get worse, rather than every thing is back to normal and the good times are here again.

    But when I was back in Australia last people seemed convinced that the Oz economy only has forward gears and that the mining boom would pick up again and carry the nation forward..no matter how the economy was managed.

    I think “if” by the way is quite okay to include in any outlook as in simply implies what we all know to be true and that is, none of us can predict the future with certainty. (except my hero the Amazing Criswell of course!)

  • 106 Anon // Feb 12, 2010 at 1:19 pm

    “Criswell authored several books of predictions, including 1968’s Criswell Predicts: From Now to the Year 2000. In this book, the author claimed that Denver would be struck by a ray from space that would cause all metal to adopt the qualities of rubber, leading to horrific accidents at amusement parks. He also predicted an outbreak of mass cannibalism and the end of planet Earth, which he set as happening on August 18, 1999.”

    lol

  • 107 Ned S // Feb 12, 2010 at 1:20 pm

    If lots of bad things happen we could get a drop in property prices. Mitigated to the extent that Rudd and the RBA see fit to take action to counteract it. And they certainly have bullets they can fire. With the possibility of allowing negative gearing on homes being the nuclear option I’d imagine.

    If we get a deflationary great depression I don’t want my money in a bank – Most of them will go broke. If we get an inflationary great depression I don’t want my money in a bank – It won’t be worth anything.

    What’s a chap to do? Buy stocks?? But lots of companies will go broke. At least a house will always be worth something. If a worst case scenario should occur. And maybe one won’t.

  • 108 Anon // Feb 12, 2010 at 1:28 pm

    For all you cautious people out there (and theres lots)

    See where caution sits on the “Investor Psychology Cycle.”

    http://www.marketoracle.co.uk/images/29-aug-2c.jpg

    Also:

    “Although the S&P 500 is down less than 7.5% from its January high, bulls are heading for the hills. According to Investors Intelligence, bullish sentiment among newsletter writers is currently at 34.1%, which is the lowest level since March 2009. At the same time, bearish sentiment (26.1%) is the highest since November, while the percentage of newsletter writers in the correction camp has sky-rocketed all the way to 39.8%, which is a level that hasn’t been seen since 1983.”

    http://seekingalpha.com/article/188008-bullish-sentiment-drops-to-lowest-levels-since-march

    Remember above is not advice, just commentary, see a registered competent financial advisor for info/decisions

  • 109 Anon // Feb 12, 2010 at 1:39 pm

    ‘If we get a deflationary great depression I donโ€™t want my money in a bank โ€“ Most of them will go broke. If we get an inflationary great depression I donโ€™t want my money in a bank โ€“ It wonโ€™t be worth anything.”

    Yeah thats the conundrum. The ultra bears are preaching the end of the world/great depression…but if that does occur we will all get hit — you just cant hide from that kind of carnage.
    But the problem with the great depression advocates, is that they always seem to come out post recovery preaching for another disaster because they were perhaps unprepared for the first one, or they are suffering from rear view mirror effect ?
    But its happened so much in history the track record of the bears in this regard is not a good one !

    Remember above is not advice, just commentary, see a registered competent financial advisor for info/decisions

  • 110 Greg Atkinson // Feb 12, 2010 at 1:50 pm

    Anon the only problem with that chart is the investor psychology cycle does not move quite that smoothly and we have moments of panic in the middle of bull markets and moments of confidence in the depths of a bear market. I guess if we drew a graph/chart based on how the mood of investors actually changed it would be a pretty messy picture ๐Ÿ™‚

    Imagine what a day traders psychology cycle must look like!

  • 111 George // Feb 12, 2010 at 1:53 pm

    Anon: George may I ask when you exited shares? Did you manage to get some of the recent bull run or did you stay on the sidelines?
    I haven’t been long on stocks since 2007, and warned my friends months in advance of the 2007 crash (forecast Nov 07 as change in trend). Made loads with put options throughout 2008, and went short the markets pre-empting the continuing bear, in June/July 2009, and again late September and late October, getting stopped out on the rallies back. I have recently played CFD’s on downside (sell) again, since last month. I believe the rally from March 2009 to Jan 2010 was the reaction rally in a long term bear market, following the 1929-32 Dow Jones chart fractal. The greatest confirmation that this bull run is over, is the fact that the high made on Dow Jones in January 2010 completes a Gann 10 year cycle (exactly to the day) from January 2000 high (Tech bust followed). The main reason I didn’t trade 2009 long, is that the bigger main trend is still DOWN, and should continue until at least 2012, and the big money is to be made on the downside. Just as we have seen the biggest rally of this bear market, we are about to witness the biggest run down (in time) following.
    For long term investing, my money is on gold (physical), its performance will outshine all else in the next couple of years, and can’t disappear off your computer screen or from your bank account in a blip!

  • 112 Anon // Feb 12, 2010 at 2:08 pm

    “Imagine what a day traders psychology cycle must look like!”

    LOL. I would suggest a heart monitor graph would be appropriate?
    I dont understand how those blokes can make money. How do you pick random moves that occur throughout the day?

  • 113 Anon // Feb 12, 2010 at 2:19 pm

    George you are a smarter man than me. When I try and time the market with too much precision and not enough nimbleness I end up under performing an index fund.
    Im not good enough at TA to be able to have confidence that I could pick the correct entry and exit points.
    Mind you I have a very defensive portfolio atm as it provides me with arguably the same upside as the more riskier stocks with less downside risk.
    I agree with your gold synopsis, it has a long way to go to reach inflation adjusted highs. Although i wont buy it simply because its a crowded trade atm. Every mum and his pony is long gold.

    Remember above or any of my posts is not financial advice, just commentary ๐Ÿ˜‰ see a financial adviser for decisions/advice/info

  • 114 Biker Pete // Feb 12, 2010 at 2:31 pm

    “Remember above or any of my posts is not financial advice, just commentary ๐Ÿ˜‰ see a financial adviser for decisions/advice/info”

    You’re wise to add this rider, Anon. Perhaps if Steven Keen had included it with his brilliant financial advice, less families would have missed out on the $21K FHOGs… . ๐Ÿ˜‰

  • 115 Anon // Feb 12, 2010 at 2:44 pm

    “Youโ€™re wise to add this rider, Anon. Perhaps if Steven Keen had included it with his brilliant financial advice, less families would have missed out on the $21K FHOGsโ€ฆ . ;)”

    lol Biker. Steve Keen was abit extreme. Harry Dent is a fan of his work…
    I think he should have been more careful with his predictions. As we all know, most of us arn’t clairvoyants ๐Ÿ˜‰
    Certainly listening to Steve has lost them money if they sold into the heart of the crisis. I wonder if Steve got alot of hate mail from disgruntled sellers?
    But in defence of Steve its hard to predict bailout and stimulus measures that the government intervened with.

    Remember above or any of my posts is not financial advice, just commentary ๐Ÿ˜‰ see a financial adviser for decisions/advice/info

  • 116 Greg Atkinson // Feb 12, 2010 at 3:09 pm

    I think Keen did not grasp that when you have a non-recourse loan you tend to do a lot of things to save dollars before you give up and move out of your house. This gives our housing market a bit of a recession buffer I guess.

    Keen’s spreadsheets may have told him prices would fall, but spreadsheets don’t drive the property market.

  • 117 Biker Pete // Feb 12, 2010 at 3:36 pm

    ‘George’, you’re keen to predict a fall, but why just “..25-50%…”. Why not 45-70%, for example?

    On what circuitist mathematical formulae would you base your “..25-50%…” crash? Are you selling your family home, in anticipation… or have you already sold it?!~ ๐Ÿ˜‰

  • 118 George // Feb 12, 2010 at 4:06 pm

    Biker Pete: โ€˜Georgeโ€™, youโ€™re keen to predict a fall, but why just โ€œ..25-50%โ€ฆโ€
    This is a guesstimate, 25-50% decline from highs. I have not done extensive analysis of property market charts or anything, so its just round figures, based on how most markets behave in a major corrective phase, which is what I believe we are due for in Aussie property. Major corrections will usually result in 50% loss of profits accrued during a major cycle, or 50% of value at high. This could be less if the particular market holds longer term strength, or a great deal more if it has inherent or systemic weakness. The 50% is nearly always a strong support level, in most major moves. So, as a guide, I would take the gains from 1990 (or possibly early 80’s), and wipe 50% off them, that would probably be a support level (bottom) for future property prices. Note that most counties’ property values fell around 25% (in value, not profit accrued over a cycle) over the last 2 years, and will probably drop another 25% this next wave down, making a 50% correction. These are estimates based on behaviour of markets in major corrections, but as I said in my first comment, the economic cycles being played out now are much bigger than we have seen in our short lifetimes. I got out of property, and advised my sister to sell also in 2007. If you are still in, waiting for the next boom, good luck!

  • 119 Biker Pete // Feb 12, 2010 at 4:20 pm

    George: “If you are still in, waiting for the next boom, good luck!”

    No, we need no boom at all. Rents are high and we’re enjoying a comfortable semi-retirement, thanks to good tenants like you and Steve Keen. ๐Ÿ˜‰

    Does your guessing take into account (further) government action to support construction and meet the demands of our rising population, or is it just your ‘China’s-gonna-fail’ theory on which your guessing is based? I presume you see all the Asian giants falling? If you consider the US, UK and the PIGS are now practically defunct, you’re really quite the ArmagHedonist, aren’t you?! Kinda last days for civilisation as we know it, I ‘guess’. Have you considered publicly announcing this view? I’m sure the media would lap it up, ‘George’… ! Just remember to tell them you’re guesstimating… . ๐Ÿ™‚

  • 120 Anon // Feb 12, 2010 at 4:22 pm

    George I went to the site you linked on your profile — Interesting concepts — It recommends some winning x-lotto system(s). How does it beat the odds of 5 gazillion to one?
    I’ve seen some strategies for beating the casino, altho the casinos have picked alot of these up and regularly ban people who shift the odds in their favour.

    Remember above or any of my posts is not financial advice, just commentary ๐Ÿ˜‰ see a financial adviser for decisions/advice/info

  • 121 George // Feb 12, 2010 at 4:43 pm

    Looks like its time for a little George bashing…
    Its all just numbers to me guys, I love my numbers, they always tell the truth, unlike the spin sold to us by politicians and their media circus. Biker Pete, yes I am a good tenant, and am free to walk away anytime without going bankrupt! Armageddon is a picnic compared to what’s just ahead, oh well, we each make our choices…
    I didn’t mean to rock your world, just expressing my opinion like others here do. Property ownership is great if you can do it without racking up 10-30 years income worth of debt, particularly in the current economic climate. My guesstimates are usually not far from the mark. Time will tell.

  • 122 Greg Atkinson // Feb 12, 2010 at 4:53 pm

    George your views are welcome here and the purpose of this site is the play the ball not the man as the saying goes ๐Ÿ™‚

    If comments don’t add any value and are aimed at just having a go at someone then they will be deleted.

  • 123 Biker Pete // Feb 12, 2010 at 4:59 pm

    Nuff said, Greg. Please feel welcome to delete my posts.
    Good luck with beating “the odds of 5 gazillion to one”, George.
    And good luck with your investments, Greg!~ ๐Ÿ™‚

  • 124 Greg Atkinson // Feb 12, 2010 at 5:06 pm

    Biker, you are welcome to comment of course. But let’s just keep things civil and not get into tit for tat exchanges.

    Forecasting is not a very exact science and many argue it is the process itself which is important as the forecasts themselves seldom turn out to be that accurate.

    Have a look at my random stocks portfolio for example…it is doing pretty well and remember these stocks were picked via a random number generator!

  • 125 Anon // Feb 12, 2010 at 5:11 pm

    Appologies George. I was actually interested in how it works. I know some people who can regularly beat the odds with bookies. Theres always a select few who can do it out of many who cant =)

  • 126 George // Feb 12, 2010 at 6:08 pm

    Thanks guys. Most future events may seem random, and forecasting is primarily the process of seeing some order, amidst the chaos of randomness. There have been many great mathematicians, scientists and philosophers over time, that could see, and express such order in seemingly complex/random systems. They created formulae/algorithms/systems of structure to define the nature and occurence of these events, and ultimately forecast future possible/probable outcomes.
    There are many basic principles that can be applied across various disciplines, self-evident mathematical proofs, as mathematics is the closest we can get to defining concensus reality in conscious terms. Thats why I like numbers, and they never lie.
    Consistently investing in events of high probability outcome, will produce greater winning streaks and shorter losing streaks. Investing in events of low probability outcome (usually higher risk, higher return) may produce some nice quick returns, but the potential for extremely long losing streaks may prove devastating.
    Anon, most of my gaming theory is based on the work of Ion Saliu, and involves identifying events of high probability outcome in games of chance, and playing at these times only.
    Most of my market trading theory/practice is based on the work of WD Gann, a great trader and forecaster of his day, with timeless principles that still apply to the markets today.
    Back on the subject of property prices going higher, I would love to have a real go at some property price charts and make a more accurate forecast based on price data – does anyone know of a traded property trust or similar vehicle that accurately reflects property prices in Australia?

  • 127 Anon // Feb 12, 2010 at 6:35 pm

    Centro ๐Ÿ˜‰

  • 128 Anon // Feb 12, 2010 at 6:36 pm

    Hey george, could you put a chart up of the XAO showing possible/probable outcomes ?
    Cheers ๐Ÿ˜‰

  • 129 Ned S // Feb 12, 2010 at 9:59 pm

    I’m not picking up the feeling there is a lot of “irrational exuberance” amongst aspiring Oz house purchasers – More a case of “Geez, these things are expensive – I wish they’d go down.” Or “I reckon it’s a bubble; They’ve got to crash soon.” Which would seem to be funny psychology for a bubble where all the fundamentals have gotten totally out of whack that’s about to crash – From what I’ve seen written on the subject anyway.

    Of course, my impression of what aspiring purchasers are thinking could be quite wrong. I’m really just judging off comments like at the end of the following article:

    http://www.theage.com.au/business/rates-to-fight-housing-booms-20100209-npqm.html?comments=59#comments

  • 130 Greg Atkinson // Feb 13, 2010 at 7:43 am

    Hi Ned it is a funny world when in 2009 we have the RBA cutting rates and the Government propping up home prices and now they start to worry about a housing prices bubble. Sounds a lot like short term planning to me!

    Anyway I see property bubble stories are getting plenty of coverage in the media now. See: Stressed out: waiting for the bubble to burst

  • 131 George // Feb 13, 2010 at 9:47 am

    Anon: Centro
    No mate, can’t do because Centroโ€™s properties under management are located in Australia, the United States and New Zealand – I need one that refelects Australia’s property price fluctuations accurately. Other suggestions?
    Greg Atkinson: I see property bubble stories are getting plenty of coverage in the media now. See: Stressed out: waiting for the bubble to burst
    Yes Greg, isn’t it funny that the Economist estimates property is overvalued by 50%, similar to my estimates yesterday, guess I’m in good company – quote from article:
    Yet on Wednesday one of the unpalatable and less obvious side-effects of Australia’s inflating house prices – now deemed by the Economist magazine to be overvalued by 50 per cent – became clearer. The rise in the number of Australian households who are in so much difficulty with their mortgage repayments that they are facing selling up – or being sold up – is continuing its ascent beyond the 200,000 mark reached in November. By this year’s end, some 270,000 Australian households will be in severe mortgage stress.
    I believe this is the main reason interest rates were kept on hold, and won’t rise until global financing dries up, then banks are forced to increase rates. Aussie banks get around 40% of lending funds from offshore sources.

  • 132 Ned S // Feb 13, 2010 at 12:31 pm

    Perversely enough, were nothing else to change, a 50% drop in Oz RE prices may very well see me become a “no worries mate” type self funded retiree. But we’d be in the midst of Great Deflationary Depression II I imagine. And that would need to be figured into one’s plans.

  • 133 Ned S // Feb 13, 2010 at 2:13 pm

    G’day Greg – They’ve been worried about a house price bubble since 2002 minimum is my best recollection on it mate. And it’s quite possible they’ll still be worrying about one in 2022. I don’t have a strong opinion about what prices will do. Although I do firmly believe that government will be supportive of them.

  • 134 Ned S // Feb 13, 2010 at 3:36 pm

    I question some of the language of some of this stuff as well. For example, I note that Demographia rates properties as:

    Rating Median Multiple
    Severely Unaffordable 5.1 & Over
    Seriously Unaffordable 4.1 to 5.0
    Moderately Unaffordable 3.1 to 4.0
    Affordable 3.0 or Less

    One could ask if there is any reason they don’t use the following instead? :

    Rating Median Multiple
    Expensive 5.1 & Over
    Getting a bit expensive 4.1 to 5.0
    Still pretty cheap 3.1 to 4.0
    Cheap 3.0 or Less

    Then you get questions like what exactly does “severe mortgage stress” equate to in Oz. Does it mean:

    A. Can only go to restuarant once a week.
    B. Can only go to restuarant once a month.
    C. Can only go to restuarant on special occassions.
    D. Happily enjoying lots of good food at home.
    E. These baked beans and sausages are getting a bit monotonous.
    F. Geez, I wish Vinnies would open up ’cause I’m starving!

    With the term “severe mortgage stress” tending to bring thoughts to mind of some sort of cross between E and F perhaps, whereas in truth I doubt it really is that?

    Let’s just say that the thought has crossed my mind that some of the terminology could have a bit of bias built in.

  • 135 Senator13 // Feb 13, 2010 at 4:08 pm

    This is an excellent observation Ned.

    I reckon a lot of people who claim to be in the โ€œsevere mortgage stressโ€ category own two cars, eating out several times a week, yearly vacation and have phone, internet, computers and everything under the sun. Not to mention probably already in a house that is too big for themโ€ฆ

    Also, it is a bit biased when they have 3 โ€œunaffordableโ€ categories and only one โ€œaffordableโ€ category.

    That is not to say that there are not people out there who genuinely are in severe mortgage stress โ€“ as no doubt there will be many of them โ€“ but maybe these kind of surveys need not be taken at face valueโ€ฆ?

  • 136 Ned S // Feb 13, 2010 at 6:01 pm

    While I fully suspect that some official body somewhere has a definition of what they regard as various levels of mortgage stress Senator (which is at least a standard that one can choose to argue the toss about), the following would seem to indicate the mob refered to in the link above (Fujitsu Consulting) don’t have a track record of using it:

    “Instead of defining mortgage stress as borrowers spending 30 per cent of their after-tax monthly household income on repayments, Fujitsu Consulting asked respondents to fill out a 13-part questionnaire.

    It asked consumers if they could meet loan repayments and if they had to sell their property.

    The research on 26,000 consumers since 2006 concluded that people who had to adjust their spending habits to pay off a home loan were suffering from mild mortgage stress.

    Severe mortgage stress was when borrowers were falling behind in repayments, thinking of selling up or facing default proceedings against them.”

    http://news.theage.com.au/business/mortgage-stress-levels-could-rise-study-20080424-28bl.html

    Same old story; Be a bit wary about what one takes at face value.

  • 137 Ned S // Feb 13, 2010 at 6:49 pm

    George, while I suspect it isn’t the sort of thing you are looking for(?), on the off chance it is, Nigel Stapledonโ€™s Oz house price stuff is the closest we have to any US Case Shiller housing price numbers that I’ve heard of. I’ve seen graph info based on them back to about 1880.

    Can’t provide a link to them as such – I’ve just seen them used in other work (including Steve Keen’s). Although maybe the top article here contains them? (2.8 MB is more than I feel to make my dial up connection look at right now):

    http://unsworks.unsw.edu.au/vital/access/manager/Repository?query=nigel+stapledon

  • 138 Greg Atkinson // Feb 13, 2010 at 7:20 pm

    Yes I wonder about “mortgage stress” as well. At the end of the day you cannot “walk away” as such from a home loan in Australia, so the market is a lot different to the U.S.

    I would imagine (as Senator suggests) that people can cut back on a lot of spending before they start getting behind on their loan repayments however, when people start cutting back on spending it can start a viscous downward economic spiral where consumer demand drops, unemployment rises and then consumer demand drops more and more people lose their jobs etc. (or lose their overtime)

    If unemployment does not creep higher and interest rates don’t surge then I don’t see why there would be a mass outbreak of mortgage stress.

    But even if people can handle their existing loans, this does not mean home prices will not fall. It’s a complex world out there ๐Ÿ™‚

  • 139 Senator13 // Feb 13, 2010 at 7:30 pm

    Very true – it is a complex world out there.

    Wonder how many of these people in mortgage stress turned down the free credit card that came with their loan?

    Some of these people are their own worse enemy..

  • 140 Greg Atkinson // Feb 13, 2010 at 8:03 pm

    You’re right I reckon Senator, I don’t think it is simply the home loan that causes problems, but rather all the other things people want “now”. There use to be a time when people saved up to buy a car, go on a holiday and but a new stereo. Not any more it seems.

  • 141 Ned S // Feb 13, 2010 at 8:35 pm

    And Senator has the option of scooting home and renting out for 6 years (initially) with all the advantages of neg gearing without the downside of CGT Greg.

    While it’s a bit unrealistic to hope to make too many perfect decisions with perfect timing, having the tax man 100% behind you for basically as long as you choose to have him, sounds like a pretty handy buffer regarding one’s investment decisions? ๐Ÿ™‚

  • 142 Senator13 // Feb 13, 2010 at 8:52 pm

    As long as the review does not change the rules on me! They are already reducing contributions for super even before the review… There would be a lot of people approaching retirement worried about those..

    I just think a safe option is to get a place paid off as quickly as possible and then its one less thing to worry about down the track. Who know what other rule changes they will want to do.

  • 143 Greg Atkinson // Feb 13, 2010 at 9:06 pm

    Nobody wants to do anything that hurts existing home owners since they are such a large voting bloc. I suspect the only home owners that might be in for some changes are those in the higher income bracket or who own properties valued say at over $1 million. Rudd and Swan would reckon there isn’t many votes there for them in those areas anyway so they might as well grab a few dollars where they can.

  • 144 Ned S // Feb 13, 2010 at 9:42 pm

    Oz has no history of making retrospective changes Senator. “Civilized” countries that see advantage in maintaining their credibilty just don’t do such things. I’m probably a bit paranoid – In that I continue to bear it in mind as a very vague possibility regardless. But in truth, I judge the likelihood to be exceptionally low!

    However, the rules going forward WILL change on different things over time. As a matter of both fiscal and political expediency. They always have and will continue to.

    So Yes, at least once a year at budget time we are real wise to tune in I guess. More often is ideal; But I’m very sure you are doing that anyway.

    As to getting the place paid off as quickly as possible – While others might be able to suggest a better plan, I can’t. ๐Ÿ™‚

  • 145 Ned S // Feb 13, 2010 at 9:53 pm

    And reckon you are right on the money!

  • 146 George // Feb 14, 2010 at 12:20 pm

    Ned S: Nigel Stapledonโ€™s Oz house price stuff…
    Thanks for the link Ned, the chart only goes to September 2007, so without recent data is not so useful for incorporating recent moves accurately into the picture.
    Summarily, from what I have seen of property price action since 2007, we have just had a “double-top” on the chart. Prices made high in 2007, then dropped 10-15% into 2008, before rising 10-15% in 2009, touching the 2007 levels once again (approx), hence, a double-top.
    In basic technical analysis terms, once a double-top forms on a chart, and holds good (is not broken), there usually follows a significant decline from that level. This is known as “resistance”.
    When looking at such a chart formation, I would expect declines in price levels to commence, unless the tops are breached by a significant amount, usually at least 5%+ higher.
    The next move in prices (2010) will confirm either a significant decline, or a possible major breakout to the upside (don’t hold your breath for this one!)
    I still would love to hear of a traded property trust (or similar) that accurately reflects Australian property prices, as I think it would be a great short.

  • 147 Greg Atkinson // Feb 14, 2010 at 12:43 pm

    George why don’t you just use the ASX property index which is a grouping of all the major listed property trusts etc?

  • 148 George // Feb 14, 2010 at 12:51 pm

    Thanks Greg, I will check it out, I frequently face this problem while investing: most investment instruments/vehicles/indexes etc do not accurately reflect the true fluctuations in the underlying asset.
    I will look into it, but doubt it will be a true reflection of Aussie property prices.

  • 149 Ned S // Feb 14, 2010 at 1:15 pm

    Wouldn’t be suprised if you are correct in saying that there was a small correction in 2008 George – Purely anecdotal, but in late 2008 I mentioned the possibility of a correction to an RE salesperson I know in Brisbane and she bit nice and hard – Pretty much to the effect “Don’t think so! We’ve just had a 10% correction.” My impression was more that the market had been flat. But she was in a position to know what things had been selling for rather than what the asks had been I guess?

  • 150 Anon // Feb 14, 2010 at 5:18 pm

    Hey George, shorintg OZ REITS is a good idea in thoery. Problem is alot of them are significantly below their stated NTA and in most cases are pricing in a fall in real estate prices. Of course the NTA figure could be wildly overpriced, but I was just mentioning this on a superficial basis.
    But if you could find one that isnโ€™t doing that, and its NTA is not understated, iโ€™d agree it would be the short of the century (if historically price/book is near highs in valuation) I think the easy money in this sector was made during the credit crisis. I suspect the best shorting candidates will be in cyclicals/commodities.

    Remember above or any of my posts is not financial advice, just commentary ๐Ÿ˜‰ see a financial adviser for decisions/advice/info

  • 151 Ned S // Feb 16, 2010 at 2:54 am

    This is a hoot:

    http://www.cabinet.qld.gov.au/MMS/StatementDisplaySingle.aspx?id=68505

    If I’m not mistaken, the QLD state government has just said to everybody “Build duplexes on any bit of residential land you want!”

    And the Brisbane City Council choked down on it. (They reckoned they’d done good work saying it’s OK to plonk highrises up to 30 stories high in a couple of scummy old inner city suburbs where bugger all of the “better” class of hovels already are I gather.)

    So the state came back and said โ€œIf council want to set a code on where duplexes can and canโ€™t go, they can set a code and the State Government will respect it.โ€

    I bet there’ll be some voter pattern analysis going on before that code gets written!

    But any funny business aside, it is precisely the sort of housing that we need. IMO. And it SHOULD fill a very necessary affordabilty/lifestyle gap in the property market. Providing council can bring themselves to keep their vote grubbing little fingers out of it.

    They would have been MUCH smarter to just shutup and let the state government wear the heat. IMO. ๐Ÿ™‚

    Wonder if a duplex can contain a “granny flat”? Hmmmm … ๐Ÿ™‚ ๐Ÿ™‚ ๐Ÿ™‚

  • 152 Greg Atkinson // Feb 16, 2010 at 11:11 am

    Perhaps the way that home prices will ultimately be kept down will be by having people settle for smaller homes? I think this trend is already under way in many urban areas and was once quite common as you can see from some of the older suburbs in Sydney and Melbourne for example.

    As for high rise, I can’t say I am a big fan of these sorts of developments but the trend now is probably more towards mid rise (around 10 stories) outside the CBD’s. Mind you this does not please people when one pops up next door!

  • 153 Ned S // Feb 16, 2010 at 12:00 pm

    That is my punt also Greg. With us now seeing Brisbane (SE QLD really) at least, being forced to begin to adjust to reality. State and local government actions have caused a shortage of affordable land. And thus, affordable housing. So now we are getting some – And in a hurry – In the form of all existing property becoming eligle to have duplexes built on it. Plus some rezoning re highrise stuff in some of the inner suburbs.

    It may have the potential to give the RBA some of that “affordable housing” they reckon they want to see. If we can find the labour to build it perhaps? But it sounds like a commonsense enough step anyway. Albeit, not necessarily a popular one with many existing property owners.

  • 154 George // Feb 16, 2010 at 4:53 pm

    Greg, I checked the charts/data of the following, and found all of them failed to reach the highs of 2007, by a large margin (40-80%):
    SPDR S&P/ASX 200 LISTED PROPERTY FUND – [SLF]
    S&P/ASX 200 Property Trusts (Sector) – [XPJ]
    S&P/ASX 200 Financial-x-Property Trusts (Sector) – [XXJ]
    They may be good shorts anyway, but it would be nice to speculate in one that follows property prices more accurately. I would say they have already factored in projected future prices… or maybe investing in property is becoming less profitable than it used to be?

  • 155 Anon // Feb 16, 2010 at 6:51 pm

    You can get 8% p.a. over 5 years in term deposits now. I wonder if the market could get those same returns over the same period? Something tells me this is highly unlikely.

    Remember above is not advice, just commentary.

  • 156 Greg Atkinson // Feb 17, 2010 at 10:01 am

    George it is probably okay that they did not hit the “highs” as they are suppose to track property not the wider market. However having said that they also probably hit lows when residential housing held up okay.

    But maybe we should ask ourselves if the home price data we normally watch is actually what we should be watching…or are the property indexes telling us something closer to the truth?

    Over the last few years a number of major property developers have failed so this means that there are some underlying problems perhaps in the property market? Maybe looking at simply the sales data reported by real estate agent is simply just that, sales data, and not a good guide to the overall health of the market?

  • 157 Biker Pete // Feb 22, 2010 at 9:37 am

    Greg: “Perhaps the way that home prices will ultimately be kept down will be by having people settle for smaller homes?”

    Precisely how we see it, Greg. Our two latest projects are being built to meet a.) Couples just starting out; b.) those starting families… mum, dad, up to two kids; c.) retiring couples, downsizing. In the latter case, we think location is even more critical than with the former.

    Reflecting on Keen’s recent re-emergence as media star, we often single out his flawed prophecies on home prices (40% fall… actually 5.5% across Australia); without remembering that his two other guesses were almost as inaccurate. He projected two-digit unemployment figures (now 5.3%) and _zero_ interest rates (now 4%).

    The news media need to be _reminded_ of these wild hunches of Keen’s, around the end of March… .

  • 158 Greg Atkinson // Feb 22, 2010 at 9:51 am

    Biker it just isn’t fair, I am just as inaccurate with my market predictions and I get no media attention at all ๐Ÿ™‚

    Anyway thanks for the feedback on what you are seeing regarding house trends. In the area where I grew up in Sydney the duplex is becoming the new norm and the homes built in the 50’s& 60’s are being knocked down and replaced with duplexes. (not something I am a fan of by the way)

    Are there many duplexes over your way?

  • 159 Senator13 // Feb 22, 2010 at 10:54 am

    This is an interesting article:

    http://www.smh.com.au/business/property/housing-affordability-hits-the-wall-20100222-opcd.html

    Makes me glad I got in when I did. But I do think if people spent less time complaining and more time trying to make it work for them they would be in a lot better position..

  • 160 Ned S // Feb 22, 2010 at 11:05 am

    Think you are being a bit unkind to your crystal ball gazing abilities there Greg! ๐Ÿ™‚

    But Yes, I’d say you and Biker are both on the money. It’s just a part of that fall in “standard of living” I reckon is coming our way and mentioned recently in a post under one of your other articles.

    Not too sure where SE QLD is going on the duplexes thing – For now anyway – Brisbane City Council isn’t sounding very supportive at all. And Yep, whilst I liked Oz when I could go for a walk along a pristine bit of beach 40 years ago and be the only person there, it would seem that some things really do change.

  • 161 Greg Atkinson // Feb 22, 2010 at 12:01 pm

    Hi Ned…well maybe I am a little better than Keen ๐Ÿ˜‰ I wonder if that guy will ever pull his head and admit he was wrong, full stop.
    I guess not, he seems to be selling himself as a legend so I reckon he needs to keep rolling back his predictions of doom.

    Yes things so change, when I was a young lad there was still a farm in the suburb and the milk was delivered by a horse and cart!

  • 162 Biker Pete // Feb 22, 2010 at 3:34 pm

    When-I-Was-A-Lad Dept.:

    “…when I was a young lad there was still a farm in the suburb and the milk was delivered by a horse and cart!”

    All delivered by horse-and-cart when I was a kid:

    * Milk

    * Bread

    * Ice, large blocks

    * Fruit n Veges

    * Fish (on ice)

    Duplexes: We’ve owned two duplex lots over the years. Wealthy folk bought both, to build very large homes.

    Duplexes exist… and have become more popular in some suburbs. Mount Lawley’s a prime example. Most homes are a million plus, but they sit on 1000m2 – 1200m2 lots, so there’s a temptation to subdivide and build. Many a couple buy in at a mil, then do just that, putting a second home (or granny flat) behind the first. Friends just completed one.

    They’re not _true_ duplexes in the ‘attached’ sense. These tend to be built in less expensive suburbs. It may well be that once the concept became well-known, developers were limited in how many duplexes blocks could be included in each development stage. Thinking about that further, I’m sure it’s correct. The last few land releases we’ve studied still include very few duplex blocks (perhaps two or three) and they fetch silly prices in comparison.

    Deep sewerage, which is only a ‘recent’ development (rather than septic systems) appear to have been the initiative which freed up building restrictions. The two criteria used to be:
    * 1100m2; and * deep sewerage. I think some councils may have dropped the former requirement to 900m2, by application.

  • 163 Ned S // Feb 22, 2010 at 4:30 pm

    Prof Keen probably needs to decide if he sees his future as an academic or a pollie? He isn’t going to get a house of reps seat anywhere, but he just could pull a senate seat as an independant maybe.

  • 164 Biker Pete // Feb 24, 2010 at 2:52 pm

    Keen would attract derision, Ned. He’s safer ensconsed in the robes of academia than he would be on the political podium. I’ll grant you that politics is his preferred location, but it’s unlikely he’d get a seat, given his abysmal record… .

    I think once his enforced trek is completed he’ll gradually fade to a well-deserved ignominy…! ๐Ÿ™‚

  • 165 Greg Atkinson // Mar 1, 2010 at 5:01 pm

    Well it seems home prices rose again in January. Can we expect prices to keep trending up for all of 2010?

  • 166 Ned S // Mar 1, 2010 at 5:35 pm

    My interest is Brisbane. And in relation to same, I’d say, On the balance of probability, Yes! ๐Ÿ™‚
    Although the rest seems to be looking safe as well. With WA in for another boom most likely?

  • 167 Greg Atkinson // Mar 1, 2010 at 6:04 pm

    I wonder how far the RBA is willing to go to cool the housing market down? It is also going to be very interesting to see what the government does if interest rates are rising as they head towards what might be a tough election.

    Also I am curious about what impact the relaxing of the foreign investment rules in regards to residential property has had on prices. I seen some people complaining in the media about foreign investors pushing up prices but I have not seen any hard data suggesting it is happening.

  • 168 Ned S // Mar 1, 2010 at 6:16 pm

    Foreign residential RE investment – No stats are tracked is my take on it. So the best we’ll get is anecdotal stuff with accusations (right or wrong) of landbanking, they are only paying 1% interest etc, etc, etc.

    RBA – Much talk; minimal action – Sameo, sameo would have to be my punt.

  • 169 Ned S // Mar 1, 2010 at 6:29 pm

    What has to be borne in mind is that in 2008, while we were hearing lots of squawks about how tough things were (at interest rates of maybe 9.5% ? at the “coal face”) we weren’t seeing defaults. Prices have gone up maybe 10% in the interim? And people are paying maybe 7.0% at the coal face? Those sums just don’t add up. RE is WAY more affordable than it was – And even then we wern’t seeing defaults as stated.

    So we’d need to see very significant interest rate increases or significant job losses for a crash. And neither is looking especially likely. IMO.

  • 170 Ned S // Mar 1, 2010 at 6:51 pm

    Mulling over same a bit more – As it’s important to me – I’ll be a bit surprised if I don’t purchase an investment property in the next three months. (As a cash purchaser.)

    Nah, the RBA isn’t going to up the rate too much. (Not that it would affect me as I’m in for cash as stated – Except it could cause me to lose some capital on paper – Which is never nice.) But, I’ve followed them for so long that I’m as sure as I can be that they are pretty much just mouth.

  • 171 mendes // Mar 12, 2010 at 9:45 am

    The problem with demand in this country is that its fuelled by large amounts of debt. The first home buyers grant has saturated the market and sucked in buyers who wouldnt have normally borrowed or would have bought in the next few yrs. where are all the buyer going to come from in the next few yrs? and dont tell me overseas. once interest rates rise further and families are looking to deleverage we will see a correction that will see debt to GDP decrease and therefore see the economy contract. then you will hear a loud pop.

  • 172 Greg Atkinson // Mar 12, 2010 at 5:52 pm

    Mendes I do worry how hooked on housing the Oz economy has become. It is now an addiction that will be hard to voluntarily kick because politicians know that it is career suicide to do anything that might cause home prices to cool.

    Ned the situation with higher interest rates in 2008 was probably a little different to now because there was plenty of overtime and less unemployment back then. Also the full impact of the GFC had not hit yet.

    Now many households I suspect no longer have a healthy investment portfolio to fall back on, dividends payouts are down and many people are taking home less pay than they were in 2008. Therefore I would suspect that interest rates would not have to get much higher than now to start causing some real heartache.

    On top of this, much of the economic activity that is keeping people in work has been funded by Government debt and that gravy train is going to end one day. (well at least I hope so)

    Maybe it will be okay if the Chinese economy roars ahead for the next 10 years but personally I think we will see the Chinese economy come off the boil fairly soon. When that happens, things will get very interesting in Australia!

  • 173 Ned S // Mar 14, 2010 at 1:54 pm

    I grant all your points Greg but still come back to the issue of what is a chap to invest in? And I pretty much do have to discount stocks for myself – I don’t have the stomach or the skills for coping with making and losing 1, 2 and 3% (and more) in one day. I guess when it comes right down to it, I also just don’t have the fundamental faith in stocks as an asset class as I do in residential RE.

    Following expresses some significant doubts about China as well. But the comment that suggests the author is being unfair by including local government debt while omitting it for the US and wanting to conclude both countries are about 100% of GDP does sound reasonable to me? :

    http://articles.moneycentral.msn.com/Investing/JubaksJournal/is-china-actually-bankrupt.aspx?page=1

    I don’t have faith in anything much at the moment. Except I’m expecting developed nations to become more socialist and for taxes to be increased. And providing globalization continues, standards of living in the West are going down and standards of living in the East are going up. That doesn’t mean the West’s quality of life HAS to go down a whole lot – But it probably will because our governments have gotten into the habit of living beyond our means.

    As to investment in the West, it seems to me it’s more about politics than ever now. And in Oz, residential RE is the one and only political “holy cow” with superannuation coming a pretty distant second.

  • 174 Ned S // Mar 14, 2010 at 10:54 pm

    What is a bloke supposed to think/do when he reads the following two articles back to back:

    http://www.smh.com.au/business/reserve-should-nip-rising-house-prices-in-the-bud-20100314-q64z.html

    http://www.smh.com.au/opinion/society-and-culture/batten-down-the-hatches-the-waters-are-still-treacherous-20100314-q5yg.html

    Funny ole world at the moment! ๐Ÿ™‚

  • 175 Greg Atkinson // Mar 15, 2010 at 10:46 am

    Ned as I wrote a while back, the Governments decision to throw extra money at first home buyers was a major blunder. As a result, instead of our housing market remaining flat or dipping a little during the GFC, what has actually happened is that prices generally rose.

    Remember our housing market is fuelled largely by debt and much of this is sourced from overseas. Therefore prices are not going up just because houses/homes are becoming more valuable, but also because people are willing to pay more and fund their purchases via debt.

    So the question I cannot answer is this: how much are house prices being distorted by the availability debt at the current interest rates? If interest rates were 10% would prices remain the same? Also would house prices remain at current levels if people thought prices could fall?

    As to where to invest, I am confused also ๐Ÿ™‚ But I tend to lean towards cash and stocks which give me exposure to Asia. But this is not financial advice, just my own personal view.

  • 176 Ralph // Mar 15, 2010 at 1:19 pm

    The housing market in Australia becomes ever more interesting by the day. It would be difficult for any rational observer to disagree with the notion that the Aust gov’t has been madly stoking the fire in the form of first home buyers grants, allowing foreigners to buy Oz houses and ramping up immigration. Then there is the government’s bank borrowing guarrantees (to encourage banks to keep pushing mortgages). It would also be difficult to disagree with the thought that one of the major reasons Australia didn’t suffer much in the GFC was because we didn’t have a house price crash.

    It would seem that the government has done a pretty good job of keeping the bubble inflated. They’ve stacked all their chips on the real estate market and it seems to have been a winning bet. And based on its recent performance, you’d have to back the government to keep stoking the fire for as long as they are able to do so.

    It looks like the Australian economy is almost entirely dependent on increasing house prices. The mining boom is what keeps the government coffers ticking over and allows the massive welfare spend that we have. But I don’t think it contributes massively to the mainstream economy, except for a handful of ute-driving bogans in mining states and their immediate circle of influence. The government would have to cut spending, but I think things would go on. It’s increasing house prices that provides the impetus behind the vast majority of consumer spending. If house prices fall, the economy falls with them. Very sad.

    I think the key will be that it is ultimately unsustainable. It will reach a point where the average person simply can’t afford to pay the ridiculous prices. At that stage, house prices will probably become a political liability rather than an asset. Unfortunately, I think that day of reckoning is probably several governments away yet.

  • 177 Biker Pete // Mar 20, 2010 at 9:32 am

    Greg: “…the Governments decision to throw extra money at first home buyers was a major blunder…”

    As time passes I think we’ll develop a different view, Greg. There were many benefits… and one downside… rising prices.
    For us, personally, there was a second downside, which we felt in the hip pocket. Our view is that the minor pain of having 200,000 or so rentals suddenly flood the market, was _nothing_ compared to what might have happened without FHOGs and stimulus.

    As Ralph suggests, some homes in some locations have reached ridiculous prices. Some of our aspirations for shelter and location will have to change. Many Australians do not accept that. It’s far, far easier to stay put… and hope that someday, over the rainbow, Keen’s GPC will provide an open window… .

  • 178 Greg Atkinson // Mar 20, 2010 at 9:46 am

    I actually don’t see how the FHOG has done anything but push prices up? Did it make the nation more productive? No. Did it help make our hospitals safer? No. Did it help drive the development of cutting edge technology? No.

    Sure the grant was good for builders, developers and the housing industry but did they really need to be supported?

    Well at least the FHOG is not as bad as the vast sums of money we hand out to the automakers in Australia (all foreign owned) so they can make cars here. They even get to export vehicles subsidized by taxpayers to overseas markets!

  • 179 Ned S // Mar 20, 2010 at 10:22 am

    It’s as plain as the nose on a bloke’s face what has to happen – Higher density living. Both in the inner city regions and clustered around transport nodes further out. As a result of both land development and transport costs.

    And it’s not even necessarily bad at all from a lifestyle perspective. I was quite impressed by the Russian approach of having your compact little apartment in the city where you eat and sleep Monday to Friday plus your shack on 1,000 m2 in the village that you head to on the weekend to tend the vegie plot and party with the friends and neighbours.

    ‘Course the shack in the village is quite literally that – With bugger all services – And accessed via a dirt road. Compensated for by the fact that you can buy one for about 1/10th the cost of your apartment in the city. We’d never be allowed to live “like that!” But then the Russkies have this quaint notion that something called “freedom” is REALLY important? … ๐Ÿ™‚

  • 180 Biker Pete // Mar 20, 2010 at 7:38 pm

    Greg: “I actually donโ€™t see how the FHOG has done anything but push prices up? Did it make the nation more productive? No. Did it help make our hospitals safer? No. Did it help drive the development of cutting edge technology? No.”

    Really don’t believe it pushed prices up in WA at all, Greg. But… did it help keep employment high? Yes. Did it help preserve Australia’s tax base? Yes. Did it protect and maintain Australia’s third largest industry, construction? Yes. Did it put the brakes on increasing rental costs? Yes. Did that free up more dollars for consumers, thus keeping employment high? Yes.

    My missus and I both received cheques for $900 in the mail. Was I embarrassed? Yes. Did I think it was a useful form of stimulus? No. Did we use it wisely, to boost construction in Australia? Yes. Are Aussies now better off than much of the rest of the western economies…. (?) Ask _any_ immigrant.

  • 181 Ned S // Mar 20, 2010 at 8:15 pm

    I reckon the FHOG pushed prices up over this way Biker. Wisdom in hindsight of course, but the RBA crashing the interest rate may well have been enough to prevent any major correction – Given the stimulus from China and the US. But absolutely free money “NOW” is the very greatest of motivators regardless I suspect?

    Talking about which … Where’s my cheque? ๐Ÿ™‚ ๐Ÿ™‚ ๐Ÿ™‚

  • 182 Biker Pete // Mar 20, 2010 at 11:41 pm

    Well, even KEEN predicted the interest rate would go down, Ned.

    You didn’t get a cheque?! Seriously??? My CAT got a cheque! ๐Ÿ™‚

  • 183 Ned S // Mar 21, 2010 at 12:21 am

    No $900 cheque here Biker? (I’d recall a monumental event like the Oz guvment giving me the skin off their poo I suspect? – Next GFC perhaps???) … But best wishes to your undoubtedly deserving feline in the interim … ๐Ÿ™‚ !

  • 184 Biker Pete // Mar 21, 2010 at 8:39 am

    Hypothetical question, Ned. What would you do if another GFC did hit us… say in late 2011…?

  • 185 Ned S // Mar 21, 2010 at 12:06 pm

    “What would you do if another GFC did hit us… say in late 2011…?” – Thanks for asking the question Biker. It’s an excellent point to consider.

    Just depending what comes out of the KHR and the Super review, by then I’d hope to be earning most of my income from rental properties. With another rental property held in the name of my SMSF. And I’ll be 53. So not able to access the income from that SMSF property – Which is what I figure is needed for me to remain in my current happily unemployed state. But less than two years off being able to do so.

    My potential saving grace in that regard is that about $122k of my super is an unrestricted non-preserved amount. So can actually be accessed before 55 I believe. (Although it seems that tax of up to 20% has to be paid to do so.) And while I don’t have $122k cash in my SMSF (in addition to the property), I certainly do have more than enough cash there that I could strip out and pay tax on if that was necessary to top up my personal income and tide me over between the ages of 53 and 55. With 55 being the magic age when I can go on a TTR as you’ve pointed out. (Fingers crossed it doesn’t change.) And with a TTR having some very useful tax implications – That change the sums again.

    The valuable thing about your question is that it serves as a reminder of the potential benefit of ensuring I retain enough cash in my SMSF to top up other income if needed until I am 55. It’s too good a safety net to be dispensed with lightly.

  • 186 Biker Pete // Mar 21, 2010 at 1:23 pm

    “Although it seems that tax of up to 20% has to be paid to do so.”

    Yes, the missus faces that… . She’s 58 in July, so patience on our part may be the best strategy. She can still access about a quarter of her Super, tax-free, if she pulls the pin next year, at 59, leaving the rest in until 60.

    As you say, the TTR is well worthwhile. If my one-year-plan comes to fruition, I’ll lose my TTR this year!
    Mind you, more properties will be literally paid-off with my Super… and our cash funds, in offsets, will still be there to access if opportunities present… .

    Any more info on the KHR? You seem to have a knack for spotting the latest tidbits…. . ๐Ÿ™‚

  • 187 Ned S // Mar 21, 2010 at 3:23 pm

    You’ve almost certainly checked it out very thoroughly Biker, but one thing I did notice is that regarding the “tax-free” component of super (I have about $52k of it) that one can’t draw down only the tax-free bit. Don’t remember the specifics – Eg If that only applies if one is under 55? It’s one that I’m intending to run past my accountant when we get together after the KHR.

    Nothing new on the KHR recently – Apart from promises that there will be lots of time for debate. And that business will be consulted … Which seemed strange as I thought the idea was that every chap and his brown dog was supposed to have already been consulted? That’s politics for you maybe … ๐Ÿ™‚

  • 188 Ned S // Mar 21, 2010 at 3:58 pm

    Just to give you a bit of an idea of that I’m aiming for Biker:

    1. My own very humble little home owned outright and no other debts
    2. Assets (RE in my case) that I’m hoping will generate a reasonably stable income adjusted for inflation/deflation that I can live on in retirement without eating into those assets

    With number 2 being a damn tricky one given that it is pretty obvious that if there is a problem, governments will respond by upping our costs on everything except credit.

    Anyway, what may stick with me is that I don’t think my lifestyle expectations are especially high. Although others may disagree?

    What are my lifestyle expectations? In an ideal world I’d feel comfortable knowing that I could eat home cooked meat and veg/salad daily if I chose to but sometimes wouldn’t, plus some fruit, and buy a takeaway weekly (two if I was feeling REALLY lazy!), plus do the salad bar thing at Sizzlers monthly (a bit luxurious I admit – I’d probably never really go more than quarterly), and afford the fuel to drive to the Sunshine Coast once a month (again I’m pretty sure I wouldn’t bother but it would be nice to have the option), plus have a takeway when there too, and to our crappy North Brisbane beaches for a BBQ weekly, plus spend maybe $2k pa on hobbies, and about the same on a holiday – With most of that being driving expenses, plus afford private medical insurance, and spend $500 pa on clothes, and about the same on gifts, and be able to afford hot water, and keep my kitchen, lounge and bedroom at between maybe 15 and 28 degrees C, plus afford broadband, and buy a new laptop and software every 3 years, and be able to pay someone else to maintain my vehicle, and have maybe $3k pa I could spend on home improvements where I did the labour myself; Oh, and drink as many $12 bottles of port and smoke as many roll your own White Ox ciggies as I felt to – With filters!!! At that, Ned would be in pig heaven! ๐Ÿ™‚

  • 189 Anon // Mar 21, 2010 at 4:10 pm

    lol Ned sounds like a plan ๐Ÿ™‚ You seem pretty switched on tho..perhaps turn that outright home into a street owned outright?
    Maybe in the suburb owned by Biker Pete? LOL
    Altho, on a more serious note, aussie house prices are still too high in my humble opinion. Personally I’m happy to be priced out of the market. When I look at opportunities in the UK, US and Japan it just reinforces my view there is an insufficient margin of safety in Australian housing at present.

    “Oh, and drink as many $12 bottles of port”
    No doubt this will be cheaper as you age, fueled by the current demand/supply imbalance in the wine industry at present!

    “Nothing new on the KHR recently โ€“ Apart from promises that there will be lots of time for debate. ”

    I think we can safely assume we will all be taxed a great deal more in the future. They’ll slowly sneak it up on us…you cant keep borrowing huge amounts in government without the obvious associated increase in taxes.

    Not advice, just banter/friendly discussion. Always see a financial adviser for decisions/info/advice etc.

  • 190 Ned S // Mar 21, 2010 at 4:43 pm

    Taxes Anon – If nothing else (and I do fully concur that we WILL see the system adjusted so taxes are higher), they just nail us with bracket creep. Wages were up close to 6% last year – So Welcome to our higher tax rates already I think?

    Which is a large part of why I look for all ways to potentially minimise tax. And super does remain one of those.

    Hmmm … I don’t need $500 pa for clothes. $200 ($250 tops) would pull it up. But having a few dollars in the budget to buy my dad decent footwear is nice. He’s a Great Depression babe who baulks at spending more than $15 on a pair of shoes – So you can imagine what he buys! ๐Ÿ™‚ And it is nice to be able to give him a comfy pair of shoes every few years as a gift. And he LIKES them too!!! ๐Ÿ™‚ ๐Ÿ™‚ ๐Ÿ™‚

  • 191 Biker Pete // Mar 21, 2010 at 5:51 pm

    Ned: “…the โ€œtax-freeโ€ component of super (I have about $52k of it) that one canโ€™t draw down, only the tax-free bit.”

    We each have three components, Ned: Employer Contributed; TTR; Self Contributed. Can’t touch the first, as you say. We chose to roll the self-contributed into TTRs; but we now maintain a third Self-Contributed fund each, as well. We could pull it all out of TTRs, put it back into SC, then pull it all back into TTRs, again. Fiddly, no cost, have done so twice, but now we just don’t bother. We’re pulling the minimum anyway… around $50K p.a.

    Anon: “Maybe in the suburb owned by Biker Pete? LOL”
    Well, after the developer himself, we do own more of the ‘last stage’ than anyone else. I think it was Prozak who, taking the piss, accused me of playing mind-monopoly. I resisted the temptation to respond that we’ve pretty much dominated two streets in two different suburbs, during the last thirty years. Right now, we have three homes in one street, which used to confuse the residents no end… most figured I was a labourer sent in to finish up. It wasn’t until they realised I was actually living in the garages of five, all within a 170m radius, that a few put two-and-two together… .

    Your plan looks pretty good to me, Ned. The budget looks very much like ours…! You’d laugh if you saw the level to which we economise to get the best bang for our bucks. Our only real extravagance is travel… and that will remain a priority. Oh… and good running shoes (can’t hit a moving target!) Port? It’s a biker’s staple. We carry two hip flasks… .

  • 192 Anon // Mar 21, 2010 at 6:05 pm

    “It wasnโ€™t until they realised I was actually living in the garages of five, all within a 170m radius, that a few put two-and-two togetherโ€ฆ”

    haha, yeah I can see how that would be confusing. You seem to have a good grasp of housing. I guess its always best to concentrate on things you have a competitive advantage on as you eluded to earlier re: your stock market experience.
    I’m not sure I would have any idea what I was doing if I was trying to develop a house..let alone multiple housing projects ! I’m thinking of buying some books on investment property, do you have any recommendations?
    Thanks

  • 193 Anon // Mar 21, 2010 at 6:29 pm

    You might of read these already, but I thought it might be good for any beginners that wish to learn some fundamentals of equities investing (wish I had this list when I started :P):

    Seth Klarman
    Margin of Safety
    (Its a 1-2k book because its out of print but you can get it from your state library)

    Stan Weinstein (a good beginners techie book)
    Profiting in Bull and Bear Markets

    Benjamin Graham
    Intelligent Investor (My favourite book I must say!)

    Benjamin Graham
    Security Analysis

    Howard Schillit
    Financial Shenanigans (shows you how to pickup dodgy accounting)

    Investment Timing and the Business Cycle (Bad reviews on amazon, but it helped me time my cyclicals exposure — so I wont knock that !).

    Peter Lynch
    Beating the Street

    David Einhron
    Fooling Some of the People all of the Time

    Keith McCullough
    Diaries of a Hedgefund Manager

    Hope that helps someone out there!!

    Above definitely not advice, just commentary โ€” see financial advisors for financial decisions/info/advice etc.

  • 194 Ned S // Mar 21, 2010 at 6:31 pm

    “The budget looks very much like ours” … Which is at least part of the reason we both butt heads with other parties elsewhere on ocassion Biker? My dear ole ma ‘n pa who have an after tax income of about $26k pa (with government subsidised cheapy house rates and car rego etc admittedly) go out for lunch once a week, do pretty much everything they want entertainment wise, eat plenty of good healthy food, pay their private health insurance and medical bills, change their car every couple of years, and STILL manage to save a little bit of money on that income – Even though they drop in here regularly and give me way more choccy biscuits/soft drink/home cooked rissoles than I give them! They’re a generation it is difficult to not have a very great deal of respect for Biker … IMO?

  • 195 Anon // Mar 21, 2010 at 6:41 pm

    “My dear ole ma โ€˜n pa who have an after tax income of about $26k pa (with government subdised cheapy rates and rego etc admittedly) go out for lunch once a week, do pretty much everything they want entertainment wise, eat well, pay their private health insurance and medical bills, change their car every couple of years, and STILL manage to save a little bit of money on that income โ€“”

    Geez Ned! How do they do it…are they secretly growing something in the basement ๐Ÿ˜‰ haha.
    Nah, I admire that…wish I could live off 26k! Just shows its not how much you earn, its how effective you use the money you earn that determines your lifestyle!

    Above definitely not advice, just commentary โ€” see financial advisors for financial decisions/info/advice etc.

  • 196 Biker Pete // Mar 21, 2010 at 6:44 pm

    Funnily enough, it has only been really recently we’ve read any books about realty, Anon. Travelling through BC, we stayed with a young bloke and his GF in their Victoria apartment. We presumed the hundreds of books he had on the subject were passed on by his father. Turned out he had bought them on eBay, recently. We found few of them worthwhile. Most advocated very high leveraging, extreme risk-taking (in our view) and they favoured a North American market/tax system, about which we know very little.

    One of our current tenants, who is a property MM, loaned us a few books on the subject. Again, we weren’t all that convinced.

    I could write a book on the subject, but very few would be impressed. We’ve never, ever tried the get-rich-quick route. It has been hard work, a hobby which has paid off better than we could ever have envisaged. Somewhere in the previous blog on this subject, I itemised the essentials, our criteria, the tax implications and some very critical first steps. For us, researching everything we didn’t know… in addition to attempting to confirm or reject what we _thought_ we knew, was a major step. Mind you, we’ve added some new learning to our knowledge and practice again this year, thanks to an excellent accountant. The more really good questions you ask, the closer you get to understanding how to make it all work for you… .

    When critics tell me you can’t become ‘very comfortable’ through realty, I rarely bother to demonstrate the learning we’ve undertaken. Most would dismiss it as just too hard. They’d much sooner be told to buy XYZ stock and pick up 40% in three months; or snap up a dozen ingots; or just await the crash. Once or twice I’ve considered responding with 20 questions, to challenge a critic’s own knowledge about property. I doubt whether most posting would even score 20%!

    We really enjoy the property market… and finishing off a new project is always a buzz, even when I have to pole-vole out of a freshly-dug soakwell, with a long shovel… . ๐Ÿ™‚

  • 197 Anon // Mar 21, 2010 at 7:02 pm

    ‘Funnily enough, it has only been really recently weโ€™ve read any books about realty, Anon. Travelling through BC, we stayed with a young bloke and his GF in their Victoria apartment. We presumed the hundreds of books he had on the subject were passed on by his father. Turned out he had bought them on eBay, recently. We found few of them worthwhile. Most advocated very high leveraging, extreme risk-taking (in our view) and they favoured a North American market/tax system, about which we know very little.”

    Thanks for the heads up. I think leveraging is ok aslong as you know what you are doing; which, like you eluded to, would not advocate high risk taking. High leveraging, at near zero percent interest rates, in a post crash market (excludes oz housing) isn’t the most riskiest proposition. Its funny people were advocating high interest loans and high leverage before the crash, and now they are saying its too dangerous to leverage at near zero and post crash prices.

    Regarding book quality, its generally difficult to find good books though hey. You usually have to buy 20-30 for every good one ;). Also the problem is the more popular a book is the more people use the technique…then it basically loses its effectiveness and competitive advantage. So I guess the people who make the big bucks really have no incentive to publish their secrets. I notice alot of the gurus who publish leave out alot of the main “guts” to their techniques.

    “Theyโ€™d much sooner be told to buy XYZ stock and pick up 40% in three months; or snap up a dozen ingots; or just await the crash.”

    Certainly there is much higher probability of one making more money on real estate than on stocks. There is just less psychology involved, which is a huge difference. You dont have the constant prices thrown in your face daily, and liquidity to exit in a few minutes without any thought at all! And like you said snapping up 40% in three months is VERY DIFFICULT, although most think its very simple to do.
    I know for one if Australian housing was 30-40% less than its current levels, I wouldn’t be in the Stock Market at all.

  • 198 Biker Pete // Mar 21, 2010 at 7:13 pm

    Ned: “Theyโ€™re a generation it is difficult to not have a very great deal of respect for Biker โ€ฆ IMO?”

    Have to agree with all you’ve said, mate! In their last years together, my folks held a brilliant valley with two freshwater streams, were virtually self-sufficient, drove old utes (’62 and ’64) they’d can-spray-painted themselves… and they thought they were the richest people on the planet. I figure they probably were. They’d come through the Depression, raised five kids, had everything they needed and were generous to a fault.

    Your people do well to manage so happily on $26K pa, Ned.
    We’ve never actually sat down to budget for retirement. In our case, we have so many different options, it’s impossible to know which option to budget for. Most of our free time is spent list-making. There are 23 things I must organise tomorrow, from pinning a grano worker down to a confirmed date for driveways and paths, to phoning to organise return of a double bed and fridge from a neighbour minding them, so I can move into another garage… .

    Just walked around our firebreaks with the rifle and tele looking for Tamara’s dinner. Very relaxing on dusk…. .
    Simple pleasures.

  • 199 Biker Pete // Mar 21, 2010 at 7:41 pm

    Anon: “Benjamin Graham
    Intelligent Investor (My favourite book I must say!)”

    I’ll buy it for our eldest. Thanks!~

  • 200 Ned S // Mar 21, 2010 at 7:48 pm

    Anon: “Geez Ned! How do they do it” – Effective use of their income as you say Anon. With them not being part of a generation that ever really felt confident they had enough disposable cash to allow themselves to get hooked on merchandising perhaps? Or on paying exhorbitant amounts to be entertained? Or on other people doing things for them?

    So they never covetted relatively useless “stuff” in the way that a lot of us do nowadays perhaps? And always saw value in being as self sufficient (re home repairs/maintenance and being able to cook and sew) as possible I guess? (Although my mum doesn’t especially bother sewing anymore – Things do change hey? ๐Ÿ™‚ )

  • 201 Biker Pete // Mar 21, 2010 at 9:02 pm

    Ned: “And always saw value in being as self sufficient (re home repairs/maintenance and being able to cook and sew) as possible I guess? (Although my mum doesnโ€™t especially bother sewing anymore โ€“ Things do change hey?”

    Being able to do practical things yourself is a real bonus. My mother (89) no longer sews, but she still produces food… and this now on a 300m2 city block. The double-storey Perth unit she owns has a nice little garden she still works… .

    When we first moved onto our ten-acres, I paid specialists a small fortune to do work I now do myself. When we started building homes, it was a similar situation. I now photograph every job I do, in case we have a warranty claim. In that event, I can prove that I over-spec.

    I really enjoy servicing our seven vehicles… legacy of my dad… but, y’know, it’s really only now I realise that… .

    My missus still sews. She supplied a Vancouver boutique while at uni. When I consider how bonding between partners occurs, I have to reflect that common values and goals provide a pretty strong foundation. Hope my sons are as lucky!~ ๐Ÿ™‚

  • 202 Biker Pete // Mar 21, 2010 at 9:11 pm

    “…yโ€™know, itโ€™s really only now I realise thatโ€ฆ .”

    And my dad’s building of two kit homes probably gave me the confidence to tackle some of the stuff I now do. Never really recognised how formative those experiences were, either… .

    Sometimes when I come up the stairs, my dad is there on the screen-saver which shuffles through several thousand images daily. Let’s enjoy the time we have with these remarkable people who not only gave us life, but gave us so much more through the years… .

  • 203 Greg Atkinson // Mar 22, 2010 at 8:25 am

    I am not sure the chances of making money from property are higher than from investing in stocks. Both have their good points and bad points and will outperform each other under certain conditions. I have seen comparisons made between the two but as usual the results are skewed to suit either the property bulls or the stock bulls.

    What is interesting now is that the stock market has obviously taken a hit, the financial markets have been battered and the listed property sector has been hammered, but Australian residential house prices remain solid and have been rising.

    Is this a market abnormality or simply reflective of a growing & affluent population?

  • 204 Ned S // Mar 22, 2010 at 8:58 am

    Yes it was handy being brought up by people who just naturally worked on the theory that if they wanted something done the first and obvious option was to ask if they could do it themselves.

    They tell some funny stories though – Like the roof my dad put on his first house – He’d busted so many fingers on his nail holding hand trying to drive the nails through the corrugated iron that he’d been reduced to holding the nails with a pair of pliers. But he mentioned it to a more experienced chap and was told Ya silly bastard – You’re supposed to punch the holes first! (Things like electric drills weren’t part of the average working man’s toolkit back then of course.)

  • 205 SV // Mar 22, 2010 at 9:37 am

    Someone please explain to me where does the affluent population come from in the east coast.

    I can see more Indian faces, perhaps some of them are professional migrants, but by no means rich.

    Hong Kong? nope, whoever wanted to move, moved when it was handed over to China.

    Chinese businessmen migrating (rather than investing) to Australia?

  • 206 Ned S // Mar 22, 2010 at 10:03 am

    Anyone who has anything to do with the mining industry SV? Plus blokes in the construction trades can get paid pretty well nowadays I gather.

  • 207 SV // Mar 22, 2010 at 10:08 am

    But Ned, mining is in WA and north QLD. What would these people be doing in Sydney, Melbourne and, to a lesser extent, Brisbane?

    As for tradies – yeah, they earn a bit better than before, but they are all local blokes. We are not importing tradies are we?

  • 208 Ned S // Mar 22, 2010 at 10:33 am

    Some mines certainly work fly in/fly out rosters these days SV (unsure of the extent) – But either way your average miner is still going to be wanting to buy his home in the likes of Melbourne, Sydney or Brisbane rather than in the immediate vicinity of the mine they are working at. Plus the capitals would have to seem as attractive to them as anyone else regarding investment properties I guess?

    There were a range of building trades were on the Skills Shortage list back in 2008. The government decreased the numbers coming in as a reaction to the GFC – Protect local jobs given the expected increase in unemployment. But I assume that will be reversed if it hasn’t been already.

  • 209 Biker Pete // Mar 22, 2010 at 10:40 am

    I’ve read two slightly conflicting reports in the last 24 hours.

    The first, WA’s Sunday Times, predicts million-dollar medians in almost every WA location by 2020. Yes, it was based on APM projections… . Surprisingly, it showed Aussies spent 34.4% of their income on mortgages in 1990… and 29% in 2010. All to do with interest rates… .

    I’ll get the URL for the second, now…

  • 210 Biker Pete // Mar 22, 2010 at 10:43 am

    OK… here’s the second:

    http://www.watoday.com.au/business/prosperity-on-rise-as-economy-shows-signs-of-recovery-20100321-qo40.html

    If true, some of this is pretty fascinating….

  • 211 Biker Pete // Mar 22, 2010 at 10:47 am

    From that report: “The National Performance Gauge, published today by CommSec, also shows those who own shares and property increased their wealth by 8 per cent last year and 40 per cent over the past decade.”

    I can state without hesitation that our wealth more than doubled during the last decade. Not all property… . Our improved knowledge of Super and taxation structures helped… .

  • 212 Biker Pete // Mar 22, 2010 at 10:58 am

    SV, I think _small businesses_ generate far more wealth than we can imagine. My nephew married a Vietnamese girl whose refugee vessel went north rather than south, making land in Italy!!~
    She now speaks three languages fluently. Against all odds, she now owns and manages a steel distribution company, north of Perth.

    The WAToday report addresses some of the issues you’ve raised.

    Most tradies I know would be MMs, by the way. One of the reasons I do more of our previously-contracted work… . ๐Ÿ™‚

  • 213 Ned S // Mar 22, 2010 at 5:03 pm

    “it showed Aussies spent 34.4% of their income on mortgages in 1990โ€ฆ and 29% in 2010” – That aligns with my general thoughts Biker – At least in so far that if one has had a mortgage over the last 12 months, it’s been a great opportunity to make additional repayments to get it down. (Apart from the unfortunate few who did actually lose their jobs.)

    As to one’s wealth going up by 40% over a decade: If they are talking nominal as opposed to inflation adjusted, it’s not impressive at all – Because that just represents 3.5% pa, which I reckon inflation would have taken care of.

  • 214 Biker Pete // Mar 22, 2010 at 5:29 pm

    Ned: “As to oneโ€™s wealth going up by 40% over a decade: If they are talking nominal as opposed to inflation adjusted, itโ€™s not impressive at all โ€“ Because that just represents 3.5% pa, which I reckon inflation would have taken care of… ”

    Too true! But ya know, it’s impossible for the average bloke to beat inflation… . It’s one of the reasons, that despite our considerable assets, we ask ourselves “How much is enough?!”
    My last pay cheque will be 54X my first. If wages continue to grow at that rate, I’ll be fighting Max and the blue heeler for the empty can of Pal!~ ๐Ÿ™‚

  • 215 Ned S // Mar 22, 2010 at 5:42 pm

    Inflation => “fighting Max and the blue heeler for the empty can of Pal!” … It’s got to be the worry the way the system is rigged hey mate? ๐Ÿ™‚

    “How much is enough?” – Very important point Biker. With the answer quite correctly differing for all of us. But given that you’ve asked that question, I reckon you are at least starting to get a handle on the answer???

  • 216 Biker Pete // Mar 22, 2010 at 6:22 pm

    โ€œfighting Max and the blue heeler for the empty can of Pal!โ€
    Still one of the most memorable scenes in cinema history.

    I can’t _begin_ to imagine how much is enough, mate. What I do know is that we’re all damned lucky to live in Oz; and that our extended family has everything on this property we’d need to see out long periods of want. Beyond that health is really all we need… .

    Despite that, it would be good to know what Labor will do with the KHR. I imagine close elections recently may temper any radical policy initiatives. We’ve put the next project on hold again, until our builder comes up with a better design/deal.
    Just put a sign up on that block asking 22% more than we paid for that block last year, mainly to see what’s swimming by… but also to show the builder that time-is-of-the-essence.

    The KHR spectre has really put things on hold for us…!~

  • 217 Ned S // Mar 22, 2010 at 6:31 pm

    For myself, I reckon I can get set up with “enough” over the next two years. But there wouldn’t be a lot of safety margin in that.

    To get same I’d probably have to work for 5 years. Problem is I can’t think of many jobs I’d like to do. Though making and fitting security screens could be good. And I do have a hunch the demand will increase over time.

    Another option would be to trundle back to uni and become a pharmacist – Suspect there’ll continue to be a call for them. (While it’s a commonsense option now, I ruled out being a doc many years ago – Asked myself how I’d feel if every time I greeted any client during my working day with Hello, how are you? .. the answer was Aw geez, no good doc – With the conversation continuing to deteriorate from there! ๐Ÿ™‚ ๐Ÿ™‚ ๐Ÿ™‚ )

  • 218 Ned S // Mar 22, 2010 at 6:49 pm

    “weโ€™re all damned lucky to live in Oz” – To be sure Biker. Which is part of why I sometimes mention the potential value of giving our youngies a good long look (6 months?) at a developing country.

    Wouldn’t want to see them exposed to an underdeveloped one at that age though – A bit risky given their life experience. Plus just a bit too brutal an exposure to reality I suspect – About 1/3 of them would become Mother Teresa; And another 1/3 would become lifelong communists; And the remaining 1/3 would become insatiable capitalists! ๐Ÿ™‚

  • 219 Ned S // Mar 22, 2010 at 8:49 pm

    I’ll run a radical one past yuz here gents – To what extent do you think that given that stocks tend to get whacked early with declines in the global economy while Oz housing gets whacked late (because it’s tied to our “real” economy which is pretty much at the bottom of the global food chain), that Oz housing is a sitting shot to hold up better than stocks – In downturns – Because the Oz government will get some warning and the chance to stimulate? Providing we don’t do the true Yank subprime thing? (Another Eg – No crash in China’s housing; They saw potential bad things coming – And stimulated; With housing booming.) Just a thought???

  • 220 Ned S // Mar 22, 2010 at 9:21 pm

    The reason I ask, is that while I know government fiddling has always been important re markets, my suspicion is that over the next 10 or 15 years it could become moreso?

  • 221 Biker Pete // Mar 22, 2010 at 9:26 pm

    Ned: “…why I sometimes mention the potential value of giving our youngies a good long look (6 months?) at a developing country…”

    We took our kids down into Tijuana back in ’95. One day was enough, Ned. Two trips into Java and Sumatra probably capped that off… .

    Agree with your rationale on crash-and-recovery theory. It has always been held that the first sign of any recovery will be a rising property market. But let’s consider you’re in government and you have the opportunity and political motivation to save just one one of the following:

    * the goldbugs, who have been continuously canning politicians for their stupidity and ineptness;

    * the stockmarket… and those who own shares;

    * the homes of millions of voters, the banks who lend to them
    and Australia’s third largest industry, construction…

    Gee, that’s a tough one! ๐Ÿ™‚

    Major storm here. The sky went bright red in every direction ninety minutes ago. Better switch off before it all blows!~

    Cheers…

  • 222 Ned S // Mar 22, 2010 at 9:41 pm

    Hmmm … Never much been into seances … Even when the sky is lighting up! But was that the spirit of King Neb just spoke to me and said Needdd … If I give you some bullion, can you buy me a nice little Bondi beachfront bungalow? ๐Ÿ™‚

  • 223 Anon // Mar 22, 2010 at 10:07 pm

    “The reason I ask, is that while I know government fiddling has always been important re markets, my suspicion is that over the next 10 or 15 years it could become moreso?”

    Yeppers, they say never to bet against the fed/governments. In the end if they want to do something bad enough it will happen ๐Ÿ˜›
    Alot of investors spend hours scouring proposed bills/policies and find areas where the government is going to support/pump money into and invest accordingly.

    Above definitely not advice, just commentary โ€” see financial advisors for financial decisions/info/advice etc.

  • 224 Greg Atkinson // Mar 22, 2010 at 10:17 pm

    I guess the fact that it is a no-brainer for governments to support the housing market is the bit that worries me, because their support is in fact distorting the market, and if you believe George Soros these distortions can lead to market bubbles.

  • 225 Ned S // Mar 22, 2010 at 10:34 pm

    “Bubbles” – Or fundamental changes in the market/politics of same Greg? With investors being prepared to accept maybe 3.5% pa rent from houses, plus the neg gearing tax payback, and even 1 or 2% capital growth – Which would still add up to a respectable return.

    But with the result being that our % home ownership declines. Not all countries have 70% home ownership of course. Must admit it still has me a bit “bum fuzzled” – But accepting of the need to roll with a few punches should they come one’s way given what we’ve seen over the last 18 months in all asset classes.

  • 226 Ned S // Mar 22, 2010 at 10:36 pm

    Anon’s point is the reality of it I think – At the end of the day it is the government that will make the call. And Biker has a pretty good track record of reading what that mob will do … ๐Ÿ™‚

  • 227 Biker Pete // Mar 23, 2010 at 8:19 am

    Whether they’re ‘bubbles’ or just the inflationary results of supply and demand is difficult to know. My nearest neighbour has just put his smaller, undeveloped SR lot on the market for $1.2 mil. Asked us if we are interested. At the time he bought it, for $125K, I was trying to get the vendor down to $120K.

    My first brand new car cost $2200.00. The same model today is $35K.

    When I consider these examples, the term ‘bubble’ seems ludicrous.

    Another: My first home, bought in a regional centre north of Perth, cost $32K. I sold it for $105K. Today it would easily fetch $500K. Bubble?

    The Sunday Times projections for the next decade, assigning almost every WA location a median $1 mil pricetag within this decade isn’t at all prophetic. Of course bears will argue that you can’t use past experience to project the future. Wishful thinking. OK when you’re young, but I wouldn’t want to be a tenant in retirement!~

  • 228 Greg Atkinson // Mar 23, 2010 at 9:11 am

    Yes it is hard to know when prices are in a bubble but we do need to be careful about simply using past data to project prices going forward. There is probably no better example of this than the Irish property market.

    I recall years ago that one of the hot topics was the amazing Irish economy and the booming property market. House prices were rising strongly because of a rising population, strong domestic growth, rising GDP and a shortage of new homes. (sound familiar?)
    We have might had the commodities boom but Ireland had the tech/services boom.

    But the property market slumped when the GFC took hold although some experts will tell you that the housing market was in bubble territory for years. The comparison between home and car, food prices etc all applied to Ireland as well, in fact people moaned about the soaring price of beer which I think went up even more than housing! (for shame)

    But it does not really matter what a beer costs in relation to house prices. What matters is how much are people prepared to pay for their beer or home and how much they can afford.

    So for house prices to keep rising as they have in the past we need a lot of good things to keep happening for the Oz economy or are we simply starting to become a little overly optimistic in Oz?

    Remember our housing market is fueled largely by foreign debt, government debt is on the rise and we import more than we export.
    This is also a trend…what would happen to house prices if we projected this data forward?

  • 229 Biker Pete // Mar 23, 2010 at 10:16 am

    All good points, Greg.

    I recall my grandmother telling me a loaf of bread was a farthing when she was a teenager… and her family baked their own. Today, bread is 1200 times that amount.

    While Ireland is a good example of a housing crash (and there are plenty of those!) you have to ask what it is that Ireland exports that the rising Asian giants want. Yes, her technology was cutting edge for a time (I once paid $800 for a really good turntable) but those days are long gone… .

    I’m re-reading Toffler’s ‘Future Shock'(1970) written exactly 40 years ago. As you know, Toffler attempted to prepare the world for rapid change… such concepts as ‘information overload’ abound. Yet Toffler could not have foreseen such technological innovations as the internet. His attempt to imagine the role of computing (effectively just 20 years old, at the time) falls _light years_ short of the reality. Not knocking Toffler… who could have imagined this future?

    Ultimately, it’s all back to Maslow. Humanity’s basic needs: water, food, warmth (energy?) and shelter are all things you can bet on. Oh… and continuing, progressive government intervention in all those needs! ๐Ÿ™‚

  • 230 Greg Atkinson // Mar 23, 2010 at 11:10 am

    Well Ireland was positioned to tap into Europe, South America Africa & the Middle East and there are plenty of dollars to be made there. They also positioned themselves to exploit the timezone differences between the U.S and Europe and plenty of global support hub operations sprung up there.

    A few years ago economists were pointing to Ireland as an example of a well managed economy, today many economists are saying the same thing about Australia. My point is things can change very quickly.

    As for technology, well I am a technology guy by background and I know it is foolish to try and predict where it will take us. (expect forward hopefully) The scary part is that I have watched Australia slide further behind in the tech sector over the last 10 years, so we better hope Asia keeps buying what we dig up (or farm” because we export very little else!

    By the way, one thing that is often overlooked when we discuss property is not what is being spent on mortgages, but what is being spent in total by consumers. For example when there are plenty of good years households tend to get into a pattern of spending more..i.e private school for the kids, annual holidays, purchases of flatscreen TV’s, bigger mortgages etc. and all this is fine as long as the money comes in. (or people think that the money will come in)

    But then when the lean years come around households need to save their pennies and of course most people will cut back on spending before they go into default regarding their mortgage, especially in Oz due to the nature of our home loans.

    So where are we now? Well credit card debt is down so people are obviously cautious about racking up consumer debt. In addition many of the big retailers sound pretty cautious about the rest of this year as the impact of the government stimulus measures start to fade. (remember the government was enticing business to spend last year as well)

    So I would suggest that the domestic economy is not quite as robust as most economists suggest, in fact I would say it was a little on the weak side as the stock market seems to indicate. But the paradox is that house prices keep rising!

    Why exactly this is happening is the million dollar question. The ten million dollar question is; can these rises be sustained?

  • 231 Biker Pete // Mar 23, 2010 at 2:46 pm

    Greg: “Why exactly this is happening is the million dollar question.”

    The expression ‘Safe as Houses’ is interesting, as it originally compared property with stocks:

    ‘This expression means ‘perfectly safe’, but some of the variants refer to physical safety, whereas others are used in the context of ‘a sure bet’. As safe as houses, first recorded in 1859, has endured in both meanings to the present day. Partridge quotes Hotten’s A Slang Dictionary as an explanation of its origin, saying that the meaning may have arisen “when the railway bubbles began to burst and speculation again favoured houses.”‘

    We Aussies reinforce the colloquial… always have… . Maybe this saying has become a truism… or perhaps we just heard the story of the Three Little Pigs so many times it’s as solid as a brick shiphouse… . ๐Ÿ™‚

  • 232 Biker Pete // Mar 23, 2010 at 4:49 pm

    Does this shed any more light on the subject?:

    http://www.watoday.com.au/business/at-any-cost-the-seduction-of-home-ownership-20100323-qsgb.html

  • 233 Greg Atkinson // Mar 23, 2010 at 5:29 pm

    Biker thanks for the link. It does indeed shine some light on the subject and makes me a little more worried about the economy in general. Perhaps home ownership is becoming a dangerous obsession?

  • 234 Biker Pete // Mar 23, 2010 at 5:49 pm

    Greg: “Perhaps home ownership is becoming a dangerous obsession?”

    I figure it’s more dangerous to be out than in. Imagine trying to save faster than property is rising, Greg. And imagine how well off our young friend might have been if he’d taken his $100K, plus Rudd’s $14K and bought _carefully…. ._ Australia will not be able to build sufficient homes to meet population demands. It’s dangerous all right… .

  • 235 Ned S // Mar 23, 2010 at 6:42 pm

    We’re told a home has historically cost 3 times median income. In Brisbane we are at maybe 7 times?

    So how much of that discrepency (if any) is sustainable? Well to answer that we need to know the reasons for it. So some thoughts on same follow:

    1. Women in the workforce
    2. Negative gearing
    3. Limitted land releases
    4. Higher quality/larger homes
    5. Higher quality infrastructure
    6. A GST that added 10% to everything
    7. Higher standards re OH&S and environment
    8. Low interest rates
    9. High immigration
    10. Superannuation I – add 9% to your labour costs
    11. Superannuation II – lower incentive to save long term as super will provide the extra needed for retirement so people can spend more now including on their housing
    12. Credit being more freely available than in the past
    13. The FHOG
    14. Decreasing diversity in the national economy leading to Oz housing being a bigger part of it that pollies/bureaucrats have felt to extract increasing tribute from

    Add whatever others you can think of; Figure out how much each of them added to prices; And what you reckon the likelihood of them being sustainable is; And you might have a ballpark answer to how sustainable housing prices are? Providing the economy continues to poke along nicely.

  • 236 Ned S // Mar 23, 2010 at 7:04 pm

    Must admit that looking at the list I do think that anyone who expects Oz housing to go back to 3 times median income because that was the historical norm is probably turning a blind eye to some fairly fundamental changes that have taken place in our society.

    While yacking about such stuff generally, (including Biker’s comment that “I wouldnโ€™t want to be a tenant in retirement!”) my perception is that historically the “average” Aussie couple seemed to manage to go into retirement with their house paid off and a little bit of savings to top up the pension. That worked OK when divorce rates were low. But given they are much higher now, we could see quite a few more retired tenants than in the past I suspect?

  • 237 senator13 // Mar 23, 2010 at 7:11 pm

    That’s some great insight guys – thanks. It has given me much to keep in mind.

    I just know that for me personally down the track I would rather own my own home and then it is one less thing I have to worry about.

    With all the policy settings in place currently it feels the right direction for me.

    Since buying my apartment I have still been attending open homes just to keep an eye on the market. Each of the ones I have attended over the last month have been packed and seem to go under offer fairly fast. Asking prices seemed to have nudged up as well.

    Is it sustainable – who knows – but for the time I feel comfort that I bought when I did am not having to try and compete now.

  • 238 Biker Pete // Mar 23, 2010 at 7:23 pm

    Ned: “…historically the โ€œaverageโ€ Aussie couple seemed to manage to go into retirement with their house paid off and a little bit of savings to top up the pension… ”

    Yes, that has been the pattern, Ned… and remember Australians survived a Big D Depression with typical Australian initiative.
    Not too bad an expectation after 40+ years slogging, either… .

    The other big D, Divorce, may knock a few about. I still believe our social security net is pretty good, maybe second best in the world… after Canada… and we’ll all come through, whatever ship floats down from the NH.

    My missus is currently eyeing a 30-unit inn, in a regional centre. She’s a worry at times, but her grasp of practical mathematics is so good, I still sleep soundly at night. Whenever I do get a little nervous, I remember the old man’s words:
    “Get obsessed, stay obsessed… .” Worked for him!!~ ๐Ÿ™‚

  • 239 Ned S // Mar 23, 2010 at 7:38 pm

    “My missus is currently eyeing a 30-unit inn” … You might need to check that you and the lady are thinking along the same lines as to “How much is enough” Biker? ๐Ÿ™‚ But that aside, having a missus who derives a certain amount of pleasure from adding to the family finances doesn’t sound like a bad thing to me at all! ๐Ÿ™‚ ๐Ÿ™‚ ๐Ÿ™‚

  • 240 Biker Pete // Mar 23, 2010 at 7:58 pm

    Have to agree that ‘enough is enough’, Ned. I’m quite happy to complete the current project… pull my super… and retire.

    You’ve summed it up well, mate. She derives great enjoyment from developing property. Remember that Rousseaun theory that these traits unfold at certain ages/stages of development? I remember the year that gene suddenly switched on. She’d always been as interested in property as I was, but suddenly all the lights started flashing and it moved from hobby-level to business-level passion.

    Pretty difficult to turn off…!

  • 241 Greg Atkinson // Mar 23, 2010 at 8:23 pm

    Ned I am not a big fan of historical “norms” when it comes to housing since they mean nothing if you don’t have a well defined baseline unit. As we have discussed a few times and as you mentioned above, the average home 30 years ago was a lot different to the ones going up today so I fail to see how economists can make comparisons between the two.

    All in all I reckon the family home is still a man’s (or woman’s) castle as they say. If people don’t get into too much debt then why should they worry if the value of their home dips say 10% over a few years?

    At the moment it is hard to imagine house prices in Australia going into long term decline and even if there were a sharp correction, isn’t this likely to just be a speed hump?

    The only dark cloud I see on the horizon is that the Australian economy is too dependent on commodities. If the China growth story ends in tears then the Oz economy and house prices will be under some real pressure.

  • 242 Biker Pete // Mar 23, 2010 at 9:03 pm

    But Greg, your past response has been “China isn’t Asia” and we utterly agree with that perspective. When India lifts off, I think we’ll all be a little awed, even at its domestic market.
    China’s domestic market is emerging, too. Yes, the transition from export-to-domestic economy will be a highly uncomfortable transition… and not just for the East.

    And, if it all blows up… and we own a dozen properties outright… there will be a helluva lot of Aussies far worse off. In other words, The Plan Worked.

    Just have to reel the missus in!~ ๐Ÿ™‚

  • 243 Greg Atkinson // Mar 23, 2010 at 10:05 pm

    Yes Biker China isn’t Asia that’s for sure, but the RBA and Government are counting on China being the centre of Australia’s universe for quite a while.

    I don’t imagine it will all blow up, nothing really blew up during the GFC when you think about it. But I suspect we will see a shift of wealth across the globe and where Australia fits into that picture, remains to be seen.

  • 244 Biker Pete // Mar 23, 2010 at 10:21 pm

    Your long-term concerns about what happens when there are no more holes to be dug.. and we realise we’ve sold it off too cheaply… are all valid, Greg.

    With one son in Canada… and his elder brother likely to move there for post-doctoral research in July, we’ve considered moving there. Never really seriously, though. In our view, Australia is open-wide to opportunity and may well be for many decades.

    Just listened to Australia’s top bankers explaining their views on lending to business as opposed to financing mortgages. Their comment that the latter are ‘far lower risk’ was an interesting perspective I’d never considered… .

  • 245 Ned S // Mar 23, 2010 at 11:05 pm

    A transition phase coming up maybe Biker? For both you and your wife. With the last chick leaving the nest even maybe?

    It all sounds like a real good thing to be having a chat about to be sure that “retirement” doesn’t throw up any unexpected obstacles to either of you continuing to be happy and fulfilled. (The thought of an unhappy missus terrifies me!!! ๐Ÿ™‚ )

    Is the Biker’s Home Maintenance Service still part of the plan? I bet at one level you’d love to get back to that creek in Mexico for a few months! ๐Ÿ™‚

  • 246 Biker Pete // Mar 24, 2010 at 8:25 am

    Definitely in transition, Ned. One of our reasons for spending a lot of our time in Canada last trip was to try to establish a base in the NH. We just couldn’t agree whether BC was a better proposition than Nova Scotia… ! ๐Ÿ™‚

    I really enjoy working on the rentals and this should remain part of the ongoing plan. We’ll probably get back to Mexico, but it’s likely we’ll explore the eastern coast.

    As for chicks leaving the nest, both ours left home at 17. So we’ve now had seven years of empty-nesting. We’ve encouraged the older fella to do his post-doctoral at UBC. That will be _four_ generations of us if he studies there.

    Think the missus has dropped the Inn idea. She’s back to drawing up 4X2s again… ! Probably noted my impending stroke…!!!~ ๐Ÿ˜‰

  • 247 Ned S // Mar 24, 2010 at 10:13 am

    “Probably noted my impending strokeโ€ฆ!!!” – She works on the theory that a lady having a stressed hubby is about as desirable as a bloke having an unhappy missus maybe? – So it sounds like you’ll both be just fine! ๐Ÿ™‚

    You’re in an great position financially though of course. With those sorts of assets and knowing your wife’s business smarts as you do, you could even sell a house or two so she was working with cash and say Here Darl, build 4x2s to your heart’s content (or do whatever else); With the only request being that if you ever manage to lose half of it, you’ll retire too!!! ๐Ÿ™‚ ๐Ÿ™‚ ๐Ÿ™‚

    I gather BC is a good bit of the world – Including climatewise – Which is why all of Canada’s homeless head there I was told. But Yep, Novia Scotia in summer sounds great too – And hugely more affordable you’ve said.

    It’s pretty important to have something to do in “retirement” that one enjoys – At 77 my dad is still always looking for minor projects he can do around his place – Enclose the patio, build a set of cupboards, paint the eaves, lay some pavers – It’s all fair game! My mum loves her art and gardening and cooking.

    I’ll eventually have to find something as well. With security screens probably being the most sensible thought I’ve come up with to date. (For my circumstances where I’d actually like to turn a buck from it.) Wonder how long it’ll be before Aussies start to find that they need steel entry doors with multiple triple locks on them? It’s a changing world!

  • 248 Ned S // Mar 24, 2010 at 11:00 am

    Just got the land valuation on my home – Up 30% in two years – In her wisdom Anna Bligh didn’t do valuations last year – Was pretty obviously worried values would go down and people might ask some hard questions if the related government charges didn’t go down to.

    A huge threat to SFRs is that given that governments see themselves as needing to collect more revenue rather than less in any downturn (to stimulate), then we get whacked but increased government charges (plus taxes from Mr Henry) as well as falling interest rates on any nice safe cash investments. It’s a tricky one! ๐Ÿ™‚

  • 249 Biker Pete // Mar 24, 2010 at 11:03 am

    “Iโ€™ll eventually have to find something as well. With security screens probably being the most sensible thought Iโ€™ve come up with to date. (For my circumstances where Iโ€™d actually like to turn a buck from it.) Wonder how long itโ€™ll be before Aussies start to find that they need steel entry doors with multiple triple locks on them? Itโ€™s a changing world!”

    Good move, Ned. Yes, security is becoming an issue. We had an attempted break-in at one of the rentals recently. Doors and windows all survived the attack. Insurance covered the damage.
    The young, pregnant tenant and hubby were quite concerned, so we’ve put up two sets of movement-activated double spots.

    Our main house has a brilliant security system. The only issue is that multi-coloured LEDs wink at you, wherever you go, even when turned off. A little unnerving at night… .

    I’ve been thinking along similar lines… what to do to keep one fully engaged in retirement(?) The home property needs constant work, of course… doing all the gutters this month.

    Your folks sound like they’ve really got it together. Wish I had some advanced woodworking skills! Failed carpenter, but I’m a good plumber… . ๐Ÿ™‚

  • 250 Ned S // Mar 24, 2010 at 12:25 pm

    The old bloke can pretty much do it all Biker. Including laying a reasonably straight course of bricks. And some basic electrical stuff – Although he sort of mostly manages to resist that temptation these days! ๐Ÿ™‚

    All basically self taught – One bit of advice his dad (who was more your stockman/labourer type) gave him, was learn to measure things boy – You’ll always get a job!

    I’ve got his original carpentry and woodwork books – “The Australian Carpenter” by C. Lloyd, 1955 reprint and “100 Beautiful Pieces of Furniture You Can Build” by a US mob called Popular Mechanics Company, copyright 1950.

    There were some pretty motivated people in that generation. Which is why they are known as “The Builders” I guess?

  • 251 Greg Atkinson // Mar 24, 2010 at 12:49 pm

    So I wonder what people feel are the chances of average home prices in Australia rising over say:

    A) The short term (2 years)
    B) The medium term (5 years)
    C) The longer term. (say 10 years plus)

    Is a correction in the short term fairly likely?

  • 252 Biker Pete // Mar 24, 2010 at 12:56 pm

    Ned: “There were some pretty motivated people in that generation. Which is why they are known as โ€œThe Buildersโ€ I guess?”

    You’re not wrong. My dad was also a fair example of that generation of can-do people.

    I can handle ‘rough’ carpentry, but when it comes to finesse, I’m finished… . Electrickery? Forget it. Watched my kids building computers when they were 10 and 12, static-wrist-straps and all, but it must have come down from the wife’s side. You can still see patents developed by William Marchant Rand online.

    We’ll spare Greg this online chat for a while, I think… . Must test his patience sorely! Can you get the links to work? I click on ’em, get a blank page, and a single word: DONE.

  • 253 Ned S // Mar 24, 2010 at 1:11 pm

    No issues with any links here at all Biker – Eg, this last one you put in worked fine for me:

    http://www.watoday.com.au/business/at-any-cost-the-seduction-of-home-ownership-20100323-qsgb.html

  • 254 Biker Pete // Mar 24, 2010 at 1:18 pm

    Sorry, mate. I meant the little ad boxes on his home-page, etc.
    I’m using Firefox and Snow Leopard, both the most recent versions. Must try Safari, Camino and Chrome, to see if any of those work.. .

  • 255 Biker Pete // Mar 24, 2010 at 1:28 pm

    A) The short term (2 years)
    B) The medium term (5 years)
    C) The longer term. (say 10 years plus)

    Getting us back on track? Don’t blame ya, Greg! ๐Ÿ™‚

    A. 2) In WA, I’d say 7% per year, minimum…
    B. 5) In WA, up 40% from 2010;
    c.) 10) In WA, double today’s values.

    We really only know our state. Several of our properties doubled in value in three years… one virtually trebled… _without_ the boom / population increase we now expect.

    Considering the likelihood of inflation, will my forecasts mean much? We think of today’s million as yesterday’s 100K.
    Wealthier on paper, but if my favourite bread is $10.00… ๐Ÿ˜‰

  • 256 Ned S // Mar 24, 2010 at 2:00 pm

    By and large the ad boxes worked Biker – One didn’t like me but it may have just been a temporary thing for that site – Just tried it once.

    One other possible issue with house prices is Mr Rudd’s halving of the amount of super contributions people can get tax breaks on. With the KHR having also having pointed out that high income earners get more of a tax break advantage from their super contributions than others. If that gets “rectified”, high income earners are going to be looking for other tax breaks. And if neg gearing RE is still available, then it’s a pretty obvious move to make.

  • 257 Biker Pete // Mar 24, 2010 at 2:20 pm

    Thanks for trying the ads, Ned… .

    “One other possible issue with house prices is Mr Ruddโ€™s halving of the amount of super contributions people can tax breaks on.”

    * YES, that could happen. It would really affect our ability to minimise CGT during the next nine years…

    “With the KHR having also having pointed out that high income earners get more of a tax break advantage from their super contributions than others.”

    * YES, and we’ve used that to place 70%+ of our before-tax incomes into Super for the last six or so years. Our timing is pretty good on that, though. We no longer need salpack to reduce our tax… . No effect on us personally…

    “If that gets โ€œrectifiedโ€, high income earners are going to be looking for other tax breaks. And if neg gearing RE is still available, then itโ€™s a pretty obvious move to make.”

    * YES, but remember that the CGT exemption through super might have been flushed…! Currently we can write off $900K every three years… .

    There are a SCORE of possibilities we have gone through here.
    Abolition of the TTR would be a pity for Aussies, but our timing here is good. Abolition of NG would have a dual effect:
    a.) less construction; b.) more demand for rentals…. leading to c.) higher rents…. . Tax claims on mortgages may be uncle Kev’s ace-in-the-hole. Could be the other reason he’s sitting on the KHR… .

    Our greatest _fear_ is the sudden ‘freezing’ of all Super funds… with compulsory annuities forced on us. My own timing should mean I bail out expeditiously (possibly in 21.5 days!) Goldilux would be caught right in it! She’d put off retirement until sixty, if that occurred… .

    We’re in ‘holding pattern’. About to move into the newie for a couple of weeks… carpets in Monday, venetians Tuesday, us Friday! We’ll get a few fish, squid, crabs, in the tinny. ๐Ÿ™‚

  • 258 Ned S // Mar 24, 2010 at 4:06 pm

    “There are a SCORE of possibilities we have gone through here” – Too many to try and predict what they’ll come out with of course.

    “Abolition of the TTR would be a pity” – It would up-end my plans that’s for sure! To the point that I really would consider becoming a reverse boat person – Albeit briefly while I sulked perhaps? ๐Ÿ™‚

    “compulsory annuities” re super – My personal feeling is that if we get that (and we very well may), it will be capped at the lesser of some maximum amount and some % of the total maybe? Just seems too unreasonable to effectively impound it all – Not straight up anyway. They’d have to say This will begin to be phased in as of 2015 or somesuch so that people who are really relying on their anticipated cash payout, have some sort of chance to rework their plans. IMO.

    Sun’s over the yardarm again … Yeehah! ๐Ÿ™‚

  • 259 Biker Pete // Mar 24, 2010 at 4:37 pm

    Sunโ€™s over the yardarm again โ€ฆ Yeehah! ๐Ÿ™‚

    OK for some! Just 3:30 here… .

    Won’t get at it until 6:00 pm. Long beach walk promised….
    Sprinkling with rain. Enough to drive me indoors. Fairly difficult cleaning gutters in the rain atop a bloody great ladder!

    The TTR is a minor lotto win, Ned. I’d hate to see it end.
    We pull about $50K pa from two of the six accounts, tax free.
    That _exactly_ matches annual earnings in cash, also tax free.
    Gotta take my hat off to Howard & Costello for that one!~

    Hope you’re right about the phase-in. Seems fair “…so that people who are really relying on their anticipated cash payout, have some sort of chance to rework their plans…”

    Mine dew, I’m extremely biased!~ ๐Ÿ™‚

  • 260 Ned S // Mar 24, 2010 at 5:17 pm

    Reading Henry’s stuff Biker, he’s a got a decent whack of socialist in him; And he knows he needs to collect more tax; And he really, really knows his stuff – So we can’t expect all the news to be good.

    But he does seem to be a realist. And comes across as “reasonable” in many ways – For example, his thought on the “fairness” of potentially compensating people who might find themselves on the wrong side of some rule that gets changed.

    So he isn’t 100% one way – As in he sees a lot of benefit in getting the welfare recipients to work. (As well as continuing to extract higher tax from those more able to pay of course.)

    And I also heard a bit of gos once upon a time that there was a view in Treasury that taxing income on savings that had already been taxed had a bit of a double dip type of smell to it – Which thought did seem to possibly be reflected (in spirit at least) in some small way in his early stuff about wanting to encourage saving. I’m hoping there still might be a bit of that filter through?

    Sun … Yardarm – Yeh, it could have been a bit of low cloud? … But it fooled me! ๐Ÿ™‚

  • 261 Vince L // Mar 24, 2010 at 8:00 pm

    If international investors find somewhere else to park their money then this could take some air out of the real estate scene. Also I would not be counting on commodities driving prices upwards much further, there are a lot of mining projects in the pipeline outside Australia and these will keep a lid on iron ore prices etc.

  • 262 Biker Pete // Mar 24, 2010 at 8:40 pm

    Yeah, Vince… yer right. See QLD just did a $60 bil gas deal with China, Ned. Must be about the same size as W.A.’s, I guess.

  • 263 Ned S // Mar 24, 2010 at 8:55 pm

    The projects are in Africa Vince – Which is a bit of the world which since the times of the Pharoahs has never had much to recommend it apart from “opportunity” (read “risk”) perhaps?

    Hey, I might be a bit crazy … Or desperate??? (so “could” consider a $150k pa job in SA or Ghana?) – But they can seriously put the Democratic Republic of the Congo and Niger and suchlike where “the sun don’t shine” – Would YOU want to live (and work) in those places?

  • 264 Ned S // Mar 24, 2010 at 9:03 pm

    Yeh, I had two Brits and a Canuck drop in for a four hour yack ‘n fish ‘n chips a couple of Sundays ago Biker – They were over here working on DCS type stuff re LNG fields. The Canuck couldn’t shutup – Reckoned Brisbane is gunna BOOM! (The Brits were a bit more reserved of course; But I got an email from the missus of one of them after he’d got home saying he figured Oz might be a decent place to live … ๐Ÿ™‚ )

  • 265 Greg Atkinson // Mar 24, 2010 at 9:19 pm

    Actually we are not getting what I would call great deals from some of the big commodities deals going down in Oz. Remember folks some of these projects are majority owned by foreign companies and our cut of the revenue is not fantastic. In the case of the Gorgon Project, Western Australia will actually be buying back it’s own gas from a foreign consortium.

    In other deals the large customers in China, Korea, and Japan are taking significant equity stakes in the projects and they are doing this to secure good prices for themselves, not for Australia.

    As for Africa, yes folks they don’t pay $150k for jobs out there. Chinese engineers head out to these projects and work for a fraction of what workers are paid in Australia.

    Mongolia may have larger deposits of Uranium than Australia, Russia is signing deals with Japanese companies to get projects underway to supply LNG to Asia, PNG is still virtually untapped and while we rest in our beds in Australia secure in the belief our commodities will save the day, our major trading partners are working to sidestep us or buy up what we own from under our noses.

    Finally as I have said many times before. We don’t value add much in Oz, so when we think we are getting a great deal for iron ore it comes back to bite us when we buy imported steel, imported cars, imported ships and even cheap imported pink batts ๐Ÿ™‚

  • 266 Biker Pete // Mar 24, 2010 at 9:42 pm

    As a 457 sponsor, I get referrals from friends all over Europe; from well-educated young people with skills we need, wanting to emigrate, now.

    I thought Rudd’s response to Abbott in regard to Australia’s strong economic position (second-best in the world) relevant.

    Despite that, I confess I’m still astonished at the resilience of the ASX. Tonight’s news figures showed us No. 1 in the world… with Italy’s stock market the worst… .

    Gawd help the Brits… over one trillion pounds in debt… and an election in the offing… .

    Value-adding? If the banks see business as riskier than houses, why would you bother? Both my sons see themselves setting up businesses, but with labour costs so high, comparative to Asia, they’ll need to do their homework… .
    I know you’ve advocated setting up in Asia, Greg; but our BC friend, who exports very, very high quality air-conditioners (hospitals, silicone chip factories, etc) to the US, recently sold off his Chinese factory. Too many management issues… .

  • 267 Greg Atkinson // Mar 24, 2010 at 10:18 pm

    What I worry about is that Australia is being outflanked. It has happened before in the wine industry, tourism and years ago in the manufacturing sector.

    What really pushes our economy along now? Commodities and housing..is that healthy I wonder?

    Yes China has some issues, but there are plenty of other Asian nations who already run rings around us in everything from ship building to the construction of nuclear reactors.

    But maybe I worry too much. Perhaps as long as we have our resources sector all will be okay….

  • 268 Biker Pete // Mar 25, 2010 at 8:22 am

    Wine? I think we should fear Chile and Argentina, mainly because their wines are good quality and their costs incredibly cheap. Shipbuilding? Our high-tech aluminium ferry-builders operate efficiently, but six months without orders virtually shuts them down, with subsequent loss of skilled labour.

    There’s no question that it is difficult for Australia to manufacture any _export_ product competitively, due to labour costs…. which are not going to go down, while miners are paying double and treble wages. You’re right, that is neither healthy nor positive for the future, once wages rise in Asia. Our imports will become highly expensive. Maybe that’s the point at which competition becomes possible… .

    I have a feeling that the scenario you describe will continue (commodities and construction) for decades to come. Given that situation… and knowing governments will intervene in very critical areas… how should investors a.) accumulate to ensure a comfortable retirement; b.) preserve and protect that wealth?

  • 269 Greg Atkinson // Mar 25, 2010 at 9:12 am

    Biker I think we are on the same wavelength. My growing concern is that government support of the housing market is causing prices to become distorted and I don’t see this changing because governments (of any flavour, state or federal) cannot afford not to support the housing market.

    So where does it all end? I wonder?

    As for competition from Asia, even as wages there do increase the region will probably still be more competitive than Australia. Japan is a classic example, wages here are not low but Japan still has a large manufacturing sector that is far more efficient than most operations in Australia. (apart from the ones the Japanese has set up)

    Our car manufacturing sector for example only survives because it is subsidised by taxpayers.

    By the way I think Vince has a good point about commodities and home prices. Have a look at the deal just signed for LNG in Queensland. It is between a U.K and Chinese company to tap our resources to sell to China. Now tell me, isn’t that a little odd?

  • 270 Ned S // Mar 25, 2010 at 10:05 am

    Africa as a major supplier of base mineral resources: I guess if anyone can help turn African nations around it just might be China? Tricked if I’d want the job though. And it could give the Yanks an awful lot of stones to throw at them.

    Even turning a blind eye to the bulk of the political issues, you’ve got real basic stuff to contend with like labour unions (and governments) that don’t love mechanisation due to the perception that it decreases jobs. And if you are in sub-Saharan Africa, a very real problem with your valuable employees dying of AIDS within a fairly short time of getting them trained. And it isn’t necessarily regarded as polite to express a preference for employing HIV negative personnel I gather?

    To get just the tiniest feel for some of the differences one could encounter in such countries, consider Mr Jacob Zuma’s 2006 rape trial: Yes your honour, I did it. She turned up in a short skirt. And all good Zulus know that means a lady is ready for it. So it would have been uncaring of me to not attend to her need. Even though I knew she was HIV positive. But I had a shower after our unprotected encounter to help ensure I didn’t catch anything. Verdict: Not Guilty. (PS: The lady with the short dress has since been granted asylum in The Netherlands.)

    http://www.timesonline.co.uk/tol/news/politics/article3087478.ece

    Any company that walks into such countries is walking into a minefield of issues. And the “We’re just here to do business” approach doesn’t even go close to cutting it. Didn’t work for the Brits and Yanks re Apartheid in SA. And won’t work with whatever the current issues in these countries are – Not for a developed nation that has a proportion of its citizens that sometimes have some tender hearted thoughts about “human rights” issues anyway. Even a real risk that once your businesses get involved, your government has to get involved – Very, very high risk stuff. IMO?

    Can China make a better fist of it??? That will be interesting to see! ๐Ÿ™‚

  • 271 Biker Pete // Mar 25, 2010 at 10:17 am

    Ned, you’re spot on with Africa. And have you heard about Zimbabwe’s new ‘indigenisation’ laws? Nationalisation in its most popular form…!

    Greg: “…governments (of any flavour, state or federal) cannot afford not to support the housing market…” Correct… it’s political to the extreme. Kochie was on Sunrise this morning feigning surprise that one-in-seven Aussies owns an investment property. Well, there’s 14% of your vote. ๐Ÿ˜‰

    Now on the Super scene, Aussies with a large fund are more exposed. Just 2% have a large amount cached. I figure we’re a very, very large target. Don’t know whether to duck, or run…!

  • 272 Ned S // Mar 25, 2010 at 10:21 am

    “Commodities and housing” – I read a somewhat tongue in cheek comment by a bloke recently that all one needed to know about investing was that whenever BHP shares dropped a bit, buy some and throw them in your bottom drawer.

    Add a negatively geared house or two to that, plus 10% cash maybe, and Yep, it is just possible one has a pretty respectable Oz investment portfolio! ๐Ÿ™‚

  • 273 Biker Pete // Mar 25, 2010 at 11:20 am

    An acquaintance lives comfortably off his Apples shares. He has _nothing else._ Not even a home.* Buys low. Sells high. Travels a lot!

    * Gotta admit that I was just a little amused, tho’, when he:
    1.) Sold his house at the absolute WA property peak; 2.) Moved into rentals; 3.) Complained _bitterly_ when rents went up. ๐Ÿ™‚

  • 274 Ned S // Mar 25, 2010 at 12:01 pm

    “Zimbabweโ€™s new โ€˜indigenisationโ€™ laws” – I knew a bit about their old ones Biker – Last I read they were down to something like 10% of their pre-Mugabe farmland being productive or somesuch? The word “insanity” comes to mind.

    Just one more on Zuma – He and his have a well known fondness for a song called “Bring me my machine gun”! ๐Ÿ™‚ ๐Ÿ™‚ ๐Ÿ™‚ If someone was to suggest investing “in Africa” to me, my initial reaction would have to be “I’d like to check out prospects on the Moon first please!” ๐Ÿ™‚ But then I’m definitely not your high risk/high reward type of chap.

    “one-in-seven Aussies owns an investment property” – A lot of those would be public housing that has been sold off over the last decade I’d guess. Here, buy these people – We don’t want the upkeep or the hassle.

    Super – Wish I had some sort of insight Biker. My personal feeling is that what you are suggesting is not necessary at this time. And I guess one always likes to hope that some of that 2% you mention are pollies who’ll be a bit reluctant to shoot themselves and their high superannuation long term public servant mates in the foot? With the word that comes to mind in relation to it being “draconian” anyway. But given your exposure and the fact you have the opportunity to reduce it, I can certainly understand your concern.

  • 275 Greg Atkinson // Mar 25, 2010 at 12:24 pm

    What do people make of this? http://www.theage.com.au/business/bubble-risk-rates-set-to-rise-rba-says-20100325-qxo8.html?autostart=1

    Does the RBA fear a housing bubble?

  • 276 Ned S // Mar 25, 2010 at 12:29 pm

    They’ve feared a housing bubble since 2002 that I know of Greg. So they no longer have any credibility in that regard – The little boy who cried wolf story. Unfortunately that doesn’t mean that the wolf may never actually come.

  • 277 Greg Atkinson // Mar 25, 2010 at 12:46 pm

    Well Sydney peaked around 2002 so I guess they got something right ๐Ÿ™‚ Seriously though I am a bit worried about house prices as well since most people tell me that I have nothing to worry about.

  • 278 Biker Pete // Mar 25, 2010 at 12:52 pm

    Greg: “I am a bit worried about house prices as well since most people tell me that I have nothing to worry about…”

    Worried about prices rising… or falling, Greg?

  • 279 Greg Atkinson // Mar 25, 2010 at 1:28 pm

    About them falling ๐Ÿ™‚ I guess all should be okay if the Oz economy can kick ahead when the Government stimulus spending fades. Still I guess we need to ask ourselves the question, have we avoided a major housing correction or has it just been pushed back? I wonder what George Soros would say..if only he read this blog! ๐Ÿ˜‰

  • 280 Biker Pete // Mar 25, 2010 at 2:12 pm

    OK. I thought you might be worried about not being able to buy in again… .

    Investor sentiment is a funny thing. Midday news report says property investors are cautious about investing, with interest rates likely to rise. I have to agree, personally. So less houses will be built. But the population _will_ rise.

    In sought-after locations that really can mean only two things: ‘values’ rise… rents rise.

    With so much equity, my missus says if supply decreases we should be building more, now… .

    (Soros? He’d tell you NOT to buy… then quietly buy all the best stuff. There’s a great story about Packer employing a bloke to visit every little country pub and cellar, to quietly buy up all the Grange he could find. He made a killing.
    My mate once picked up a doz 1980s at $30 each. Worth $800+ now… .)

  • 281 Biker Pete // Mar 25, 2010 at 2:14 pm

    Ned: “…some of that 2% you mention are pollies whoโ€™ll be a bit reluctant to shoot themselves and their high superannuation long term public servant mates in the foot…”

    Bloody pollies have different rules to the rest of us, mate! ๐Ÿ™‚

  • 282 Biker Pete // Mar 25, 2010 at 2:48 pm

    Remember, too, that we went looking for property bargains in the northern hemisphere… and despite all the data, found _nothing_ of real value in highly-desirable areas.

    Overpriced crap in the UK (despite the fabled fall in values!) and prices close to ours, in areas of NA where demand outstrips supply. Yes, friends have bought a place in Tucson, but they looked at hundreds of ‘bargains’ before finding any value. Even in coastal Mexico, which we both enjoy immensely, values had held firm.

    If you look at the US cities suffering the most, you’ll generally see why realty in those areas is down. Detroit is an extreme example, as is Las Vegas, for different reasons. Miami?
    Wouldn’t touch it with a bargepole… . ๐Ÿ™‚

  • 283 Greg Atkinson // Mar 25, 2010 at 3:21 pm

    Biker you are right about Soros. He is talking about a gold bubble now, but I wonder if he is still buying? I don’t think I will buy a home back in Oz for a while simply because I don’t live there, not because of any fears about prices falling or rising.

    The direction of the housing market has never really impacted my (or many others I suspect) reason for buying a home. If you don’t want to rent you buy (if you can afford to)..pretty simple decision really, and you can’t live in your car while waiting for the prices to fall..if in fact they ever will.

    Now buying for investment purposes is another thing altogether and there you need to factor in rents so as long as you don’t overpay/over-borrow, then I would guess you have a pretty large safety buffer. The trick is to know if you are overpaying and that is where I guess you have the inside scoop Biker in the areas you ply your trade.

  • 284 Ned S // Mar 25, 2010 at 4:36 pm

    “Complained _bitterly_ when rents went up” – Gawd! ๐Ÿ™‚

    “pollies have different rules to the rest of us” – You are not helping to improve my opinion of pollies Biker – And it really shouldn’t be too hard a thing to do?

    “property bargains in the northern hemisphere” – It’s a damn interesting point – To just what extent have we been “spoiled” down under in the past? I’m not sure – But I still reckon governments are stitching us up on land prices regardless?

  • 285 Biker Pete // Mar 25, 2010 at 5:35 pm

    โ€œComplained _bitterly_ when rents went upโ€ Yes, it was quite interesting, as we have a close mutual friend, who, without initially even realising the irony, asked me if I could find ‘cheaper’ accommodation for the third party, who was in high dudgeon because his rent went up ten bucks a week! We had nothing vacant at the time, anyway.

    Property bargains: Anything we really liked in BC started at around $1.6 mil, Ned. Now, if we’re there less than six months per year, that would be silly. We saw some nice apartments in a very rural area, but prices compared with those in Perth city. Yes, my view is that we have it pretty good here… .

    Plying my trade: Yes, I’m probably WA’s leading amateur soakwell installer, Greg. Dad would be quite proud of me! ๐Ÿ™‚ Seriously, when it comes to realty, I can list a dozen times I’ve got it very, very wrong. Didn’t buy when I should have… .
    (I’m only very occasionally reminded about this.)

  • 286 Ned S // Mar 25, 2010 at 6:05 pm

    Re potentially having been โ€œspoiledโ€ down under in the past Greg, what is the “typical” ma ‘n pa and one to two kids type accommodation expectation in Japan?

    Difficult one to answer I know, but just to give you my ballpark feel for the current Oz thing to compare against:

    Minimum expectation – Stand alone house on 520 m2 of land with 3 bedrooms, 1 bathroom, a patio and 1 lockup garage attached to the house – 120 m2 of house maybe? (Ouch – That’s lean! ๐Ÿ™‚ ) Within 40 minutes travel from work.

    Maximum (reasonable) expectation (for a cashed up FHB) – Stand alone house on 620 m2 of land with 4 bedrooms, 1 bathroom + ensuite, a patio, a rumpus, a study and 2 lockup garages attached to the house – 240 m2 of house maybe? (With those who have some extra cash to splash liking bigger rooms.) Within 40 minutes travel from work.

    Typical specs being low set brick veneer, pine studs etc, gyprock interior, colourbond/concrete tile roof, laminate kitchen, carpeted floors in bedrooms, tiles elsewhere (except garage and patio where raw concrete is OK.)

  • 287 Ned S // Mar 25, 2010 at 7:14 pm

    If Rudd had testes the size of grape seeds, instead of lining up to debate a loser like Abbott, he’d pull on the following:

    * A FHB
    * An SFR
    * A welfare recipient
    * An SME owner

    Then we’d see pudden’s stuff – But he doesn’t have any “stuff” of course. No smiley face – Hmmm … ๐Ÿ™ – ๐Ÿ™‚ ๐Ÿ™‚ ๐Ÿ™‚

  • 288 Biker Pete // Mar 25, 2010 at 7:39 pm

    NED’S SPECS: Interested in these specs, because they differ here.

    Minimum expectation โ€“ Stand alone house on 520 m2 of land with 3 bedrooms, 1 bathroom, a patio and 1 lockup garage attached to the house โ€“ 120 m2 of house maybe? (Ouch โ€“ Thatโ€™s lean! ๐Ÿ™‚ ) Within 40 minutes travel from work.

    * Substitute carport for lock-up garage; within 15 minutes of work.

    Maximum (reasonable) expectation (for a cashed up FHB) โ€“ Stand alone house on 620 m2 of land with 4 bedrooms, 1 bathroom + ensuite, a patio, a rumpus, a study and 2 lockup garages attached to the house โ€“ 240 m2 of house maybe? (With those who have some extra cash to splash liking bigger rooms.) Within 40
    minutes travel from work.

    * Add home cinema… standard in most of our rentals; add aircon; add solar HWS; optic-fibre; 220 m2 – 260 m2. Two our rentals have three bathrooms.

    Typical specs being low set brick veneer, pine studs etc, gyprock interior, colourbond/concrete tile roof, laminate kitchen, carpeted floors in bedrooms, tiles elsewhere (except garage and patio where raw concrete is OK.)

    * Double-brick in both cases.

  • 289 Ned S // Mar 25, 2010 at 8:03 pm

    “within 15 minutes of work” – Oh sweet Lordy Biker – I guess it might have been possible for the average family to do that once? But not in my recollection re Brisbane? (Unless you lived quite a bit sub par re the dwelling.)

    Maximum (reasonable) expectation (for a cashed up FHB) – “Add home cinemaโ€ฆ standard in most of our rentals; add aircon; add solar HWS; optic-fibre; 220 m2 โ€“ 260 m2. Two our rentals have three bathrooms.” + “Double-brick in both cases.” – You bloody miners are just TOO bloody flash!!! ๐Ÿ™‚ ๐Ÿ™‚ ๐Ÿ™‚

    Wonder what Greg will have to say about Japan?

  • 290 Biker Pete // Mar 25, 2010 at 8:31 pm

    Put ya outa yer misery, son. Paid $375K. Rent $600 pw.
    Yep, we’re spoiled.

  • 291 Biker Pete // Mar 25, 2010 at 8:44 pm

    Lot of features I didn’t mention, including 840m2 block.

    Here’s the real laugh. My tenant makes four times the rent we charge him, on his Pilbara rentals… . ๐Ÿ™‚

  • 292 Biker Pete // Mar 25, 2010 at 9:00 pm

    One should never ask someone else what they paid for a house.
    And I did. So I reasoned I’d asked you to take on a miserable chore. Sorry, mate. Lesson learned… .

  • 293 Ned S // Mar 25, 2010 at 9:05 pm

    “My tenant makes four times the rent we charge him, on his Pilbara rentals” – Yeh Biker, all comes back to that thing about “How much is enough” I suspect? (With a very necessary cushion for sure!)

    But not to be overdone unless one figures they have some deep psychological need to be a Warren B or Johannes B mega acquirer rather than enjoyer – With a bit to pass on to those they love. IMO.

  • 294 Ned S // Mar 25, 2010 at 9:19 pm

    Didn’t notice you ask me what I paid for a house Biker? Maybe I’ve become inattentive?

    But no dramas any which way providing PB hasn’t hit us. We’ve argued with all and sundry all whichways about Oz housing for over a year now – Including against each other and even ourselves ( ๐Ÿ™‚ ) So any minor misunderstanding just ain’t a hassle. To be sorted later if necessary. But most likely not necessary … ๐Ÿ™‚

  • 295 Biker Pete // Mar 25, 2010 at 9:23 pm

    Totally down to me, Ned. Click through the house. We’re still amazed we scored a bargain like this. One of the very fortunate times I listened to my better half… and wrote a cheque within seconds of doing the tour… .

  • 296 Biker Pete // Mar 25, 2010 at 9:35 pm

    So, having picked up quite a few good deals like that, why would we buy OS? We had believed all the guff about prices in the UK and NA having dropped out of the sky… but we really only found bargains in locations with major issues: high unemployment, poor weather, long distances from major services, etc.

    There’s no question that we all take what we have for granted.
    I’m probably the worst… .

  • 297 Ned S // Mar 25, 2010 at 9:43 pm

    Nah, I don’t believe you take it for granted Biker – You’ve done just a bit too much work of both the physical and thinking types for that. I think you know my general thoughts on people who weren’t born with the proverbial silver spoon positioned in their posteriors and managed to make a go of it regardless. Cheers hey! ๐Ÿ™‚

  • 298 Greg Atkinson // Mar 25, 2010 at 10:56 pm

    Ned the typical home size in Japan varies a lot. Also generally speaking, the homes are built to a higher standard than in Oz because of the need to withstand earthquakes.

    As for home sizes, the Tokyo area for example has a population greater than all of Australia and so in the central areas you would be looking at a 2 bedroom apartment of say 60-70 m2 in size. But of course the places get bigger as you head further out and get bigger again in the rural areas where some houses are quite large.

    The thing is that if you live in a major city in Japan you have access to services and infrastructure that you just can’t get in Australia. Where I am for example, within 15 mins I can be at the airport, the main railway station (with access to “true” high speed rail) and a port with a high speed ferry service to South Korea. Within 10 minutes by foot I can get to the local railway station, several 24 hour supermarkets, a number of hospitals, schools and the list goes on.

    So my gut feeling is that if you actually wanted to forgo the convenience of living near services etc in Japan and head out the outer suburbs/regions you could get a good size home at a price pretty much the same as the median home price in Oz. But you would have to head a long way out!

  • 299 Ned S // Mar 25, 2010 at 11:17 pm

    Ta Greg – Is “a 2 bedroom apartment of say 60-70 m2 in size” what ma ‘n pa in Tokyo with a kid or two would be looking at as “reasonable”? (Sounds very similar to Russia if so.)
    And what might same cost in those ever more ubiquitous USD at this time?

  • 300 Biker Pete // Mar 26, 2010 at 9:46 am

    Here’s someone (Gelber) who agrees with your views on the resources boom, Greg:

    “”It doesn’t make a lot of sense giving the infrastructure to China,” he said, referring to the proposal to sink more than $700 million of taxpayer funds into the port development at Oakajee.

    “We’re basically subsidising it for people who will be selling stuff back to us.”

  • 301 Ned S // Mar 26, 2010 at 1:29 pm

    At 60-70 m2, the average Aussie family would be looking for more space at some point I’d say.

    There’s different ways things could unfold of course, but it looks to me like we’ve pretty much got ourselves into a corner with housing where the least painful solution all round (with it being the one the RBA and Commonwealth government want to see), is for lots more of that apartment style living.

    It can definitely have it’s advantages as Greg points out – If the services and infrastructure are good. I do recall Greg saying he was able to dispense with his car a while back. Which would a very difficult thing for the average Aussie family to do.

    But the policy makers aren’t keen to come straight out and tell us they see us as budding apartment dwellers I guess. As I think it would be seen by most as a decline in our standard of living. Just not a big vote winner at all.

    I guess one question to be asking is, just how might such a change affect the price of our traditional stand alone homes in the suburbs over time?

    “$700 million of taxpayer funds” – Part of Henry’s reasoning behind hitting the miners with a resource tax maybe – Get the miner type tax payer to foot the bill with them presumably passing the cost onto the buyer???

  • 302 Biker Pete // Mar 26, 2010 at 2:00 pm

    Apartment living can be pretty luxurious, Ned. Both our boys are enjoying it.

    Son 1 overlooks the Swan and has access to a large, very beautiful pool.

    Son 2 is in a Montreal tower adjacent a luxury hotel. Through some kind of deal I don’t understand, he has total 24/7 access to all their facilities; gym, huge indoor pool, the works. Think there’s common ownership.

    I have suggested buying an Old Brewery Apartment, but with prices now exceeding three mil and certain to rise, I’m unlikely to end up rowing along the Swan in my final years… .

  • 303 Ned S // Mar 26, 2010 at 3:54 pm

    Apartments – Yep, all depends how much value Aussies will eventually place on having a bit of dirt to do whatever with I guess. And paying the higher council rates and maintenance costs on a stand alone home. As opposed to paying a body corporate and being closer to stuff like entertainment venues and shopping and work maybe.

    It is giving me a bit to think about in relation to my next investment property. It’s just possible that stand alone houses in the ‘burbs mightn’t be as highly prized in 10 to 20 years as they historically have been? If we see a marked shift towards growing “up” rather than “out” as one would have to expect we must. I’ll still go with a stand alone house. But I’ll be paying a huge amount of attention to location. With proximity to transport being no 1 and to shops being no 2.

    One of the reasons I bought my home where I have Biker, is that there is a salt water creek close by. (Us Queenslanders call it a river but I wouldn’t want to give anyone the wrong impression.) I plan to do a bit of paddling of a fishing canoe there in my retirement. Was talking to a bloke this week who could tell me he pulled a decent sized mangrove jack out of it recently. And that you get prawns there – I thought you would. Plus I imagine there might be some crabs? ๐Ÿ™‚

  • 304 Biker Pete // Mar 26, 2010 at 4:14 pm

    “Iโ€™ll still go with a stand alone house. But Iโ€™ll be paying a huge amount of attention to location. With proximity to transport being no 1 and to shops being no 2.”

    Same here, if we proceed… . (KHR and all that.)
    Apparently that’s the preferred model over there, particularly the public transport issue. Probably future-proofing…. .

    I enjoy a bit of fishing. Mangrove Jacks? Great sporting fish and good eating, too. The canoe to look at may be Hobie’s Pro-Angler.

    Crabs?* Never had much time for them until we crossed Canada.
    We now have some great ideas for cooking.

    * Gotta laugh: I’ve just been called a crotch louse on a dung beetle by our old mate Pete! ๐Ÿ™‚
    Don’t go there. Too bloody!~ ๐Ÿ˜‰

  • 305 Ned S // Mar 26, 2010 at 4:47 pm

    Stuff I’ve read in the past indicated that Aussies still like their stand alone houses. But the question was asked whether that decision is being driven more by the purchaser or the industry. With there being more profit for the industry in stand alone type stuff. At one level it seems like a bit of a strange argument to make – It definitely wouldn’t be a case of the free market in action would it? But maybe not with the ultimate decision coming down to what governments feel to release land for and the banks feel to extend credit for???

    From elsewhere … “a crotch louse on a dung beetle” ๐Ÿ™‚ – As a bloke who once worked for the dung beetle section of CSIRO and also had a few basic clues on mammalian anatomy, I can only hope our mutual associate’s investing skills greatly surpass his general knowledge of biology! ๐Ÿ™‚ ๐Ÿ™‚ ๐Ÿ™‚ Tell him the learned professional types call ’em cooties maybe? ๐Ÿ™‚

  • 306 Biker Pete // Mar 26, 2010 at 5:12 pm

    Amazing how a quick slap can shut Limp Pete up for an hour!

    We don’t appear to have the same levels of expense related to land release as you do, Ned. I did read that it’s five years between approval and sale, though.

    I think what we are going to observe is:

    * Increased public housing. Seems a lot of it is going to
    Aboriginal housing in WA

    * Higher interest rates

    * Increased population (highest in the world)

    * Reduced private construction

    * Smaller houses, as per Stockland

    * Higher rents… and tenant anger….

    * Flow to states with higher employment by young (WA, QLD)

    * Flow to states with lower employment (by elderly)

    * Increased uncertainty (KHR doesn’t help!)

    The foregoing points to higher home prices… but ultimately, who _really_ knows… ? I’ve been told we’re _holding_, anyway!! ๐Ÿ™‚

  • 307 Ned S // Mar 26, 2010 at 6:33 pm

    I think what we are going to observe is:

    * Increased public housing. Seems a lot of it is going to Aboriginal housing in WA

    Agreed.

    * Higher interest rates

    “Yes But” as they say – Namely I’d bet on them being kept lower this cycle than in the past.

    * Increased population (highest in the world)

    YES, JA, OUI, DA – How many languages does one know how to reply in the affirmative perhaps?

    * Reduced private construction

    Agreed.

    * Smaller houses, as per Stockland

    Agreed.

    * Higher rentsโ€ฆ and tenant angerโ€ฆ.

    Agreed.

    * Flow to states with higher employment by young (WA, QLD)

    Agreed.

    * Flow to states with lower employment (by elderly)

    Agreed. (With the implication for me personally being do I wish to behave like one of the young or the elderly? ๐Ÿ™‚ )

    * Increased uncertainty (KHR doesnโ€™t help!)

    Agreed – But at some point “uncertainty” will become factored in as the norm?

  • 308 Biker Pete // Mar 26, 2010 at 7:12 pm

    Agreed. (With the implication for me personally being do I wish to behave like one of the young or the elderly? ๐Ÿ™‚ )

    Jeez, mate… you’re young. I still feel young at 63. Got to admit that when I’m running on a treadmill next to a 25 yo, I start to feel around forty, though!!~ ๐Ÿ™‚

    Interested in your comments about ‘membership’ of the CSIRO. It has always seemed like an exclusive ‘club’ to me. As Churchill once noted: “I wouldn’t want to belong to any club which would accept me as a member… ” (or words to that effect… . )

    I’ve long pondered joining the Ulysses Club, whose motto “Growing Old Disgracefully” matches my demeanour daily. Problem is that the people I ride with are all in the 28 – 40 y o group. I really am the ‘old man’ of the group. Funnily enough, they’re all very much into property. One of them insists he’ll one day buy us out of the home property. Last time I heard that comment, at a party, it actually did happen…. the fella bought the house; but the missus says we’re leaving this one to the kids… . ๐Ÿ™‚

  • 309 Ned S // Mar 26, 2010 at 7:40 pm

    “Jeez, mateโ€ฆ youโ€™re young” – It’s a nice thought Biker; But I do know I can’t lay concrete blocks anywhere near as happily as I once did!

    So have started thinking in terms of “cheats” if I build another one myself – Nice light Hebbel blocks made of cinders one can cut with a handsaw maybe – They’re expensive though! Also a few other ideas. No biggy … I’ll only actually do the bulk of the work myself if I have to. ๐Ÿ™‚

    CSIRO – I was never at a level where I saw any sign of “membership” being part of the deal! ๐Ÿ™‚

  • 310 Vince L // Mar 26, 2010 at 11:16 pm

    I am thinking that real estate prices in Australia over the next few years will remain flat but over say the next 20 years of course they should go higher. But does this mean property is the best area or even a good area to invest money in.

  • 311 Ned S // Mar 27, 2010 at 1:49 pm

    “But does this mean property is the best area or even a good area to invest money in” – For me it probably is Vince. A few reasons:

    * I’ll be paying cash
    * I’m at a stage where preserving my capital is more important to me than growing it a great deal
    * I know I don’t have the skills to invest in stocks, bullion, currency etc
    * And I’m not real comfortable handing the job over to anyone else
    * While cash is nice, after tax it battles to keep up with inflation.
    * I figure there is a fairly reasonable chance that I’ll be be able to organise my finances so that I’ll have enough coming in off rents to live
    * By and large I’d expect rents to keep pace with inflation

  • 312 Anon // Mar 27, 2010 at 4:22 pm

    “* Iโ€™m at a stage where preserving my capital is more important to me than growing it a great deal”

    Yep, return OF my capital is more important than return ON my capital! Especially if we have prolonged sideways markets which are not good for us retail investors. If this did happen returns could be basically non existant for several years. Cash would outperform dramatically.

    “I know I donโ€™t have the skills to invest in stocks, bullion, currency etc”

    Ned you never know. You are not overly confident in regards to stocks; thats usually a good omen! I think everyone has to get involved in the stock market, eventually, in some form; regardless of whether they like markets or not.

    Not advice, just banter/chatter, always seek professional advice for decisions and information etc.

  • 313 Anon // Mar 27, 2010 at 4:33 pm

    The problem with houses is if you look at the States..house prices are obviously down. Now if you bght at the peak in 06 you now could be waiting 10+years or even 15years to get back to breakeven (assuming rents just cover maintenance/expenses etc). House prices will recover but it will take ALONG time to get back to what they were.
    So buying high is a very dangerous proposition if you are not correct. A 10-15 year nonperformance can significantly hurt your retirement nest egg.
    Thats not to say it will happen in Australia, but once crashes occur seldom do you recover losses quickly…look at the ASX for example…we are still along way off the 07 highs.
    So I guess the question is…if you are wrong can you seriously sit there and be comfortable with an incorrect decision for more than 10 years? My guess is most people couldn’t….i know I would be furious with myself!!

    Not advice, just banter/chatter, always seek professional advice for decisions and information etc.

  • 314 Ned S // Mar 27, 2010 at 7:40 pm

    “I think everyone has to get involved in the stock market, eventually, in some form” – I had exposure through an industry super fund in the dot com days Anon. Once I got my money back and safely into cash, I pretty much vowed and declared I wouldn’t do that again unless maybe I got enough of an idea on stocks to be able to manage my own portfolio. I’ve used the GFC as a learning experience in that regard – And have been a very interested observer. But it’s too cut and thrust for me – I’d actually rather stay out I think.

    A lot of it is personal I guess. With economists maybe sometimes making the mistake of assuming people will act in ways that they won’t necessarily. Take myself for instance – I own my home and have another house in the name of a SMSF. Which should bring in about $12k pa tax free rent in retirement – With that being a bit more than is required to pay all my recurring bills in retirement. So if I can arrange my other assets to earn food ‘n fun mun (plus some for “disasters”) without having to worry about selling any assets off or worry too much about losing a bunch of it irretrievably through stuff like a company going broke, then it really shouldn’t worry me too much if the paper value of the assets did go down a bit. Because it isn’t like I have any intention of selling them anyway. And in that regard houses still sound OK – For me. And Yes, I know that makes me an unsophisticated investor. But I really am quite OK with that.

  • 315 Anon // Mar 27, 2010 at 8:15 pm

    “I wouldnโ€™t do that again unless maybe I got enough of an idea on stocks to be able to manage my own portfolio.”

    Good decision Ned…altho my intuition tells me your shooting yourself in the foot. You can always paper trade before you go into something to see how things play out.
    I’m not sure if you got burnt in the dotcom bust? I hope you got out ok. But a problem alot of us retail investors make is we keep switching asset classes after being burnt on one type…instead of going back and staying with it.
    For instance I used to get burnt in one stock or ETF and then vow never to go back into it. Now if the stocks future changes I will usually triple my longterm positions even if I have only been out of it for 2 weeks. I just try and make sure I correct the error quickly. Had too many situations occur where I let moderate problems turn into gigantic ones from acting and changing too slowly.
    A typical scenario playing out now are the people who got burnt in stocks during the GFC are now moving to the safety of housing..”because it always goes up.” However what they have done imo is now compounded their losses. They’ve moved assets from an undervalued class into overvalued territory and made things worse.
    I guess this is why we have alot of demand that isn’t real…in that the more prices rise the more dumb money chases these assets and creates perceived shortages and safety.
    You seem like a pretty bright bloke Ned, I don’t think you are unsophisticated at all !

    Not advice, just banter/chatter, always seek professional advice for decisions and information etc.

  • 316 Ned S // Mar 27, 2010 at 8:57 pm

    The dot com gave me a lot of food for thought Anon – But by maybe 2005 I got out with what I went in with; Which was better than a lot I think? ๐Ÿ™‚

    “A typical scenario playing out now are the people who got burnt in stocks during the GFC are now moving to the safety of housing” – That is a potential concern. But I’ve got to admit that I’d now feel to put more faith in the likelihood of governments stimulating if faced with problems then letting them play out in any sort of “free market” fashion.

    โ€because it always goes up.โ€ – God help anyone who truly thinks that because even at 51 yo I’ve been around long enough to know that depending on property type and location, 15 and even 20% drops have occurred in the relatively recent past. We had maybe an 8% one in Brisbane as recently as 2008 is my best info on it. And one can only speculate as to why the average bloke doesn’t seem to know about it?

    Yes I’m unsophisticated in relation to investing generally Anon. It’s only been since the GFC that I learned what stop losses and shorting are. Annoying that they don’t teach such things at school hey … But then maybe they do these days?

  • 317 Anon // Mar 27, 2010 at 9:01 pm

    “worry too much about losing a bunch of it irretrievably through stuff like a company going broke, then it really shouldnโ€™t worry me too much if the paper value of the assets did go down a bit. Because it isnโ€™t like I have any intention of selling them anyway.”

    Thats an interesting point. I guess at the end of the day we have to do what we think is best for our particular circumstances. Seems like you have all your plans setout and what goals you want.
    And you make good points about the stock market being a dangerous place, especially if you dont know whats going on. Many peoples lives have been destroyed going into stocks with little clue of what to do.

    Not advice, just banter/chatter, always seek professional advice for decisions and information etc.

  • 318 Scott Murray // Mar 27, 2010 at 9:55 pm

    Great St Patrick’s day podcast on “Ireland’s epic boom and bust”
    http://podcastdownload.npr.org/anon.npr-podcasts/podcast/330/510053/124795206/WBUR_124795206.mp3

    A salutatory warning for Australia.

    The Irish fooled themselves with all the Celtic tiger, we are a special case, this time its different, our boom is sustainable, immigration is driving demand, we don’t have enough housing etc. etc. House prices have fallen 25% and are still heading south.

    The only way for house prices to rise faster than incomes is for household indebted-ness to grow. Australia’s household debt to GDP ratio is the highest in the world (increased from 37% in 1977 to over 160% of GDP currently).

    The 37% to 160% change in leverage is your explanation for Australia’s housing bubble. Forget about all the other arguments.

    Ask yourselves can Australian households continue to carry more and more debt? What is going to happen when the inevitable household de-leveraging starts?

  • 319 Biker Pete // Mar 28, 2010 at 12:54 am

    Sounds like these blokes know their stuff, Ned. Probably very, very wealthy due to their sharemarket investments. After years and years of reading such arguments I’m considering selling up. Paper certainly sounds a lot stronger than bricks… . ๐Ÿ˜‰

    Seriously, if housing in Australia crashes, it’ll take out not only the banks, but the stockmarket as well. And suddenly people won’t need houses any more. The need for shelter will simply disappear.. . ๐Ÿ™‚

    Not banter/chatter, just advice. Always seek medical assistance if you’ve lost money in the sharemarket (as we both have!) and you’re considering plunging back into that froth again!~
    (Shacked up in one of WA’s best hotels, with a sea view to Africa… and a glass of good wine!)

  • 320 Greg Atkinson // Mar 28, 2010 at 8:59 am

    Scott, thanks very much for the link to the podcast. I think there are some very important lessons we should be learning from Ireland and actually the situation in Australia now is eerily similar to “Celtic Tiger” economy in many ways.

    Biker, the stock market is already down and has suffered a major correction so if the housing market cools then I don’t think that stocks will take another major hit. (remember the ASX All Ords was over 6500 back in 2007…so it is still way down)

    But as I mentioned earlier, it is pointless getting into a stocks vs property debate because they are simply different and you can lose money quite easy investing in both!

    There is so such thing as a perfect, 100% safe investment.

  • 321 Biker Pete // Mar 28, 2010 at 10:39 am

    Have to agree nothing is 100% safe, Greg.

    At some point, it would be useful to be able to read a list of tax claims applicable to share trading. In my brief six-year virtually-daily involvement, I compiled and used my own list, but I was never able to approach the level of taxation sophistication we have with both property and Super.

    Our accountant, a brilliant fella, not only lost a packet in shares (and _won’t_ go back) but he was never able to create a worthwhile tax claim list, either; compared to property… .

    I watched, horrified, as numerous good folk I managed, blew their life savings in shares; and Super which was set… and unmanaged. It did not matter a whit which form of trading they employed… _every one_ of them went down.

    The day I go back into shares, I might just as well start playing online poker…! ๐Ÿ™‚

  • 322 Greg Atkinson // Mar 28, 2010 at 11:29 am

    Biker I make it a rule never to invest in something because of the tax breaks. Anything the tax system helps me with I consider a bonus or icing on the cake.

    Sorry for your friends, but if an investor had a good spread of ASX 200 stocks and had been in the market say from 2002-2004 then it would have hard for them to have lost everything or even 50% unless they went into margin lending.

    Of course if an investor had managed to buy right at the top of the market in 2007 and then sell in March 2009 then they could have taken a major hit. But you get burnt in any investment if you time your entry and exit points that poorly.

    I also have Super and that hasn’t been wiped out. Taken a hit yes, but I did not hear people complaining when Super was providing returns of greater than 10-15 PA%.

    Finally let’s not forget that a number of high-flying property developers in Queensland went bust over the last few years. This is in a State that is enjoying a mining boom, a growing population and has apparently a housing shortage as well. So there can be trouble, even in property paradise.

  • 323 Biker Pete // Mar 28, 2010 at 11:40 am

    My take on margin-lending is the same on high leveraging in property, Greg. Silly to place onself at risk.

    I explained Super poorly in that post. We love our Super. It will pay out all debt. But we have _managed_ it, whereas we personally only know one other person who _made_ money in the recent debacle. That fella, with the same given name as you, incidentally, _requested_ my advice… and followed my lead. His wife did not… and must continue working another two years, to play catch-up.

    I’m serious about tax claims, though. We don’t buy property for the claims (simply for the increased security we enjoy… and the fortnightly dividends) but it certainly helps to have those large cheques coming in at tax return time each year… . ๐Ÿ™‚

  • 324 Ned S // Mar 28, 2010 at 6:04 pm

    For me at least, things have changed a bit since I’ve started thinking very seriously about retirement Anon. As in what has become most important is knowing I have assets that are about as close to a 100% cert to still be there in 5 and 10 and even 20 years times as I can get, and where there is a reasonable chance they’ll still be earning me an income I can live on.

    Biker’s point about the banks is sound I believe – Oz tax payers would be milked white (in terms of our deficit anyway) to stimulate housing before the banks that are invested in it are allowed to be threatened.

    Interesting the things that come out of GFCs and housing crashes though – I see that Arnie wants to legalize dope in CA – So he can collect some more tax and reduce the costs of running his justice and prisons system I guess. ๐Ÿ™‚

  • 325 Ned S // Mar 28, 2010 at 6:22 pm

    errata: “bled white” cf “milked dry” – I’m sunburnt and pooped! ๐Ÿ™‚

  • 326 Anon // Mar 28, 2010 at 7:56 pm

    “For me at least, things have changed a bit since Iโ€™ve started thinking very seriously about retirement Anon. As in what has become most important is knowing I have assets that are about as close to a 100% cert to still be there in 5 and 10 and even 20 years times as I can get, and where there is a reasonable chance theyโ€™ll still be earning me an income I can live on.”

    Makes sense Ned. I guess housing is something more tangible that you can see that requires less psychology and decision making to hold. I guess this is where self managed shares lose.

    “Bikerโ€™s point about the banks is sound I believe โ€“ Oz tax payers would be milked white (in terms of our deficit anyway) to stimulate housing before the banks that are invested in it are allowed to be threatened.”

    Its interesting to note in the states and the UK, the government is stepping in to try and stimulate housing, but its effects have been mediocre.
    Regarding your banks argument, you have solid points…but I have yet to see banks not rollover to some degree when housing gets to ridiculously overvalued levels (irrespective of government intervention) over the last 150 years. Perhaps we will beat the odds just like we did in the financial crisis when we averted a recession.
    All I can do is fold hands that give me low probabilities and then let time do its thing.
    I know i’d rather be holding A-A hands in the Japanese, UK and US housing markets right now than 2-10 or 5-10 hands in Australian housing.

    Not advice, just banter/chatter, always seek professional advice for decisions and information etc.

  • 327 Anon // Mar 28, 2010 at 8:03 pm

    “Seriously, if housing in Australia crashes, itโ€™ll take out not only the banks, but the stockmarket as well. And suddenly people wonโ€™t need houses any more. The need for shelter will simply disappear.. . :)”

    Go talk to a spectrum of prospective buyers in the US market right now and see what responses you get. I have and alot of them are not buying simply because they fear house prices will continue to fall.
    Unstable unemployment is obviously another big issue…regardless of how enticing owner occupier situations are, noone is going to take on a huge multi decade liabilities with an unstable work situation. Atm this is not a problem in OZ, but it could be later down the track.

    Not advice, just banter/chatter, always seek professional advice for decisions and information etc.

  • 328 Ned S // Mar 29, 2010 at 8:10 am

    “I guess housing is something more tangible that you can see that requires less psychology and decision making to hold” – In a worst case scenario it’s the fact that companies do actually go broke while houses don’t Anon – And one has no real control over what a company gets up to. They can take on levels of debt I mightn’t be comfortable with, make other bad decisions, even fiddle their books – If a bloke’s privately owned investment property does that, then by and large he’s only got himself to blame. And I’m really not interested in continually tracking what individual companies are doing and why, for stocks to really be something I feel to get into. They sound like an awful lot of effort to me. Although Yes, I accept that the effort can be handsomely rewarded.

    I think the point about the banks is that once one realises it, they get a better feel for what the potential downside risks are – As opposed to the much vaunted 40% we were hearing a lot about until recently. While just about anything is possible in this crazy world, that one would now seem to be pretty low probability.

    “I know iโ€™d rather be holding A-A hands in the Japanese, UK and US housing markets right now than 2-10 or 5-10 hands in Australian housing” – Again, there is a fundamental difference in mindset between us I suspect – As in you’d see those foreign properties as assets to be sold at a profit at some time? With taxes being paid on the profit. Whereas I want a small number of Brisbane properties bringing in rents. Which I hold unto death preferably – So I pay costs going in only once, and no exit fees, and if there are any taxes on any capital gains, they won’t be my problem. ๐Ÿ™‚

  • 329 Ned S // Mar 29, 2010 at 8:50 am

    http://www.smh.com.au/business/rbas-stevens-warns-against-housing-speculation-20100329-r5y5.html

    The little boy who cried wolf is at it again – Positively screaming now. It isn’t difficult Glenn – If you want people to get the message just put rates up 1% per month for three months running – Same as when you were putting them down. Much talk, minimal action.

  • 330 Greg Atkinson // Mar 29, 2010 at 9:28 am

    I think Glenn is probably worried by the combination of the home buyers grant and low interest rates. To be fair to the RBA, they have to juggle rates carefully because these affect business lending as well.

    By the way, the commentary about housing in Ireland should ring some alarms bells in Oz. (see the link Scott posted above)

    As a nation are we becoming obsessed with housing? Is there a danger that we will skip the worst of the GFC only to create our own economic disaster later?

  • 331 Ned S // Mar 29, 2010 at 9:54 am

    Point well and truly taken about business lending Greg. So Stevens has a problem doesn’t he! ๐Ÿ™‚ With all he can really do being to cry wolf.

    Oz housing is the really obvious one to speculate in because the banks exposure to it is so high it pretty much has to be protected. They made their bed and aren’t very happy lying in it apparently. The words “moral hazard” come to mind.

  • 332 Biker Pete // Mar 29, 2010 at 1:34 pm

    “And suddenly people wonโ€™t need houses any more. The need for shelter will simply disappear.. . ๐Ÿ™‚ โ€

    Anon, this point is made in reference to the continuing need for rental accommodation, nothing more.

    To preserve or improve our equity would ne _nice_ but it’s not necessary. With increasing population, we can’t see rents falling. We’ve just raised rent _slightly_ on a third property, this year.

    We’re now investigating the intallation of solar-electricity panels on six of our homes which have north-facing roofs. This will halve tenant’s electricity bills, provide us with more write-offs, and encourage more demand / longer term tenancies to those families we’d like to keep.

    This morning’s building inspection went well. Another home almost ready for tenants. Figure we’ve ‘made’ about 10% already on this one, with building costs increasing 6% since July ’09.

  • 333 Ned S // Mar 29, 2010 at 1:39 pm

    Can’t get a post through with a link in it, but that’s precisely what I’m speculating on too Biker – That rental income after expenses and tax will continue to be close to inflation. Rather than on house prices themselves.

    Rents really are fairly inexpensive at this time. Comparatively. IMO.

  • 334 Greg Atkinson // Mar 29, 2010 at 1:49 pm

    Of course if the commodities boom doesn’t create the jobs we think it will then rental returns may not be safe either. What would be interesting to find out is how much of Australia’s population is mobile in nature, meaning that if the grass became greener elsewhere what % of the population may pack up and leave?

    Rent’s for example in an area I know in Sydney went south during the GFC because expats in the finance sector packed up and left (or we laid off) despite a real estate agent once telling me that would never happen because Australia’s population was booming, there was a shortage of homes in the area etc.

  • 335 Ned S // Mar 29, 2010 at 2:01 pm

    “grass became greener elsewhere what % of the population may pack up and leave” – Less than one might think I suspect Greg. I’m “mobile” – But know that Oz is a really great place to live so would only leave now if I really had to.

  • 336 Ned S // Mar 29, 2010 at 2:13 pm

    What makes Oz good – Climate is OK, crime rates are comparatively low, the society is pretty tolerant, and at 5% unemployment even the slightly backward and old and somewhat tired have jobs – If they want them.

    Donwsides – We are really, really over regulated. And a tad too socialist for my personal taste. Oh, plus I think we’ve lost the plot in relation to families a bit? But maybe compared to others, we never really had it to lose anyway.

  • 337 Biker Pete // Mar 29, 2010 at 2:31 pm

    The old arguments about current housing oversupply or undersupply pale into insignificance when you look at the _current_ poulation increase. Every statistic we’ve read points to massive undersupply. Stevens’ comments are predictable. So are rent rises, contained by low interest, once low rates disappear. Wonder if the RBA ever gives any thought to that?~ Probably figure it’s tax claimable, so largely irrelevant… .

    Ned makes a good point re. low rents, IMHO. I read an interesting piece in yesterday’s Sunday times. Average WA rental is making 4.7%… . Ours are all doing better than that… but the real shocker was that east coast returns are as much as 10% higher! If true, that could mean a lot of things, but it may mean that our rents here are about to double…

    Greg’s cautions re the boom busting are worth consideration… but while China is buying up _everything_ rather than seeing their financial advantage eroded, I can’t see it happening, myself. And if it did, I suspect most ASX players would be fried to carbon.

    Hard to know where the grass is really greener than Australia. Every other country we’ve lived in, or visited, has its attractions… and plenty of downside.

    Where’s our carpet layer? Nearly three hours late!~ ๐Ÿ™

  • 338 Ned S // Mar 29, 2010 at 3:01 pm

    Oz is just a pretty respectable place to be Biker – You’d have to really go out of your way to get frozen to death here in Winter. Or to find a place to live where you’d have to pay big power bills to prevent same.

    Where a mug can still hope to buy a house on 600 m2 for $350k within 5 mins of some fishing and the same from shops and maybe 10 mins of work (driving time) – Providing they don’t insist on living in Sydney or Melbourne maybe???

    Or get a job in the mines for $100k plus if they are a bit more motivated to get ahead.

    Rent increases on basic hovels in Brisbane aren’t doing real well at the moment that I can see personally. And SMEs are still going under. Albeit reasonably slowly. But the RBA seems to think big business and the miners will power us.

    Goodo – But it’s a nice bit of the world regardless.

  • 339 Anon // Mar 29, 2010 at 4:12 pm

    “โ€œAnd suddenly people wonโ€™t need houses any more. The need for shelter will simply disappear.. . ๐Ÿ™‚ โ€

    Anon, this point is made in reference to the continuing need for rental accommodation, nothing more. ”

    House prices fall = rush to exits = lack of liquidity forces a mass of rentals onto the market and rents fall. This has happened in every property crash.
    Analysis of population growth is irrelevant if much of the entire market is euphoric and overpriced.
    There are just so many warning signs here; this apex is just looking bad. Those Irish comparisons don’t look good for us either !

    Not advice, just banter/chatter, always seek professional advice for decisions and information etc.

  • 340 Ned S // Mar 29, 2010 at 4:20 pm

    I thought the following was worth reading:

    http://www.investingator.org/the-trouble-with-warren-buffetts-investment-strategy/

  • 341 Greg Atkinson // Mar 29, 2010 at 4:24 pm

    I guess what amazed me is was what happened in Ireland. During the boom their population grew at record levels, as the population grew they of course built more houses. There were jobs everywhere and the U.S. was citing Ireland as an economic model to be followed. But now unemployment in Ireland is over 11% and suddenly they have too many houses!

    Could that happen in Oz? We seem to think not, but then again so did the Irish! (and Ireland is a nice place to live to be sure, to be sure)

    I think we might be getting a little over confident in Oz. Are the mining projects creating long term jobs or mainly short term construction jobs? What is going to happen when the school halls spending ends?

  • 342 Ned S // Mar 29, 2010 at 4:26 pm

    “There are just so many warning signs here, this apex is just looking bad. Those Irish comparisons donโ€™t look good for us either” – If it gets a wriggle on it might save me 20% or so on my next house Anon. And Yep, I would really appreciate even one little break like that.

  • 343 Ned S // Mar 29, 2010 at 4:40 pm

    “What is going to happen when the school halls spending ends” – There is just a vague little possibility that the RBA is putting interest rates up to counteract the effects of Mr Rudd’s (and other’s) stimulus as opposed to true growth Greg. My hunch would have to be that China will stimulate regardless though. Why wouldn’t they? As in why would they continue to buy US T bonds when the worth of same is extraordinarily questionable. Better to have your own worthless roads and buildings and ports and mines and steel mills and water plants (if that’s how it pans out) than some worthless paper from a mob who’ve committed to spending more than they can afford on their population’s retirement and health and housing – And banks and insurers and car makers. IMO?

  • 344 Anon // Mar 29, 2010 at 4:43 pm

    Thanks for the link Ned.
    “Beginning investors fail because, in addition to lacking Buffettโ€™s superior access to information, they lack his temperament. Buffett says if you cannot watch your portfolio lose 50 percent of its value without becoming panic-stricken, you shouldnโ€™t be in the market.”

    Alot of people dont realise, altho Buffet is a buy and hold investor, he has most of his assets in unlisted companies. Thus he basically has control over the bulk of his book values. Mr market doesn’t go manic depressive and severely discount some of his quality assets, because he’s the one that determines their intrinsic value!
    He says if you cant watch your portfolio drop 50% you shouldn’t be in the market — this is true, but its abit hypocritical, he himself has previously used massive short positions to protect himself prior to corrections. He also hedges and uses put options.

    Not advice, just banter/chatter, always seek professional advice for decisions and information etc.

  • 345 Ned S // Mar 29, 2010 at 4:55 pm

    “he himself has previously used massive short positions to protect himself prior to corrections. He also hedges and uses put options.” – Thanks Anon – I don’t know that sort of stuff of course. And just basically take info as I get it with a bit of salt maybe.

  • 346 Ned S // Mar 29, 2010 at 5:02 pm

    Little quiet question just amongst Aussies so we don’t appear too big headed maybe … Is there anyone out there who knows of an allround better country to live in?

    But having said that, I do see much value in being able to walk out onto the street at night and buy a feed and have a chat – But Aussies don’t really seem to have got into such stuff (yet)?

  • 347 Anon // Mar 29, 2010 at 5:33 pm

    “The International Monetary Fund in mid April 2009 forecasted a very poor outlook for Ireland. It projected that the Irish economy would contract by 8 per cent in 2009 and by 3 per cent in 2010 โ€“ and that might be on the optimistic side. [58][59]

    Unemployment in Ireland is forecasted to rise almost 17 per cent in 2010, the Economic and Social Research Institute (ESRI) stated in a report published on 2009-04-28 [60]”

    Dear god, let us pray we dont go down this similar path!

    “Former Taoiseach Garret FitzGerald has blamed Ireland’s dire economic state in 2009 on a series of “calamitous” government policy errors. Between the years of 2000 and 2003 the then Finance Minister Charlie McCreevy boosted public spending by 48% while cutting income tax. A second problem occurred when government policies allowed, or even encouraged, a housing bubble to develop, “on an immense scale”.[54]”

    Not advice, just banter/chatter, always seek professional advice for decisions and information etc.

  • 348 Ned S // Mar 29, 2010 at 5:52 pm

    Sounding like a possible win/win situation to me Anon – As in I’ll likely get to buy some Oz housing for cash that isn’t too unaffordable. And you just might get to pick a bit up on credit after a reasonably minor correction maybe … If you want it?

  • 349 Anon // Mar 29, 2010 at 6:02 pm

    “Sounding like a possible win/win situation to me Anon โ€“ As in Iโ€™ll likely get to buy some Oz housing for cash that isnโ€™t too unaffordable. And you just might get to pick a bit up on credit after a reasonably minor correction โ€ฆ If you want it?”

    I probably wont buy unless I can find someone really desperate to sell. I dont like the illiquidity of housing, and the maintenance costs associated with it. In shares you get tax free dividends and theres no maintenance or additional capital required (provided you dont have OPM addicts who issue to wazoo).
    I think housing is a great store of wealth but its not the best grower of wealth.
    Perhaps if I were in a position like you in 40 years Ned, i’d be more concerned about protecting what I had.

    Not advice, just banter/chatter, always seek professional advice for decisions and information etc.

  • 350 Ned S // Mar 29, 2010 at 6:13 pm

    Very fair comment Anon – We all get to make our own choices and row our own boats hey? … Which is really the best way ultimately I think … ๐Ÿ™‚

    I’m big on taking responsibility for one’s own decisions/choices.

  • 351 Greg Atkinson // Mar 29, 2010 at 7:12 pm

    I guess what it boils down to for me regarding house prices is this: where will the money come from to keep driving up house prices in Australia? If it is fuelled by more debt than we might get into trouble.

    People simply arriving won’t keep pushing prices up. For prices to keep climbing at the current rate you need immigrants with money to burn, people in Oz to see their wages go up or overseas investors betting that our real estate sector is a winner.

    I wonder if the mining boom can really keep pushing growth along for the next 10 years or so?

  • 352 Ned S // Mar 29, 2010 at 7:36 pm

    My personal feeling is that Oz housing is going to hold up just fine over the next 5 years for instance Greg – Pick a number between 15% down and 40% up and a bloke could be close? ๐Ÿ™‚

  • 353 Biker Pete // Mar 29, 2010 at 7:49 pm

    Greg: “For prices to keep climbing at the current rate you need immigrants with money to burn, people in Oz to see their wages go up or overseas investors betting that our real estate sector is a winner…..”

    …or upwardly-mobile people upgrading, simply because they can. Watched my folks do it in the 50s, 60s, 70s, and 80s… . Contrary to popular opinion here, we’re _not_ Ireland, nothing like Ireland, however Green we’re becoming politically!~ ๐Ÿ˜‰

    We’re sitting in a park, adjacent a lake, opposite the new house, having an evening pignic. Bottle of good wine, fresh buns, roast chicanery and other odds and ends. Stuck here until 8:30pm, estimated time of carpeting completion.

    Checked one more time, to be sure. Lovely green park, but definitely not Ireland. Think this one may be a pot o’ gold, though…!!~ ๐Ÿ™‚

  • 354 Anon // Mar 29, 2010 at 7:53 pm

    ^lol

  • 355 Ned S // Mar 29, 2010 at 8:11 pm

    Can’t sip ya evening bucket of grog looking out over palm trees in Ireland last time I heard Biker?

  • 356 Biker Pete // Mar 30, 2010 at 7:59 am

    Yer right there, mate!

    Ned: “My hunch would have to be that China will stimulate regardless though. Why wouldnโ€™t they? As in why would they continue to buy US T bonds when the worth of same is extraordinarily questionable.”

    And right there, too… . ๐Ÿ™‚

  • 357 Ned S // Mar 30, 2010 at 6:59 pm

    Greg: “I wonder if the mining boom can really keep pushing growth along for the next 10 years or so?” – Ken Henry’s punt is that it, in combination with rapid population growth, will keep growth coming until 2050 or more:

    http://www.theaustralian.com.au/business/news/golden-age-will-stretch-to-2050-ken-henry/story-e6frg90f-1225790218893

  • 358 Ned S // Mar 30, 2010 at 10:02 pm

    Pick the bit where Swan says HE sure won’t be doing away with neg gearing ๐Ÿ™‚ :

    http://www.brisbanetimes.com.au/business/no-relief-in-sight-for-housing-shortage-swan-20100326-r24c.html

  • 359 Biker Pete // Mar 30, 2010 at 10:47 pm

    Both links make good reading, Ned. Thanks.

  • 360 Anon // Mar 31, 2010 at 3:36 am

    “Golden age ‘will stretch to 2050’: Ken Henry”

    Geez, if thats not a comment just prior to an intermediate term unraveling of the Australian economy, i dont know what is!

    That looks eerily familiar to newsletter articles Greg posted awhile back re: Tiger economies.

    I’m getting more and more concerned about the Australian economy. If significant value doesn’t appear, I may avoid any asset allocation in this country (apart from cash) for several years.

    Just chatter, not advice — see financial advice for decisions etc.
    etc.

  • 361 Greg Atkinson // Mar 31, 2010 at 7:28 am

    Anon anyone who thinks they can forecast anything out to 2050 is in fantasy-land. Ken Henry to me highlights all that is wrong with economics and economists. The profession has not moved on much since the 19th century.

    “Golden age” goodness me, life must be good in the Treasury “Matrix”!

  • 362 Greg Atkinson // Mar 31, 2010 at 7:45 am

    Regarding the situation in Ireland, if you listen to the podcast you will hear that there are a lot of similarities between the Irish Boom and the Australian one.

    By the way, I still don’t get how we can have a severe housing shortage in Australia and yet quite obviously everyone is housed. Maybe there is a shortage of houses/homes in certain price ranges or areas, but a severe housing shortage across the nation..really

  • 363 Anon // Mar 31, 2010 at 10:04 am

    “Regarding the situation in Ireland, if you listen to the podcast you will hear that there are a lot of similarities between the Irish Boom and the Australian one.”

    I tried listening but the link didn’t work for me? I’ll have another go!

    “By the way, I still donโ€™t get how we can have a severe housing shortage in Australia and yet quite obviously everyone is housed. Maybe there is a shortage of houses/homes in certain price ranges or areas, but a severe housing shortage across the nation..really”

    It just doesn’t look right does it. I’m sure alot of the data people are compiling and assessing is done by alot of smart operators, but so were the figures dispensed by people during the dotcom boom to justify those lofty valuations.
    It seems every apex of a bubble is characterized by justification for current prices and why they should be going higher. Denial is widespread !

    Not advice, just banter/chatter, always seek professional advice for decisions and information etc.

  • 364 Biker Pete // Mar 31, 2010 at 10:11 am

    Anon: “Denial is widespread!”
    And floods annually… .

    Seriously, we know quite a few young people who are sitting on the branch, flapping. Many are in their mid-to-late twenties.
    Quite a few believe waiting will bring big discounts when home prices fall… and it’s cheaper at home with mum and dad… .

  • 365 Anon // Mar 31, 2010 at 10:22 am

    Well some housing related figures are beginning to sour, so looks like your young friends are on the right side =)
    I would like to see house prices rise if GDP falls, lets defy logic !
    The vast majority of people are in denial imo, you can cherry pick the data all you like, show me very impressive statistics that show continuation of the bubble, but its all just noise imo. The longer term trend is down.

    Just chatter, not advice โ€” see financial advice for decisions etc.
    etc.

  • 366 Biker Pete // Mar 31, 2010 at 10:28 am

    Anon: “…but its all just noise imo… ”

    Clearly from both sides!~ ๐Ÿ˜‰

  • 367 Anon // Mar 31, 2010 at 10:35 am

    ahh Biker Pete I know when things begin to tank you’ll switch your views to bearish ;). I’m happy to switch to bullish if people can convince me…i’ve been wrong many times and happy to be proven wrong again. The facts just don’t stack up.

    Ok so the facts are:
    Building Approvals down;
    Housing Finance down;
    Volume of houses sold slowing dramatically;
    Leading GDP indicators (reliable ones) in the US point to contraction (implications for Australia);
    FHOG windback.

    Looks just all round bad to me.

    Just chatter, not advice โ€” see financial advice for decisions etc.
    etc.

  • 368 Greg Atkinson // Mar 31, 2010 at 10:42 am

    It is all a bit confusing at the moment. In some areas of Sydney for example I know it takes quite a long time to shift properties.

    I am not a doom sort of guy, but the talk about property prices now worries me. It has become almost an obsession and some people are buying into the market because they fear they will miss out on the boom. This is the same sort of behaviour that cause stock market bubbles.

    The Australian economy is not booming and yet house prices are higher now than they were prior to the GFC….isn’t that a bit odd?

    How can the stock market, the commercial property market, the economy and business activity all weaken but the housing market keep heading upwards?

  • 369 Anon // Mar 31, 2010 at 10:57 am

    “How can the stock market, the commercial property market, the economy and business activity all weaken but the housing market keep heading upwards?”

    It cant, i rkn 15-25% falls in property australia wide, occuring over 1 to several years.

    One of my recent posts:
    “I think housing is a great store of wealth but its not the best grower of wealth.”

    I’ll revise that quote…i rkn its a great store of wealth over 50 to 100 years…perhaps it maybe be a shocking store of wealth for the next 10-20?

    Just chatter, not advice โ€” see financial advice for decisions etc.
    etc.

  • 370 Ned S // Mar 31, 2010 at 11:18 am

    Can’t get my links through? Nevermind, they come from the site http://www.myforeclosurenightmare.com

    The RBA acknowledges that there are downside risks and the Asia could disappoint. However, there would also seem to be reasons to suspect that the next several decades could be a period of pretty respectable growth in much of Asia. We also have a government that is intentionally targetting very high levels of immigration. And will not back off that voluntarily as they see it as the way to kick the baby boomer retirement can down the road. And at this time the concerns are for inflation in Oz. Plus I’m now reasonably confident that in any sort of a period of “disappointment”, the Oz government will stimulate housing.

    “Housing shortage” – With the concerns being that we will have one – With the high immigration; But from what I can make out, that in itself is not necessarily enough to prevent housing price corrections. At some point people are just basically forced to cope in other ways if they can’t access the funds to buy a home.

    Greg mentioned above that stock market investments and housing investments are different. One fundamental difference (to me) is that a housing investment is for pretty much 10 years minimum. In an even vaguely normal world one does not expect to trade houses like they might stocks?

    And within that sort of timeframe, one obvious risk to Oz housing prices would be retirees selling investment properties to fund their retirements. (As they will stocks, but with superannuation presumably continuing to feed replacement monies into stocks in a way that it won’t with property.)

    But even in that circumstance, the cost to goverment to support housing prices (even with what would seem like ridiculously high FHOGs just as one way of stopping the rot) would be attractive I suspect – Consider it:

    BB bought for $250k. Hopes to sell for $500k. CGT on $250k profit at 25% = $62,500. So government can afford to give $62,500 FHOG and regard the stimulus program as self funding. With a happy BB who loves his PM who propped up house prices and a happy Gen Y who just got a $62,500 freebie loving his PM also. And pretty much everyone else (banks, builders, RE sales agents, businesses, home owners and those who still have IPs) loving their PM too. Downside = Government foregoes $62,500 CGT it might have expected to collect. But I’m sure the cunning little chaps can find other ways to extract tax over time. Indeed we can expect it. ๐Ÿ™‚ And if there is any accuracy at all in a recent writeup I read that indicated every foreclosed US home “damages” their economy by $250k, government might see the deal as very acceptable.

    First link: huge-majority-want-government-to-stay-out-of-foreclosure-crisis

    Another writeup on the same site reckoned it’s silly to encourage FHBs to buy them actually – Argued it is better to encourage investors. But that would be another debate for another day – And not one I’d actually want to participate in! But found it interesting enough to feel to point it out.

    Second link: zinowl-obamanomics-making-the-housing-crisis-worse-29mar10

    I still reckon Oz housing sounds OK. (But then I don’t feel inclined to go into a huge flap at all if someone says Housing could go down 20% – Yep, that’s correct, It could? And it could also continue to pretty much track inflation – Whatever that might be? With highly sought after locations doing better than that.)

    I must admit I suspect a bit of the difference in perceptions is timeframe – Anon is talking 2 years maybe and I’m talking 10 minimum. Oh, and that Anon has deflation in mind while I lean to inflation – But that could well just be the 2 years versus 10 years thing again?

  • 371 Anon // Mar 31, 2010 at 11:26 am

    “Anon is talking 2 years maybe and Iโ€™m talking 10 minimum.”
    The slowness at which US, UK, Irish and Japanese Property is recovering is making me wonder that any crash will take a very longtime to recover ones capital. Meaning over the next 10-20 years property could be a very poor store of wealth. Of course much lower prices would trigger a reassessment of that view.

    Just chatter, not advice โ€” see financial advice for decisions etc.
    etc.

  • 372 Ned S // Mar 31, 2010 at 11:40 am

    Which explains your leaning towards cash I suspect? While I don’t want to be too heavy in cash – As I know that in any severe downturn, the RBA will crash interest rates and I won’t be able to live on the bank interest. Whereas if I’m in property, I just might be able live on the rents. Providing they pretty much “self-adjust” for either inflation or deflation.

  • 373 Ned S // Mar 31, 2010 at 11:50 am

    We’ve got the IMF trying to convince the RBA (and the rest of the world’s central banks) to target 4% inflation Anon. And we know that we know that we know that inflation is typically higher than targetted and reported by the CPI. Which makes finding a good store of wealth a real trick.

  • 374 Biker Pete // Mar 31, 2010 at 12:06 pm

    Anon: “Building Approvals down;

    Housing Finance down;

    Volume of houses sold slowing dramatically;

    Leading GDP indicators (reliable ones) in the US point to contraction (implications for Australia);

    FHOG windback.”

    You forget, I’m a ‘Have.’ Four items on your list look like positives to me… .

    The fifth, US situation, may or may not be an issue.

  • 375 Biker Pete // Mar 31, 2010 at 12:20 pm

    Ned: “Which explains your leaning towards cash I suspect?”

    Our eldest has over a third his assets in cash. This has added many tens of thousands a year to his tax liability. He is reviewing his position… .

    Meanwhile our tax refunds eclipse his losses.

  • 376 Greg Atkinson // Mar 31, 2010 at 12:24 pm

    Hi Biker, I reckon the U.S situation/economy is an issue for Australia..just look at how our stock market tracks the U.S market. (I posted the charts in yesterdays blog)

    The global economy is pretty much coupled/linked together despite what some commentators in Australia think. The Australian economy is not a fortress.

  • 377 Anon // Mar 31, 2010 at 12:29 pm

    “You forget, Iโ€™m a โ€˜Have.โ€™ Four items on your list look like positives to me”

    Its only positive when prices reflect this reality. Oz real estate market is showing duration mismatch. People are taking out 30 year loans betting house prices will continue to rise over the next several years; banks are providing long term loans at very inflated asset prices.

    Just chatter, not advice โ€” see financial advice for decisions etc.
    etc.

  • 378 Ned S // Mar 31, 2010 at 12:40 pm

    Glenn Stevens isn’t much help either – His plea: Please don’t invest in housing; It could cause a bubble which me and all my mates earning our half mill a year salaries in nice safe government jobs with great super and loads of other perks would have to try and find some way to prevent crashing – Because our past actions that have caused lots of people to be really highly leveraged mean that even a piddling little 15% correction could be very bad for the economy.

    But what alternative is he suggesting? – All put your money in stocks? Given that we know he sure isn’t going to rush in and save businesses that go to the wall??? – Except banks of course. Which they’d only have a problem with if housing crashed anyway. So it will be protected.

    Or put your mony in cash – When you know that I’ll gut your returns on that to prop up all the indebted mortgagees if there does look like being a correction?

    Nah, sorry Glenn – You’ve pretty much made it obvious that for those who don’t feel confident trading in and out of asset classes, that there is only one half trustworthy game in town mate! ๐Ÿ™‚

  • 379 Anon // Mar 31, 2010 at 1:00 pm

    “But what alternative is he suggesting? โ€“ All put your money in stocks? Given that we know he sure isnโ€™t going to rush in and save businesses that go to the wall??? โ€“ Except banks of course. Which theyโ€™d only have a problem with if housing crashed anyway. So it will be protected regardless of course.

    Or put your mony in cash โ€“ When you know that Iโ€™ll gut your returns on that to prop up all the indebted mortgagees if there does look like being a correction?”

    This is a big problem. Where do we put our money?? Cash arguably looks good, no stress, don’t have to do anything.
    If the banks go under, we do have the protection from the government re: deposit guarantee till 2011?..but obviously the banks aren’t protected, only the depositors.
    If the banks are nationalized then its not going to occur before house prices crash and blood is on the streets, in order to justify the cost.

    I’m not a bear usually either, and I still think returns in equities will be positive overall for 2010. However, returns for the next several years look very concerning to me — I wouldn’t be surprised if real estate and equities, both lag and go nowhere, at best, for the next 5-10 years. So essentially cash is better, unless our currency implodes which i think is unlikely (altho a temporary panic from an unwinding of the risk carry trade is a serious possibility).

    Just chatter, not advice โ€” see financial advice for decisions etc.
    etc.

  • 380 Greg Atkinson // Mar 31, 2010 at 1:01 pm

    Ned – Glenn Stevens and Ken Henry don’t help much when they keep talking about the growth of Asia as being the path to riches for Australia. Their message seems to be “relax, all will be well – just sit back and wait for the good times!”.

    Well lads, Asian companies will compete against Australian companies and Asian nations trade amongst themselves a lot. The Asia region is not some exclusive economic domain ready for Australia to exploit.

    The rise of Asia as an economic bloc could actually be a threat to Australia’s long term economic growth..or hasn’t that thought crossed their minds?

  • 381 Biker Pete // Mar 31, 2010 at 1:04 pm

    Anon: “People are taking out 30 year loans betting house prices will continue to rise over the next several years…”

    Disagree. People are taking thirty year loans because that’s how long the banks calculate it will take to repay the sum borrowed.

    Greg: “I reckon the U.S situation/economy is an issue for Australia..just look at how our stock market tracks the U.S market.”
    So, who would be in shares?!~ ๐Ÿ˜‰

    Ned: “..there is only one half trustworthy game in town mate! :)”
    Utterly agree, Ned.
    ASX? Totally vulnerable, with loss of all dividends possible…
    Cash: Subject to high taxation, no write-offs.
    Property: Many complain about the huge number of advantages enjoyed by property owners, but a.) we’re providing a service; b.) government intervention is a fact of life; c.) population _will_ grow; d.) demand _will_ increase; e.) rents and values will be constant, if not steadily rising… .

  • 382 Ralph // Mar 31, 2010 at 1:17 pm

    Yes, Glenn’s comments on Sunrise have got everyone talking. He’s certainly made it clear that he’s worried about the exuberant house prices and that rates need to rise. Having said that, I think he’ll put the brown underpants on again next week and keep rates on hold. Stevo is trying the jawboning this month to see if he can calm things down. Of course, irrationality has taken over and his words won’t make much difference. So we might see a rate rise in May once Glenn’s figured out that this jawboning didn’t work.

    But we must be close to turning point – it seems that rapidly increasing house prices are on everyone’s lips. There’s talk from politicians of the need to free up more land to address the housing shortage, there’s scaremongering about Chinese coming in to buy up all our houses and price the locals out, we’ve even see the RBA chief talk publicly about it. It has all the signs of a mania.

    As we’ve all commented on here over the past year or so, the Oz economy is utterly dependent on avoiding a house price crash. As Ned said, even 10-15% falls would probably be catastrophic for the Oz economy. Yes, the banks are a protected species and high house prices will be defended at almost any cost. But with the election coming up and the need to appear to be fiscal conseratives, the government will be brazen to attempt anything as bubble-inflating as first home buyers grants again. I’m sure Dudd and Goose are madly praying that they can keep the bubble up another 6 months or so until the next election. They probably will too.

    But at some point, a housing bubble-dependent economy will have to collapse under its own weight. If not, how is it sustainable?

  • 383 Anon // Mar 31, 2010 at 1:23 pm

    “Anon: โ€œPeople are taking out 30 year loans betting house prices will continue to rise over the next several yearsโ€ฆโ€

    Disagree. People are taking thirty year loans because thatโ€™s how long the banks calculate it will take to repay the sum borrowed.”

    Yes thats how long the bank thinks it will take to be repaid, but would you seriously buy a home knowing that it would decrease in value over the next several years? Its a fact people are speculating on higher prices. This is why you get this fake demand occurring where dumb money chases rising prices. Its happening right now in the stock market. And as Greg said, people fear on missing out. They are taking out 30 year loans, to get on the housing bandwagon, as they fear prices will be even higher the next year.

    Just chatter, not advice โ€” see financial advice for decisions etc.
    etc.

  • 384 Ned S // Mar 31, 2010 at 2:18 pm

    “Cash arguably looks good, no stress, donโ€™t have to do anything.” – The concern there remains inflation of course Anon. And no tax breaks as Biker says. If I’m in houses I get the depreciation on the construction costs. And it makes a lot of the rental return tax free. So it’s competitive with cash for a cash purchaser.

    Agree with you about Stevens being way more bark than bite Ralph – If he wants to show some teeth after his recent effort he needs to throw in a 50 percentage points increase. But he’s very much between a rock and a hard place given the degree to which SMEs are still struggling a bit. With the effects of the stimulus unwinding still to really be felt perhaps.

    “But at some point, a housing bubble-dependent economy will have to collapse under its own weight. If not, how is it sustainable?” – Making sure any bubble does not collapse, but corrects slowly is the whole name of the game Ralph. The three things that are needed: 1) release cheap land in the distant suburbs, 2) push the higher density thing (including duplexes put up by small developers if the banks don’t feel to support the big apartment block developers) and 3) bring in more building trade migrants. Which all take time. So in the interim the need would be to keep things up with a bit of stimulus if and as required. IMO?

    “would you seriously buy a home knowing that it would decrease in value over the next several years?” – No you wouldn’t Anon – But the issue is that none of us actually do know that.

  • 385 Biker Pete // Mar 31, 2010 at 2:47 pm

    Ralph: “But at some point, a housing bubble-dependent economy will have to collapse under its own weight. If not, how is it sustainable?”

    When I bought my first house, from a doctor in a regional centre in WA, I was paranoid about having paid $32,100.00 for it. Talked to friends about it. Their view? “You’ll be all right, mate!” Looking back at those fears now, I’ve got to laugh at terms like ‘bubble’ and ‘sustainable’.

    Anon: “โ€œ…would you seriously buy a home knowing that it would decrease in value over the next several years?โ€

    You _know_ that homes will decrease in the next five years, Anon? You should buy a lotto ticket every week.

    Ultimately, knowing what one is doing in property comes down to _knowing_ (not guessing) and the only way we’ve learned, is by asking the right questions. Most folk don’t even know what the right questions are… or how to begin sequencing them… let alone getting correct answers.

    I can demonstrate that very quickly… and easily, if you wish. ๐Ÿ˜‰

  • 386 Anon // Mar 31, 2010 at 2:50 pm

    “โ€œCash arguably looks good, no stress, donโ€™t have to do anything.โ€ โ€“ The concern there remains inflation of course Anon. And no tax breaks as Biker says. If Iโ€™m in houses I get the depreciation on the construction costs. And it makes a lot of the rental return tax free. So itโ€™s competitive with cash for a cash purchaser.”

    Its competitive if you believe real estate is not an overvalued asset class and it doesn’t drop in value substantially. Cash has little downside risk if you hold solid currencies.
    If we have raging inflation, interest rates will rise benefiting cash holders. It may not keep up with inflation in real terms, but arguably housing wouldn’t either at these levels.
    I think basing decisions on tax considerations is just a way of justifying why an overvalued asset is worth buying or holding.
    The housing market tax setup is starting to resemble those MIS schemes ;P, both had many people borrowing to get more tax effective returns.

    Just chatter, not advice โ€” see financial advice for decisions etc.
    etc.

  • 387 Biker Pete // Mar 31, 2010 at 3:09 pm

    “Just chatter”

    Yep. ๐Ÿ™‚

  • 388 Anon // Mar 31, 2010 at 3:12 pm

    “Ultimately, knowing what one is doing in property comes down to _knowing_ (not guessing) and the only way weโ€™ve learned, is by asking the right questions. Most folk donโ€™t even know what the right questions areโ€ฆ or how to begin sequencing themโ€ฆ let alone getting correct answers.”

    Thats true, as I said before I wouldn’t profess to have a clue about buying a house. But I know psychology, and its absolutely manic right now re: OZ real estate. I’ve always been a believer that typical analysis and “right questions” become absolutely useless when there is excessive euphoria in a certain asset class. Keeping it simple sometimes can keep you out of the most obvious bubbles when every man and his dog is coming up with constant justifications for continuation. No doubt, these tools/questions of yours would be very effective for you. But for someone like me who has no clue about buying a house, i’d rather throw a dart into a sea of value than try and cherry pick amidst a sea of overvaluation. Probability would suggest I would fail at the latter; perhaps in your case, you might be able to beat the odds.

    Just chatter, not advice โ€” see financial advice for decisions etc.
    etc.

  • 389 Ned S // Mar 31, 2010 at 3:14 pm

    “If we have raging inflation, interest rates will rise benefiting cash holders.” – Raging inflation? We already have high inflation in Oz surely? But it is not being reflected in interest rates yet. And may not be able to be without seriously damaging the economy. Even wages were up by about 6% last year.

    “I think basing decisions on tax considerations is just a way of justifying why an overvalued asset is worth buying or holding.” – I’m not too fussy where I get my income from Anon. If it comes from the government taxing me less that’s fine. Even huge businesses choose to operate in one country rather than another for tax advantages. And Yes, there are risks in doing. But there is no way I’m going to discount the tax effectiveness of investment types when making decisions.

  • 390 Biker Pete // Mar 31, 2010 at 3:22 pm

    Well, I wouldn’t want to argue with anyone who holds a _doctorate_ in psychology! ๐Ÿ˜‰

    Possibly the most amusing aspect of ‘investment-site touring’ is the sheer volume of blogs about realty, as opposed to any other investment: gold, shares, cash, super (yes, super… a vehicle for all the foregoing… .)

    Take this website… and any given topic on Greg’s home page:

    4 comments

    16 comments

    8 comments

    10 comments

    388 comments (Property… 70% negative! ๐Ÿ™‚ )

    DRA is the same… but the negative percentage is MUCH higher.

    Now a psychologist could have a _field day_ with these stats. Here are bears, utterly _obsessed_ with property. Why?!

    Now there’s a key question for ya… ! ๐Ÿ™‚

  • 391 Anon // Mar 31, 2010 at 3:28 pm

    Actually this explosion of comments across blogs would reinforce the bubble ๐Ÿ˜› Similar things were happening on stock blogs re: comment levels just prior to the GFC stock implosion; in some cases, alot were negative. Your arguments are feeding the bears lol.

    Just chatter, not advice โ€” see financial advice for decisions etc.
    etc.

  • 392 Ned S // Mar 31, 2010 at 3:38 pm

    “Most folk donโ€™t even know what the right questions areโ€ฆ or how to begin sequencing themโ€ฆ let alone getting correct answers.

    I can demonstrate that very quicklyโ€ฆ and easily, if you wish.”

    I’m not one to knock back a free lesson Biker? ๐Ÿ™‚

  • 393 Greg Atkinson // Mar 31, 2010 at 3:41 pm

    Biker, actually I would guess people talk about property a lot because it is something everyone can easily relate to. In Australia, like I have said earlier it is becoming an obsession.

    When people were predicting that house prices would fall in 2008/2009 I did not agree with them. I saw no reason why home prices in Australia would fall simply because they did in the U.S, Europe etc. but then….

    The RBA and the Government jumped in and propped up the housing market and this is when I started to get bearish as far as the short term outlook goes anyway. (beyond that, who can really tell?)

    But being bearish is not the same as being negative in my opinion. I would say that many comments on this site about house prices are posted simply by people raising the warning flag, which I think is healthy.

  • 394 Biker Pete // Mar 31, 2010 at 3:46 pm

    Doubt you’ll find property bulls in abundance on any investment site in Australia, forecasting ASX bubbles popping! Goldbugs, yes. Nor do I recall having seen a single property bull predicting the demise of the stockmarket. Goldbugs, yes.

    No, it’s a curious thing, this obsession with property. As Greg has suggested, Aussies really do have a ‘love affair’ with housing. When it’s unresolved, this passion can’t be healthy…

    “Your arguments are feeding the bears lol…”
    Nah, just rattling their cages… . ๐Ÿ™‚

  • 395 Biker Pete // Mar 31, 2010 at 3:55 pm

    Ned: “Iโ€™m not one to knock back a free lesson Biker”

    Happy to walk you through some things we’ve learned when we get over to QLD mid-year, mate!~ ๐Ÿ™‚

    The key question to ask a property bull, here or on DRA, was very nearly asked (by Steven, of all people!) recently.

    It is: “Would YOU buy, right now, in Sydney or Melbourne?”
    Asked that question, my answer would be: “Hell no!!!~”
    A sequence of key questions would follow. You can imagine some of them for yourself.

    Hardly a free lesson, Ned. ๐Ÿ™‚ But it does show the dilemma bears face. They don’t even know the _first_ right question to ask a property bull… . ๐Ÿ˜‰

  • 396 Ned S // Mar 31, 2010 at 4:05 pm

    “I started to get bearish as far as the short term outlook goes anyway. (beyond that, who can really tell?)” – I’ve seen you made that argument more than once Greg – Namely one has a better chance of predicting the short term than the long term re investments.

    Not at all sure that I agree? But either way, if one believed that they wouldn’t be a property investor I guess. Because in that game a long term time frame has to be part of the mindset to ride out the dips followed by multi year flat spots that we see.

  • 397 Ned S // Mar 31, 2010 at 4:14 pm

    โ€œWould YOU buy, right now, in Sydney or Melbourne?โ€
    Asked that question, my answer would be: โ€œHell no!!!~โ€

    My answer would be the same Biker. You may recall that in my DRA days I suggested to Steven from Sydney that he could find a bit of value in building a granny’s flat in his ma ‘n pa’s backyard.

  • 398 Ned S // Mar 31, 2010 at 4:20 pm

    As in if you don’t think the value is there, then you start thinking real hard about how you can create some value of your own. But that’s just one more diff between investing in stocks and property I guess.

  • 399 Anon // Mar 31, 2010 at 4:24 pm

    “โ€œI started to get bearish as far as the short term outlook goes anyway. (beyond that, who can really tell?)โ€ โ€“ Iโ€™ve seen you made that argument more than once Greg โ€“ Namely one has a better chance of predicting the short term than the long term re investments.”

    Yeah I guess it is pretty difficult re: long term. One still has to try and make a guess, but just keep flexible as things can and do obviously change. Most of us will be wrong more than we are right, so I guess keep losses small and capitalize on those outliers.
    My general rule is the cheaper the price, or the longer the under performance of a particular asset (in combination with a panicky or depressed market), the more confident I am of its longterm future returns; provided the asset is of high quality and for example, is not in an bad location, good demographics, potential growth, current and planned social infrastructure etc — the questions Biker would ask ;).

    Just chatter, not advice โ€” see financial advice for decisions etc.
    etc.

  • 400 Greg Atkinson // Mar 31, 2010 at 4:26 pm

    Ned I am a long term investor generally speaking, mainly because I am lousy at timing the markets ๐Ÿ™‚

    So in regards to property this means that simply if I were investing I will hold off for now and see how the market plays out. It does not mean that over the long term I would stay away from residential property as an asset class.

    But like I have said a few times, if a person needs a place to live and they don’t want a rent then what the property market will do over the next year or so is probably not a big issue. You don’t find your dream house and then say “Oh, this place is great, close to the schools, in a good area but I won’t put in an offer because prices may fall 10% in the next year or so”.

    This is the BIG difference between housing and the stock market. With stocks we are all basically investors, whereas in the residential property market, many people simply want a nice place to live and will only ever own the family home. When they buy that home they are not going to sell just because prices fall 10-20%.

    Yes the stock market and the housing market are indicators of how the economy is doing, but they are very, very different indicators!

  • 401 Anon // Mar 31, 2010 at 4:26 pm

    “thatโ€™s just one more diff between investing in stocks and property I guess.”

    Thats where Buffet has an advantage over us as Stock Investors. We can’t influence management and create value (like property investors can) as we are not controlling owners etc. He would have huge pull on the companies he owns.

    Just chatter, not advice โ€” see financial advice for decisions etc.
    etc.

  • 402 Biker Pete // Mar 31, 2010 at 4:29 pm

    Ned: “I suggested to Steven from Sydney that he could find a bit of value in building a grannyโ€™s flat in his ma โ€˜n paโ€™s backyard.”

    And good advice, too… subject to a few considerations… legal and ‘familiaral’… . ๐Ÿ˜‰

    Anon: “But I know psychology…” and “…your arguments are feeding the bears… ”

    These are such an interesting pair of comments, Anon. As a psychologist, who is familiar with TA, what do you suggest is the classic ‘game’ most played by bears both here and on DRA?!~
    Not one visit to both sites has ever been exempt… . ๐Ÿ™‚

  • 403 Ned S // Mar 31, 2010 at 4:30 pm

    A thought – I can run a bit short of patience with people who say to me that they don’t want to “do anything” re their property investment – Except pay the mortgage? But when it comes to stocks I’m not much different as I don’t want to “do” all the work re figuring out what’s going on with individual companies etc. But in either case maybe, it is the people who don’t want to “do” those extras to give them an edge who can expect to underperform … As I said; Just a thought.

  • 404 Anon // Mar 31, 2010 at 4:38 pm

    “Anon: โ€œBut I know psychologyโ€ฆโ€ and โ€œโ€ฆyour arguments are feeding the bearsโ€ฆ โ€”

    My supposed qualifications in psychology are nothing in comparison to your doctorate in data mining ๐Ÿ˜›

  • 405 Ned S // Mar 31, 2010 at 4:39 pm

    “Most of us will be wrong more than we are right” – Again Anon, stocks really obviously aren’t “my thing” – But the general impression I get is that a bloke can do quite well once he manages to be getting maybe 66% of his calls right. With all the appropriate provisos like using trailing stop losses – Leastways that seems to be the line the reasonably sane stock market investment boffins plug???

    When it comes to property, I must admit that I aim for a 100% hit rate. And if a bloke misses on that (I have missed once – By selling “early” and not repurchasing), it hurts! ๐Ÿ™‚

  • 406 Biker Pete // Mar 31, 2010 at 4:44 pm

    We really enjoy the idea of people getting value from the little extras we build in, Ned. The plan to equip north-facing properties with solar-electricity is an example. Giving people service doesn’t cost… it pays. (The tax advantages are just a bonus! ๐Ÿ˜‰ )

    Y’know, I’d expect ASX afficionados to be hanging out in the Shares blogs, looking for trends… . Don’t imagine there’s much gain looking for tips about cash rates in a property blog either… . ๐Ÿ™‚

  • 407 Anon // Mar 31, 2010 at 4:44 pm

    “With all the appropriate provisos like using trailing stop losses โ€“ Leastways that seems to be the line the reasonably sane stock market investment boffins plug???”

    I dont like stop losses tbh, the pros target your stops. They know where newbes etc place them and purposely pump volume through support lines to buy stock on the cheap. Thats why alot of bearish chart patterns suddenly turn bullish these days.
    I think mental stops are better because you can be abit more flexible with them, depending on investment horizons etc. You can avoid the whipsaws most investors get aswell.

    Just chatter, not advice โ€” see financial advice for decisions etc.
    etc.

  • 408 Ned S // Mar 31, 2010 at 4:49 pm

    Yeh, I’d be your classic newbie if I went into the stock market game Anon and would be wanting to set my stop loss at 7% – 10% tops maybe? And had the thought when I was watching all the recent crud that 15% would be way more sensible maybe? But never followed up on that.

  • 409 Biker Pete // Mar 31, 2010 at 4:51 pm

    HaHa, I was misled. When you said: “I know psychology” I assumed that you _must_ be qualified. Let me ‘help’ you then.

    In Transactional Analysis theory, the game most played (but only just) is described here*:

    http://c2.com/cgi/wiki?AintItAwful

    Before TA was developed, the game was probably described best by that old MLC adage… . ๐Ÿ˜‰

    * The Ned-Steven drama is just one of a score of variants we’ve watched played out… . ๐Ÿ™‚

  • 410 Ned S // Mar 31, 2010 at 4:59 pm

    TA is it? I just got this mental image of one of those young birds sitting in the nest with it’s yellow lined beak open and squawking – Looked up the word from my biology days – Yep, it’s called “gaping” – I’d remembered that bit right at least. ๐Ÿ™ By all means Delete this comment Greg! ๐Ÿ™‚

  • 411 Ned S // Mar 31, 2010 at 5:54 pm

    Look forward to hearing your Gough(ic?) insights Biker. ๐Ÿ™‚

    But it is a concern that current Aussies are going to go in to bat against LOTS of very highly motivated immigrants who have no expectations of being helped to get anywhere by anyone except for family with them having an obligation to fully reciprocate. But definitely being smart enough to cash in on every little bit of assistance given by government.

    What implication does that have for house prices? Just that the dynamics of the purchasing parties have been and will continue to change I suspect.

  • 412 Biker Pete // Mar 31, 2010 at 6:21 pm

    Ross relates an interesting story about taking abuse from Germans in Germany for ‘stealing their jobs’, then later seeing a Korean beaten on a Melbourne train for precisely the same crime. Made me really think… .

    Within four days, a Dutch biker friend arrives from Munich, where he’s currently developing facial-recognition programs for security purposes. He’ll bring a shipload of money into the country… and will spend it here, in his adopted country. He’ll continue to operate his German business and the flow of euros here will mean he’ll be able to buy property as soon as his 457 allows.

    Now his purchasing power, when added to his partner’s, may well exceed either of my sons’. Frankly, the thought that, being older, he may be able to outbid my kids for a highly desirable property, doesn’t bother me at all.

    It’s really all about choices. I advised our 24 y o to buy the 42nd-storey apartment he was living in, in Melbourne, two years ago. He’d have picked up around $280K by now, had he done so… . He’s happy in Montreal, now… . ๐Ÿ™‚

  • 413 Ned S // Mar 31, 2010 at 6:27 pm

    Stories like this make me really think Biker:

    http://www.smh.com.au/lifestyle/people/cleverest-man-in-the-world-ponders-whether-to-accept-1-million-20100329-r6gi.html

    But I try to not think too hard too often – It could make a bloke REALLY SAD! ๐Ÿ™‚

  • 414 Anon // Mar 31, 2010 at 6:36 pm

    Biker, just remember if property crashes, it usually goes back to where the bubble began. So arguably all gains get wiped out back from 2000-2002…if not earlier.
    So all these supposed capital gains, unless realised, are illusional ๐Ÿ˜‰

    Just chatter, not advice โ€” see financial advice for decisions etc.
    etc.

  • 415 Biker Pete // Mar 31, 2010 at 6:38 pm

    Yes, it’s an epic story, Ned. I hadn’t seen it in such detail before. _Thank you!_

    It rang particularly true for me, because our eldest is a brilliant mathematician. (NOT my gene pool!) He delays gratification in the same kind of way. Put off telling us he’d bought a new car (cash) simply because he thought we’d disapprove.

    Your time in Russia sounds fascinating. At one stage, it crossed my mind that you might be an ex-premier of WA, but your strong feelings about Goughic History confirmed my growing doubts!! ๐Ÿ˜‰
    You’ll chuckle over these comments, no doubt…. !!~ ๐Ÿ™‚

  • 416 Ned S // Mar 31, 2010 at 6:50 pm

    I’m a nothing with no aspirations to ever being an anything Biker! ๐Ÿ™‚ ๐Ÿ™‚ ๐Ÿ™‚ Apart from a SFR with a genuine little bit of space between getting hunted down by higher taxes and fees in Oz into the fold of those who leave little to their heirs.

    Hmmm … Yep, If your boy is that smart then keep an eye on him. A good lady makes about as big a difference as I can think of?? But hey, what can you really do??? Even Tolstoy got a bit confused when he was in his early eigthies as I recall? ๐Ÿ™‚

  • 417 Anon // Mar 31, 2010 at 6:55 pm

    Well I wish you well Biker, I wouldn’t label you a braggart — you obviously have done well for yourself, and I commend you for that. But perhaps some humility wouldn’t hurt just a touch ;). Take heed from Greg’s lead.

    Just chatter, not advice โ€” see financial advice for decisions etc.
    etc.

  • 418 Ned S // Mar 31, 2010 at 7:03 pm

    “Who cares? … Or that of my sonsโ€ฆ .” – You make me laugh Biker. I’m a good half a mill off being able to think like that – But it’s really where we all would like to be I guess! ๐Ÿ™‚ ๐Ÿ™‚ ๐Ÿ™‚

  • 419 Biker Pete // Mar 31, 2010 at 7:03 pm

    Ned: “Iโ€™m a nothing with no aspirations to ever being an anything Biker! :)”

    You have a good mind, Ned.

    No-one is more surprised than me to realise that The Plan worked. I’ll introduce you to The Architect!~ ๐Ÿ™‚

  • 420 Biker Pete // Mar 31, 2010 at 7:11 pm

    Anon: “Take heed from Gregโ€™s lead.”

    I’ll grant you that, Anon. Greg’s patience and tolerance are worthwhile traits I lack… .

  • 421 Ned S // Mar 31, 2010 at 7:19 pm

    “Iโ€™ll introduce you to The Architect” – Thanks Biker – I was an educator in a previous life. And figure that a half clued up educator always reckons there might be a LOT more he can learn!

  • 422 Ned S // Mar 31, 2010 at 7:48 pm

    Suspect you meant Tamara after changing a few gallons of fish water at this time of night? I’ll look forward to that too – Goodo ‘n Ta! ๐Ÿ™‚

  • 423 Biker Pete // Mar 31, 2010 at 7:50 pm

    That’s curious, mate!

    I recall you once stating: “I’ve never once been mistaken for a teacher.” Freudian, to say the least… ! ๐Ÿ™‚

  • 424 Ned S // Mar 31, 2010 at 8:08 pm

    Don’t recall saying that Biker? (Which certainly isn’t to mean I didn’t.) But irrespective, I’d like to think I acted as an educator where possible – As opposed to a teacher or a trainer – As circumstances allowed. I do see much value in mentors! ๐Ÿ™‚

  • 425 Biker Pete // Mar 31, 2010 at 8:24 pm

    Ned: “I do see much value in mentors! :)”

    Same here.

    Really wish I could take more credit for our long term plans…
    About seven years ago, I suddenly realised that our Division of Labour needed review. (Let’s forget about Tamara! ๐Ÿ™‚ )

  • 426 Ned S // Mar 31, 2010 at 8:26 pm

    Think I might have said I’d never been mistaken for a ENGLISH Teacher on thinking back through my somewhat clouded brain cells at this time of nite Biker? ๐Ÿ™‚

    But either way, mentor’s are where it’s at.

  • 427 Biker Pete // Mar 31, 2010 at 9:07 pm

    Yes, maybe you’re right, Ned. My cerebral processing also loses something after the sun is over the yardarm… .

    Going back to work on the new project tomorrow. Back on s-l-o-w mobile internet. Cheers!~

  • 428 Ned S // Mar 31, 2010 at 9:30 pm

    Seriously fellahs, doing what the RBA says is a good way to confine oneself to a life of penurary – These pricks have been calling a potential Oz housing bubble since 2002 that I know of. During which time prices have tripled and the lame butts are still saying Hmmm … We could get a “bubble” at some time in the future = Please show some discretion. HO HO HA HA YA YA – What fun … Silly “baskets!” ๐Ÿ™‚

  • 429 senator13 // Apr 1, 2010 at 7:55 am

    Interesting article: http://www.smh.com.au/nsw/the-incredible-colossal-homes-bigger-than-ever-20100331-rewz.html

  • 430 Greg Atkinson // Apr 1, 2010 at 8:58 am

    Senator as I mentioned a while back I don’t see why people compare house prices over say 30 years because the “average” home has changed so much. Our homes are getting bigger and are better fitted out than 30 years ago and this really makes it difficult to work out how the market is really faring.

    I wonder what the land prices have been doing over 30 years versus house prices? Does anyone know if this sort of data exists?

  • 431 Biker Pete // Apr 1, 2010 at 10:26 am

    Anecdote: I first became really interested in real estate at the age of 19, when my younger brother, also a uni student, bought a block of land at City Beach. He paid $4K for it. A month later, he was _unable to make the first payment_ so he sold the block for $7K. Price today would exceed a million…

    I have no data on land, other than it has appreciated _wildly_ in WA over the last 40+ years. Most of our blocks have fetched three-to-five times purchase price, with some fetching as much as NINE times purchase price. Our most recent win was in mid-2006, when we scored $310K for a block which cost us $125K. We’d owned it for around two years.

    The bad/good news: There has been a plateau for the last two years. Existing blocks we own did _not_ appreciate. We’ve seen plateaus before. Flat times are followed by _frenzies_. During the last two years we picked up two more excellent blocks from a panicking (short-of-cash?) developer.* One of these blocks is now on the market for $45K more than we paid ($135K). If it hasn’t sold by May, we’ll build on it… .

    * During the plateau a mate picked up an absolutely brilliant block for $202K. We were in Scotland… and missed it!~ Second time he has beaten me to the treasure… !~ ๐Ÿ™‚

  • 432 Ned S // Apr 1, 2010 at 2:43 pm

    It doesn’t even really make sense to compare land prices to what they were say 30 years ago. Two basic points in that regard:

    1. In Oz at least, where the population growth is pretty much centered around the capitals, the old established blocks will by and large be in better positions relatively speaking to 30 years ago when they were in the outer ring say, but are now in the middle ring maybe. So there’s not much point in comparing a block in Sururb X now to Suburb X then, as Surburb X is just that much more highly desirable relatively speaking now, than what it was then.

    2. And even comparing the price of new land in the outer ring now to new land in the outer ring then doesn’t necessarily hold water as so much has changed. Just some examples of things that add to costs that didn’t even exist then: GST, Super and OH&S. Plus new releases will have underground power (which I assume is more expensive than overhead?) and maybe storm water carried away underground (as opposed to just being allowed to run off naturally). Maybe we’ve also gotten more efficient at doing things which might be expected to decrease costs? Maybe the average lot size has changed? And the proportions of small as opposed to large lots being developed. “Lots” of differences I’d guess. ๐Ÿ™‚

  • 433 Greg Atkinson // Apr 1, 2010 at 3:31 pm

    I reckon Ned that land prices per square metre is actually a good measure because they track the value of the land quite well. Sure the values change, but that just reflects what the land is worth. If there is underground power then yes, I would guess the value of the land will go up as so it should.

    Looking at land prices takes a bit of emotion about of the system. Isn’t it better than than trying to compare different sized houses of varying ages and construction?

  • 434 Ned S // Apr 1, 2010 at 5:06 pm

    I agree that the real core value is in the land Greg. Rather than the dwelling. For houses at least. Which is one reason I steer clear of individual apartments/units. I just don’t have the experience with apartments to get my head around what the relationship between the land and dwelling components of the overall value might be with them. And how that could change over time. Whereas with houses on their own blocks of land, such considerations seem (to me), to be way less potentially complex.

    A bit more clarification re my statement “It doesnโ€™t even really make sense to compare land prices to what they were say 30 years ago” – It doesn’t really make sense if one is trying to make the argument that they might be expected to be pretty much what they were in terms of inflation adjusted individual incomes (IMO); As some seem to. Except in the “boondocks” maybe; And even there, there are a few other factors to consider.

    About the closest I can get to a no-brainer for any young Aussie investor, given the population growth we are expecting, is buy land (with a house on it for a bit of rent and to cash in on neg gearing) as close to the CBD (central business district) or some sort of respectable transport and services hub/node within striking distance of same as they feel very comfortable they can finance.

    As such property is likely to outperform – IMO.

    If I was said young Aussie investor, would I feel to try and time that move? Personally No. As I’m not at all clever at timing markets. But if you figure you are, then that’s great! (NO sarcasm intended because I do know that there are lots of people who are WAY smarter than me … ๐Ÿ™‚ )

  • 435 Ned S // Apr 1, 2010 at 5:28 pm

    Greg, given Japan’s declining population and long history of low/minimal inflation, I wouldn’t feel especially comfortable at all investing in residential RE there?

  • 436 Anon // Apr 1, 2010 at 7:01 pm

    Ned alot of the smart money is moving into Japanese Real estate. I dont see how you can say 18-25 year lows in Japanese property is a bad investment ๐Ÿ˜‰ The longer the underperformance or sideways movement generally the more fierce the upswing :P.

    Just chatter, not advice โ€” see financial advice for decisions etc.
    etc.

  • 437 Ned S // Apr 1, 2010 at 8:12 pm

    The most basic of supply/demand fundamentals don’t sound like they are there Anon – Why buy housing in a country that presumably has enough housing for its current population when one is expecting the population to decline?

    PS: After thinking some more, I’m not at all sure my comment re inflation is especially relevant. It could well be that I’m brainwashed into thinking inflation = “growth” (whatever the heck that might really mean?) from that having been the association that’s been put in our faces for so many years in Oz. But either way, I stand by my superficial thoughts on supply and demand re Japanese housing until told why I’m wrong.

  • 438 Greg Atkinson // Apr 1, 2010 at 8:56 pm

    It all boils down to where you invest in real estate in Japan. Tokyo is still a growing city and several other cities in Japan are growing as well. The areas not to invest in I guess would in some of the rural areas where the populations are aging and declining fairly quickly.

    Some Australians did fairly well by investing in property around some ski resorts areas also.

    I think you can also make a fairly good return from rents as well, taking into account you can get a loan where the interest rate is probably only around 3%. (and the fact that you will basically get zero interest on money sitting in a bank account)

  • 439 Ned S // Apr 1, 2010 at 9:03 pm

    That’s good commonsense Greg – Ta.

  • 440 Ned S // Apr 1, 2010 at 9:24 pm

    The thing that amazes me in relation to Oz property is not that desirable capital city locations are so expensive, but that no/so few (?) alternative locations where there really is bugger all work and services are dirt cheap. The Oz RE property market just seems pretty strange to me?

  • 441 Anon // Apr 1, 2010 at 9:46 pm

    Your concerns are valid Ned, but i’d say that is now priced in. There is value in this market and i’d say its one of those throw a dart times (Obviously heeding Gregs comments re: selectivity of areas) New home sales are at a 46-year-low!
    Almost everyone hates the Japanese market, and the doomers are everywhere = very bullish.

    Government seems to be attacking housing issues:

    ” Prime Minister Yukio Hatoyamaโ€™s administration is offering environmental incentives to homeowners to remodel, rather than follow the postwar scrap-and-build policy of tearing down old houses. The ruling Democratic Party of Japan aims to boost sales of existing homes and extend their lifespan from an average of 30 years, compared with 55 in the U.S.

    โ€œRight now a manโ€™s castle becomes worthless after 25 years and is industrial waste in 40,โ€ said Takeshi Maeda, a DPJ lawmaker who helped draft the provisions. โ€œWe want homeowners to be able to make money by renting their houses or selling them so they have value as an asset just like in other countries.โ€”

    And population growth:

    “In April, the government will start giving families 13,000 yen a month per child to help ease childโ€”rearing costs and encourage women to have more babies.”

    Also Japanese have better balance sheets and are more conservative. They have an untapped ability to take on more debt, which is a major driver of higher house prices. This is what most western countries lack; but most seem to be focusing on “population growth” as the be all and end all indicator.

    “The average Japanese household has a financial balance sheet that is far more conservative than that of the representative household in other industrialised countries: in the case of Japan, cash and deposits represent half of total financial assets. In contrast, the ratio for US households is only 16%, while Europeans hold about one fourth to one third of financial assets in these safe and liquid products.””

    # “Turning to the liability side, Japanese households have a smaller exposure to debt, such as home mortgages and consumer credit, than their Western counterparts. For example, home mortgages in Japan โ€“ the single largest component of household debt in Japan, as it is in most other countries โ€“ account for 12% of the financial balance sheet (debt plus financial surplus), about half as much as in France and Germany (28%), the United Kingdom (28%) and the United States (23%).””

    Their key understanding of robotics should improve productivity without associated population growth, and also provide them with first mover advantage when the eventual Robotics revolution comes. Lots of countries will hit population growth apexes in the next 10-30 years and Japan will be ahead of the curve in terms of manufacturing capability and expertise in dealing with associated population constraints.

    Alot of Japans export dollars are tied to China aswell…so as China continues to grow (with ups and downs) over the next few decades this should indirectly benefit Japan and the wealth of its citizens.

    Just chatter, not advice โ€” see financial advice for decisions etc.
    etc.

  • 442 Biker Pete // Apr 2, 2010 at 12:11 pm

    Greg: “I think you can also make a fairly good return from rents as well, taking into account you can get a loan where the interest rate is probably only around 3%. (and the fact that you will basically get zero interest on money sitting in a bank account)”

    Yes, I can recall thinking what a dip Keen was when he was stating Japanese realty was in trouble… .

    Greg, we thought foreign ownership of Japanese realty was not permitted. Has the situation changed in recent years?

  • 443 Greg Atkinson // Apr 2, 2010 at 2:48 pm

    Biker Japanese property/land prices took a hit in 2009 but it wasn’t that dramatic, mind you some of the usual suspects got into trouble i.e. developers and property investors/trusts that were up to their ears in debt.

    I am not aware of any major restrictions on foreign ownership when it comes to property in Japan apart from the fact all the contract documents etc. are in Japanese ๐Ÿ™‚

    I think investors simply stayed away from Japanese property because it was such a mess after the bubble burst in the 1990’s.

  • 444 Biker Pete // Apr 2, 2010 at 5:14 pm

    Two decades or so ago North Americans were highly indignant because the Japanese were buying up prime realty on the west coast (golf courses, hotels, etc)… and one of the arguments they frequently used to oppose these purchases was that, as foreigners, they could not buy property in Japan. My inlaws, fanatical golfers, were among those who most loudly opposed the purchases. (I think one of their gripes was that fees went to astronomical heights… and I think on one notable occasion they were refused playing rights because they were Caucasian. Now that would really have evoked WW2 memories in the old man…!)

  • 445 Biker Pete // Apr 3, 2010 at 8:45 pm

    Well, we’re in the new one… solar HWS isn’t working… but it has been reported. Washing my feet in a laundry handbasin with kettles of hotwater.

    Dunno if you can tap into this new market where you are, Ned, but friends are pulling $720 pw with fully-furnished homes in less-desirable locales than ours, so we’re now looking at furnishing the latest place with you-beaut-gee-whizz furniture (probably $30K plus) and going for it.

    Travel plans: Currently trying to organise a Cairns-to-Brizzy trip for July… . Original plan (missus flying to Canada…
    I bike QLD) has been canned. Canada is on for 2011 for bothofus. Maybe eastern Mexico, Chile & Peru as well… .

    Latest place is very small, but very well-designed. Put our own 4sale/4rent sign on it today… but it’s unlikely she’d agree to sell at _any_ price. Reckons it’s a keeper. A lot of vehicles have slowed to read the sign today… and one car parked and took notes… . I just kept diggin’… .

    Happy Easter… .*

    * Up to my ears in soakwells and retic. Bought a coupla new outboards, fuel & electric; so I may get some fish, squid, crabs, etc for a bouillabaise… . Three different couples arriving from Margaret River, Perth and Munich, so it should be a very, very drunken Easter!

  • 446 Greg Atkinson // Apr 4, 2010 at 9:49 am

    Anon they do seem to be taking steps to address the declining birthrate in Japan and so I don’t believe it is anything to panic about at this stage. The Government is also easing up on visa restrictions for well qualified foreigners and that should bring in some people.

    As for property, building a new house rather than renovating (or reforming as they call it here) is popular because the cost is not that more (and sometimes less) than giving an older style place a maker over.

    But many modern homes are now built like bunkers (due to earthquake protection measures) and so I can’t see the new ones I have looked at recently coming down in 25 years. Actually the way many houses are constructed in Japan makes the homes in Oz look quite flimsy.

  • 447 Anon // Apr 4, 2010 at 7:40 pm

    “The Government is also easing up on visa restrictions for well qualified foreigners and that should bring in some people.”

    Well didn’t know that, good to see the government being more proactive; Japanese birth rate rises wont be enough. I guess at the end of the day, if the government wants something to occur badly enough, they can do it! I think Jim Rogers is investing in Jap Nappy companies, so he is obviously betting the Government measures will have a noticeable impact.

    “But many modern homes are now built like bunkers (due to earthquake protection measures) and so I canโ€™t see the new ones I have looked at recently coming down in 25 years. Actually the way many houses are constructed in Japan makes the homes in Oz look quite flimsy”

    Well if thats true then that should encourage more longterm investors. Yes, the houses in Australia are not built very well these days, if Japanese ones are better quality as you say, well thats even better in terms of value in Japan. Its just mind boggling how overpriced the Australian Real Estate market is relative to other developed countries. Its also weird how the same mistakes are made over and over in every bubble — it seems time doesn’t solve many mistakes, we just find new ways to justify bubbles.

    Heres abit of a sad story…and shows the pitfalls of manic real estate bubbles:

    “PLAINFIELD — Michael Garrigan has seen the price of land plummet as much as 75 percent from a high of $110,000 an acre in the past couple of years.

    Garrigan, who has been Plainfield’s village planner since 2002, almost can’t believe how quickly prices skyrocketed, then crashed during his eight-year tenure.

    Two single-family homes stand surrounded by dozens of empty lots in the Playa Vista subdivision at 135th Street and Ridge Road in Plainfield.

    “I’ve seen the boom and the bust,” he said.

    From about 2002 through 2005, Plainfield was one of the fastest growing communities in the country. But the housing bubble burst and what some are calling The Great Recession sucked the life out of residential development in Will and Kendall counties, which were among the fastest growing counties in the nation.

    “Now developers are having property foreclosed on,” Garrigan said. “That is unfortunately the new norm in this economy.””

    Sell high, buy low
    When the market was hot, Gus “Butch” Rousonelos, whose family has farmed in Plainfield since 1963, sold farmland for $92,000 an acre. More recently, he bought different land for $14,000 an acre.

    The 160 acres he sold to Macom Corp. was part of the former Updike farm, south of 135th and east of Plainfield Road in Kendall County.

    The 120 acres he purchased had been sold by another farmer to Lakewood Homes for the LaBancz subdivision, which would have been north of Route 126 and east of County Line Road in Will County.

    “We were lucky,” he said of the timing. “It was fortunate for us, not so good for the developers. But they’re big boys.”

    Rousonelos, who no longer farms the land he owns, said during a phone interview if he hadn’t sold when he did, “Instead of being in Sedona, Arizona, I’d be in Plainfield.”

    Not all farmers were so lucky, he added.

    “For the person who didn’t sell, but had the opportunity, they’ll be second-guessing themselves for life,” he said.

    http://www.suburbanchicagonews.com/plainfieldsun/news/2139228,4_1_JO04_FARMLAND_S1-100404.article

    This post is NOT advice (nor any other posts of mine), just chatter, always see financial advisers for financial decisions etc.

  • 448 Biker Pete // Apr 5, 2010 at 10:21 am

    Interesting post, Anon. Where are _you_ based, BTW?

  • 449 Ned S // Apr 5, 2010 at 12:37 pm

    Got a cooked fan on the laptop here. Will chat more when things aren’t so flaky. Cheers to all.

  • 450 Anon // Apr 5, 2010 at 6:57 pm

    ‘Got a cooked fan on the laptop here. Will chat more when things arenโ€™t so flaky. Cheers to all.”

    Hey Ned, was wondering where you got off to. Hope you had a good easter, and same with you Biker and Greg.

  • 451 Biker Pete // Apr 5, 2010 at 8:36 pm

    Yeah, Happy Easter to All… . Still up to my ears in soakwells. Dug thru’ two levels of ancient bushfires today. Reckon I’m down to Cook’s ‘discovery of the east coast’.

    No fun at all when you’re down to 1.6 metres and you suddenly hit a tree trunk… and you know you’ve gotta cut through it because this is the only spot a double soakwell can go.

    Our forebears would have thrown a lot of firewood in, lit the lot up and patiently let it burn away over the next week, but we modern folk want it all NOW… .

    Too bad about the fan, Ned. Our Macbooks are supposed to overheat, but three units later, they’ve all remained very cool, despite major abuse in motorcycle panniers and backpacks… .

  • 452 Ned S // Apr 6, 2010 at 5:36 pm

    Thanks Anon … ๐Ÿ™‚

    Yep, the commemoration of his nib’s departure and (almost) immediate first return was a bit pissy here too Biker – I took and maintained the pledge for 36 hours + after my Sunday effort!

    Could be mistaken, but it’s just possible land prices might be softening a bit here. RBA did their little 0.25% trick I see – That won’t worry anyone too much except the SMEs is my general thought.

    Was busy today and and still running on flakey stuff here. Tamara might help to get it sorted out? ๐Ÿ™‚

  • 453 Biker Pete // Apr 7, 2010 at 9:59 am

    Interesting comment re. land, Ned. It’s climbing again here after the flat spell.

    Y’know, I can’t recall any past period when we’ve observed as much _mixed data_ about property. I’m not just talking about economic date… the political sphere, too.

    I see Terry Ryder has re-entered the shortage-no-shortage debate. His motive could be to slow construction so existing stock ri$e$. We read somewhere, recently, that rising interest rates won’t cool property prices… only _over-supply_ will do that. To me that makes sense.

    Meanwhile, hellzapoppin’ in WA. Retail is full-on (stores packed) and hardware warehouses have long, tiring queues. Carparks are jam-packed with cars all twenty years younger than ours… mainly black or silver, we note.

    I see that Bill Bonner has stopped referring to the Capital D Depression… and is now calling it The Great Correction. ๐Ÿ˜‰

  • 454 Ned S // Apr 7, 2010 at 1:03 pm

    Our small businesses aren’t especially happy campers over this way yet Biker. But the RBA is confident obviously – With it’s reason for that being mining. Mixed messages as you say. Plenty of houses for sale here. But a lot of the prices seem so high I’m tempted to suspect the vendors aren’t too serious about wanting a sale. And when my mum was around a few days ago she could tell me it was her perception a lot of them were sitting unsold for a good while. So I remain in my usual confused state. But I’ll be building rather than trying to compete to buy any more than one established house.

    BB’s had to pull his horns in a bit hey? I can’t access the DRA site – I just get told it has a “technical difficulty” ๐Ÿ™‚ Could be the flakey old system I’m using for now I guess, but no other site I try to access tells me it has a technical difficulty. Don’t feel I’m missing much though.

  • 455 Ned S // Apr 7, 2010 at 6:01 pm

    Hubble, bubble, toil ‘n trouble – The wise young men say it is a price bubble. Driven by the silly old men lending them their money too cheap.

    Then others reckon it’s an expectations bubble.

    And some even think we’ve got a population bubble thing happening. Plus a few speculators thrown in to boot.

    Oh, and there could be a fair bit of some sort of a “tax the buggery out of housing” type of bubble thing chucked in there too?

    My punt – It’s time Aussies re-learned to live in 100 m2 of housing like the rest of the world that’s urbanized?

    Welcome to the world Australia – When and if we should choose to embrace it … ๐Ÿ™‚

  • 456 Ned S // Apr 7, 2010 at 6:59 pm

    Got a mate of me ma ‘n pa’s lives down the road – In his sixties.

    Travelling home today I saw scaffolding set up around the house – And mentioned it to me ma when I phoned later. Yep, he’s getting the roof done.

    $2,500 to $3,500 guestimates me? – For a paint job. Nah, $16k – Pull off the tiles and put on colourbond.

    I go shite, WHAT ‘n why? He doesn’t like tiles it seems. Ask where he gets the dough? A rellie or two’s croaked it seems. So he’s cashed up and spending it on what he likes/wants – The RBA and Krudd love him I guess?

    Wonder if the youngies really will inherit what they figure? As the boomers are inheriting it first and certainly can spend up big when the mood takes them … ๐Ÿ™‚

  • 457 Anon // Apr 7, 2010 at 7:43 pm

    ‘Wonder if the youngies really will inherit what they figure? As the boomers are inheriting it first and certainly can spend up big when the mood takes them โ€ฆ :)”

    Good point Ned. If the boomers have very high medical costs/nursing homes and wish to keep up their expensive and well deserved lifestyles in a period of possible deflating asset prices there may be little left for them to inherit!
    Altho this is for 10-20 years out possibly. Of course it would be reasonable to assume society and its citizens in general will be wealthier than today, 40-50 years from now.

    Not advice; nor any of my posts, seek financial advice for analysis and decisions.

  • 458 Anon // Apr 7, 2010 at 8:04 pm

    “Plenty of houses for sale here. But a lot of the prices seem so high Iโ€™m tempted to suspect the vendors arenโ€™t too serious about wanting a sale”

    Thanks for that bit of commentary Ned, always good to know what is actually happening out there.
    So your assumption is reasonable, but what happens if one of these sellers begins to get abit desperate…they sell well below their asking price, forcing prices lower across the suburb. Would you get a rush to the exits, a flood of rentals onto the market?
    I suspect a dominoes effect would occur. Then you would suddenly have all these others people (late the the party) with negative equity, or fear of negative equity…creating more selling pressure. To me this is starting to look worrisome, if what you say is true.

    This post is NOT advice (nor any other posts of mine), just chatter, always see financial advisers for financial decisions etc.

  • 459 Ned S // Apr 7, 2010 at 8:16 pm

    There just aren’t many/any(?) certainties at all out there at the moment Anon. (One reason for my comment above being being some smarty’s recent writeup that $400b in property [or somesuch] was going to be inherited over the next decade [or somesuch] – It was a lot anyway … ๐Ÿ™‚ )

    You still talk about deflating asset prices I see. But it isn’t happening in Oz is about all I’d venture to say at this point. With the RBA apparently running scared of inflation rather than deflation. And as hopeless as the RBA might be, I really must give them credit for having an immensely better overall feel for where the overall real economy as manipulated by them and all ‘n sundry just might end up than I could possibly hope to have. With the trick being to interpret their deeds rather than their yakyak maybe – Because they DO tell porky pies! ๐Ÿ™‚

  • 460 Anon // Apr 7, 2010 at 8:38 pm

    “You still talk about deflating asset prices I see. But it isnโ€™t happening in Oz is about all Iโ€™d venture to say at this point.”

    I agree asset price deflation is not occuring yet. Commodities inflation IS occuring in regards to base metals, oil etc. I wouldn’t be surprised if CPI data rose in comming months, while commodity prices remained elevated.
    I suspect the RBA is using the excessive inflation argument as a possible cover … imo Stevens seems to be just raising rates to pop the housing bubble. And it seems he’ll keep raising until house prices begin falling. This idea seems justified given he overlooked the recent poor data regarding home loans and the consumer.
    We will see how this plays out over the next 12 months. I could be wrong…but it seems the assertion that he shouldn’t raise rates further is wrong…house prices must come down and he will do what is necessary to get things back into balance (further overvaluing the AUD in the process).

    This post is NOT advice (nor any other posts of mine), just chatter, always see financial advisers for financial decisions etc.

  • 461 Biker Pete // Apr 7, 2010 at 9:12 pm

    Ned: “I canโ€™t access the DRA site โ€“ I just get told it has a โ€œtechnical difficultyโ€ ๐Ÿ™‚ ”

    One of my computers has been blocked, Ned. I figure it’s a Red Hat cookie with an overly long URL which their system will always reject… It’s new… and my old Spy Alert won’t debug it, so I simply go around, using other computers, browsers and internet providers.

    Scaffolding: What turns us off double-storey homes here is the cost of scaffolding hire: $16K – 30K. We now only build single-storey homes. This recent rise in building costs means existing DSs are probably worth much more. Haven’t tested that!

    In my view, rising interest rates will have two effects in WA: 1.) investors like us will reduce construction and rents _will_ rise; 2.) FHBs will remain tenants… and rents _will_ rise.

    As interest rises, tenants, not understanding how taxation works, will revert to their previous stance: Investors are _stupid_. We’re used to that! ๐Ÿ™‚ When rates fell to record lows, tenants’ stance changed to “Investors are greedy!~” We were never comfortable being perceived as avaricious. We’re much more comfortable being viewed as idiots. Goes with the image of the old digger with the knees out of his jeans, shovel-in-hand, covered in dirt… and the rusty old 4WD… .

    Meanwhile the population here is growing more quickly than anywhere else. Surprised to read data today showing one of our key investment suburbs remain totally neutral during the Australia wide correction: 0%… no ‘up’, no ‘down’… .
    We think the more expensive suburb we ‘quit’ three years ago took an 8% hit… 3% higher than the 5% average.

    Stevens? Hurting those who can least afford it. Deterring further construction, creating future undersupply. Destined to be voted Australian of the Year 2011. ๐Ÿ˜‰

  • 462 Anon // Apr 7, 2010 at 9:48 pm

    Hey Biker…so many arguments for and against. Very difficult economy to navigate.
    So I guess at the end of the day it might be best to avoid getting married to any certain perspective or ideas and remain nimble! When quality value appears (and its not a value trap), take it, and keep it simple.
    I think I saw some suburbs in the states that remained flat…and I think some pockets actually rose — have to find the article.

    This post is NOT advice (nor any other posts of mine), just chatter, always see financial advisers for financial decisions etc.

  • 463 Greg Atkinson // Apr 7, 2010 at 10:01 pm

    Yes it is all pretty interesting out there. Apart from mainly the miners and the banks, most major Australian companies are still finding the going fairly tough.

    For small to medium sized businesses the rise in interest rates makes borrowing more expensive and also puts them at a disadvantage to any overseas competitors. It isn’t just home owners who don’t like to see rates rise.

    As the AUD rises, imports get cheaper and our exports get more expensive. (or less AUD comes in for those exports sold in USD)

    But in the midst of all this, house prices generally speaking, appear to be heading up. Is this a flight to safety because people don’t want to get burnt by stocks again?

  • 464 Ned S // Apr 7, 2010 at 10:06 pm

    Was talking to a bubbly switched on little 22 yo (maybe?) lass when I bought me most recent bottle of booze – She knew who
    Hitler was – So she said. But had never heard of Churchill or Stalin. So I didn’t dig to see if she knew the name of the US’s boss bits of political crud at the time.
    The recollection of most humans is almost non-existent perhaps?

  • 465 Anon // Apr 7, 2010 at 10:14 pm

    “But in the midst of all this, house prices generally speaking, appear to be heading up. Is this a flight to safety because people donโ€™t want to get burnt by stocks again?”

    Very simple reason…but sometimes the most simplest answers are the most effective ;).
    It makes sense…After the 87 crash there was a mass rush to housing after many got burnt from stocks. I think that bombed out in the early 90s from memory?
    At the end of the day we probably have no idea when the downward turn will come in housing…but we are certainly overvalued by most common methods of valuation.
    Perhaps we need another economic downturn to precipitate sizable house price falls? Its not common to have another significant downturn so soon after we just came out of one.

    This post is NOT advice (nor any other posts of mine), just chatter, always see financial advisers for financial decisions etc.

  • 466 Ned S // Apr 7, 2010 at 10:28 pm

    Over and out from me – I’m gunn’a see if I can really get my lappy sorted out for $99 over the next 4 working days beginning Tamara ta. And ask if that bubbly little 22 yo (maybe?) might like to spend a few hours over a Sizzler’s Salad Bar lunch finding out who Churchill and Stalin were … No harm in askin’ if she has an interest in history maybe hey? – ‘Cept to me most likely! … ๐Ÿ™‚ ๐Ÿ™‚ ๐Ÿ™‚

  • 467 Ned S // Apr 7, 2010 at 10:44 pm

    Ah wimmen – The peril of the workin’ man! ๐Ÿ™‚

  • 468 Biker Pete // Apr 7, 2010 at 11:27 pm

    Anon: “Perhaps we need another economic downturn to precipitate sizable house price falls?” Why? That’s as biased a position as me stating “Perhaps we need another fifty million immigrants to push prices higher.” Both are equally nonsensical (and questionable) arguments.

    It’s an interesting notion to propose widespread hurt (job losses, bank failures, sharemarket collapse, etc., in order to restore property values to some theoretical or comparative level; yet so many bears justify the means to that end! ๐Ÿ™‚
    Few even pause to consider the likely effects on their own lives, let alone their friends or neighbours. (My own highly unfair conclusion is that many currently have little or nothing to lose (shares, cash, jobs) in such a scenario… .)

    Property values? At best we can only suppose that factors we’ve experienced over time… including recent events… will continue to set prices. Government intervention has perhaps increased. As we learned with rental returns, sudden oversupply
    (through FHOGs) stopped the steady rise in rents dead in its tracks.

    Glen Stevens just precipitated future undersupply. If the population continues to rise, values and rents will be forced up rapidly. The news media will be quick to identify interest hikes as _one_ major cause.

    And how might Labor capitalise on the rising interest rate scenario? Why the withholding of the KHR? Something tells me a knight with a ruddy complexion, riding a white charger, may arrive soon, to rescue millions of sufferin’ serfs held hostage by the Evil Banks. Doesn’t seem all that Grimm…! ๐Ÿ˜‰

  • 469 Anon // Apr 8, 2010 at 12:34 am

    “My own highly unfair conclusion is that many currently have little or nothing to lose (shares, cash, jobs) in such a scenarioโ€ฆ”

    Yes, sounds like Bikers situation? ๐Ÿ˜›

    “Itโ€™s an interesting notion to propose widespread hurt (job losses, bank failures, sharemarket collapse, etc., in order to restore property values to some theoretical or comparative level; yet so many bears justify the means to that end! ๐Ÿ™‚
    Few even pause to consider the likely effects on their own lives, let alone their friends or neighbours.”

    And thats all they are speculative guesses. Like I said before we dont know what is going to happen..all we can do is make calls based on what we see and think at sepcific times. And right now oz housing valuations relative to other developed countries indicate Australian Property is overvalued and thus higher risk. Its is what it is.

    This post is NOT advice (nor any other posts of mine), just chatter, always see financial advisers for financial decisions etc.

  • 470 Biker Pete // Apr 8, 2010 at 8:34 am

    โ€œMy own highly unfair conclusion is that many currently have little or nothing to lose (shares, cash, jobs) in such a scenarioโ€ฆโ€

    Anon: “Yes, sounds like Bikers situation? ๐Ÿ˜› ”

    Correct, but for the opposite reason. We have no exposure to shares (by choice); we’ll be retired (by choice) and cash will cover debt, totally… in offset accounts. So, if Armageddon, with all four horsemen, arrives, our situation will be sound.

    Australia is unique. We _are_ still The Lucky Country. I think we’ll remain TLC for the next few decades*. Certainly those who move here in droves think so. Over half our friends have moved here from the US, Canada and Europe, leaving their friends and families permanently, because they recognise that, with major effort, they can achieve all their dreams in Australia. The flood is south, not north… . Property crash? Highly unlikely.
    * Long term… half a century? Greg’s cautions may be correct…

  • 471 Greg Atkinson // Apr 8, 2010 at 9:29 am

    Firstly I don’t put a lot of faith in Ken Henry or Glenn Stevens as far as their forecasting skills go.

    Ken Henry’s department was unable to accurately model the impact of the alcopops tax and Glenn Stevens was trying to cool the Oz economy back in in early 2008, just as the GFC was hitting. But now people seem to think they are Oracles of Oz! I would say: follow their forecasts at your peril!

    Secondly Australia is not all that unique in my view economically speaking, however the fact that many people now believe it is, worries me a little.

    The residential real estate market in Australia appears to me, as being priced as a risk free asset class that will deliver guaranteed capital returns. Maybe it will live up to that expectation..but have we learnt nothing from the GFC?

    Isn’t there a very real danger that the the risks associated with investing in residential real estate are being underestimated? Yes owner occupiers might be able to withstand higher rates and an economic downturn, but how about those with investment properties?

  • 472 Ned S // Apr 8, 2010 at 1:46 pm

    This is the article on the $400 billion property inheritance I mentioned:

    http://www.brisbanetimes.com.au/business/property/property-inheritance-to-top-400b-by-2025-20100330-r9kq.html

    It represents about 1 property in 10 over the next 15 years. And assumes property prices will rise over the period apparently.

    Some of the comments are interesting – There are a few that reckon death duties would be good way to help share out all that wealth – Presumably from those whose mummy and daddy don’t own a house either? ๐Ÿ™‚

  • 473 Biker Pete // Apr 8, 2010 at 8:36 pm

    Great posts!

    We watched with mixed amusement and horror as “..Glenn Stevens was trying to cool the Oz economy back in in early 2008, just as the GFC was hitting…” Total F-up… and many of us recognised that. We have no faith in Stevens’ ability to ward off inflation or rising property values. Hence my suggestion that Stevens will be Australian of the Year 2011. (You didn’t _buy_ that, did you, Greg?!~ )

    The Rudd/Henry saga is intriguing… and possibly a very, very clever political strategy. For some fun, highlight and copy that sentence. I think political and economic analysts may themselves have _years_ of fun with this… !~ ๐Ÿ™‚

    Greg: “…have we learnt nothing from the GFC?” Nothing _we_ did not know before. More humility, recommends Anon. OK, perhaps we learned that US banks are managed by the most unscrupulous, self-serving arseholes in the world. We always suspected that, of course, but could never have imagined the extent to which these parasitical lifeforms would bleed their countrymen… and anyone else silly enough to buy their AAA-approved sliced-and-diced excreta. Our past experience with property plateaus was reaffirmed. Oh… and we learned that Labor’s FHOGs worked so well (creating oversupply) that our rents plateaued for a year. Rudd would claim that as a major success… and rightly so!~ ๐Ÿ™‚

    Greg: “…how about those with investment properties?” We see that as a threat… which might impact on us… temporarily. It’s not that we’re at risk, but rather that companies like MRD are promising unrealistic returns to new, naive investors, particularly in QLD. We’ve analysed their figures… and they’re almost ludicrously optimistic; particularly in relation to capital gain. We can believe the rental return figures, but we both had a quiet laugh at the projected growth!
    It _may_ happen, but we doubt it. So how could a QLD collapse affect us? Simply by undermining confidence in realty across Australia. Frankly we don’t care what our stuff is worth. It’s like cash… you don’t touch the principal, the generator of income… .

    Ned: “There are a few that reckon death duties would be good way to help share out all that wealth… ” They’ll be sadly disappointed, Ned. This stuff _changes_ governments. I figure we’ll be deceased(!); the kids don’t need it; and if it does happen we’ll blow a humongous amount and go out on a pension in our late eighties or nineties, a burden to those who voted for it!~ Love the irony… . ๐Ÿ˜‰

  • 474 Greg Atkinson // Apr 9, 2010 at 7:38 am

    Biker…maybe it will be Stevens/Swan as joint Australian’s of the year? ๐Ÿ˜‰

    Anyway, I found this article in the SMH today a bit of a worry: Property bubble spurs spending

    According to the story above: “Surging property prices appear to be driving a spending spree with home owners taking out bigger mortgages to help fund the purchase of big-ticket items, from new cars to holidays.”

    It seems we are one of the few G20 nations eagerly racking up more household debt in the belief that the Henry “golden age” will pay off all our debts and deliver us untold riches.

    Isn’t this getting just a little crazy?

  • 475 Anon // Apr 9, 2010 at 8:14 am

    Biker, you have been giving compliments out lately…are you falling ill???? Its kinda freaky.

    Greg have you got a chart of the Irish stock market post housing crash?

    ….
    Its ok i’ve found one lol

    http://www.stocks.ie/wp-content/uploads/2009/08/stock-crash-ireland.gif

  • 476 Anon // Apr 9, 2010 at 8:28 am

    http://uk.finance.yahoo.com/echarts?s=^ISEQ#chart1:symbol=^iseq;range=my;indicator=volume;charttype=line;crosshair=on;ohlcvalues=0;logscale=on;source=undefined

    The hyperlink above isn’t linked properly…copy and paste the whole url into your browser!

    So the ISEQ is still well off its highs…the collapse of the housing market has obviously had some indirect effects.

    I hope our market doesn’t correlate in a similar fashion, probably unlikely…and may not even be a huge impact given the xao/xjo falls. But our economy seems very reliant on housing…Gregs hyperlink just reinforces this further!

    Even though we have all these issues I dont think equities markets will tank this year…corrections of 10-15% yes but we’ll probably end the year positive.

    This post is NOT advice (nor any other posts of mine), just chatter, always see financial advisers for financial decisions etc.

  • 477 Anon // Apr 9, 2010 at 9:03 am

    “Is there really a chance property prices could plunge?

    Probably not. As many economists have pointed out, housing shortages and increasing population growth should underpin the market.

    What most commentators expect to see โ€“ and what Stevens hopes to see โ€“ is a moderation in the rapid house price growth we’ve seen over the last six to 12 months.

    We take the heat of out the market and the bubble problem should fade.”

    http://www.smartcompany.com.au/property/20100330-is-it-time-to-get-worried-about-the-housing-market-a-smartcompany-q-a.html

    They are calling for a “soft landing” on property prices…thats bearish…corrections are seldom soft.
    Perhaps one more thrust upwards to take in the last of the speculators and take us to the point of pure mania (if we are not there yet) then a slow price drop at first (as occured in the states in 06) followed by bigger multi year declines (correlating with economic downturns?). Or as Biker suggests a plateau for awhile…but this situation looks much worse than the 90s imo. Either scenario oz house price returns will be poor from these levels.

    This post is NOT advice (nor any other posts of mine), just chatter, always see financial advisers for financial decisions etc.

  • 478 Biker Pete // Apr 9, 2010 at 9:26 am

    Greg: โ€œSurging property prices appear to be driving a spending spree with home owners taking out bigger mortgages to help fund the purchase of big-ticket items, from new cars to holidays.โ€

    Two UK trips, five years apart, confirmed for us that using home equity to finance the big ticket items contributed to the crash in Britain. Back in late ’05, we were taken on a brief tour by a good friend, to demonstrate his belief that a crash was coming. Yes, his predictions were anecdotal… based on the luxury cars parked in front yards and in the street (few garages) but what really stunned us at the time was the price of these homes!~

    Home ‘values’ made anything in WA look very cheap. We retained this view in mid-2009… _after_ the crash. English homes are still ludicrously overvalued… and it’s almost as silly in Scotland. Are we headed the same way? We see few signs that banks are actively encouraging double-mortgages, as in the UK,
    where huge motorway billboards screamed the message(!)

    Anon: “Biker, you have been giving compliments out latelyโ€ฆare you falling ill???? Its kinda freaky.”

    I searched in vain for complimentary comments, Anon. Other than ‘Great posts!’ in reference to Greg’s and Ned’s two posts, I found little to cause you concern about my health.
    I guess comments re Rudd could be construed as complimentary. Elsewhere I’ve praised Costello/Howard for creating TTRs which have added another $50K tax free to our incomes, annually.
    Rudd’s FHOGs caused us loss of income; Howard added to it… yet, in terms of giving more of our fellow Aussies a break, I think history will be kinder to Rudd, regardless of some recent errors. Whingeing tenants across numerous sites still have little comprehension of flow-on effects of 200,000+ FHOs freeing up over a fifth of a million homes, pushing rental oversupply to nearly 5% in WA.

    And I guess in twice-confirming your recommendation of humility, you can take that as a compliment. I can give credit where it’s due, regardless of politics or perceived financial bias. I’d hope that would be the same for most here.

    Now, let’s have more ‘Ain’t-it-Awfuls’! I miss Steve Keen’s comparisons of Oz to the UK and US. Wonderful stuff. ๐Ÿ™‚

  • 479 Ned S // Apr 9, 2010 at 9:40 am

    I found the following from Henry interesting reading Greg:

    http://www.treasury.gov.au/documents/1643/HTML/docshell.asp?URL=QUT_Address.htm

    It’s from Ocotober 2009 but still gives a pretty good idea of where he’s coming from in relation to the “golden age” I guess. And yep, if there’s a Plan B in relation to China and India potentially underperforming he doesn’t mention it that I can see. Lots of interesting stuff in there including him reckoning our iron ore is good for 65 years.

    Death duties Biker … We’ll know soon enough. But could only expect Rudd to totally disavow it in an election year.

  • 480 Greg Atkinson // Apr 9, 2010 at 9:55 am

    @Biker I don’t bother trying to compare house prices in Australia to the U.K, U.S or anywhere else for that matter as I don’t see the point. It makes as much sense to me as saying a home on the beach in Sydney with a great view is overvalued because it costs more than a similar sized home in some rural town out near Bourke.

    But what I do like to watch are the overall trends.

    @Anon Thanks for the chart. Poor old Ireland, they were once held up as an example of an ideal economy. BTW: They also had a housing shortage at one stage, or so they thought!

  • 481 Anon // Apr 9, 2010 at 10:05 am

    “And I guess in twice-confirming your recommendation of humility, you can take that as a compliment. I can give credit where itโ€™s due, regardless of politics or perceived financial bias. Iโ€™d hope that would be the same for most here.”

    I’m noticing improvement Biker…good to see! Your analysis is very appreciated in regards to real estate. Especially for us who have little experience in the area. Most people keep their methods secret but you have been surprisingly open on how you approach things.
    We’ll be on the same page in terms of financial bias eventually…if the data changes or improves I wont stay on the wrong side… I just need the correct pricing to justify the risk for certain asset class.
    Do you really think the UK housing market is a value trap? How much further do you think it needs to tank to get back into value territory? Thanks

    This post is NOT advice (nor any other posts of mine), just chatter, always see financial advisers for financial decisions etc.

  • 482 Anon // Apr 9, 2010 at 10:25 am

    “@Biker I donโ€™t bother trying to compare house prices in Australia to the U.K, U.S or anywhere else for that matter as I donโ€™t see the point. It makes as much sense to me as saying a home on the beach in Sydney with a great view is overvalued because it costs more than a similar sized home in some rural town out near Bourke.”

    Good point greg.
    I guess at the end of the day the overvalued currency is a major reason why real estate overseas is looking tempting atm. I think our AUD is probably overvalued by maybe 20 or 30% from some research reports i’ve been reading. Doesn;t mean it will comedown soon, especially if interest rates keep rising, but you now have a massive margin of safety into any international real estate investment you purchase coupled with post crash real estate prices in several countries. That a pretty rare mix!!!

    This post is NOT advice (nor any other posts of mine), just chatter, always see financial advisers for financial decisions etc.

  • 483 Biker Pete // Apr 9, 2010 at 8:38 pm

    Anon: “I guess at the end of the day the overvalued currency is a major reason why real estate overseas is looking tempting atm.”

    Where? We just spent six months travelling the world, _actively_ looking. Nothing came even close to the kind of value we can find _actively looking_ several times each year, in WA.

    If it looks too good to be true overseas, it almost always is. But don’t let my negativity put you off, Anon. Wherever you are(?) leave and research these O/S bargains. More Aussies need to check out these touted ‘gift homes’ as we did… . ๐Ÿ™‚

  • 484 Ned S // Apr 10, 2010 at 5:08 pm

    No crash in Oz housing. Outside a maybe 5 to 15% chance Chindia goes bad? Such is life – Enjoy! ๐Ÿ™‚

  • 485 Ned S // Apr 10, 2010 at 5:27 pm

    Tried to call me bro tonite – He has two kids. I have none. Wanted to chat to him about what he and his missus want to leave their two kids. (He’s off climbing a hill to keep fit so we’ll yak next week maybe.)

    Anyway, given I’ve got no sprogs my intention has been to leave each of me bro’s kids one. But bin thinkin’ about same – Our ma ‘n pa’s got one ‘n me bro ‘n his missus got one (which me ma ‘n pa gib ’em) ‘n I got 3 plus cash for two more.

    Thought crossed me mind that Ned yu’d me a silly capital billy B to bust ya butt ta leave a house to each of ya bro’s kids if he isn’t at least planning to make a bit of effort along the same lines himself? (Me bro’s a Gen X – 8 yo younger than me.)

  • 486 Biker Pete // Apr 11, 2010 at 8:24 am

    Ned: “But bin thinkinโ€™ about same โ€“”

    We used to spend a lot of time thinking about it, too, Ned. Then our two boys showed us it was unnecessary.

    At one time my plan was to leave each a Special Rural with houses on both. Well, we sold off all but one of the SRs… at over twice what we paid for them… and the missus’ plan is to now leave the home property to ‘the family’; but I think if the right offer came along, she might actually sell(!)

    Ned: “…to bust ya butt ta leave a house to each of ya broโ€™s kids if he isnโ€™t at least planning to make a bit of effort along the same lines himself… ”

    Completely agree, mate!~

    How’s the laptop? Cooler, I hope… .

    We’ve just had a bite on the nearly-complete house. Problem is that the T&S likes it so much, she’s gone off selling it!!! Drama. ๐Ÿ™‚

  • 487 Senator13 // Apr 11, 2010 at 11:06 am

    Interesting article: http://www.news.com.au/money/interest-rates-heading-for10-per-cent/story-e6frfmci-1225852259386

  • 488 Ned S // Apr 11, 2010 at 3:50 pm

    Sounds a bit like a journalist chasing a sensationalistic storey to me Senator? But either way, unless one has something pretty clever to do with any spare cash that comes their way, paying it off the mortgage has always seemed like a good use of it to me.

    Thanks Biker. My best mate reckons I’m nuts to be thinking of leaving too much in a will. You earned it; You spend it is very much his attitude. And I certainly see his point given that has been the attitude I’ve adopted with my mum and dad.

    It’s all just a part of retirement planning though. How much might one want to leave and to whom and why. I’m about as sure as I can be that’s how come my oldies bought my brother a house. It got rid of surplus cash that could have been an “embarrassment” to them come pension age. And my dad never made any bones about the fact that when he got to retirement age he wanted the pension – Reckoned he’d paid tax all his life so come retirement it was his turn to get a bit back. He felt VERY strongly about that in fact and reckoned he wanted the full pension too. (Guess he figured he’d paid the full tax so fair was fair hey? ๐Ÿ™‚ )

    A small place if I recall correctly that “the T&S likes it so much, sheโ€™s gone off selling it!!!” – I’ve got a suspicious mind I know, but the thought I had on reading that was I wonder if Biker is looking at his future residence for if and when the day should come that he gets a bit decrepit for doing all the stuff that is required around your current joint? ๐Ÿ™‚

    Just could be that mine ends up being a 60 to 70 m2 granny flat I build in the backyard of my current joint. With a carport in between it and the 6 x 8 m colourbond shed that’s already there.

    I’m keen to see what if anything the Ken Henry review has to say on death duties. It has the potential to affect my plans too.

    As to housing prices in Oz generally, the more I’ve looked the more it strikes me that we’ve got an issue in this country with the amount of land we’ve traditionally accepted as being the norm. Construction costs haven’t gone up by much more than inflation over the last 15 year boom that I can see. But the price of land sure has. And the size of new houses of course. But it really is the land cost that’s the big issue.

    I’d like to see that small house design your missus is so taken with – Some of the stuff the project builders have on offer just seems pretty strange – Bunching all the wet areas together in one end of a house might help keep costs down but it doesn’t necessarily make for the most livable dwelling.

    Amongst other things, I continue to keep an eye out for legislation that has the potential to affect land costs or dwelling densities. And I guess the other general thought is that it’s important for oldies to not downsize too much – At the end of the day they need to know they can still swap their property for some decent nursing care if they are unlucky enough to need it. (Don’t think I like the sounds of what Mr Rudd dishes out for free … ๐Ÿ™‚ )

  • 489 Biker Pete // Apr 11, 2010 at 7:33 pm

    Ned: “I wonder if Biker is looking at his future residence for if and when the day should come that he gets a bit decrepit for doing all the stuff that is required around your current joint? ๐Ÿ™‚ ”

    Nah, that’s _her_ plan, Ned. There are three she says she WON’T sell, including this latest one.* They’re stepping stones all right.

    It’s getting serious… and silly. They didn’t bat an eyelid at the price… and want to go through the place on Tuesday! Now I’m in the ‘nure for putting the sign up outside!!! I will send you the plan… and photos… but you’ll have to be patient with me. I’ll explain it all in good time! ๐Ÿ™‚

    * We may build this design again, on a vacant block. We’ll supersize it this time. It has some aesthetic appeal. Not as much as some we’ve built, but more than most… .

  • 490 Greg Atkinson // Apr 12, 2010 at 8:22 am

    Senator if the RBA tries to aggressively fight inflation then interest rates could hit 10% I reckon. As I have pointed out a few times, higher commodities prices are great for mining companies but not necessarily fantastic for Australia.

    The mining companies don’t give “mates rates” and when coal prices rise our coal burning power stations will see their costs rise and electricity charges will head up. (and already have)

    When iron ore prices rise the steel makers will need to cover this and we will pay more for a whole range of imported goods and even steel produced in Oz will cost more.

    Personally I don’t see how the RBA will ever win the inflation battle while the Government is still in spending mode but I reckon they will try.

    As for house prices, well I am pretty convinced if the RBA raises rates a couple more times this year that we will see them level off.

    Now if oil prices take off again…then the RBA will have a real inflation fight on their hands!

  • 491 Biker Pete // Apr 12, 2010 at 7:16 pm

    Greg: “As for house prices, well I am pretty convinced if the RBA raises rates a couple more times this year that we will see them level off.”

    To our surprise, the rise in interest rates is having no effect whatsoever here. _More_ interested potential buyers for our still-unfinished project, even though we have advised them there will be _no_ negotiation on our price.

    My (shy, retiring) mate found himself in a bidding war in which he took no part recently, as keen buyers fought each other to outbid each other for his home _pre-auction._ He finally accepted a price well beyond his dreams; cancelling the auction…

    I agree with your final point, Greg. At that point, the RBA may actually overstep… . Maybe a ‘John Kerr / Gough Whitlam Black Swan Event’ will occur!~ ๐Ÿ™‚

  • 492 TG // Apr 13, 2010 at 11:43 am

    I was directed to this link recently. It is an interesting little presentation….Whether to believe it or not? Who really knows?

    http://www.scribd.com/doc/29520921/How-to-Profit-From-the-Coming-Aussie-Property-Crash-and-Banking-Crisis

  • 493 Ralph // Apr 13, 2010 at 2:24 pm

    Almost 500 comments now. Very impressive.
    Meanwhile, interesting stuff in the news about lending for housing dropping for the 5th month in a row. I think that says that the market is ‘trying’ to vote with its feet. I reckon this is a sign that house prices are ready to start falling. I mean, if fewer people are getting loans, then that’s fewer houses being bought. If this continues, it’s only a matter of time before prices start to turn downward. Unless the so-called hoardes of foreigners continue buying up our property to keep the bubble afloat.

    Of course, the government won’t take this lying down. Not with the future of the Australian economy dependent on high and increasing house prices. I think it’s time to keep an eye out for further government intervention to keep the party going. Stevo will certainly keep rates on hold next month I’d say, maybe more RMBS purchases by the AOFM to ‘support competition’ in the mortgage market, perhaps Kevvie and Swannie will bring in the $50k first home owners boost before the end of 2010. I reckon look out for some bubble-perpetuating initiatives in the May budget.

  • 494 Greg Atkinson // Apr 13, 2010 at 3:27 pm

    Ralph the house price discussion always stirs up a lot of interest but the debate does tend to get a little emotional at times. There is also a lot of dubious data tossed around by both the property bulls and bears so I personally find it hard to get a grip on what is really happening.

    I guess in another 3 months we will have a pretty good idea if the housing market is heading up or down. I wrote late last year, that I expected average homes prices in Australia to fall back around 10% this year but so far, it seems almost the opposite has happened!

    So perhaps I better keep a low profile for a while ๐Ÿ™‚

  • 495 Ned S // Apr 13, 2010 at 4:18 pm

    Ralph’s comment re stimulus if house prices back off: Depends on the strength of the mining boom perhaps? If it is as strong as the RBA and Treasury seem to be anticipating, then maybe not. But if it isn’t, then yep, housing is the obvious domestic industry to stimulate.

    I’ve been thinking about a granny flat design. (for myself) – 60 to 70 m2 maybe. And the thought occurred to me that Greg mentioned that was fairly typical size for Japanese apartments. So thought I might see if I could cheat some ideas. Found these:

    http://www.freebell.co.jp/apts/english/ap_006_eng.html

    They are even smaller and range from 43 to 56 m2. All 1 and 2 BR jobs. (The one that reckons it’s a 3 BR job is fibbing!) No idea how typical they are, but found them fascinating regardless. These people obviously know how to economize on the size of their dwellings. A bit more looking and reading and thinking indicated that stuff like kitchen and bathroom design, appliance and furniture style and type, plus acceptance of stuff like eat-in kitchens or eating in the living room are all potentially part of it. (Not sure I’m keen on the idea of foldup beds that double as sofas in the day though – But with these designs not requiring it anyway.) And an extra sving in Oz being that we don’t have huge dramas with the toot being in the bathroom – Although others do maybe?

    Fascinating as I said – We’d fit three of these things (bigger even), each with its own carport plus a 3 x 2 m storage area on an “average” Aussie lot size of maybe 15 x 40 m I’d guess? – Without even going highrise. With small yards – And who the hell really wants to mow grass? But our planning regs typically won’t let us. Not hard to see how we could get affordable housing if we did want it. So it would seem pretty damn obvious that we don’t.

  • 496 Ned S // Apr 13, 2010 at 5:08 pm

    Oz prices will hold up OK is my punt Greg – I know you don’t like comparing prices across countries but if one does, then having looked at Japan (average is USD $500k for one of those 60 to 70 m2 apartments you mention? [in the greater Tokyo area]) and thinking about what I know from provincial Russia – Re sizes and prices – Steer clear of Moscow where the prices are/were(?) crazy!, Oz just could be pretty good value as Biker suggests. For what one gets. With the annoying thing being that our planning regs don’t facilitate us buying less. Even Greek stuff didn’t look cheap when I checked yesterday. As overpriced as it seems, Oz property just could be the buy of the century in a globalizing world?

  • 497 Ned S // Apr 13, 2010 at 5:25 pm

    Well, the half century anyway – Unless we come up with something clever to do for a living when we run out of iron ore in 2075 … ๐Ÿ™‚

  • 498 Greg Atkinson // Apr 13, 2010 at 7:45 pm

    Ned I would say that an apartment in central Tokyo and an apartment in say central Sydney are not even in the same ballpark as far as infrastructure and facilities go. You just can’t compare the two in my view.

    Then you have to take into account that a modern apartment in Japan is built to a much higher standard than in Oz due to earthquakes. In fact most apartments I have seen in Sydney look positively flimsy to me.

    But like you said, I am not a fan of comparing prices across borders ๐Ÿ™‚

  • 499 Biker Pete // Apr 13, 2010 at 8:45 pm

    Ralph: “Meanwhile, interesting stuff in the news about lending for housing dropping for the 5th month in a row. I think that says that the market is โ€˜tryingโ€™ to vote with its feet. I reckon this is a sign that house prices are ready to start falling. I mean, if fewer people are getting loans, then thatโ€™s fewer houses being bought.”

    That’s an interesting interpretation of the data, Ralph.

    Our read on this went:

    * Fewer people are _building_ 1

    * The <$400K market is hotter than ever, however

    * Trading up continues, at the next level up

    * Boomers, fearing collapse in Super (from recent experience)
    and collapse in shares (from recent experience) are either
    a.) selling $1 mil properties and buying in the $400 – $600K
    market (if unprepared for retirement) ; or buying rentals
    in the <$400K market (if very financial). There are very few
    top quality homes in this market now, in Perth… the median
    being $500K… so regional centres are now becoming red hot.

    1 Your take: "…then thatโ€™s fewer houses being bought."
    Our take: "…well, thatโ€™s fewer houses being built."
    We suspect that in WA, it's the latter. If it's all of
    Oz, however, expect prices to rise steadily, not fall…

  • 500 Biker Pete // Apr 13, 2010 at 8:53 pm

    Ned: “Unless we come up with something clever to do for a living when we run out of iron ore in 2075 โ€ฆ”

    WE will not run out of iron ore in 2075, Ned.
    THEY will run out of iron ore in 2075, mate.

    (Unless they come up with something incredibly clever to extend my time here until I’m 128… and you’re 117… ๐Ÿ™‚ )

  • 501 Ned S // Apr 13, 2010 at 10:25 pm

    Oz in 2075 – Yes, it did actually cross my mind that there was a certain element of “not my problem” in there Biker – But if I was a reasonably intelligent 6 yo I might be wanting to ask … ๐Ÿ™‚

  • 502 Vince L // Apr 14, 2010 at 8:17 am

    Interesting link TG. If there really was an acute housing shortage in Australia they why are rents not soaring? Yes rents are pretty good in many areas but from what I can tell they are not a super highs levels.

    See this in the SMH for some interesting reading: Rental reprieve: Sydney prices on pause despite interest rises

  • 503 Biker Pete // Apr 14, 2010 at 8:32 am

    Ned: “Yes, it did actually cross my mind that there was a certain element of โ€œnot my problemโ€ in there Biker โ€“ ”

    Just a little tired of that lot continually reminding us that our generation a.) had it too easy; b.) got all the good stuff; c.) ruined their lives. Thank Gawd my own kids can see the light!

    Seriously, if I paused to seriously consider 2075, I’d be awed by technological medical breakthroughs; new, more productive energy sources; and cheaper water desalination. ๐Ÿ™‚ On the downside, vast areas of the planet which are no-go zones; and less-friendly world police… . ๐Ÿ™

    Exhaustion of our mineral supplies? Small beer in the big picture. (An iPhone in every pocket and a packet of tar-and- nicotene-free whingers in every blogsite…. . ๐Ÿ˜‰ )

  • 504 Ned S // Apr 14, 2010 at 10:13 am

    “Just a little tired of …” – That’s a debate you aren’t meant to win Biker. If you wee’d it up against the wall or lost it on bad investments they are dirty on you for not providing for your retirement. And if you provided for your retirement by making good investments they are dirty on you for pushing up the costs of those investments to them. ๐Ÿ™‚ ๐Ÿ™‚ ๐Ÿ™‚

  • 505 Biker Pete // Apr 14, 2010 at 7:36 pm

    Ned: “Thatโ€™s a debate you arenโ€™t meant to win Biker.”

    Sometimes, simply representing an alternate view is much more important than winning, Ned. How could a lone bull in a cageful of bears (DRA) expect to ‘win’, mate?!~

    I see another winner commences his long trek tomorrow. ๐Ÿ™‚

    Remind me to send RR a 1980 Grange!~

  • 506 Ned S // Apr 14, 2010 at 10:03 pm

    Keep the Grange for tipping on ya bunny stew I reckon Biker – Rory did nothing special to deserve it – He just wasn’t especially stupid was all! ๐Ÿ™‚

    As to hanging in re representing the contrarian view elsewhere – “Tho’ I’ve belted you and flayed you, By the livin’ Gawd that made you, You’re a better man than I am, Gunga Din!” ๐Ÿ™‚ ๐Ÿ™‚ ๐Ÿ™‚

  • 507 Biker Pete // Apr 15, 2010 at 1:45 pm

    Ned: “Rory did nothing special to deserve it โ€“ ”

    Not sure of that, Ned. Someone occasionally has to come forward to challenge the Doom Merchants. Our long held optimism, ‘She’ll be right, mate!~” needs expressing publicly when all about are losing it… .

    Nice quote. I’d long forgotten the first dozen words. You sure you weren’t an English teacher in a past life, Ned??! ๐Ÿ™‚

  • 508 Greg Atkinson // Apr 15, 2010 at 2:17 pm

    Interesting reading in The Australian today: Residential land in parts of Australia floods the market

    Hard to reconcile an acute housing shortage with land sitting idle?

  • 509 Biker Pete // Apr 15, 2010 at 6:17 pm

    We agree that oversupply and/or lack of credit are two key issues. High employment and wages may offset that to some degree.

    We cannot find any land bargains in our preferred area, but we were offered a cheapie at $130K today, in our No. 2 locale, where unemployment is higher… and rents $60 pw less.
    Turned it down.

    Investors in their mid-fifties appear to be buying investment properties here; and houses being built around our latest project appear to have owners late forties to mid-fifties.
    Interesting to see who’s buying; who’s renting… .

  • 510 Biker Pete // Apr 15, 2010 at 8:39 pm

    Kohler, commenting on China’s 11.9% growth: “The GFC is a BNM*.”
    Love it!~ ๐Ÿ™‚

    * Brief Nasty Memory.

  • 511 Vince L // Apr 15, 2010 at 9:13 pm

    Kohler obviously doesn’t know much about China then. China’s GDP will be pretty close to what the central government aims for, well for now anyway. Remember how great the Soviet economy appeared to be?

  • 512 Biker Pete // Apr 16, 2010 at 1:12 pm

    Vince: “Remember how great the Soviet economy appeared to be?”

    Nope. Not in my lifetime, anyway… .

  • 513 Ned S // Apr 16, 2010 at 2:40 pm

    QLD gets a big mention in the article re discounted residential development land – Thanks Greg. Which may or may not eventually lead to some discounted developed residential land depending on gov’t policy here I guess.

    I see we’re going to get tax breaks on income from bank interest. If we lock the loot up for long enough. Government enticing punters to keep the banks healthy.

  • 514 Biker Pete // Apr 16, 2010 at 5:36 pm

    Ned: “I see weโ€™re going to get tax breaks on income from bank interest. If we lock the loot up for long enough. Government enticing punters to keep the banks healthy.”*

    Missus mentioned this last night, but thought it was just a proposal, Ned. Her comment was: “With contributions taxes at the same rate, why would anyone commit to Super?”

    Young bloke is pulling 17% tax-free on one of those homesaver accounts, plus another 6.2% taxed, on $5K per year. (That’s the max allowed.) If he decides _not_ to build or buy, it’s converted to Super, without the 15% contributions tax, I think.

    Wonder what will happen when all these 4-year terms start coming to fruition? Minor surge in home purchases? You’d think so, considering these kids won’t want it locked up for another thirty years or more… .

  • 515 Ned S // Apr 16, 2010 at 7:48 pm

    We’ll need to see the detail of course Biker. But one of my several reactions was the same as your wife’s – If the scheme is any good then super could be less attractive.

    Hadn’t checked details on the home saver accounts. But yep, from what you are saying it sounds like they were designed to put pressure on to buy. Just like tax advantaging bank deposits will ensure the banks have funds for home loans.

    All part of the brave new world of governments getting a bit more proactive in deciding what they want us investing in I guess.

    This one would sound radical to some, but it would seem foolish to me for the KHR to not at least mention there could come a time when it becomes desirable to tax advantage rental income. We’ll see soon though hey?

  • 516 Biker Pete // Apr 16, 2010 at 8:02 pm

    Ned: “Just like tax advantaging bank deposits will ensure the banks have funds for home loans.”

    Just what _we_ thought, Ned.

    One question which occurred to us was: “If this 15% max tax on savings comes in, would this be on top of the current $48K we can make, tax-free, on bank deposits?” If so, we might see massive flow-on effects in regard to property, shares and Super(?) What incentive would remain for private construction, we wonder? That’s when your final question might need answering! ๐Ÿ˜‰

  • 517 Ned S // Apr 16, 2010 at 8:21 pm

    “What incentive would remain for private construction, we wonder?” – Correct – So with immigration being what it’s projected to be and many immigrants probably needing to rent plus the historic dynamic that maybe 15% of people want to rent and 15% are never going to get finance from any sane banker and governments typically seeming to end up repenting their forays into supplying public housing and the ATO presumably preferring properties to be positively geared than negatively geared, I’d suggest the Henry review could raise it as a possible future need that is not at odds with the general principal of tax advantaging income from “savings”.

  • 518 Biker Pete // Apr 16, 2010 at 9:31 pm

    Yes, we factored in nearly all of those suppositions, except the very final one, Ned. If the status quo remains intact, that’s enough for us.

    We sign up for the first set of solar electricity panels on a rental tomorrow morning. We’ll monitor it closely. If it lives up to claims of 46% reduction in tenants’ electricity charges, we’ll equip all north-facing homes (most of them are, for solar-passive reasons) with 1.5 kW systems. Looking at 5.2 kW for the homestead. That was going to cost us $29K after grants two years ago. Down to $19K, now.

    Rebates double in WA from July… while power charges are rising steadily… .

  • 519 Ned S // Apr 16, 2010 at 9:50 pm

    Green features don’t add much to values over here yet I gather Biker. But one has to imagine that will change as increasing elec prices etc start to hit people.

    Following Treasury doc seems to lay out most of the issues. With us all just being eager to see the results of the deliberations now hey? : ๐Ÿ˜‰

    http://taxreview.treasury.gov.au/content/ConsultationPaper.aspx?doc=html/publications/Papers/Consultation_Paper/section_10.htm

  • 520 Biker Pete // Apr 16, 2010 at 11:33 pm

    Very, very useful link. We’ll print it off, analyse and highlight it separately, Ned… then discuss it. Thanks!

    Funnily enough, the green issues have become _savings_ issues here.

    Examples:

    Solar HWS: Cheaper hot water. Plus for tenants.

    Solar passive: Less need to heat, cool home. Plus for tenants.

    Inverter-style RC Air con: Cheapest heating/cooling system possible = Plus for tenants.

    Cross-ventilation design: Heating/cooling advantages = Plus for tenants.

    Insulation: Every home except our own is _fully_ insulated.
    Insulation has heating/cooling advantages = Plus for tenants.
    (Our own place has thirty-foot ceilings and a simple system dispelling air from below, through a skylight window, above. Our walls are up to 600mm thick, too… .)

    E-vents: Heating/cooling advantages = Plus for tenants.

    Reflective window film: Less need to cool home. Plus for tenants. More privacy = plus for tenants.

    Artificial turf and or groundcovers = Cheaper water bill. No mowing. Plus for tenants.

    Eight-litre per hour dripper systems and native gardens: Cheaper water bill. Plus for tenants.

    Rainwater tanks: Plumbed to washing machines (winter use): free water to laundry and kitchens. Less corrosion. Plus for everyone.

    In an area where 28% (!) of residents have voted Green in past federal and state elections, it makes sense to know your market… but the _economic_ factor is important, too. Tenants know it costs less, on an _ongoing_ basis, to rent our homes.
    Grants have made it easy to initiate most of these features.
    Solar electricity is just the next step in the process; a very
    good move we think, as we’ll keep great tenants longer. ๐Ÿ™‚

  • 521 Ned S // Apr 17, 2010 at 1:17 am

    Thanks for that list Biker. Whatever I build will be built to keep and as such built Green because to not do so is shortsighted now even if it isn’t showing up in prices/rents yet.

    Those consultation papers the KHR used are informative alright with a wide range of views represented. And even some interesting little facts – I saw that the link I gave reckons 15 to 20% of Aussies never purchase a home – So my 15% guestimate was OK.

    Anyway, Rudd will pick the low hanging fruit that buys the most votes for now. So I reckon it’s going to be important to focus on what the KHR actually recommends more so than on Rudd and Swan’s initial response.

    There’s some potentially scarey stuff in the consultation papers – Direct wealth taxes as opposed to wealth transfer taxes (ie death duties) even. [Hit CONTENTS on the link and have a look at section 3 for that.] The welfare lobby has been very busy putting its case I’d suggest! ๐Ÿ™‚

    They even mention (in the initial link I gave) that the CGT concession on homes and non-taxation of potentially imputed rents on same etc mean that homes are taxed at billions less pa than rentals. With an argument being made (by some) that rentals aren’t taxed enough anyway of course. So I’m maybe hoping for a bit much that income in the form of rents will be concessionally taxed – While there could be a very strong argument made for it if there was no Neg Gearing, the general view will probably be Well you should have used the neg gearing advantages to purchase! Still, if they find themselves short for rentals at any time, it would be an option.

    I find the extent to which we’ve introduced welfare into our society absolutely amazing. Eg the following from the link I gave “Rent Assistance will cease when a family with one child receiving FTB Part A has an income of $72,854” – I’d heard of FBT – Just checked – Seems it cuts out at a bit over $100k pa income for a family with only one kid – The government’s done its best over the years to get everyone hooked on welfare is my biassed perspective.

    Anyway, my personal thoughts on the “average” Aussie’s welfare needs aside, I can only guess that Dr Henry really did give Mr Rudd a full on “roots and branches” review. So he’s had a nice big belly full of cellulose to digest at a potentially inconvenient point in time … ๐Ÿ™‚

  • 522 Ned S // Apr 17, 2010 at 2:54 am

    Had realised that concessional super contribs for over 50s had been reduced to $50k pa, but not that they drop back to $25k pa in 2013 if I just read this right:

    http://www.smh.com.au/business/dont-get-caught-out-over-excess-super-contributions-20100416-skit.html

    So there’s going to get to be even less potential to take advantage of the diff between the CGT and concessionally taxed super contrib rates when one flogs off an investment property. Not much incentive to sell them is there? It’s starting to smell suspiciously like part of a broader plan to me! ๐Ÿ™‚

  • 523 Biker Pete // Apr 17, 2010 at 8:41 am

    Thanks for your comments, Ned. We’ll work through them.

    On the reduction of super contributions from $50K for $25K, I’m advised by my advisor that ‘we’ knew this. I don’t recall ‘knowing’ this(!) Her comment? “Outside our timeline”

    (Have I got a use-by-date?! ๐Ÿ™‚ )

    DRA: My comments are now ‘held’ for moderation.
    -And I was behaving,too…. !

  • 524 Biker Pete // Apr 17, 2010 at 8:59 am

    “….if you breach the non-concessional cap of $450,000 (spread over three years) as well, the total tax rate will be a shocker: 93 per cent.”

    HOLY COW!~ We’ll have to watch that….

  • 525 Ned S // Apr 17, 2010 at 10:44 am

    The constant changing of regs presents huge potential risks to the punters Biker. Radical about faces like going from $100k to $25k pa concessional super contribs over 4 years really aren’t the sorts of things one expects in a system that has carefully considered and clearly defined long term goals. But those short to medium term uncertainties aside, changes in what are already quite complex systems like tax and super mean it’s very difficult for people to keep on top of them. Including the average government department and super fund employee a punter is likely to be chatting to if they should happen to decide it might be time to ask for a bit of info I fully suspect. With the consequences of any incorrect info potentially being quite high as you’ve just said.

  • 526 Biker Pete // Apr 17, 2010 at 11:51 am

    Just signed up for the first solar electricity system, Ned. Cost $9.5K. Rebate $7K. Cost to us $2.5K. And we’ll claim annual depreciation*. Once we’ve monitored it for effectiveness, we’ll do all homes with north and west-facing roofs (15 loss in power production, but with these grants, we’ve just gotta do it! ๐Ÿ™‚ )

    You’re right: a 75% reduction in what one can write off is dramatic. Your supposition that government is promoting long-term private ownership of rentals may be on the money.

    * Maybe we should _borrow_ to do it, instead of paying cash…
    and claim the interest?!~

  • 527 Ned S // Apr 17, 2010 at 3:01 pm

    There’s a few stars aligning that will push investors towards rentals Biker. If one can’t get the tax break they are after through super and don’t like Mr Rudd’s offer to lock their money up in bank deposits, negatively gearing rentals is going to seem like the best of the remaining options to a lot of Aussies I’d suspect. Which all keeps house prices up and the banks stable.

    Of course a home owner couple would only need two paid off investment properties at today’s average prices to remove them from Mr Rudd’s hair for pension purposes based on current asset test rules. And they might find that quite an unsatisfactory situation given the equity they have tied up in them that they’d like to be spending (as well as the rent). So there are some who incline to the view that if/when investors start to sell out of property en masse to support their retirements, property prices will take a hit. But reverse mortgages would seem to be a potential solution there. Wonder what (if any) the tax implications of deriving income from reverse mortgages are? Held in various structures/entity types and at different ages – “They” do make things bloody complex!

    “Maybe we should _borrow_ to do it, instead of paying cash โ€ฆ and claim the interest?!~” – That old accumulation mode – It’s a hard one to let go of isn’t it mate? (From one who fights that same battle! ๐Ÿ™‚ ) Dunno – But if they’ve still got compulsory retirement ages, you and the lady are a long way off them – So do what you reckon will make you feel good I reckon?

  • 528 Ned S // Apr 17, 2010 at 4:06 pm

    I’m not at all sure how reverse mortgages will sell in the market over time. But given how comfortable Aussies seem to have become with debt, I wouldn’t discount them as a potentially major player over the next decade or three. Re tapping the value stored in investment properties at least.

    Of course my version of “commonsense” says to me to keep the home debt free just in case it’s required to swap for some decent aged care. And with the potential to leave it to family being “nice”.

    But lots might not feel that way??? With an eat, drink and be merry while one can attitude sounding sensible given that as a drooling dementia detainee one’s standard of healthcare really isn’t going to matter a bugger! ๐Ÿ™‚ ๐Ÿ™‚ ๐Ÿ™‚

  • 529 Ned S // Apr 17, 2010 at 6:31 pm

    Just spoke to my favourite taxman – Not his specialist field as such, but his thoughts were that a reverse mortgage wouldn’t trigger a CGT event. Hey, it’s just a loan – There is no change of ownership. And you could pay it off. With the big tax issue to be aware of being that interest charged on a loan that was being used for personal purposes as opposed to investment purposes, could not be claimed as a tax deduction. Seems reasonable to me? (Just as an aside he also indicated that he didn’t reckon the loan rate should be any higher than a normal buyer’s mortgage because they were both secured against the same asset class – And to just maybe watch the banks on that one.)

  • 530 Biker Pete // Apr 17, 2010 at 8:42 pm

    Ned: “Of course my version of โ€œcommonsenseโ€ says to me to keep the home debt free…”

    Have to admit, the idea of reverse mortgages scares me spitless, Ned. I’ve never really been comfortable with debt. Mind you, if the intent is to increase generation of income… and there are real tax and income advantages, I could probably live with the idea.

    I grew up in a ‘don’t-touch-the-principle’ environment, in which delayed gratification was a key part of the plan. Good planning, good timing and incredibly good luck has meant that continual accelerated debt reduction has meant it all worked well for us.

    But the big picture _does_ seem to indicate that we’re mortal; life isn’t a rehearsal; and that you can’t take it with you!
    I think the UK experience 2005 and 2009 showed us the _insane_ end of the reverse mortgage continuum; although along with the flash cars and European holidays also came the villas in Spain, France and Portugal… oh, and Tuscany, of course.

    Here’s a laugh… my mate just showed me his new camera, which cost a couple of thou more than our most recent car purchase.
    Maybe he who dies with the most toys really does win… . ๐Ÿ˜‰

  • 531 Ned S // Apr 18, 2010 at 3:11 am

    I share your very great reservations on reverse mortgages Biker. But having had a read, they’ve got a reasonable sales pitch with the decent ones being prepared to guarantee the homeowner will never be placed in a negative equity situation and even that enough will be left in equity to buy aged care if that is how things are set up apparently. So it’s possible to imagine that a lot of people might bite eventually for one reason or another.

    The other interesting little factoid was that 20% of them are taken out to help the kids with housing or a business. With the latter sounding real dodgy to me personally. But people are big boys and girls and make their own choices.

    If we are to believe the spruikers, prices are going up and things are selling like hot cakes over here. Maybe – But my impression is that there’s a heck of a lot of properties on the market.

    “Delayed gratification” – That’s a term I haven’t heard for a while! ๐Ÿ™‚ And given that you mention it, another one is “goals” – Apart from the footy type ones.

    A camera that costs more than a car hey? – I hope you made the appropriate exclamations of envy??? ๐Ÿ™‚ ๐Ÿ™‚ ๐Ÿ™‚ I count myself fortunate in some ways that I have no real interest at all in the techo type thingies that make up lots of today’s consumer market – Although it does mean a bloke will be a dinosaur before his time if he isn’t already …

  • 532 Biker Pete // Apr 18, 2010 at 8:38 am

    “…my impression is that thereโ€™s a heck of a lot of properties on the market…. ”

    And probably quite a few ‘held back’ from sale, Ned.

    22 rental vacancies in our No 1 location. Only four of them are below $360 pw. Average age in this area is 29. Only 2% over 65.

  • 533 Greg Atkinson // Apr 18, 2010 at 9:54 am

    I don’t quite buy into the acute housing shortage story. Perhaps there is a shortage of homes at certain prices and in certain areas, but I seriously doubt there is a nationwide shortage of homes.

    There also seems to be plenty of land around sitting with major developers who for reasons best known to themselves, are not building.

    I have heard that one reason the developers are not building is because they cannot get finance for new projects, but if there truly was a housing shortage why would this be the case? Wouldn’t the banks be happy to lend for new housing projects because they knew the properties would sell like hot cakes?

    Anyway, I still reckon prices will have softened on average by about 10% by September (as I wrote last September) but at this stage that does not look like very good call.

  • 534 Senator13 // Apr 18, 2010 at 11:41 am

    I think your right in saying that there may be a lack of homes at certain prices in certain areas, Greg. Of course there would be. Otherwise those particular areas would not be desirable and the prices cheaper. I think this is where peopleโ€™s wants vs needs take over their thinking. There are a lot of people out there who automatically think that they are entitled to buy a harbour side property at outer suburban prices. These people are just living in a fantasy world and are the ones out there screaming loud at how crazy the prices are. Yes prices might be on the high side, but anyone thinking they can get a harbor side view for $300k is dreaming. The reality is that these places cost millions and yelling about it is not going to change that.

    Also, I think another factor contributing to the ‘shortage’ is the drip feed land release by the Governments. There is a lot of land around the place – just not allowed to use it.

    I would also think there are quite a few cases of developers holding off building on land they own one because they may not be able to get finance but the other is that they have a vested interest in keeping the ‘shortage’ tale going.

    If there was an oversupply of land then of course prices would come down. But everyone seems to be managing the supply to keep the run going.

  • 535 Ned S // Apr 18, 2010 at 1:11 pm

    Yes, there is the thing about new land not being released in the boondocks. That led me to have a read on urban sprawl in wiki. Which was informative. While dated now, I also found this reference cited by the wiki article a good read:

    http://www.cis.org.au/Policy/autumn05/polaut05-1.htm

  • 536 Ned S // Apr 18, 2010 at 1:45 pm

    As stated the article is dated and looks at the last boom rather than this most recent one. But it still seems highly relevant to me. Cheap credit is identified as the single biggest factor. And it mentions a bunch of others as you’d expect. But the thing I found most interesting is that it explains one factor I had a strong feeling was contributing to higher prices but hadn’t really got my head around how or why:

    “There has also been a change in the way new infrastructure on the urban fringe is financed, with developers now required to meet the full cost of common facilities like roads, sewerage and parks in a single upfront payment. The Productivity Commission argues that, because these higher upfront charges should be balanced by lower recurrent user charges, residents should be no worse off than before. However, the Commission concedes that capitalising these costs into a one-off upfront payment will have pushed up house prices and may therefore have made it more difficult for low-income families to get mortgages in the first place.”

  • 537 Ned S // Apr 18, 2010 at 2:38 pm

    Greg: “… if there truly was a housing shortage … Wouldnโ€™t the banks be happy to lend for new housing projects because they knew the properties would sell like hot cakes?”

    Just because the RBA thinks the risks are more to the upside (and is raising rates to ensure we don’t get high inflation which they’d have to counter with even higher rates), it’s probably not realistic to expect the banks to wholeheartedly back that call after the nasty fright everyone just had until they see some pretty strong evidence of it? Different timeframes – The RBA gets to change it’s mind every month. Banks are happy enough to give 25 and 30 year loans direct to qualifying individual home buyers and investors because they figure over those sorts of periods all will be just fine. But short term loans to developers could be a very different storey just yet? Given that we all do know that if the economy goes a bit flat (or worse), leveraged RE developers and builders fall over every time. With people being able to economize on their housing needs in such circumstances.

  • 538 Biker Pete // Apr 18, 2010 at 3:20 pm

    While were OS, a developer here panicked and let some top blocks go for $200 – 220K. Must have been really flat for one of our biggest developers to give discounts like that. They all went within hours, we’re told.

    Market isn’t really firing here at the moment. I think it’s KHR-related, especially in my age group… .

    Lots of interest, but everyone’s looking for a bargain. None left, sorry… !~ ๐Ÿ™‚

  • 539 Ned S // Apr 18, 2010 at 5:07 pm

    Rudd cutting super contribs like he’s done strikes me as indicating a) he wants his tax on money earned NOW please and b) he’s starting to think that the promise of income from super being tax free after 60 could cause a few hassles somewhere down the track – Not least of which is that the government that changes it will find itself in opposition. (As important as it might be to the current old codgers who’ve put some away, it’s going to be way more important to the youngies who’ve had 9% of their potential earnings forcibly removed from them over an entire lifetime is my guess?)

    “None left, sorryโ€ฆ !” Maybe Biker – I looked at one from the outside this afternoon. I’ll see if I can arrange an inspection tomorrow. It may have termites as tenants; Or have been trashed internally by two legged insects; Or have had a kitchen fire? But if not it’ll be a chance – Mainly based on my feel for what the potential rental income might be.

  • 540 Biker Pete // Apr 18, 2010 at 9:14 pm

    Visited a display home today, Ned; mainly to find out how the agent promoting it was getting $720pw for his 3X2 rental… instead of $350 pw… the norm. Seems they furnished it (well) and signed up a long lease with a mining company. Very clever couple… .

    “…the government that changes it will find itself in opposition….”

    I think it will be death by a thousand cuts… stealth. Ultimately, though, if any party offends the vast number of Aussies who are movers & shakers, government(s) will change. ๐Ÿ˜‰

  • 541 Ned S // Apr 19, 2010 at 10:18 am

    I see the economists have picked up on something that seems to be along the lines of Anon’s previous point about how come house prices keep going up when banks are lending less for them? :

    http://www.smh.com.au/business/property/economists-baffled-by-robust-property-market-20100418-smli.html

    I missed out on that property I mentioned – Too slow! ๐Ÿ™‚

  • 542 Greg Atkinson // Apr 19, 2010 at 11:35 am

    Ned, I think this comment today in the SMH pretty much sums up the situation pretty well in regards to house price data:

    “HOUSING is the biggest market in Australia and a house is the single largest purchase a person is likely to make in a lifetime. Yet there is no central database that records transactions and prices.

    This vacuum of reliable information is filled only by estimates and surveys from the slew of industry peak bodies and assorted real estate spruikers, all of whom are tainted by a vested interest in pushing the market higher.”

    (See: http://www.smh.com.au/business/property/melbourne-and-sydney-lead-the-price-surge-20100418-smlr.html for the full article)

    Pretty worrying when you think about it. We as a nation, are obsessed with the housing market and yet we don’t actually know very much about what it is doing.

  • 543 Ned S // Apr 19, 2010 at 11:58 am

    Even without taking into account the worrying fact that a lot of data/stats comes from parties with vested interests Greg, it’s a pretty safe bet that some of the data is less than timely and that journalists just could be tempted to cherry pick from any of the range of stats available to produce stories that are long on sensationalism and short on attempts at useful interpretation perhaps?

    Off topic a little, but I saw a writeup a while back where the RBA reckoned it might actually be handy if the ABS CPI figures were updated monthly rather than quarterly! Of course I also read somewhere that the ABS had its budget cut a while back too, so it had stopped producing some stats/was producing them less frequently or somesuch – Don’t recall the specifics.

    Re: “we donโ€™t actually know very much about what it is doing” … Just at the moment even the RBA would probably really like to know if there’s any truth in the suggestion that foreign buyers might be pushing prices along a bit – Just as one example.

  • 544 Biker Pete // Apr 19, 2010 at 1:41 pm

    “I missed out on that property I mentioned โ€“ Too slow! :)”

    Too bad, Ned. They _are_ out there. We miss one from time-to-time… and pick one up far less frequently… .

    Greg, back in the good old days, we knew the sale price of every block and house that sold, in a very select northern beach suburb. As each property resold, we whited-out the last price and substituted the next. We probably had the best (on-paper) most up-to-date data base on that area.

    I was saying to the missus yesterday that we are no longer as diligent. We only record sale prices of properties in which we _personally_ were interested. (That skews them towards ‘good taste’ of course!~ ๐Ÿ™‚ )

    I remain convinced that there’s extremely mixed and contradictory data at present. As I mused yesterday, you know things are getting interesting when a _realtor_ actively seeks _your_ opinion… as happened Sunday afternoon… .

  • 545 Ned S // Apr 19, 2010 at 3:02 pm

    No dramas Biker – It just means that’s one little pocket of RE I’m now pretty familiar with and wouldn’t dither around if I saw another one pop up there at a reasonable price as the location is just that good! (Gotta work at it as you imply.)

    I got “caught” with the one I bought in the name of my SMSF in 2008 – About 500m walk from the Catholic Uni with state primary and secondary schools close by being bonuses – Settled for that combination as opposed to the ability to happily walk to rail and shops daily which is what I look for by default. Only problem being that muggins didn’t know the primary school had been flogged off to be redeveloped as townhouses which are also only about 500m from the uni. Nevermind – House prices seem to have been doing just fine around there regardless … ๐Ÿ™‚

  • 546 Ned S // Apr 19, 2010 at 3:49 pm

    There’s risks to everything of course – One of the criticisms of Brisbane transport at the moment is that existing suburban rail stations are too close together – With the suggestion being that if every second one was closed (for instance), trains would get into the CBD that much quicker. No idea what might happen, but while I’m way more a property type bloke than anything else, at least within that asset class, I’m happy to hedge my bets a bit.

    PS: When I buy close to rail, I also try to look for stations that have industrial areas close by – Just one more potential bonus.

  • 547 Biker Pete // Apr 19, 2010 at 4:17 pm

    “When I buy close to rail, I also try to look for stations that have industrial areas close by โ€“ Just one more potential bonus.”

    It’s a niche quite unfamiliar to us, Ned. West Aussies are wed to their horseless chariots. There was a window of opportunity between Perth and Mandurah a few years back, as fast rail linked the two cities.

    Should have looked at what the pollies were buying a year before that rail link was announced!~ Not joking here… .

  • 548 Ned S // Apr 19, 2010 at 4:34 pm

    We’ve got the VERY large urban sprawl thing going on here Biker. With quite a few things pointing towards the fact that yee old horseless chariot could become somewhat more of a luxury than a relatively cheap right over time. Hang around rail and rail stations that have lots of jobs close by (as opposed to houses in the boondocks) and the future sounds [comparatively] merry I suspect?

    The pollies – Yeh, since you informed me that their pensions and our superannuation operate a bit differently, I’ve noticed even a few more reasons to dislike them than previously – Maybe Henry could toss that thought into his general dicussions re “equity”? [But not if he enjoys his current job and its rewards I suspect … ๐Ÿ™‚ ]

  • 549 Senator13 // Apr 19, 2010 at 4:39 pm

    I think I stated a little while back that I suspected that FHB made up a small percentage of residential real estate transactions. That article seems to go somewhat to confirming that.

    Though I still would not be relying on the family home as a sole source of wealth creation because I see a lot of risks in that.

    I still think that real estate does have some good advantages as an investment however.

  • 550 Ned S // Apr 19, 2010 at 5:32 pm

    “I still would not be relying on the family home as a sole source of wealth creation because I see a lot of risks in that” – You could very well be right Senator. And to throw in a bit of Ned’s busted arsed bush psychology for the true “ma ‘n pa” investor in that regard (which I am), I reckon it’s important to invest in what one believes in – If one is right that’s great. And if they’re wrong, they’ll find some way to say “not REALLY my fault” and come back and keep playing the game with the chances just maybe being that one day they will be right – Albeit after having learned lots and changed many things they do.

    ‘Course that’s dependant on ensuring one’s got some safeguards in place to ensure they never get thrown off their horse so hard they break their neck and really can never crawl back on a gee gee again! ๐Ÿ™‚ And in that regard (for believers), Oz property has its place with not even the doomiest, gloomiest blokes seeming to want to write it off by more than 40 or 50% and with it having given one a roof over their head in the interim regardless.

  • 551 Biker Pete // Apr 19, 2010 at 6:23 pm

    “Yeh, since you informed me that their pensions and our superannuation operate a bit differently… ”

    Our Sunday Times (p.18) just revisited that theme yesterday, but actually failed to highlight the _real anomaly._

    I know there was prior knowledge of that rail link, which enabled advantage.

    Further south, a similar coup was attempted, but it left the insiders stranded, when a major proposal was blocked by angry residents. Had to chuckle a little… . ๐Ÿ˜‰

  • 552 Ned S // Apr 19, 2010 at 6:58 pm

    When I see telephone posts, I envisage pollies hanging from them by a single unchanged heel for a month or two on end – But only because I’m not an especially vindictive chap … IMO? ๐Ÿ™‚ Give me a decent dishonest RE salesman or GS banker who at least makes no bones about the fact he’s out to gut me – For mine! ๐Ÿ™‚ ๐Ÿ™‚ ๐Ÿ™‚

    I commented once before re one of Greg’s other writeups that I don’t vote Biker – Stopped a decade ago. And I never will. I just loathe them all too greatly.

  • 553 Biker Pete // Apr 19, 2010 at 7:19 pm

    “I donโ€™t vote Biker โ€“ Stopped a decade ago. And I never will.
    I just loathe them all too greatly.”

    My old dad stopped voting in his last few years. Also refused to read newspapers. But he was still making changes to the Government Gazette in his early eighties, challenging easements, minor roads and the like. _Feared_ by local politicians, mainly because he made more work for them… .

    Politicians? One I quite liked passed on recently… but even he wasn’t able to resist the temptation of inside information.
    My son was so upset by his passing that he not only donated a very large sum to the Cancer Foundation, but insisted the whole extended family, in Australia and Canada, donate as well! Insisted all birthday and Xmas presents go the same way.

    We were impressed by this selflessness, even though the pollie had never really approved of our son dating his daughter, which probably doomed the match a few years back. Despite that, our boy visited him frequently in hospital, as though he was the man’s own son… . My take on this? a.) my son is a better man than I am; b.) Pollies are a mixed bunch, as we are; c.) if we can find one who truly _serves_ us, we should back that rare individual to the hilt.

    My glass is empty. Strange drop called Strait Jacket… a spicy EXOTIC (in caps) shiraz. I suspect it’s a private bottling, given to us as a gift. Losing track of my little cellar!~ Biking north Tamara… laptop in backpack… .

  • 554 Ned S // Apr 19, 2010 at 7:51 pm

    “even he wasnโ€™t able to resist the temptation of inside information” … But people serving in public office must be able to mate – Which would make them 1 in a thousand maybe and not the sort of swarmy little grubs we are going to get floating to the top in our systems – Not that I can suggest better ones as Winnie said!

    My glass is 0.39876321 full is my best guestimate? Which given the several other 0.9999999999 full one’s I’ve had before it, should mean I sleep well yet again! ๐Ÿ™‚ Look forward to hearing from you on your foray up North …

  • 555 Biker Pete // Apr 19, 2010 at 9:29 pm

    “But people serving in public office must be able to mate โ€“ ”

    Yes, I agree. But I figure this bloke, seven years younger than me, _knew_ he wasn’t going to make it… and set this up for his missus. Yep, unethical, I know. And we could never really agree on much, but even as the rust crept through him, he never lost that inner strength, that care for family, probably before all else. Not what we pay them for, I know… .

    Filled that glass(!) Suspect my doc only says 375mL of red per day is OK because that’s what _she_ knocks back.

    Post as I ride north. I think Telstra _finally_ got something right. My internet mobile is cheap and fast. I may stop cursing the b*astards… .

  • 556 Ned S // Apr 20, 2010 at 12:05 am

    Knew a doc once in an isolated location we all knew ‘n loved by the name of Scrag – One of his favourite if somewhat slurred sayings as he was peering into the bottom of his final jug for the evening and waving the remains of his last pot glass about from same was You’re only an alcoholic if you drink more than your doctor! ๐Ÿ™‚

    Yeh, it’s hard to be too critical of a pollie who’s about to croak and takes the option of setting up the family. But I am regardless – One’s either got principles they hold to unto death in which case they just might be a worthy pollie – Or they don’t – So really shouldn’t be in such a position. And figure your lad most likely did well to avoid entrapment with the same chap’s progeny?

  • 557 Ned S // Apr 20, 2010 at 12:53 pm

    Seems we are in for some more interest rate rises:

    http://www.theaustralian.com.au/business/markets/reserve-bank-forecasts-boost-to-incomes-amid-higher-prices-for-exports/story-e6frg926-1225855907542

    And here’s a somewhat indignant article about it from a chap with a very obvious vested interest:

    http://www.theaustralian.com.au/business/property/lifting-rates-will-not-stem-rising-market/story-e6frg9gx-1225853745084

  • 558 Ned S // Apr 20, 2010 at 3:23 pm

    The nation’s best performing economy – Yep you guessed it – the ACT!

    http://www.tweednews.com.au/story/2010/04/19/act-ranked-best-performing-economy/

    With housing construction being a key driver there apparently. Which probably isn’t a bad thing to keep in mind if one is asking would the Oz government stimulate housing again if the economy was ever looking a bit flat.

  • 559 Biker Pete // Apr 20, 2010 at 7:31 pm

    Very interesting link, Ned.

    If 14% of Aussies own an investment property (and I presume that includes kids in the total!~) I wonder what percentage of ACTians own a second or third property? Wonder if it could be as high as 30%?

    Your conclusions are sound.

    On the biz of the missedmatch… they both met _far_ too young.
    Her mother told me once she thinks they’ll marry in their mid-30s… . She’s a good kid. Bought him a set of five new high-quality tyres for his car recently. They’ve remained great friends. Who knows?!!~ ๐Ÿ™‚

  • 560 Ned S // Apr 20, 2010 at 7:57 pm

    “14% of Aussies own an investment property” – That’s about the right number Biker given that my best historical knowledge is that about 18% of Aussies will never buy a home.

    “Who knows?'” – Depends what values your boy has ended up with mate? If he’s looking for a lass who’s going to be an ideal Aussie pollie’s wife she’s maybe in the running. Although by virtue of the fact her daddy rejected him my thought was that he just mightn’t measure up to that family’s standard – Which could be a very good thing based on what you’ve said?

  • 561 Biker Pete // Apr 20, 2010 at 8:24 pm

    “… that familyโ€™s standard…” Who knows, mate? As I said, we agreed on few issues!~

    Quote just arrived on the latest project: $169K for a pretty amazing home. (Missus basically designed it, working with our architect.) Now, that’s on a $134K block, which has $18K worth of landscaping and fences thrown in. We’re both (by email) pretty ecstatic. Numbers look pretty good, though we add around $40K in floor coverings, driveways, window treatments, AC, etc. Still, to come in under $350K is a minor coup, for a home ‘worth’ $400K+. It will pull around $370 – $400 pw in rent… .

    Another set of plans I’ll send you when things get sorted here…

  • 562 Ned S // Apr 20, 2010 at 8:36 pm

    “Another set of plans Iโ€™ll send you when things get sorted here โ€ฆ” Ta Biker – I look forward to that greatly. But must admit my thoughts are running along the line that the last time I saw house prices boom enough I could buy a block, build one and make some dough they dropped a bit and flattened for 4 years? But hey, it’s all just a game regardless! ๐Ÿ™‚

  • 563 Biker Pete // Apr 20, 2010 at 9:33 pm

    “…the last time I saw house prices boom enough I could buy a block, build one and make some dough they dropped a bit and flattened for 4 years…”

    I recall some periods when we rode out five year plateaus, to see things go crazy in the next two, Ned. Funnily enough, your QLD mates, MRD, made an identical comment recently. You’ll probably recall my skepticism in regard to their projections, recently; but their 5+2 example echoed our own experience.

    I believe what we’re doing is _safe_; but perhaps that belief is influenced heavily by our Super / cash situation. If the crazies are correct… and a 50% crash ever occurs, we’ll simply pull the Super and pay all properties off… and ride it out… with rents providing (endless?) mobility… ๐Ÿ™‚

    I agree with Sen13 that property alone leaves one a little too exposed. We lost count of the folk who lost confidence during that five-year-flat-spell… and bailed. Maybe they had no other option~ Those who were able to hold made incredible gains, setting them up _for life_… ourselves included… .

  • 564 Biker Pete // Apr 21, 2010 at 9:44 am

    “Quote just arrived on the latest project: $169K”

    She’s just pushed that up to $185K with a raft of little changes.
    Time to reel her back in, methinks!~

  • 565 Ned S // Apr 21, 2010 at 2:32 pm

    “property alone leaves one a little too exposed” – True; If I end up basically 100% in property (which is what I’d need to scratch by on rent) I’ll probably want to head back to work for a few years to build up an appropriate cash buffer.

    In that regard I just looked at some jobs on offer in mining. Yep, there’s a few I could apply for. But I’m in NO hurry – Two or three years of not working has definitely watered down my Protestant work ethic.

    “pushed that up to $185K with a raft of little changes” – A reminder that there’s a good reason dwellings are depreciable assets maybe Biker? With the value being in the land as I continually parrot in my mindless mantra … ๐Ÿ™‚

  • 566 Greg Atkinson // Apr 21, 2010 at 6:42 pm

    The property price debate rages on in the mainstream media…it seems to becoming a daily topic now! Here is an interesting article from the SMH online today: http://www.smh.com.au/business/property/why-property-pricing-doesnt-add-up-20100421-sttz.html

  • 567 Biker Pete // Apr 21, 2010 at 7:41 pm

    HellZapoppin’!~ Lost a tenant yesterday, got a new one today. And, according to the new family, they left because the landlord raised the rent from $400 pw to $450. Our rent, $360 pw, looks pretty amazing in comparison. When they heard they were getting solar-powered electrickery, they practicallty swooned… .
    Just took them through the house. They love it.

    “Two or three years of not working has definitely watered down my Protestant work ethic.”

    Wish I could _rid_ myself of that WASPE, Ned. Maybe you can provide some counselling!~ (Seriously. I’m driven.* )

    * And it doesn’t really help that I’m wed to a driver!!!!!~

  • 568 Biker Pete // Apr 21, 2010 at 11:33 pm

    I found Hoffman’s argument a little lame, Greg. Property isn’t ‘like any other investment’. There is an emotional link to housing which is, admittedly, quite irrational. One of our first rules has always been to disengage emotions before viewing. Our belief is that most people can’t do that… .

    We have avoided auctions for that reason. Auctions add fuel to the emotional fire.

    We are surprised how emotionally-involved people are with their cars, too. We even suspect there’s a kind of strange link here. The tenants who assert we ‘charge too much in rent’ always drive the largest, flashiest cars, or the most expensive European models. It’s almost compensatory.

    Finally, Hoffman’s article joins the ranks of a recent trend I’ve noticed… ‘my mate-the-‘ The Shoeless Investor has been using it again recently, to post parables explaining how foolish the property bulls are. His mate the realtor rang bells with Hoffman’s mate, the valuer. Journo-listic licence, I guess.

    There are a dozen oft-repeated arguments why Australian property _might_ falter. Some of them are credible. Did Hoffman’s parable really add anything at all, other than his admission of utter confusion? (Lots of _that_ about! ๐Ÿ™‚ )

  • 569 Ned S // Apr 22, 2010 at 12:14 am

    “Iโ€™m wed to a driver” – Well, you’re compatible Biker. Which is an essential thing when it comes to money matters.

    Suspect I’m not very balanced though in that regard either if that’s what you’d like to become – It’s just that my focus moved to trying to figure out if I was smart enough to make money without working for it? And by virtue of the fact I’m letting thoughts of returning to the workforce flit through my mind, I’ve probably got my answer.

    In relation to remaining cautious about what we read and aware that lots of info comes from groups that have vested interests, I got an email very recently from a mob who state ‘In its Global Financial Stability Report published last night Australia time, the IMF wrote that, “The dramatic rise in residential property prices in recent years, especially in Australia, Ireland, the Netherlands, Spain and the United Kingdom has heightened concerns of an asset price bubble and thus the likelihood of a sharp price correction.”‘ With this being the source: http://www.imf.org/external/pubs/ft/gfsr/2010/01/pdf/text.pdf

    While their “quote” is a bit of a fun read of course, given I’d read the IMF was saying something different about Oz housing, I checked the source and can’t see anywhere it says that at all? Quite incongruous in fact – Do they really expect me to believe that the IMF has just said that in recent years residential property prices in Ireland, Spain and the UK have gone up and it’s making people worry that bubbles could be forming there – But NOT mentioning China in that regard??? I’d like to know their chapter and verse reference for their quote from their source? I’d mention it on their site – Except I appear to have been rather actively discouraged from commenting there … ๐Ÿ™‚

    But that aside, is it possible that residential RE prices might behave differently to stocks regarding “bubble theory”? Well, to the extent that unlike GM it can never go broke and that probably only something like 20% of it is held by investors rather than 100% and it isn’t very liquid and the equivalent of margin calls don’t seem to be part of the game, Yep it’s possible it could I guess?

  • 570 Biker Pete // Apr 22, 2010 at 8:16 am

    Ned: “I appear to have been rather actively discouraged from commenting there โ€ฆ ๐Ÿ™‚ ”

    I beat the DRA block, Ned. Cleared _all_ history from my browser.
    Each time I’m blocked, I clear the history, including cache.

    IMF Link: I thought Figure 1.38 put it all in perspective.
    Australia has some issues, but it’s the place-to-be at the moment. Also thought the comments about having avoided another Great Depression were sound… although Bonner would disagree: it’s still to come. And, of course Keen would agree with that!

    Warnings about Oz property seem almost anecdotal, don’t they?
    Kind of like ‘well, we’d better throw that in, in case it happens and we’re accused of having missed it from The Big Picture’… . ๐Ÿ™‚

  • 571 Ned S // Apr 22, 2010 at 11:58 am

    “Warnings about Oz property seem almost anecdotal” – The crash and burn crowd have been so wrong for so long Biker, it’s reached a point where one might suggest they’d be better off asking why they’ve been wrong and if it’s just possible they could continue to be wrong rather than saying We’ll be right one day.

    As to the mob you mention, I’m quite happy being blocked … ๐Ÿ™‚

  • 572 Biker Pete // Apr 22, 2010 at 3:35 pm

    “As to the mob you mention, Iโ€™m quite happy being blocked โ€ฆ :)”

    HaHa…!~ Most of the AHs have gone, mate. Lost a few good ones along the way, tho’. Think I must have bored ’em to death… or blinded ’em with BS… ! ๐Ÿ™‚

  • 573 Ned S // Apr 22, 2010 at 4:19 pm

    “Australia has some issues, but itโ€™s the place-to-be at the moment” – You’re not wrong! The sister in law is Chinese Malaysian. She never bothered going home after she graduated from uni (except for visits). Not sure what her sister’s storey was but I gathered she’s been married up and living happily in Oz for a good while now too. And bugger me if their only brother and the family heir apparent (a legal eagle) hasn’t just lobbed in Oz with his missus and kid and has no intention of going back either if he can score a job. No idea what must be going through the parents’ minds – Spend all that dough getting the kids educated in Oz only to eventually have them all decide they’d rather do it tough over here rather than live the good life back home.

  • 574 Biker Pete // Apr 22, 2010 at 5:05 pm

    “…theyโ€™d rather do it tough over here…”
    Can’t blame them, Ned.

    Hey, y’know that vacant rental? Tenants moved out on the weekend and we now have three different families applying… . One from our own sign and two from the realtors. It’s heating up again…

    Missus is adamant she’s going to furnish the almost complete project and go for an eighteen-month contract at $700+ per week.
    Plans to spend well over $20K this weekend… and says the higher rent and tax writeoffs will pay for it all by the end of the first contract(!)

    Gotta laugh. (With her, not at her, I hope!~ ๐Ÿ™‚ )

  • 575 Ned S // Apr 22, 2010 at 7:02 pm

    Yeh, we’ll talk about the immigrant issues when we catch up Biker.

    “well over $20K” – That should still buy a few decent sticks of furniture? Here’s a hoot – I just realised that I paid money for my first ever bed a bit over a year ago maybe – A very comfortable and respectable secondhand job from Vinnies for maybe $60? Up until then I’d basically just slept on foam matresses on the floor, or the landlord/motel/boss supplied bed, or the one my ex had when we got together. Guess my life hasn’t been as conventional as a lot? ๐Ÿ™‚

  • 576 Anon // Apr 22, 2010 at 7:08 pm

    Marc Faber Warning on Australian Market(s):

    http://www.youtube.com/watch?v=mLrFK1bBEm4&feature=player_embedded

    Marc Mentions:

    (1) Australian (and Canadian) Housing Bubbles

    (2) Currency Overvaluation

    (3) Chinese Bubble burst – Marc said it will happen, its just when and mentioned he’s been a couple years early calling the Nikkei Top and the Dot Com top.

    Interesting times!

    Not advice (nor any of my other posts). See financial adviser(s) for that.

  • 577 Biker Pete // Apr 22, 2010 at 7:30 pm

    Ned: “Iโ€™d basically just slept on foam matresses on the floor, or the landlord/motel/boss supplied bed… ”

    Remember I’m happiest when camped beside the water* in a 3-man tent, on a roll-up, beside a warm woman and a hot motorcycle, mate!!~ ๐Ÿ™‚

    * But not in croc country…. !

  • 578 Ned S // Apr 22, 2010 at 7:43 pm

    Croc country – Yeh, they have pretty sizable water lizards in the Nile I’ve heard … Do ya reckon that might be why The Prophet lets a bloke have 4 wives? One each to his North, South, East and West “side” so to speak? ๐Ÿ™‚

    PS: I’ll leave it to you to respond to Anon’s last comment (if it suits) – I can’t view those fancy new fangdangled video thingies … ๐Ÿ™

  • 579 Greg Atkinson // Apr 22, 2010 at 8:42 pm

    Anon, I am pretty much aligned with Marc Faber at this stage and wrote about my concerns about the impact of a slowing Chinese economy on Australia in January. See: http://www.shareswatch.com.au/blog/stockmarket/when-the-chinese-economy-slows-australias-may-tumble/

    If commodities prices did take a significant hit in terms of prices and demand then Australian house prices will fall in my opinion unless the Government jumps in again.

    We will just have to wait and see what happens. But Faber does have a pretty good record when it comes to spotting market peaks.

  • 580 Biker Pete // Apr 22, 2010 at 9:18 pm

    “PS: Iโ€™ll leave it to you to respond to Anonโ€™s last comment (if it suits)”

    Same problem this time of night, Ned. After praising the Telstra dongle, it has slowed down to snailpace… particularly between 7:00 pm – 9:00 pm in WA.

    I will have a look at Anon’s link early Friday. What was it again… ? Mark’s Fable, or Fark Mabel…? ๐Ÿ™‚

  • 581 Biker Pete // Apr 22, 2010 at 9:33 pm

    Well, I do recall reading that the most economically sound state or territory was the ACT… and that was off the back of housing, Greg. One could imagine a strong case for any Australian government to rapidly stimulate construction in the event of an economic crisis… again.

    We might argue that it’s akin to moving the outdoor furniture about on The Sydney, but it actually appears to _work_ here, for some reason. Maybe it’s the resources, or the weather, or the fact that Oz simply shines in a world of dimness and duplicity…

    Not saying there won’t be some speed bumps to hurdle, but your view that there are property marketS may see a lot of the really good locations remain constant. All the good stuff in NA appears to have weathered their storm… and even the garbage is still horribly overpriced in the UK. Comes from having 61 million people crammed into a space about the size of Victoria, I guess.
    Poor b*stards… !~

  • 582 Biker Pete // Apr 23, 2010 at 8:48 am

    Appears the KHR will be tabled next Thursday…

    Coincides exactly with the sign-up for our new building project.

    Karma, or what?!~

  • 583 Biker Pete // Apr 23, 2010 at 9:01 am

    Faber: What I heard in that clip was that if China goes, it doesn’t really matter what you’re in, it ALL blows. If you get a chance to see the clip, listen to what Faber actually says, Ned.

    I heard him reiterate that stocks and resources will crash in Oz.
    Well, we know that the last time we were hit, the ASX fell 54.5% and property less than 6%.

    I’m more convinced than ever, despite the insulation debacle, that Rudd or Abbott would both see construction as an absolute first for stimulation. Consider that China has done the same… in addition to stockpiling, to get value they can’t find in US dollars.

    I will forward the clip to our eldest son. I’m still concerned about his high exposure to the ASX… .

  • 584 Ned S // Apr 23, 2010 at 9:58 am

    Interesting comments here from Faber on a number of things:

    http://www.kitco.com/reports/KitcoNews20100412J.html

    He describes the elements of a bubble. And reckons China has one.

    He reckons the Fed is talking horse feathers about putting rates up.

    He still likes gold – A lot.

    One that I’d seriously question is ‘Overall, Faber has little hope for financial reform in the U.S. โ€œThe U.S. should have less regulation and not more regulation โ€“ that is the origin and cause of the crisis.โ€’ – Not that he has little hope for reform but that he puts the GFC down to too much regulation in the US?

    As to a China “slowdown”; Bad for Oz generally but how might it affect Japan Greg?

    Guess a couple of the things to recognize with following these blokes is that they probably don’t ultimately count their wealth in AUD and that it’s risky to cherry pick the bits of their strategies one likes and ignore the others as they presumably have some overall game plan in mind – Assuming they have spoken about all bits of it which they very well may not have.

  • 585 Anon // Apr 23, 2010 at 11:54 am

    Good point about Japan Ned. There will be some impact there for sure…didn’t think about that.

    “Well, we know that the last time we were hit, the ASX fell 54.5% and property less than 6%.”

    Abit of a stretch to imply that would happen again, if anything its likely to be completely different. Could end up being small drop in stocks, and much larger drop in property. But then this wouldn’t make sense given the indirect effects of housing on the economy.

    Marc Faber needs to be data mined…his calls are abit all over the joint…but he has made some very big and accurate calls over the years.

    “I will forward the clip to our eldest son. Iโ€™m still concerned about his high exposure to the ASXโ€ฆ .”

    I just hope we dont go the way of the Irish index. That was just purely shocking. Might be a small drop like Greg suggested.

    Not advice (nor any of my other posts). See financial adviser(s) for that.

  • 586 Ned S // Apr 23, 2010 at 1:15 pm

    I think Biker’s point re Oz housing being stimulated in the event of any China slowdown should be extremely obvious Anon – Even me and Steve Keen understand it now … ๐Ÿ™‚

    The RBA would lower interest rates and that would flow through into higher capacity to borrow. (With Aussies loving low interest rates!) Then we’d get the direct housing stimulus – Who knows what varied forms that might take but one real potential game changer would be the ability to negatively gear the purchase of the home. (Which Biker has also mentioned in the past.)

    I’m actually in favour of it with one proviso – Namely that it should be a choice – Neg gear the allowable deductions during the purchase and owe the CGT on sale or forgo the neg gearing and be exempt from the CGT. Keep an eye out for any mention of allowing neg gearing on the home in the KHR regardless though I think. (The media would tend to want to focus on the CGT downside of it if it does get a mention – But if Rudd and Co are smart, selling the package as a “Your choice” option would put a lot of smiles on a lot of dials.)

    None of this stuff has got much to do with the free market in operation of course. But to the extent that the free market had existed previously in Oz, it took a fundamental and long term popularity hit around the time Rudd announced his conversion from being a fiscal conservative to a social democrat. When none of the Libs could bring themselves to poohoo him publicly as they were presumably thinking much the same privately?

  • 587 Biker Pete // Apr 23, 2010 at 2:08 pm

    Anon: “Abit of a stretch to imply that would happen again, if anything its likely to be completely different. Could end up being small drop in stocks…”

    But in fact that’s not at all what he said. Worth watching again.
    Property gets thrown in later. Stocks AND property are both threats to gold’s ascendancy, after all… .

    Ned, I absolutely agree on the NG choice proposition. It would be the way to go.

    More relaxed about the KHR than ever. While Labor’s chances seemed unbeatable, they’re shakier with every passing day.
    Why is the KHR being made public now? Probably so Labor can ‘save us from it’ and restore some ‘saviour’ status… .
    Rudd certainly does need it at the moment… ๐Ÿ˜‰

  • 588 Ned S // Apr 23, 2010 at 4:53 pm

    I’m not sure about Japan at all Anon – Is it possible they might even gain in some way if China was to come back to the field a bit? :

    http://www.theeagleonline.com/news/story/economic-competition-between-japan-china-likely-panel-says/

    Rudd potentially playing games re the KHR and his election chances Biker? Almost certainly – I have no fondness for him and his, but the other lot certainly aren’t doing much to inspire anyone to give them a vote.

    Hoffman talking about the returns on rentals:

    http://www.smh.com.au/business/property/property-valued-properly-20100423-thxu.html?comments=30#comments

    It’s not much of an article, but either way the returns ARE pretty low so my guess is that governments would be currently thinking they are well out of them. Still, thinking along the lines of one of Anon’s comments that return OF capital can count for a bit more than return ON capital these days, the knowledge that the Oz government loves and protects the housing market continues to make it a reasonably agreeable asset class to my way of thinking.

    PS: Pretty sure I just spotted some motorbike tracks on one of the comments in this article? :

    http://blogs.domain.com.au/2010/04/time_for_boomers_to_move_on.html?s_rid=smh:rainbowstrip:content2:22-04:retirement:isittimefortheboomerstomoveon?

    Lots of the usual hooha I see.

  • 589 Ned S // Apr 23, 2010 at 10:53 pm

    Got to admit I had a heck of a lot of trouble figuring out what Hoffman was doing with his number crunching exercise in that article. But either way you share market orientated chaps might be able to help me with the following question:

    Is there some sort of underlying general assumption in valuing stocks, that the percentage growth in stock price over a period can be expected to be the same as the growth in earnings over the same period? (In the hypothetical, though obviously unrealistic absence of any other info.)

  • 590 Ned S // Apr 24, 2010 at 1:11 pm

    Seems that Bligh is having a think about whether to stick to the current model of government charging developers for infrastructure (with the costs being passed on to new land buyers) or to go back to what I gather the old model was with costs being spread around ratepayers:

    http://www.couriermail.com.au/news/queensland/council-rate-rise-tipped-for-304/story-e6freoof-1225857617110

  • 591 Greg Atkinson // Apr 24, 2010 at 1:48 pm

    Ned I think Hoffman is trying to stir the old property versus shares debate. Since he works for a stock market investor newsletter I would not put him on my list of impartial commentators.

    These days it seems everyone is writing about house prices..which just goes to show what a national obsession it has become!

  • 592 Ned S // Apr 24, 2010 at 2:37 pm

    Thanks Greg. Yes, I looked up who he was and figured he might have a vested interest. But then who doesn’t. The RBA, Rudd, the opposition, banks, the industry, current home owners, aspiring home owners, local PIs, foreign PIs – So why not stock market investment newsletter writers? … ๐Ÿ™‚

    On the foreign PIs, I see that Rudd has bowed to the pressure of popular opinion in an election year:

    http://www.couriermail.com.au/money/australian-federal-government-gets-tough-on-foreign-ownership-rules/comments-e6freqoo-1225857643432

    Doesn’t do much for Oz’s credibility with foreign investors would be my main comment – Here, we think the market might be about to drop – Please buy our crud; Woops, it didn’t – Please stop buying our highly valuable assets.

  • 593 Greg Atkinson // Apr 24, 2010 at 3:06 pm

    Ned it is interesting to see that the Government is moving to tighten the rules for foreign investment in real estate since they are the ones who relaxed the rules in the first place! However as you point out, it is not likely to make overseas/foreign investors very happy!

    As for Hoffman, I think he writes some interesting stuff but of course he is pro-stocks. I also like stocks, but that does not make me anti-property. As the old saying goes: “horses for courses”. ๐Ÿ™‚

  • 594 Biker Pete // Apr 24, 2010 at 7:03 pm

    Ned: “PS: Pretty sure I just spotted some motorbike tracks on one of the comments in this article?”

    Man, you’re _good_!! ๐Ÿ™‚ I thought I was a smartass figuring out Anon’s location, but you get the prize for that call!!~

    Greg: “Hoffman … works for a stock market investor newsletter… I would not put him on my list of impartial commentators.”

    That was my conclusion. It was a very biased piece of writing.

    FIRB Changes? I suspect there’s very little FIIR here in WA. Sydney and Melbourne, perhaps. Don’t the changes only apply to existing houses? Clever move, if so. It means Labor gives a boost to the construction industry, if foreign investors move en masse to building _new_ homes… .

    Spent last night with a fine paintbrush, spotting-in paint chips at our vacant rental, a few hours before the new tenants move in. Spent today in Ikea, looking at U-beaut G-whizz furniture. It’s an _immense_ multi-level Ikea… but it was completely packed with couples loaded to the gunnels with new furniture. Certainly doesn’t feel like a recession…!!!

  • 595 Ned S // Apr 24, 2010 at 7:31 pm

    “I suspect thereโ€™s very little FIIR here in WA” – Same here – Some Asian omahs ‘n apahs buying some pricey apartments close to unis for their kids to study in while paying our unis megabucks in education fees; Plus one or three eyeing us off as a possible retirement home after they’ve made their cash in the Wild East if they want to settle down/use said cash to buy in here as “business migrants”; And some saying Yep, it’s never clever to have all your assets held locally so let’s buy some OS property – With Oz being one of lots of available options.

  • 596 Biker Pete // Apr 24, 2010 at 10:29 pm

    Asian investment in western Canada is almost unbelievable, Ned. Indians have purchased whole suburbs like Abbotsford; and, at the opposite end of the scale, the Hong Kong Chinese have bought up the very best of the Kerrisdale, Greys Point and Shaunessy suburbs… . We’re talking medians of $2 mil plus… .

    Canada has been light years ahead in terms of respect for investment and wealth… as well as social responsibility… for over three decades… . I had a real laugh, back in December ’87, when I was invited to apply for a $48K doctoral grant (quite a sum way back then) available to students from ‘developing countries’. Canada had deemed us 3rd World, for Chissake!!!~ I think my chuckle may have seemed highly inappropriate to the panel!!~ ๐Ÿ˜‰

    Think my supposition in regard to Rudd’s timing of the release of the KHR may have been an oversimplification. It’s more likely that the Libs are correct; that a week is hardly sufficient time to completely analyse the full implications of its impact…. . And we have virtually 24 hours to skim it, before deciding whether or not to plunge into the next project! Gotta laugh!!!~~ ๐Ÿ™‚

  • 597 Ned S // Apr 25, 2010 at 6:07 am

    I remember my one trip to Vancouver Biker. The first taxi driver I saw was wearing a turban. And after being there a while the penny dropped that about half the population appeared to be Asian. (Maybe the Western Canuks thought that was way preferable to being French??? ๐Ÿ™‚ )

    Australia as a developing nation – I think there’s a lot of truth in it actually. And we’d do well to bear it in mind and give some thought to what we’d like to develop into – Long term.

    I’m looking forward to hearing your thoughts on the KHR.

  • 598 Biker Pete // Apr 25, 2010 at 10:27 am

    “Iโ€™m looking forward to hearing your thoughts on the KHR.”

    I suspect Greg is right about it, Ned. Not much will actually change…. .

    But if you examine Labor’s recent moves on the Super and FIRB scene, they’ve actually pre-empted Henry’s findings… which is extraordinary, really.

    There was a time in my career, not all that long ago, where I realised major policy changes were being launched ‘between floors’ in the lift. No consultation with any of the players at all. I sense the same kind of rapid upward knee-jerk responses by government now.

    Beside me in bed, at this very instant, the missus is drawing on a set of plans. This week’s announcement is unlikely to see them shelved, but the KHR _may_ see me quit digging soakwells! ๐Ÿ™‚

  • 599 Ned S // Apr 25, 2010 at 2:22 pm

    “Not much will actually change” …

    Not immediately* Biker. The long and the short of it probably is that they figure we rode out the GFC pretty well doing what we’re doing – So in that respect some of the pressure for change is low. Plus this is obviously not a time to be upsetting the voters.

    But with Henry taking the attitude that any case for change should be compelling, I’m still real keen to get a look at the things he does recommend should be changed.

    * One that looks very likely to be introduced quick smart is increased taxes on mining:

    http://www.theaustralian.com.au/business/miners-face-billions-in-new-taxes/story-e6frg8zx-1225857648944

    Re the plan to tax the miners, it reminded me of something a bloke said to me about setting up a business in Russia – Namely that one of the things was to make sure that you didn’t earn too much; Because if you did you’d come to the attention of the big boys and they take the business off you. ๐Ÿ™‚

  • 600 Biker Pete // Apr 26, 2010 at 12:06 am

    “…to make sure that you didnโ€™t earn too much; Because if you did youโ€™d come to the attention of the big boys… ”

    Ned, that period of transition must have been incredibly interesting. Outlaw rule in Russia has scarely been touched on in literature… although cinema has made it almost a cliche.

    Personally, I still feel that the scenario may be as follows:

    1. KHR is released;
    2. Shock and awe;
    3. Opposition (over)-response (Watch Hockey!);
    4. Labor reassures voters;
    5. Rudd ‘saves’ Australians from radical reforms.

    A more cynical possibility:

    1. KHR is released;
    2. Shock and awe;
    3. Opposition (over)-response;
    4. Limited changes implemented;
    5. Not-immediately apparent loopholes allow workarounds.

    Second cynical possibility:

    1. KHR is released;
    2. Shock and awe;
    3. Opposition (over)-response;
    4. Labor reassures voters;
    5. Rudd implements major reform during the course of second
    term anyway(!)

    The most radical sequence:

    1. KHR is released;
    2. Shock and awe;
    3. Opposition (over)-response;
    4. Major reforms proposed;
    5. Liberals win back power.

    I’m not up on the current polls. I suspect that the election will be close, not because Abbott is a better candidate, politician or performer… but simply because Labor has had a string of recent high-profile snafus. Does Labor still have sufficient confidence in its likelihood of re-election to implement any radical change(s) which will disenfranchise a significant number of voters? I doubt it.

    Could Labor add, to its string of recent mistakes, reforms which lead to a future election loss? No question. While the Oz economy fared much better than most of the world, our resilience has been credited to many other sources other than political and financial leadership.

    The KHR may yet be the most interesting political exercise in decades. Messing with retirement may be a silver bullet; screwing with housing investment counter-productive; raising the tax threshhold a winner; making all housing mortgages tax-deductible a mixed blessing. Can’t say that I think we’ll _really_ know much immediately. It’s the budget and later pre-election periods which will shake out Labor’s confidence in pursuing its traditional ideologies… .

  • 601 Biker Pete // Apr 26, 2010 at 7:17 pm

    Here’s some fun, Ned:

    http://www.crackshackormansion.com/

    My score? 12 / 16 ….. p*ss poor… ! ๐Ÿ™‚

  • 602 Senator13 // Apr 26, 2010 at 7:22 pm

    Hahaha, I only got 10 out of 16…

  • 603 Ned S // Apr 26, 2010 at 7:30 pm

    I got 8 out of 16 – Remind me to steer well clear of Vancouver residential RE! ๐Ÿ™‚

  • 604 Ned S // Apr 26, 2010 at 7:45 pm

    I think the one that most annoys me is the inability to build a granny flat in the backyard of one’s main residence and live in same whilst renting out the house without exposing oneself to CGT on that main residence which now consists of a house and a granny flat. (If one was to live elsewhere in such circumstances includind buying a campervan/Winnebago and doing a grey nomad routine [for less than 6 years in any one stint] and rent out the entire main residence [both house and granny flat], the property is CGT exempt is my understanding.)

    Doubt the KHR will recommend changing that though.

    But suspect I might have finally cracked an acceptable work around – For someone in my circumstances at least. I’ve been wracking my minute mind over it for the best part of two years off and on:- Given that I only have enough assets for 5 basic properties and it’s pretty obvious that a bloke needs 5 to rent and one to live in to squeak over the line as a self funded retiree based on rents (ie 6 altogether with some risks still existing), I need that extra residence but am not at all keen on working for it. (Although Yep, a granny flat I build myself for $50k in the backyard of any one of those 5 properties and can live in without sacrificing the usual CGT exemption on an entire property which would normally be regarded as the main residence would suffice.)

    I’ll talk to my favourite taxman about it tomorrow. Presumably he’ll find a flaw in my grand plan and make me feel all sad … It’s a bloody good thing we’re mates! ๐Ÿ™‚

  • 605 Ned S // Apr 26, 2010 at 10:07 pm

    PS: Spent the middle part of today pulling down a garden shed in one neighbour’s yard – Which was then dropped over the fence to another neighbour’s yard – To use as fencing, chook pens … Whatever he should choose … ๐Ÿ™‚ !

  • 606 Biker Pete // Apr 27, 2010 at 3:31 pm

    Thought I’d posted a reply, Ned… but it’s gone… Alzheimers!!

    I’ll be interested to see how you get on with your workaround. We’re about to get six houses strung along our south-east boundary… and doubt that the shire will even let US build a shed.

    I’m carting sand from the new rental to our orchard, to fill in bunny diggings. (Rabbit for dinner, Tamara!~)
    Being absent from home, the hoppers are literally having a field day… . Nice healthy specimens, though!! ๐Ÿ™‚

  • 607 Ned S // Apr 27, 2010 at 5:45 pm

    I just read through some crap I’m presumably expected to sign to make it easy for my SMSF to pass an audit Biker. Some of it is pure legal fiction. I’m not feeling inclined to talk to any taxman today – Not even a mate – On the off chance I tell him what I think of a system that results in people being asked to fib so the audits the ATO requires can be flick and tick exercises for those the ATO/SIS(?) presumably deems qualified to get paid good money for doing them.

    My SMSF is pretty squeaky clean and I reckon it would stand an audit by any sane and even half-reasonable person. But the minute I knowingly sign crap to make it easy for all concerned to say that it does comply, then it definitely doesn’t comply! I knock heads with the system on occasion … ๐Ÿ™‚

    “six houses strung along our south-east boundaryโ€ฆ and doubt that the shire will even let US build a shed” – If the original zoning was the same, then talk to the previous owner of the land on your SE boundary maybe? He presumably knows the right party to “bribe”, how much they want and what form that bribe/”contribution” is required to take to pass muster in a country like Oz where maintaining the appearance of being ethical is important.

    Talking about ethics, I see that all and sundry are howling for the WA Treasurer’s blood. He does sound like a bit of a liability – Jeez, even this old baby boomer didn’t go around snapping chicky babes bras! ๐Ÿ™‚

  • 608 Ned S // Apr 27, 2010 at 6:41 pm

    “Prime Minister Kevin Rudd and state leaders also announced a review into housing affordability and availability at the Council of Australian Governments meeting in April, with a view to seeing whether such factors as zoning and planning, taxation and the first home owners grant had affected the market, and possible measures to alleviate the situation.” :

    http://www.smh.com.au/opinion/politics/rising-wave-of-voter-anger-over-housing-20100426-tmma.html?comments=144#comments

    For pity’s sake, when I wrote to Tanya Plibersek maybe a bit under 2 years ago about Oz housing issues, she wrote back and said it was all being reviewed. Can anyone think up a decent tune to go with a song that has a chorus of:

    “Kev’s a whanker,
    He’s a whanker,
    A whanker … Thru ‘n thru,
    True bloody blue!”

  • 609 Biker Pete // Apr 27, 2010 at 7:24 pm

    As smatter a fact, I wrote to Kev this morning, Ned. Basically advised that though we were supplying the rental market with cheap, high-quality homes, we’d ‘review’ that policy if the KHR recommendations include any adverse to our plans!~

    Must talk to you about your SMSF. It’s an arena we haven’t entered yet.

    Buswell? Good treasurer, but he’s a punter. If you _really_ want to live dangerously, ride a motorcycle…. . ๐Ÿ™‚

  • 610 Ned S // Apr 27, 2010 at 7:36 pm

    And yeh, I just sent an unedited copy of the above comment to both Rudd and Plibersek. Not that it will make one squat of an iota of difference I fully imagine. (Except in so far as the fact I supplied my real name and address could cause me to get busted for having stopped voting maybe? ๐Ÿ™‚ )

    Yes, I’ll tell you what I know about SMSFs Biker – Basically very good things for those who care about their money enough to be bothered paying attention to it I think. With the advantage of being a different entity type with different rules.

    Just talked to that nice little lass down me local bottleo – She’s good fun. Gaw’d, I’m glad I’m too old to REALLY want to do anything other than chat!

  • 611 Ned S // Apr 27, 2010 at 8:34 pm

    I see a lot of things going for super Biker. There is a very minor risk Oz super funds generally could be nationalized I guess. But by then things would be in such a mess that we’d be experiencing a world of pain that one most likely isn’t able to get their head around without having lived through same. (And from what I know of those who have, life goes on – Leastways if at least one family member has security of tenure re their digs and maybe two have a job.)

    I’m pretty much forced by tax law to have some assets in super – I expect to put about $26K (minus the 15% contrib tax) into same this year to reduce my tax rate on those dollars from 30% to 15%. With an SMSF at least to my mind leaving open the most likely/best chance/avenues for avoiding being caught in any of Kev’s infrastructure plans.

  • 612 Ned S // Apr 27, 2010 at 9:55 pm

    Me chorus was a bit off – But I think I’ve fixed it? :

    โ€œKevโ€™s a whanker,
    Heโ€™s a whanker,
    A whanker โ€ฆ Thru โ€˜n thru,
    Bloody true bloody blue!โ€

  • 613 Biker Pete // Apr 28, 2010 at 12:08 am

    “…weโ€™d be experiencing a world of pain that one most likely isnโ€™t able to get their head around…”

    I think this is a probability the Crashnburn Crew really haven’t included in their Armageddon Agenda, Ned… the fact that _most_ of them would be collateral damage.

    DRA is replete with links to prophetic British experts, who never saw the GFC coming and who are now utterly ursine about Australia. You’d think they’d be preoccupied endeavouring to save Mother England, but no, they’re dumping in forests abroad. Glad we’re starting to discriminate in who comes ashore…!~ ๐Ÿ™‚

  • 614 Ned S // Apr 28, 2010 at 7:03 am

    Brits cheering themselves up by looking around for anyone they can possibly imagine could end up worse off than them hey? Yes, I gather things aren’t great over there – I spent a pleasant late Sunday afternoon with two Brits and a Canuk maybe two months back. The Canuk had discovered the joys of XXXX and was talking rather freely – He’d obviously spent some time in Britain! ๐Ÿ™‚ And I got an email from the missus of one of the Brit chaps afterwards noting that having now been to Oz, he figured it mightn’t be a bad place to live. If anyone knows a good argument why a bloke might want to swap Aussie citizenship for Brit citizenship, I must admit I’m yet to hear it.

    As to the Armageddon scenario, where Blankfein jumps out a window and Buffett is institionalised as a raving nutter, yeh, I don’t figure I’m smart enough I can expect my finances to be looking real flash either!

    I still can’t get over the gall of Rudd announcing he’s gunna have a housing review carried out. If my recollection is correct the Senate finished one of them in maybe early 2008 and figured the Henry review would shed more light on it or somesuch?

  • 615 Anon // Apr 28, 2010 at 7:07 am

    Actually the British economy is turning Ned. Economic data out of there is improving.

    Not financial advice (nor any of my posts), see a financial advisor for such decisions etc.

  • 616 Anon // Apr 28, 2010 at 7:09 am

    “Hereโ€™s some fun, Ned:

    http://www.crackshackormansion.com/

    My score? 12 / 16 โ€ฆ.. p*ss poorโ€ฆ ! :)”

    Score was 11/16. No idea what was going on lol.

  • 617 Biker Pete // Apr 28, 2010 at 8:44 am

    “I still canโ€™t get over the gall of Rudd announcing heโ€™s gunna have a housing review carried out.”

    I wouldn’t spend ten minutes worrying about it, Ned.

    The only thing which will ease home values is _oversupply._
    In areas in which people want to live… and savvy folk invest, there’s undersupply. Our vacant rental had four enquiries… and was empty five days. Are the queues back?

  • 618 Biker Pete // Apr 28, 2010 at 9:36 am

    And further to that last comment, this item just appeared on my desktop:

    http://www.watoday.com.au/wa-news/housing-shortage-getting-worse-20100428-tqhd.html

    Make it better, Kev! ๐Ÿ™‚

  • 619 Anon // Apr 28, 2010 at 10:04 am

    US Real Estate 2006:

    “The California Building Industry Association (CBIA) continues to express alarm over what it calls an ongoing housing crisis in Southern California.

    Alan Nevin, the associationโ€™s chief economist, projected in a 2006 CBIA Housing Forecast that only 185,000 to 205,000 building permits will be granted this year, far short of the 240,000 new homes needed each year.

    Southern California has been experiencing a massive population boom in recent years and itโ€™s believed that 6 million new residents will be living in the region by 2020. The population increase, coupled with the housing shortage, has the CBIA worried that it will be increasingly difficult for first-time homebuyers to find a moderately priced unit. ”

    http://www.toacorn.com/news/2006-02-09/Front_page/005.html

    How critical is Californias Housing Shortage? March 2004
    http://www.ppic.org/content/pubs/rb/RB_304HJRB.pdf

    It looks as though when housing shortage alarms hit the mainstream newspapers this is a contrarian warning signal of an impending top in housing.

    I’ll look at the Irish and UK markets…i’d bet theres housing shortage media articles near the apex of those bubbles too. I wonder what they were saying in Japan just before the bubble imploded.

    Not financial advice (nor any of my posts), see a financial advisor for such decisions etc.

  • 620 Greg Atkinson // Apr 28, 2010 at 10:40 am

    Anon…interesting information thanks. I know that in Ireland they were ringing the housing shortage alarm bells as well and ended up over building. Probably happened in the UK as well.

    This is the old boom/bust cycle. We always think we have a good grip on supply & demand fundamentals but actually we rarely do.

    Could it happen in Oz? Of course. If the mining “boom” does not turn out quite as big as we plan then the creation of jobs would slow, thus the need for immigrants would decrease and all those lovely future housing demand numbers would be wrong.

    I am not saying this will happen, but what scares me is few people in Australia even think it is a possibility!

  • 621 Biker Pete // Apr 28, 2010 at 10:44 am

    Interesting comments, Anon.

    We could not find anything we’d term a bargain in California. Yes, there will always be _crap_ going cheaply in sought-after cities, as the Vancouver link shows.

    We quite like San Francisco and San Diego (although our Spanish is almost non-existent); but you’re welcome to Los Angeles and the ‘beaches’ north and south of LA.

    Our travels through the NH in the last decade convince us that Australian property is a bargain. We don’t believe WA has peaked… and in fact the calls we’re getting almost daily indicate rising demand here.

    “I wonder what they were saying in Japan just before the bubble imploded.” Whatever it was, we probably wouldn’t understand it! ๐Ÿ™‚

  • 622 Greg Atkinson // Apr 28, 2010 at 11:25 am

    “I wonder what they were saying in Japan just before the bubble imploded.” I guess they said what is always said just before bubbles go pop…”it’s a boom, you better buy now or else you will miss out”. ๐Ÿ™‚

  • 623 Anon // Apr 28, 2010 at 1:30 pm

    lol @ Greg…i’ve heard that a few times already in Oz unfortunately. I do hope we are all wrong and that Oz housing wont tumble. It just wont be pretty for anyone.

    Greg I was wondering what Technical Analysis software you use? I’m thinking of upgrading. Have you tried Decision Point?
    http://www.decisionpoint.com/

    Not financial advice (nor any of my posts), see a financial advisor for such decisions etc.

  • 624 Biker Pete // Apr 28, 2010 at 7:27 pm

    โ€œI wonder what they were saying in Japan just before the bubble imploded.โ€

    More likely their Prime Minister said something like:

    “These Gaijins must stop buying Japanese property!!!~”

    Roll on the KHR!~

    (Have to sign by 5:00 pm, Monday, Ned. Got an extension!!~ ๐Ÿ™‚ )

  • 625 Julian // Apr 28, 2010 at 8:28 pm

    Hi all, I’ve really enjoyed reading this blog.

    I’m not experienced in investing or finance, but know the basics. My main interest is psychology/philosophy and I have a contribution to make along those lines.

    I have struggled over the last two years to determine if the Oz housing market is a bubble or supply/demand forces and the truth obviously lies somewhere in between.

    Something to support the bubble argument: I think a large amount of demand can actually be classified as speculative (i.e. bubble producing). I have noticed that a big motivation for my friends buying into the highly priced market is fear. They are scared that prices will keep rising relative to incomes and they must get in quick before it’s too late and they are left behind. This fear is a kind of speculation which has a positive feedback effect on the market – fear intensifies as prices rise.

    The other element of speculation is hundreds of thousands of “mum and dad” investors buying investment properties because traditionally this has been the best way to make money.

    So in summary demand is, to a large extent, made up of fear and tradition, not rational assessment of the market. I know this argument is one-sided but I think there is a speculative element on the demand side that is not often acknowledged.

  • 626 Julian // Apr 28, 2010 at 9:24 pm

    Another comment, which somewhat neutralises my previous argument is that owner-occupiers have a strong emotional motivation for buying a house (everybody wants their own home, social expectations etc etc). This is a very solid motivation and quite rational, as far as emotional motivations can be! I think this strong emotional motivation for purchasing a home actually makes demand very resilient – people will almost do whatever it takes to satisfy this desire.

    I am sick of thinking about this: emotions, motivations, markets, governments, global economies, it’s too complex to predict – arhhhhhhhhhhhh!!!!!!!!!! I’m going to bed and buying a house in the morning.

  • 627 Ned S // Apr 28, 2010 at 10:02 pm

    Extension – I’m pleased for ya mate!

    Lot’s of snappers in all this legislation stuff – One I’ve just picked up on SMSFs:

    http://www.articlesbase.com/small-business-articles/an-smsf-member-may-appoint-their-representative-to-be-trustee-in-their-place-ato-guidance-released-2227672.html

    A cynic might be tempted to suspect they make everything complex and stupid in a genuine hope a bloke will fall in a hole. But I suspect it’s way more a matter of them just being useless bloody bureaucrats … ๐Ÿ™‚

  • 628 Ned S // Apr 28, 2010 at 10:27 pm

    The IMF reckons we are a bit overvalued I gather Anon. But also reckons there are options other than seeing a “bubble” go pop – Namely incomes increasing (on the back of China I fully suspect) plus a bit of inflation.

    It’s all down to immigration and China is my guess.

    Gotta do some more reading on the China storey – Because while the RBA reckons they are the go (with India kicking in at some point?), Greg appears to have some pretty strong reservations.

  • 629 Ned S // Apr 28, 2010 at 11:09 pm

    I’m just glad I’m not in the Sydney and Melbourne markets paying $700k plus for a hovel. Anyone who isn’t at least mildly retarded would look around for some better value elsewhere – IMO?

    And in that regard I see WA job adverts are up 93% over the last year. Whilst the rest of Oz is down 11%.

  • 630 Greg Atkinson // Apr 29, 2010 at 7:36 am

    Julian I reckon you are right about the owner-occupiers helping to support prices. That combined with the fact that you can’t walk away from a home loan (like in the U.S for example) means that owner-occupiers in Australia and unlikely to walk away from their family home unless they are really struggling financially.

    That is why suggested last year only a 10% fall in prices in Australia in 2010. That call is not looking too good at the moment, but the Government is doing it’s best to help me out by changing the rules for foreign investors and the RBA is lending a hand by raising interest rates.

    Ned as for the IMF, aren’t they the same mob who were praising the Irish for having wonderful economy a few years back? ๐Ÿ˜‰

  • 631 Anon // Apr 29, 2010 at 7:56 am

    Lol @ IMF predictions. No comment!
    Must admit successfully used them as a contrarian indicator when investing at times. But a broken clock can be right twice a day??

    House prices rise again:
    The people who have bght housing have been dead right so far – and us property bears have been dead wrong. Might take awhile for prices to unwind…more rate rises ahead?

    “House prices rose 3.1 percent in the three months to March 31, from 5.3 percent in the previous quarter, APM said in an e- mailed statement. Unit prices added 0.2 percent, compared with 2.6 percent in the prior period.”

    http://www.bloomberg.com/apps/news?pid=20601087&sid=aXCgOqZUxOyk&pos=7

  • 632 Greg Atkinson // Apr 29, 2010 at 8:11 am

    By the way, Tokyo continues to grow as reported in the Japan Times today:

    “The population of metropolitan Tokyo is estimated to have topped the 13 million mark for the first time in April, the Tokyo Metropolitan Government said Wednesday. The population has increased by 1 million this decade after surpassing 12 million in 2000.”

    ..and guess what? House prices still fell ๐Ÿ™‚

    By the way, this is only the metropolitan area..the population of the Greater Tokyo Area is closer to 40 million.

  • 633 Anon // Apr 29, 2010 at 8:16 am

    “Anyone who isnโ€™t at least mildly retarded would look around for some better value elsewhere โ€“ IMO?”

    I guess if you are very good at picking out value, not a bad strategy? Its weird in the US housing market many focused on which areas collapsed…but there were some areas that held their value admist the carnage. Not smart enough to be able to pick these value buys…a dangerous game if you get it wrong.

    Not financial advice (nor any of my posts), see a financial advisor for such decisions etc.

  • 634 Biker Pete // Apr 29, 2010 at 8:28 am

    Julian’s comments have some validity, but my take on it is this:

    * Yes, fear IS a major factor. In our case, it’s fear of other asset classes. Shares, for example, lost over half their glitter during the last crash. Property remained virtually untouched. During our lifetimes, it has always been so in both Australia and Canada.

    * Fear of over-taxation. Cash-in-the-bank loses almost half its lustre, at tax time, in our case. Property has been treated relatively well in that respect.

    * Fear of negative government intervention(s). Super, admittedly a vehicle, rather than an asset class in itself, is so vulnerable an asset that we may both pull ours out this year. If not this year, certainly the next. ALL of it…
    When you consider the _benefits_ of Super to folk our age, THAT’s fear!!

    * Tradition, yes. In our case, three generations on both sides have benefited from property investment. (On the other hand, my mother-in-law, whose father was a broker, had just one strict piece of advice for her daughter: Do NOT marry a stockbroker!!~ ๐Ÿ™‚ )

    Thanks for the link, Ned. We’ll work through it… .

  • 635 Ned S // Apr 29, 2010 at 11:22 am

    Just been looking at my SMSF Investment Strategy. It contains thoughts like Whatever happens on the stock market, short of Oz losing a war or suchlike, at least a residential property in Brisbane should always be worth something! ๐Ÿ™‚ And I can still recall feeling really twitchy about cash I had in a bank around about the time Rudd felt to guarantee bank deposits.

    Hey, did you read about those poor buggers whose super funds took a trip to some Caribbean tax havens and “Regulators have been unable to find any money”:

    http://www.smh.com.au/nsw/racecourse-workers-lose-savings-in-super-fraud-20100418-smn5.html

    Yep, everything has its risks.

  • 636 Biker Pete // Apr 29, 2010 at 3:18 pm

    โ€œRegulators have been unable to find any moneyโ€

    Bloody criminal. I feel the same way about the idiot CEO who invested shire funds in the American $ludge… affecting our rates for decades. He moved on before we could lynch him…
    Feel sorry for the poor b*stards who inherited him… !!~

    My only real issues with cash are 1.) the very low returns;
    2.) the high taxes; 3.) complete lack of tax concessions to offset a.) and b.)

    I’m away from our main base again.

    Great to be back in my favourite inve$tment patch again… fences being painted; lighting completed; aircond going in… and we’ll spend the weekend landscaping and researching SMSFs.

  • 637 Ned S // Apr 29, 2010 at 5:57 pm

    Yeh, I’m no bleeding heart socialist as you know, but the idea that 71 yos still in the workforce who’ve managed to rake up maybe $21K in super over the last 15 odd years it’s been compulsory despite the likes of Goldman removing every possible penny from them at every available opportunity, only to have it all ultimately pinched in an even more blatant fraud, sounds a bit iffy to me too.

    Cash – The Oz peso could take a whack again I suppose. But at least it is now pretty obvious that Kev has figured out that seeing his housing and banks collapse is bad joss.

    A saying I just made up reckons that while your average blue chip is good for 40 years, land is forever. Like seriously, for all the entertaining press indigenous Aussies can attract, they just aren’t that dumb – They don’t waste too much time whinging about health rights or education rights or housing rights or welfare rights or pension rights or bullion rights or blue chip stock rights – But they do whinge about land rights! ๐Ÿ™‚

  • 638 Ned S // Apr 29, 2010 at 6:23 pm

    Do you ever get the thought cross your mind that if the most negative of thinkers known to personkind just should have his dreams fulfilled that he reckons a bolthole up in the Andes with a few scraggy cows eating sand might tide him and his over for a good while?

  • 639 Biker Pete // Apr 29, 2010 at 7:55 pm

    “But they do whinge about land rights! :)”
    Know value when they see it, mate!!

    “…a bolthole up in the Andes with a few scraggy cows eating sand might tide him and his over for a good while?”
    Ya mean Buffalo Bill, Ned?!~ ๐Ÿ™‚

  • 640 Ned S // Apr 29, 2010 at 8:11 pm

    Yeh Biker, a chap with the initials of BB was in my mind at the time of writing.

    Hot damn, I wonder how many bags of flower and bottles of rum Cap’n Phillip got charged for setting up residence east of Botany Bay’s Great Divide?

  • 641 Biker Pete // Apr 29, 2010 at 8:42 pm

    Dunno, mate. It was a coupla centuries before flower power was invented! ๐Ÿ˜‰

    And Bundy took at least a century, didn’t it?!~ ๐Ÿ™‚

    Knocking back a nice bottle of Shiraz, right now. Label says ‘Silkwood’ 2002. Can’t remember buying it, so it must have been a present…. and probably not from the governor. Beware of governments bearing gifts. KHR pushed back to Sunday. Why Sunday?
    Do I need to fall to my knees and genuflect, I wonder???!!~ ๐Ÿ˜‰

  • 642 Ned S // Apr 29, 2010 at 8:51 pm

    “Why Sunday” – The stock markets are closed on Sunday. Give them a bit of time to contemplate reducing their 3% dumby spit to a 1.5% dumby spit perhaps?

  • 643 Biker Pete // Apr 29, 2010 at 9:12 pm

    Yeah, you’re right…

    Just saw this:

    “The review, by Treasury Secretary Ken Henry, is due to be published on Sunday when financial markets will be closed.”

    Must be losing it in my old age!!~

  • 644 Biker Pete // Apr 29, 2010 at 10:51 pm

    Some time back, someone on DRA suggested at the rate Australian property is rising, that even if Keen is correct (that there will _eventually_ be a 40% crash) the price of Australian housing will have risen to such a level that it will easily exceed the ‘values’ he said would crash.

    At the time, I remember dismissing that comment as interesting, but a little irrelevant. Considering the annual figures for Sydney (14.7%) and Melbourne (27%) we’d now have to concede that two more years of that ‘growth’ would render even a 50% crash of lesser consequence, unless one bought at the top of the market. For that reason, if you really believe there will be a 50% crash, you should stay put… and rent.

    The possibility of a crash in China offers potential for a cheap holiday home abroad, however. Some of the luxury apartments in Shanghai look pretty amazing. Think we’ll go have a butchers, Ned!

  • 645 Greg Atkinson // Apr 30, 2010 at 7:43 am

    Don’t worry Biker, Keen will claim as his own any housing market correction of 20% or more ๐Ÿ™‚

  • 646 Biker Pete // Apr 30, 2010 at 2:02 pm

    Think you’re right, Greg!~

    Amazed how little ‘common knowledge’ there is about the KHR even in the building trades. Two groups of contractors working here today (lighting and aircond). None had heard of Ken Henry… .

    More surprising was to meet a realtor recently who had never heard of either Steve Keen or the KHR. And this fella runs _full page_ newspaper adverts, claiming to be the city’s top real estate salesman… .

    Wonder if I can ship my bike to China on an ore carrier?!~

  • 647 Ned S // Apr 30, 2010 at 2:04 pm

    I see Jeremy Grantham is still put out that the Oz housing “bubble” hasn’t popped after at least 5 years of him saying it will:

    http://www.nakedcapitalism.com/2010/04/jeremy-grantham-on-bubbles.html

    It’s extremely rare for me to have anything new to add to this discussion, but here’s a thought (triggered by Grantham’s comment that “family income, which is what should drive house prices”) – With all the kiddies supposedly staying home in ma ‘n pa’s 250m2 and 300m2 mansions, is it possible Oz is seeing the concept of “family” being redefined? – Wouldn’t that be a hoot! ๐Ÿ™‚

  • 648 Ned S // Apr 30, 2010 at 2:39 pm

    Grantham talks about things reverting to their trend line – Is it possible we may revert to a trend line of having maybe 30 m2 of housing per inhabitant rather than 60 m2?

  • 649 Biker Pete // Apr 30, 2010 at 3:37 pm

    “Is it possible we may revert to a trend line of having maybe 30 m2 of housing per inhabitant rather than 60 m2?”

    Well, that WAS my theory, Ned. But I note that the next project is nearly _double_ the size of the one I’m completing right now.
    Seriously!~ Huge house on nice block, in good area. Cost all up under $350K… .

    I’d read Grantham’s stuff recently… but had no idea of the history. I note he forecasts the collapse of both UK and Australian property… but steers clear of western Canada… which makes anything in Oz look incredibly cheap.

    Funnily enough, I’m bearish on UK property… . In my view it IS horribly overpriced… . I also think the V cities in BC are questionably high… .

  • 650 Julian // Apr 30, 2010 at 8:02 pm

    There is a lovely woman at my work from London. She thinks Australian house prices are quite decent compared to the UK. Even taking into account that Australia is a less advanced civilisation; as she keeps reminding me we are at least a year behind on everything LOL!

    She also said something very interesting – that grocery prices are cheaper in London and the fruit and veg is better quality!! I think Australia has really lost out on the Woolies/Coles oligopoly, unless you are a shareholder. So much for a “free market”.

    Anyway Biker I’m very interested to know why you think UK property is overpriced even after their small crash? Isn’t it just supply/demand, everyone wants to work in the UK, international hub, etc etc?

  • 651 Ned S // Apr 30, 2010 at 10:56 pm

    Despite that fact that lots of Aussies may not be especially chuffed with the idea, I thought whacking up a bunch of apartments and townhouses might have been the way to get some of that “affordable housing” policy makers tell us they want to see. But there would seem to be issues with that when you read stuff like the link Biker gave at comment 622 about a two bedroom apartment in the city costing more to build than a 3 bedroom house in the boonies.

    That’s got to be a bit crazy surely? I’m as sure as I can be that going to higher density living has been a time honoured way of getting more affordable housing – Which is why we get all the NIMBY stuff about it. Wonder what’s happened to mean it is no longer a viable option? It’ll be some combination of policy maker decisions I guess.

    Talking about policy makers, I’ve just noticed that Al Greenspan reckons the American housing bubble was basically the Soviet Union’s fault ๐Ÿ™‚ :

    http://www.reuters.com/article/idUSTRE62H3OO20100318

  • 652 Ned S // May 1, 2010 at 12:42 am

    Just been to the CBA homepage doing some banking – There’s a banner with a pic that rolls past that says “Keep the music going”, and amongst the news items that roll past above that revolving banner, one that says “Affordable locations for first home buyers” – I thought it created an interesting effect when they coincided! ๐Ÿ™‚

    PS: Keeping the music going is apparently about getting $100 worth of your favourite songs over the next 3 months when one reads the detail.

  • 653 Ned S // May 1, 2010 at 3:05 am

    “taking into account that Australia is a less advanced civilisation” – Lots of groups have reckoned they represented the epitome of civilization’s advanced state over the eons. With quite a few even concurrently figuring that was the case I think? (Which has led to a few fairly nasty squabbles over the years.)

    But letting a bit of time go under the bridge seems to have a way of challenging such thoughts? ๐Ÿ™‚ Poor ole Brits – My thoughts are that they were a power 100 years ago in the way that Italy/Rome was a power 2,000 years ago.

    Things change and don’t necessarily change back anytime soon, if ever I guess. Still, history can and does continue to celebrate the legacy of such groups – As to what consolation that might really be, one could ask the Greeks perhaps?

  • 654 Biker Pete // May 1, 2010 at 8:54 am

    British realty: Our last two fairly lengthy trips to the UK were nearly five years apart, Julian. The first, in 2005, was just prior to the property crash. A friend gave us a fairly detailed description of what was happening and showed us numerous examples to illustrate what he thought must happen next. These were abuses to common sense, both personal and institutional… .

    During our second trip, in 2009, he was able to show that he’d been absolutely right. But, to our astonishment, homes in England and Scotland were still very, very expensive. Because we build houses every year… and buy if we can find quality cheaper than building, we have a fairly good idea of value. That used to be a narrow, parochial perspective, but it’s much wider since we have spent much longer periods abroad.

    What the Engish get for their pound is far less than Aussies can easily buy for the same kind of expenditure. We can only assume it’s a population issue… that demand is higher because they have over double our population. At times it was difficult not to laugh with derision when reading the adverts on realtors’ shopfronts. The prices are ludicrous… .

    Fruit and veges were OK, quality and pricewise. We’d agree that supermarket prices were a little lower for many items. Wine was surprisingly cheap if it was European… quite expensive if Australian. Restaurants and accommodation appear to have levelled off reasonably, due to the GFC… every cloud has its silver lining… . ๐Ÿ™‚

  • 655 Biker Pete // May 1, 2010 at 9:21 am

    Greenspan blames the Russians! What next?!~
    Wonder if anyone anywhere can accept his explanation?

    He’d have been smarter to simply admit that corrupt US banking practices encouraged a perversion of an essentially noble goal… to get the poor into their own homes. However laudable that principle, all the low-doc, no doc NINJA practices _had_ to come unstuck. Greenspan was oblivious or perhaps criminally irresponsible in allowing toxic debt of that kind to be certified AAA and sold off to insitutional buyers.

    How different is the situation in Australia?

    Before we approach a bank, we prepare a comprehensive portfolio, with a dozen colour photos and every other item of supporting information including assets and liabilities. We also include a two and five year plan, to show not only where we are, but where we’re going. We were therefore fairly astonished to have Members Equity send a valuer into one of our recently-completed homes, to thoroughly check it out(!) Our banking practices have always been conservative, but that’s a wall of protection against what happened in the US, UK and U-Rope… .

  • 656 Greg Atkinson // May 1, 2010 at 10:57 am

    I know I have said it before, but in my opinion there is not much to be gained from comparing house prices across different nations. Do you get a bigger house in some parts of Oz than the U.K? Yes, but so what? Think of the location of where the homes are and what infrastructure is available. e.g. you can get on a plane in the U.K and within a few hours be in about any part of Europe, in Australia the best you can hope for is a trip to N.Z. ๐Ÿ™‚

    Comparing house prices across nations to me is the same as trying to compare a house price in a beach side suburb in Sydney with a home on the outskirts of Wagga Wagga. What exactly are people trying to compare? Do both homes have equal access to transport, hospitals, good schools, employment opportunities, broadband etc?

    I recall some years ago many people from the U.K buying up properties in Spain because they got more bang for their buck and they seemed to be doing well….until the Spanish property market imploded.

  • 657 Ned S // May 1, 2010 at 11:48 am

    Greenspan’s excuse is pretty lame – The Soviet Union fell over, so lots more workers entered the free market economy, which resulted in a “bubble” in savings becoming available for lending, and I couldn’t bring myself to force America’s borrowers to keep their snouts out of the cheap money trough. (In fact, if you look at my record, I exaccerbated the situation very significantly by colluding with our banks to up their allowed leverage levels on such loans.)

    But regardless of the merits of his plea, his apparent need to lay blame is still interesting, in that the fact he feels to do it, would seem to especially highlight the point that he knows that more than any other single person in the world, he had the best available options/tools/potential influence, and thus the greatest ultimate responsibility for mitigating the effects of all and any such disturbances.

    I think I’d respect him a lot more, if rather than saying Not my fault, he’d say Yes, I cocked up right royally and here’s my detailed accounting of what I did wrong and the silly thoughts that were going through my mind when I did them – So please learn from same!

    If he could bring himself to willingly give us the benefits of those insights, it’s just possible history might ultimately remember him as something more useful than the incompetant old fart he’s proved to be to date.

  • 658 Ned S // May 1, 2010 at 11:59 am

    Imagine if Gorbachev did the same as well – What a wealth of combined experience to be mined!

  • 659 Biker Pete // May 1, 2010 at 4:22 pm

    “I recall some years ago many people from the U.K buying up properties in Spain because they got more bang for their buck and they seemed to be doing wellโ€ฆ.until the Spanish property market imploded.”

    One of the many excesses my mate Nick explained back in 2005.
    O the vomitous Brits we met in Spain… . Chundrama…!!~

  • 660 Biker Pete // May 1, 2010 at 4:32 pm

    “…there is not much to be gained from comparing house prices across different nations…”

    Completely agree. My comments are in response to the _legions_ who do so. And your point about marketS is _not_ lost on us.
    Location is a critical first, second and third rule.

    Frankly, I’ve never considered Perth’s isolation to be anything but an advantage. We’ve been abroad close to forty times in the last three decades. Yes that includes much of SEA and NZ, but distance has never been a factor in deciding destination.

    Comparing house prices across the world is, however, common; and equally as suspect as surmising that Australian property must fall because Ireland is in crisis… .

  • 661 Biker Pete // May 1, 2010 at 4:39 pm

    “…heโ€™d say Yes, I cocked up right royally and hereโ€™s my detailed accounting of what I did wrong and the silly thoughts that were going through my mind when I did them…”

    If he’s going to blame factors beyond his control, he might simply have blamed that American propensity to see how far the ockystrap can be stretched before it whacks one in the face.
    Extremism has been a much-vaunted attribute in corporate finance in the last two decades. Maybe the key players, Greenspan included, suspected they’d all be dead before it unravelled… .

  • 662 Ned S // May 1, 2010 at 5:33 pm

    Greg’s laid out a little scenario here, that should it come to pass, would have Oz policy makers loudly proclaiming “Not my fault” too Biker:

    http://www.shareswatch.com.au/blog/economy/what-might-an-australian-economic-slump-look-like/#comment-3811

  • 663 Biker Pete // May 1, 2010 at 8:44 pm

    OK, Ned. I read it, had a _major_ panic attack, followed by a nice cuppa tea*, a Bex… and a good lie down.

    Then I posted a response, entirely repenting my optimism:

    http://www.shareswatch.com.au/blog/economy/what-might-an-australian-economic-slump-look-like/#comment-3811

    * In truth, I upended half a bottle of Arlewood Shiraz.

  • 664 Ned S // May 2, 2010 at 1:16 am

    When one starts to poke around, there certainly are some warnings being issued on China Biker. Goggle “gottliebsen china” to pick up mentions of a range of them over the last 2 months.

    This is stuff on Premier Wen Jiabao saying back in March that the world risks a double-dip recession. So he isn’t letting the Yuan/USD peg go just yet.

    http://business.timesonline.co.uk/tol/business/economics/article7061436.ece

    Way too hard for me to say how much of all this stuff is policy makers talking their book.

  • 665 Biker Pete // May 2, 2010 at 9:47 am

    Seems Oz may be about to follow your lead, mate:

    http://www.perthnow.com.au/business/super-to-drive-property-wave/story-e6frg2ru-1225860479001

  • 666 Ned S // May 2, 2010 at 12:14 pm

    There’s a lot of good reasons for me personally to be in property Biker – Including the fact that I know I’m inclined to panic in major stock market moves and sell low – Probably after having bought high.

    But my various personal reasons aside, it should come down to what one thinks the chances are that the property they choose to buy as an investment will outperform other asset classes over time I guess. So my “faith” in buy and hold property in that respect is at least as much a reflection of my lack of faith in buy and hold stocks to do well over the next 5 or 10 years as anything thing else. (I don’t want to be actively trading stocks. And don’t feel very comfortable with the thought of giving someone else open slather to do it on my behalf – With my retirement funds – At my expense! ๐Ÿ™‚ )

    But good luck to those who reckon they can do such things on their own behalf.

  • 667 Biker Pete // May 2, 2010 at 2:55 pm

    Utterly agree with those sentiments, Ned.

    KHR: “The review proposes a 40 per cent discount on all income from savings, as well as on all residential rental income and losses, and capital gains.”

    Pluses and minuses here. Can you see the potential drawback… in the last two words?

  • 668 Ned S // May 2, 2010 at 3:39 pm

    Agreed Biker โ€“ Itโ€™s a negative; As could be the 1% tax on land value; And keeping super locked up until retirement age. Guess weโ€™ll just have to do Swannyโ€™s job for him and sift through to see what we reckon will eventually fly. And take the risks into account.

    By and large it seems that the gov “response” to the KHR has pretty much been aimed at directing public attention away from the KHR? With the suggestion even being made that they want to save some of the “good” bits (like decreased tax on bank deposit interest) as an pre-election bribe. Rudd and Swan – Thoughts like Tits and Bulls, and Pockets and Singlets, come to mind … ๐Ÿ™‚

    They’ll say they want to give everyone a chance to have a chat about it I guess.

  • 669 Biker Pete // May 2, 2010 at 7:47 pm

    The devil’s in the details, of course, but my missus figures the changes may give us _another_ $80K pa tax-free to live on in retirement; but hit us 10% higher for CGT on sale.

    The intent appears to be to encourage rental home owners to _keep_ their rental homes… forever… . We just may do that.

    The DRA Bears and Goldbuggers are S-P-E-W-I-N-G of course… . I’ve tried hard to console them, but the old ‘cheer-up’ trick (running a stick backwards and forwards along the bars of their cage) doesn’t appear to working this time. Any ideas?!~ ๐Ÿ™‚

  • 670 Ned S // May 2, 2010 at 7:58 pm

    “The intent appears to be to encourage rental home owners to _keep_ their rental homesโ€ฆ foreverโ€ฆ” – That was always my stated preference anyway Biker. (I’m not a trader!)

    “the old โ€˜cheer-upโ€™ trick (running a stick backwards and forwards along the bars of their cage) doesnโ€™t appear to working this time” – Didn’t work on the few times I tried it either mate; Just not a mob that gets any joy from giggling at themselves I guess? ๐Ÿ™‚

  • 671 Biker Pete // May 2, 2010 at 8:05 pm

    Jeez, I wonder what the ASX will do at opening Tamara(?)

    Whatever happens, it’s probably a blip-in-time…

  • 672 Ned S // May 2, 2010 at 8:21 pm

    They didn’t seriously expect neg gearing to be done away with did they Biker? Even the bit of minor research I did precluded that possibility.

    Although my impression was they’d like to see both it and CGT concessions axed – Anything for a cheap house! (Including Great Depression II; And WWIII if it should eventuate as a result.) Silly buggers! ๐Ÿ™‚

  • 673 Biker Pete // May 2, 2010 at 8:29 pm

    “They didnโ€™t seriously expect neg gearing to be done away with did they Biker?”

    No question. Go figure… .

    “Anything for a cheap house! (Including Great Depression II; And WWIII if it should eventuate as a result.)”

    I blame Keen. Meybe _HE’s_ the Anti-Christ!!!~ Wonder if he intends to give a sermon-on-the-Mount? He tried to crack the property market with hatred, so he may yet deliver the Loathes and the Fissures… . ๐Ÿ˜‰

  • 674 Ned S // May 2, 2010 at 8:36 pm

    A 1% dumby spit should wrap it up Biker – Nothing much there re stocks I can see that hadn’t been clearly telegraphed.

    “itโ€™s probably a blip-in-timeโ€ฆ” – Yep, in 2, 5 or 10 years I imagine it’ll be all different – And hopefully better – Comparatively at least … Ask the Greeks whether they’d prefer their hills were full of olive trees or iron ore maybe?

  • 675 Ned S // May 2, 2010 at 8:41 pm

    Keen … “Meybe _HEโ€™s_ the Anti-Christ!!!~ ” I really, really, really don’t get to enjoy a great belly laugh all that often anymore these days Biker – But that just gave me one! Thank you … ๐Ÿ™‚

  • 676 Biker Pete // May 2, 2010 at 11:07 pm

    Liked your quip about the Greeks and the olives too, mate!

    Really struck a chord as this year’s the best we’ve had in twenty. Our trees are loaded with the largest, shiniest, blackest olives I’ve ever seen…. . And the bloody 28s are into them in flocks. I’m not there to fend ’em off with my cricket bat, so they’ll be hanging around all over the orchard like Christmas decorations…

    Off to sign up for the next project, in the afternoon. A FHB who is still eligible for $21K (!) is after us to sell the block (26% profit) but if he doesn’t front with the deposit by 4:30 pm, he’s missed out.

    You’re probably spot on with the 1%. Maybe a little higher with BHP and RIO, but who knows?!~

  • 677 Ned S // May 3, 2010 at 8:44 am

    Recommendation 14 in the KHR does seem to be (amongst other things) a shot at neg gearing on residential rental property? :

    http://taxreview.treasury.gov.au/content/FinalReport.aspx?doc=html/publications/papers/Final_Report_Part_1/chapter_12.htm

    Swan confirmed the fact that he won’t be doing it:

    http://www.treasurer.gov.au/DisplayDocs.aspx?doc=pressreleases/2010/028.htm&pageID=003&min=wms&Year=&DocType=

  • 678 Biker Pete // May 3, 2010 at 1:23 pm

    Thanks for both links, Ned. Sent to the missus for her analysis.

    I guess the good news is:

    * No attack on NG or CGT

    * Construction won’t fall over

    * No need to expedite my/our Super withdrawal…

    The questionable news is:

    Might the mining taxes adversely affect our economy?

    Will I need an FA again, to clarify our situation…
    or are my accountant and my wife sufficient?

    Time to start framing up and sequencing the Big Questions again! ๐Ÿ™‚

  • 679 Ned S // May 3, 2010 at 2:45 pm

    “No attack on NG” – Not for the forseeable future Biker; Point 4.2 here (the devilish detail) is worth reading:

    http://taxreview.treasury.gov.au/content/FinalReport.aspx?doc=html/publications/papers/Final_Report_Part_1/chapter_4.htm

    Amongst other things it says “The tax advantages from borrowing to invest in a rental property, also relevant for shares, leads to investors taking on too much debt and distorts the rental property market.”

    But it’s all very softly as she goes sort of stuff with him saying in Recommendation 15 “When the 40 per cent savings income discount is introduced a smooth transition should be provided to minimise any disruption that may arise. The transition to a savings income discount for net residential rental income should only be adopted following reforms to the supply of housing (Part Two Section E4 Housing affordability) and reforms to housing assistance (Section F5 Housing assistance).”

    As to CGT – He’s talking a 40% discount on 35% and 45% tax rates I guess. (In his brave new world the first $25K of an individual’s income for the year is tax free.)

    And if the whole package was adopted, we’d see a 40% discount on the rental income as well.

    Nothing there that greatly scares me.(Irrespective of the fact that Swan has disavowed it anyway.)
    How about you and the lady?

  • 680 Ned S // May 3, 2010 at 7:32 pm

    Having seen the KHR and government’s lack of response to it, I was initially more confused regarding what to do in relation to retirement planning than before. But looking at it further, they have ruled out so much “In the interests of business and community certainty”, that, without a complete backflip (anything could happen with those yobs), it wouldn’t seem possible for them to move towards acceptance of the report in a significant way?

    And it would seem that they could have misread the mood of the electorate in this – They are certainly getting their butts kicked by just about everyone for having been so evasive. (Even now, all Swan really wants to talk about is how nice he’s been to small business so he can pinch some votes off Abbott.) While the sort of balanced, considered change Henry proposed has won a lot of support.

    The Mad Monk putting himself in the position of saying he hates the key tax grab on which it all hinges (TAX THE MINERS MORE!) without wanting to say he won’t support it, doesn’t help greatly either:

    http://online.wsj.com/article/BT-CO-20100502-703397.html?mod=WSJ_latestheadlines

    I’m gunna take a break from it for a while – Give the dust some time to settle. (Hopefully Spain and Ireland won’t go broke in the interim!)

    PS: I see that if Britain’s Labour falls much more in the polls, they’ll be minor party.

  • 681 Biker Pete // May 3, 2010 at 8:25 pm

    Signed up for the next one, Ned. It’s the ninth we’ll build with this particular company, so they’ve thrown in a lot of impressive freebies, including raked ceilings… .

    Up to my ears in landscaping. All good dirty fun!~ Not sure what I’ll do with myself if we ever stop building. Missus says she’ll take six months off again next year, now there’s no panic due to a SuperGrab.

    Have a young lass interested in one of my vintage bikes… so I can hear the rumble of a new Ducati Multistrada 1200 twin-cylinder in the distance.

    You were pretty much spot on with your ASX predictions, mate.
    I’m watching Twiggy Forrest doing a dummy-spit on ABC2 right now!

  • 682 Ned S // May 3, 2010 at 9:21 pm

    Sounds like business as usual to me as well Biker – Just hung up after chatting to a chap who knows a bit about tax – His interpretation is that the KHR is great – But that no other nation has ever gone so far before; And OUR pollies sure aren’t gunna be the leaders of the pack re world tax reform – In case it goes bad and they look silly.

    Such is life! ๐Ÿ™‚

    He thought I was gunna do a dumby spit over it? But when I said it looks great to me – What’s the catch? – He told me what he did. So I guess that’s that … Like I said, I’ll drop offline for a while. Got a few things to do now too. But you know my email … ๐Ÿ™‚

  • 683 Biker Pete // May 3, 2010 at 10:55 pm

    No worries, Ned. Thanks for all the very helpful links.
    We’re throwing ideas about at present, but I think we’ll stay the course.

    Take care of y’self, Ned… .

  • 684 Greg Atkinson // May 3, 2010 at 11:11 pm

    The mining tax will make mining companies think of ways of getting around it. Personally I tend to go with the saying “don’t bite the hand that feeds you”.

  • 685 Biker Pete // May 4, 2010 at 8:37 am

    There’s generally a workaround, isn’t there?~

    Just in case you missed this DRA contribution, Greg: ( ; )

    “Comment by smallcap on 4 May 2010:

    Don, I, unlike you am not a miner so have to bow to your superior knowledge on the subject. However, I would have thought that the mining industry is somewhat restricted to where it can do business, basically having to mine where the minerals are, which probably keeps us in the picture. I fondly remember from my teen years, Various British governments milking the north sea natural gas and oil cash cows They sold the stuff (10 years in advance) to the oil companies while it was still in the ground. But now, its all gone. The UK now has to rely on Russian gas for it’s power stations. This is shipped in in gas tankers. Reckon the oil and gas companies give them a discount for services rendered?

    If we canโ€™t value-add in this country (and it sadly seems that we canโ€™t), then we need to get bang for our commodities. Lets see if the miners go away โ€“ I bet they donโ€™t. Sometimes you have to push the envelope, because maybe, just maybe, you are selling yourself short. If you donโ€™t find out for yourself, the mining companies are not going to tell you.

    Oh, and on the economy, can I take it that we are all decided that it will belly-flop by the end of the year. I keep reading the โ€œsell out now,โ€ comments, have my finger on the sell button, but keep making money. Itโ€™s very confusing for a simple man.

    Seriously, there has to be some form of timeframe to the โ€˜end of the worldโ€™ predictions. Eventually it either has to happen or you don one of Steveโ€™s tee-shirts and go for a walk. Otherwise you may have to rename TDR the Nostradamus Chronicles. ”

    Nice!

  • 686 Greg Atkinson // May 4, 2010 at 9:10 am

    Hi Biker, quite true that you have to mine where the resources are but our two biggest exports, iron ore and coal are not exactly rare earth metals.

    Coal in fact is not needed as an energy source and it is pretty clear that most major economies (apart from Oz) are working out ways to generate power cost effectively without coal.

    As for iron ore, there are massive reserves outside of Australia so good old supply/demand fundamentals do apply.

    What we should be doing in Oz as I have written about a dozen times, is move up the value chain as the poster on DRA suggested..but actually I fear we are moving backwards in that area.

    For example I was at a international marine & shipping trade show a few weeks ago in Tokyo where around 32 nations were represented but guess who wasn’t there?… Australia! Yes Australia has no exhibitors whereas one of the more popular booths was set up by a New Zealand company!

    So can house prices keep rising if we fail to move up the value chain? I don’t think so, unless you believe that we can sell our iron ore and coal at any prices we like.

    By the way I have talked about the dangers of relying on iron ore and coal before here in: Are we facing a peak demand scenario for Australian coal and iron ore?

  • 687 Biker Pete // May 4, 2010 at 10:50 am

    “For example I was at a international marine & shipping trade show a few weeks ago in Tokyo where around 32 nations were represented but guess who wasnโ€™t there?โ€ฆ Australia! Yes Australia has no exhibitors whereas one of the more popular booths was set up by a New Zealand company!

    Shame on us…. . Are we taking too much for granted?
    You’ll recall the LIO fiasco I’ve mentioned previously…

    “So can house prices keep rising if we fail to move up the value chain? I donโ€™t think so, unless you believe that we can sell our iron ore and coal at any prices we like.”

    But we do have much more than iron and coal, Greg.

    I do agree with your take on coal and alternatives.

    Aussie house prices? Who knows?~ Keen might actually turn out to be right, within RR’s lifespan. For us, there’s minimal risk. You simply can’t build high-quality homes in beach areas for the money we’re spending. Selfish view, I admit; except that our tenants love their accommodation.

    We’re now engaged in what may become (at least) a $100K program to put solar electricity systems on all north-facing rental homes. Cost per house is $9500.00, but cost to us is $2500.00. Depreciation will pay that back quickly. I’d expect that after rebates our own home will cost another $20K. If we’re abroad much of the year, we’ll be making a quid from sales back-to-the-grid. From July, the amount we’ll be paid for excess elec produced in WA _doubles_… ๐Ÿ™‚

    Back to the landscaping… .

  • 688 Greg Atkinson // May 4, 2010 at 5:32 pm

    Biker indeed we have more than coal and iron ore, but they are the big money spinners and make up a significant amount of our resources exports.

    Also let’s not forget we import more than we export at the moment in dollar terms, so despite high prices for commodities we are still living beyond our means.

    Anyway the RBA is trying it’s best to cool the property market at the moment, I wonder if they will have any success?

  • 689 Biker Pete // May 4, 2010 at 9:25 pm

    They’ll be running for the lifeboats if all the dire predictions come to pass, Greg!~ ๐Ÿ™‚ It won’t be the first time Stevens, misreading the tea-leaves, has done a _total_ about-face… .

    Sometimes wonder about the wisdom of putting banks in charge of economies. Stevens’ confidence, in the face of global trends, is probably as counter-cyclical as my own penchant for property, whatever the markets are doing. At least it’s my own money I’m playing with… .

    Melbourne and Sydney probably need to cool. Our eldest is thinking of buying in Melbourne. My advice would be to wait… or to use another city as a stepping stone.

    We still view the property market(s) here as incredibly cheap. Yes, we can point to _scores_ of homes for sale at _silly_ prices. We’re not buying them… and they’re not selling them, either. But house sales are thick and fast… .

  • 690 Greg Atkinson // May 4, 2010 at 10:25 pm

    Biker I reckon good property in good locations will do okay and I don’t expect the Australian economy to enter the Dark Ages. But I do think that some people who have over extended themselves in terms of taking out big mortgages might find the going tough in the years ahead.

    I am not a doom and gloom sort of guy, but I do get nervous when I see a big disconnect between what the stock market is doing and how house prices are tracking. Maybe it will all come out in the wash..maybe not?

  • 691 Biker Pete // May 5, 2010 at 10:46 am

    Interesting to see WA giving an extra $4K to FHBs next year… but only for _new_ homes. That suits us, as our newie will be completed.

    We’ve observed that ‘asset disconnect’ before. It is often followed by a movement from one asset class to another.
    More folk our age may take their Super to property, too;
    as we are, one-of-these-days.

    I suspect property investors may now flock back to the marketS, encouraged by the KHR, or at least its hands-off perspective.
    The time to buy was many months, ago, of course. We only _just_ scraped in on a special building deal, at $169K. Today that same house is $186K.

    Around us rents are going _nuts_…. mostly up $50 pw. Crazy.

  • 692 BP // May 8, 2010 at 9:56 am

    Missus just brought me the _original_ advert for the last block we bought. We paid $134 for it, which includes free fences and a $9K landscaping package. We knew it was an amazing deal, with some lake views… but hadn’t ever scoped the _original_ 2007 advert: $178K. So the developer’s expectation fell $44K, after a one-year ‘sale’ to a 457 visa-holder fell through… !!~

  • 693 Ned S // May 8, 2010 at 3:45 pm

    A lot of the concept of what “fair” value is, has to come back to land prices Biker. I remember when I was documenting the Investment Strategy for my SMSF I “valued” the land the house was on at a 50% discount on my guestimated component of the purchase price for the house and land – As a worst case sort of scenario – And figured I could live with that in the unlikely event it came to it. Given that I didn’t like the thought of what the alternatives might be doing in such a scenario.

    What can I say? It’s working out OK so far – Touch wood!

    And I still agree with you that inflation is a way bigger risk here than deflation. Our inflation fighting RBA is even more full of it than Elvis is reputed to have been!

    Gotta go – I’m even more under the hammer to get a bunch of stuff done now given that I couldn’t resist having a good rubberneck at all the stuff that was going down last week. ๐Ÿ™‚

  • 694 Anon // May 8, 2010 at 4:09 pm

    This one is for you Biker:

    http://3.bp.blogspot.com/_pCDyiFUv9XU/ShMqUrLvbNI/AAAAAAAAEEk/ougOqPcR2NM/s1600-h/qqxsgPopulation%2520chart.gif

    lol

    Not advice, just gambling and speculation. Always see a financial advisor for decisions etc.

  • 695 BP // May 9, 2010 at 9:39 am

    Thanks, Anon. Enjoyed that and sent it to a friend in Canada.

    Short of a nuclear war, I really can’t see population slowing. We’ve knocked out the major diseases and extended lifespans… and the great migrations south to the New World have increased.

    You may recall some of the dire predictions made when steam trains first began to exceed 40 mph… including the one which warned that at greater speed blood would spurt from the noses of passengers.

    Mind you, I’m not discounting the threat of rising global populations. I just think we’ll cope, using new technologies, some of whose byproducts will make feasible and economic new systems we haven’t fully developed. Our real estate agents are still scratching their heads over our decision to equip each rental with solar electricity systems. To a lesser degree, they queried why we’d bother to plumb rainwater tanks into rentals, or give tenants solar HWSs, or tinted windows to reflect heat. Automatic low-water-use retic systems and inverter-style aircon are pretty much standard in WA, now.
    (All but the tinted windows and aircon attracted generous government grants… and tenants do appreciate our simple, lo-tech initiatives.)

    We could contrast these innovations with New York’s excesses.
    If there’s a danger to the planet, we’d contend it won’t come from opening up more of coastal Australia to new people, using improving desalination and wholescale recycling (of human waste, for example) but from giant cities whose arteries continually clog up as infrastructure costs begin to overwhelm an America-in-Deficit.

    Decentralisation is starting to be actively promoted in WA.
    It’s long overdue!~ ๐Ÿ™‚

  • 696 Anon // May 9, 2010 at 2:50 pm

    Yep agree Biker. Quality and longevity of life is better than it was decades ago, and presumably this will improve in the decades ahead. Population growth is assured for most countries. But it doesn’t mean we cant have stagnating periods of sub par returns unfortunately.

    To be honest, when i first saw your solar panels post I couldn’t understand why you thought it was a great idea. I didn’t like solar panels as an investment in being greener and saving power. I remember doing the sums and working out its better just to put the money in the bank and use the interest to pay the electricity bill lol.
    But I didn’t realise the house price may increase as a result of the installation…in addition to the associated depreciation tax deductions. Also the lure from potential renters about being in a greener home. Fully greening up ones home would obviously increase intrinsic value, especially if speculation goes gangbusters in any future green boom bubble. I can see Greg is positioning himself for a green bubble too.

    On a much happier note…
    In December 2012 its the end of the world supposedly, so the doomers will be in full force. Mayan Calander etc, you’ve probably seen the movies on it ;).
    I know i’ll be going all out short in that month, I figure I might awell go out knowing that I made a killing, before being killed. lol
    I guess its analogous to people investing in Biota (flu vaccine coy) hoping that the world will be engulfed with a deadly flu strain.

    Not advice, just gambling and speculation. Always see a financial advisor for decisions etc.

  • 697 BP // May 9, 2010 at 6:46 pm

    I have the missus busily researching the SMSF issues, Ned.

    Spent the weekend acid-washing driveways, patios and pathways; putting in painted garden borders; and completing reticulation.
    That’s virtually _all_ we did… .

    Anon, I guess the threat of a major epidemic is always with us. The possibility of some biotech company engineering both the disease and the cure simultaneously may be too much for rabid shareholders to resist.

    2012…. Terrible movie…!* It is an important year for some us.
    I turn 65… and the CGT Super roller drops from $50K to $25K… No plans to sell anything, unless someone really wants to pay us what we want. Think I sold a vintage MC today, tho’… ! ๐Ÿ™‚

    * Maybe the Mayans did know something. Wonder if we should be chucking a few sacrificial offerings down wells? I can think of a couple who deserve a good dunking!~

  • 698 Ned S // May 9, 2010 at 9:53 pm

    I really AM trying to make a half respectable attempt to stay out of all this chit chat Biker. Based on pure self interest – I’ve got to get some crap sorted out re me SMSF!

    But comments like “Wonder if we should be chucking a few sacrificial offerings down wells? I can think of a couple who deserve a good dunking!” make it difficult … ๐Ÿ™‚

    Yes, apart from the laugh it gave me, it could make a 2012 devotee have some second thoughts about whether his all knowing and beneficent god is all that likely to pay too much attention to what s/his Mayan mates figured s/he should do!

    Sometimes I get that feeling it really is more a case of s/her having figured s/he’ll just handball the shite to us what deserve it to make the best of same??? ๐Ÿ™‚

  • 699 Ned S // May 9, 2010 at 10:16 pm

    Amongst the several problems I’ve got re me SMSF, ATO TR 2010/1 could be a bit of fun – For anyone who has a residential property in their SMSF – That they do a bit of work on themselves. The ATO buggers are going to be torn between do they classify such work as a contribution that they can maybe collect 15% contribution tax on (with the gross value being pretty difficult to decide) or do they get all bitter and twisted about it potentially being a way for people to overstate contributions and claim the concessional 15% tax rate on them against other income?

    It’s a complex world out there with governments’ abilities to model it being rather limitted I suspect! ๐Ÿ™‚

  • 700 Anon // May 9, 2010 at 10:38 pm

    Rudds approval rating crashes! Time to get rid of the mining super tax or start some new topic of distraction.

    “According to a May 3 Essential Research poll, Rudd’s approval rating has fallen to 46%, down from 71% a year ago. The Liberals lead Labor by 51% to 49% on a โ€œtwo party preferredโ€ basis according to polling by Newspoll published in the May 4 Australian.”

  • 701 BP // May 9, 2010 at 10:48 pm

    The election could be anybody’s guess. Bet you Swan pulls a rabbit out of the hat tomorrow, despite telling us there’s nothing up his sleeves.

    Whether it will be enough to save Labor is anyone’s guess… !

    Problem is that the Libs are yet to show us their hands, let alone a squizz up their sleeves. Does Abbott think it’s safer to tell us nothing… and rely on Labor’s stuff-ups alone?~

  • 702 Anon // May 9, 2010 at 11:11 pm

    “Does Abbott think itโ€™s safer to tell us nothingโ€ฆ and rely on Laborโ€™s stuff-ups alone?~”

    Yep I think thats what Abbott thinks. The less he talks, the better! Just let Rudd fall on his sword.
    Lets hope the recent poll wasn’t a rogue one and that I was wrong in assuming Rudd would easily win! I am abit excited, I thought the Liberals had no hope. Really if China slows we need the Liberals in to cushion us, not car salesman.

  • 703 Ned S // May 9, 2010 at 11:45 pm

    I’ve got a comment awaiting moderation (the one before my last) – Anyway, Yep, the less Abbott says the better his chances sound. People are onto Rudd now. And while Abbott really worries me, it’s just possible he might stop being stupid if he doesn’t have the pressure on him to “win” – Nah, they’ve got to find someone credible. That’s their (and our) major problem.

  • 704 Anon // May 10, 2010 at 9:45 am

    “I really AM trying to make a half respectable attempt to stay out of all this chit chat Biker. Based on pure self interest โ€“ Iโ€™ve got to get some crap sorted out re me SMSF!”

    lol Ned…this site does increase ones procrastination ! I try to take several day breaks from posting or else it gets abit addictive and mentally tiring ๐Ÿ˜›

    Not advice, just gambling and speculation. Always see a financial advisor for decisions etc.

  • 705 Anon // May 10, 2010 at 1:29 pm

    “My Joyce says the mining tax plan will scare off other investors.

    “Do you think any person in their right mind is going to come to Australia to set up a financial hub in Sydney when they’ve just seen what we did to our mining industry?” he said.

    “They will do the same thing and say ‘look you people, the biggest risk we’ve got in your country is sovereign risk. We don’t have to worry about fire, pestilence, famine we’ve got to worry about your government, your government is as nutty as a fruit cake’.””

    haha!

    http://www.abc.net.au/news/stories/2010/05/10/2894777.htm

  • 706 BP // May 10, 2010 at 8:57 pm

    Until you posted that stuff about gov’t taxing personal input in SMSFs, we were seriously considering that path, Ned. During the weekend, I figure we did about $3K worth of development on our latest project, untaxed, so I’ve retreated, all tortoise-like, into my shell…!

    My current focus is consolidation, rather than expansion. The big picture is so confused, we think we’ll just enjoy the view! No plans to buy anything more. The German chickie who was about to buy one of my vintage Paris Dakar MCs seems to have suffered a heart-attack at the price…!!~ ๐Ÿ™‚

    Can anyone here remember a time like this in the previous six decades?!~ OK, I accept that not all of us were around back in the forties… and that period _is_ somewhat obscured… but what a political-and-economic panorama is unfolding before us.
    We’re surely amid (a merde?) the old Confucian curse!!~ ๐Ÿ˜‰

  • 707 Ned S // May 11, 2010 at 1:43 pm

    I haven’t got my head around it Biker, but it may largely be a case of it being an accounting exercise IF it has to recorded as a contribution AND providing it can be recorded as a non-concessional contribution. It’s uncharted waters for me. But in my experience, there usually ends up being some way to fall in a hole once one gets anywhere near the ATO. Another one for my poor long suffering accountant I think.

    On recent world developments, if I wasn’t twitchy about inflation before, I surely am now! I did pick up one comment that suggested the Europeans were possibly going to sell their high quality debt to fund their purchasing of their low quality debt. (Which would mean it wasn’t QE as such – I think?) Maybe, but if that’s how it works we may well see unhappy Germans in action instead of unhappy Greeks.

    On the home front, I’m waiting to see what little delicacy Kev tries to tempt our palates with this evening. It wouldn’t surprise me if it is lower tax rates on bank deposits. But it also wouldn’t surprise me if he shoots himself in the foot (again) by saying you have to lock the loot up for years (mention of that was made recently) to give them all ample opportunity to totally destroy its value with inflation:

    http://www.perthnow.com.au/money/money-matters/rudd-to-offer-generous-concessions-to-bank-accounts-for-savers/story-fn3iztr4-1225854304093

  • 708 Ralph // May 11, 2010 at 3:43 pm

    Yes, Ned, I too think that any discount in the tax rate for savings accounts will probably be accompanied by needing to keep your cash locked up for some unreasonble amount of time. All window dressing, really. Probably something like those first home savers accounts that had a take-up rate of close to zero.

  • 709 Ned S // May 11, 2010 at 5:53 pm

    What’s going to get up my nose will be the way he misrepresents his motives I suspect Ralph. (Lots of pollies misrepresent their motives regularly I guess, but the Milky Bar Kid just seems to have a bit too much of a sickly sweet way of doing it maybe?)

    Following is well worth a read on work done on SMSF properties Biker (including building whole houses – which would seem to be on their poo list. ): See Point 59 Part B ) :

    http://law.ato.gov.au/atolaw/view.htm?docid=SFR/SMSFR20101/NAT/ATO/00001

    More research required though.

  • 710 Ned S // May 11, 2010 at 7:07 pm

    “From July 1, 2011, you will only pay tax on half of the total interest earned” – No lock it up for decades clause. But 2011??? What’s wrong with 2010? Promises, promises, promises; Wait, wait, wait; Disappointment, disappointment, disappointment – Ta Kev, for more of the same.

  • 711 Ned S // May 11, 2010 at 7:30 pm

    If I was looking at creating a super power I’d consider a Germany Russia China league – Lots of brains, lots of land, lots of water, lots of mineral and energy resources, lots of labour, lots of ability to live within their means.

    One could stack them up against a Mexico US Canada combination – Who’d do quite well also; Until they hit the last point … ๐Ÿ™‚

    Just idle chit chat as Anon always says.

  • 712 Ned S // May 11, 2010 at 8:01 pm

    Correct me if I’m wrong, but Rudd’s budget was a total fizzer – Apart from not reneging on some minor personal income tax rate changes promised back in 2008, it’s pretty much a case of a few marginal fiddles and some futuristic promises. Wonder what Kev and Wayne do to keep themselves amused when they aren’t laying round the pool sipping rum ‘n cokes in la la land?

  • 713 BP // May 11, 2010 at 9:19 pm

    We call it a fizzog in the West, Ned. (I will direct you to my site, operational ten years, one of these daze!!~)

    “Probably something like those first home savers accounts that had a take-up rate of close to zero.”

    Well, my eldest jumped at it. He pays immense tax(!) and is _just_ starting to acknowledge his parents’ expertise in this area.

    Love the Milky Bar Kid reference, Ned. Very apt!!!~

    Will check out the Building Houses link. Thanks.

  • 714 BP // May 11, 2010 at 11:04 pm

    OK. Scanned the SMSF details, Ned. What a toss-pot of legalise administrivia. Your patience and perseverence amaze me! No wonder one needs an FA to negotiate this pile of excrement… .

    Don’t think we’ll bother. No need really.

    Two weeks from finishing up here. I’ll be glad to return to home base, to beat off the parrots. Still working on the QLD plan for June/July, but was kind of hoping the German biker would help fund my new Ducati. Think she wanted me to give it to her. ๐Ÿ™‚

  • 715 Ned S // May 12, 2010 at 8:50 am

    Plus there’s a bit more devil in the detail it seems? – “From 1 July 2011 the Government will introduce a 50 per cent discount on up to $1,000 of interest income” :

    http://www.budget.gov.au/2010-11/content/overview/html/overview_34.htm

    Must admit the initial report seemed considerably out of character for any Labor guv.

    “Think she wanted me to give it to her” – Lots of people looking for handouts these days mate. June/July – Yep, with luck I can avoid being incarcerated for any flagrant and knowing breaches of SMSF regulations until then? ๐Ÿ™‚

  • 716 BP // May 12, 2010 at 9:48 am

    As Hockey noted: “That’s worth $3 per week to the average Australian… ”

    Have to agree. The Canucks allow $5K tax-free per year.
    Never seen Joe looking so dignified, coiffed and well-dressed.
    Wonder when he’ll make his run?!~ ๐Ÿ˜‰

  • 717 Ned S // May 12, 2010 at 10:01 am

    Yep, no game changers from this guv. Shame; They’ve missed a big opportunity.

    Hockey seems popular enough amongst Lib supporters I guess. Maybe the Libs could adopt a campaign slogan of “It’s time – To DO bloody something!” ‘Cept it would be wasted on all the under 50 yos.

  • 718 Greg Atkinson // May 12, 2010 at 11:45 am

    I think house prices, the budget and it seems just about everything else in Australia now depends on the Chinese economy. Personally I think Swan’s view of the economy is a little too optimistic and I will be buying the beers if he can get the budget back into surplus as planned.

    If commodities prices rise that will fuel inflation, which means rates will need to rise in order to try and cool things down. Higher rates will take money about of people’s pockets and hurt companies that need to borrow funds, so this will tend to damper the domestic economy.

    Remember we export iron ore but buy back the valued added products made from this resource. Higher iron ore costs come back to us via imports. Miners will also look at ways to absorb the “super profits tax” so that will come back to bite us as well.

    Don’t forget, we import more from China than we export in dollar terms. So the trade relationships is in their favour.

    So how does Swan come up with growth scenario where nobody seems to be a loser?

    By the way, I just saw Jim Rogers on Bloomberg saying he thought coastal Chinese property was in a bubble, so that might make things interesting if it bursts! (and could have a knock on effect on Oz property)

  • 719 Ned S // May 12, 2010 at 5:26 pm

    One day China will have a recession and Oz will be borrowing as required (and stealing from widows, orphans and cripples) to prop up housing – Or more specifically, the banks! And Yes, there are a lot of voices saying it could happen sooner rather than later.

    But even that’s a stagflationary senerio I’d suspect Greg, with our lords and masters having learned the joys of 0% interest rates and/or QE?

    So one’s loot will probably still be better in a house than in cash; I’d imagine.

  • 720 Ned S // May 12, 2010 at 5:36 pm

    I very much doubt I’ll buy another property in the name of my SMSF with that last ATO link saying what it does Biker. A discretionary (family) trust could well be the next best option for my circumstances. I’ll need to check the KHR to see if he went hunting them. But would be pretty surprised if he did.

  • 721 Ned S // May 12, 2010 at 8:44 pm

    If you want to see some REAL gobbledeegook Biker, this is the specific bit of legislation that last ATO interpretation applies to:

    http://www.austlii.edu.au/au/legis/cth/consol_act/sia1993473/s66.html

    It’s about acquiring assets from a member of the fund. And there are other regs about other things elsewhere in the legislation of course.

    I’m pigheaded. I’m thinking in terms of Why can’t a trustee buy some goods for the fund and a member (or related party) provide the service of installing them? – With provision of service seeming to be acceptable. (Unless it gets nailed under another reg.) And me being tricked if I can see any problems with a trustee buying assets for a fund – Trustees are EXPECTED to buy and sell fund assets.

    Give it a few more days and if no joy, run it by a tax lawyer is maybe best. (My accountant is good, but some of this stuff appears to be murky maybe?) I’d say I’ve just missed something obvious except I ran it past a bloke who specialising in auditing SMSFs and he indicated it was all a bit up in the air too.

    There’s a lot of unknowns in the world at both high and low levels at the moment methinks! ๐Ÿ™‚

  • 722 Biker Pete // May 13, 2010 at 6:11 pm

    Still figure if you can buy well-located land at the right price and build a quality ‘upspecced’ home cheaply, you’re on a winner.
    We figure the only competitors we have, in our niche, are the small group of savvy tradies who band together to build similar homes.
    We’ve gone off SMSFs, Ned. Our original, simple ‘offset’ plan still seems best to us.

    We were pleasantly surprised to see our primary beach suburb had officially risen 26.4% in value, during the last year. Apart from Super, that’s our best return for the last year. Our other beach suburb (three homes) rose minimally (10%) in comparison…

  • 723 Ned S // May 14, 2010 at 12:14 am

    “build a quality โ€˜upspeccedโ€™ home cheaply, youโ€™re on a winner” – I’m hearing you Biker – Was chatting with a couple of younger lasses this evening and it was pretty obvious that neither of them want to live in weatherboard boxes. And by and large the young are and will become the market movers I guess.

    (Didn’t repeat the bit about location as that is, was, and always will be a given.)

  • 724 Biker Pete // May 14, 2010 at 7:44 am

    “And by and large the young are and will become the market movers I guess.”

    Yes, my only slight reservation is their purchasing capacity as a demographic. Wages really aren’t keeping pace with rising values, even here. If this 26.5% rise in value is ‘real’ what correlation can there be to a.) wages; b.) ability to save, to compensate(?) And given that savings are the highest taxed form of ‘investment’, it’s a double-blow to catching-up(!)

    Long talk with the tenants of our beach house two days ago. Very clever people, with several million in property. They’ve just returned from QLD, after attending property seminars there. Doubtless a tax write-off(!) Their confidence is reassuring, _but_ I’m cautious about the level to which one _might_ leverage if one believed it _can_ only go up… rather than hitting a five-year plateau… .

    I (now) know of two cases where this all went belly-up during the recent correction. Both families came out of it well, but in each case the _family home_ had to be sold, to carry the other investments. They had no buffer, no back-up plan, no cash reserves of any kind. Mind you, both couples also had two incredibly expensive cars… a sad folly, in my view… .

    I see WA’s unemployment rate just fell below 5%, to 4.7%.
    I think QLD is next, at 5.3%. Abbott seems to have lost the moment, if he ever had it. In fact there’s little to inspire the hordes there, from either crew!!~

  • 725 Senator13 // May 14, 2010 at 1:40 pm

    What amazes me is how so few of the people who I have spoke to have made additional repayments on their mortgage while rates have been so low. I doubt that many are unable to do it (some might be unable) but it seems more like they are unwillingโ€ฆ

  • 726 Biker Pete // May 14, 2010 at 2:46 pm

    We’ve been fortunate to be able to do so, Sen13. It’s a little difficult, as my missus insists we’re actually much better off topping up our ten offset accounts.

    Spent the morning evaluating our situation and was a little surprised to realise our asset-to-debt ratio is 7:2 … and that’s without including the claimed 26.5% increase in values.

    Even more surprising is my partner’s claim that she can now lock-in a one-year fixed loan at a lower rate than the 6.71% about to commence shortly. The ANZ must be anticipating a _fall_ in interest rates during the next twelve months!!~

  • 727 Biker Pete // May 14, 2010 at 7:27 pm

    Postscript to that last post. Son 1 has a different view, proposing that it may be ANZ’s way of ‘luring in’ some too highly-leveraged punters. At the end of the twelve month period, ANZ simply refuses to give ’em finance… . Hey presto… high-risk loans off the books… !

  • 728 Biker Pete // May 15, 2010 at 5:09 pm

    Here it is:

    ANZ 6.71% variable
    ANZ 6.65% fixed one year

    C’est encroyable, ce n’est pas?!

  • 729 Senator13 // May 15, 2010 at 6:27 pm

    Those sorts of returns might start to look like super profits in Rudd’s eyes! Wonder what he will try and get his mits on next..

    I’ve been pouring everything I’ve got into the loan at the moment. Almost knocked off 10 years..

    For me smashing down the loan is the best investment for the moment at the moment.

  • 730 Biker Pete // May 15, 2010 at 6:51 pm

    “For me smashing down the loan is the best investment for the moment at the moment.”

    Then imagine having ten loans, totalling well over two mil.

    I hope that later we don’t regret not having taken more!

    Over ninety five percent of the ‘mistakes’ I’ve made in the last 3+ decades involve _not_ buying properties my wife identified as a great deal. These ‘losses’ would total many millions of dollars. Every excuse I offered for NOT proceeding with a deal was my explanation that the property was overpriced(!)

    She’s kind enough to _rarely_ mention my lack of foresight.
    Fortunately I took up enough of her recommendations to be able to retire, soon, in comfort…. . ๐Ÿ™‚

  • 731 Senator13 // May 15, 2010 at 7:06 pm

    Haha I hope one day I am in a position to have 10, Biker!!

    I am already planning to have a second.. But it seems a little more tricky…

    I would like to get another property – one to live in while renting out my current place. Then saving up and trying for a 3rd… I’m aiming for over 10 years time maybe… Don’t know if it will be possible but I think it is not a bad goal and reasonable time frame..?

  • 732 Ned S // May 15, 2010 at 7:54 pm

    Debt used wisely can certainly be a very powerful tool Senator. But (in my experience) it’s not a bad idea to allow a bit of margin for error – Three unexpected ones I hit over the years were a divorce, a job loss and realising that neg gearing loses a bit of it’s gloss if one has minimal Oz income to negatively gear against – Re the latter I went overseas to work. (I got the debt on that investment property paid down pronto … ๐Ÿ™‚ )

    Glad to hear it’s working out well for you!

  • 733 Biker Pete // May 15, 2010 at 9:08 pm

    Yes, a buffer is critical; in our case, it’s cash and Super.
    At least three of our rentals are questionable. They total 1.9 mil in ‘value’, but draw only $61,360 in rent. Sounds worse than it is. We paid well under a mil for them; and owe around $700K on them… but as rentals they’re our very _worst_ performers. (CGT will knock us about eventually!~ ๐Ÿ™‚ )

    All part of the learning curve. The ideal seems to still be that old property investment rule…. spend $360K, rent for $360 pw; spend $400K, rent for $400 pw. During the very low interest period, landlords who had followed that rule were laughing; as interest rises returns are less, of course.

    The whole-day analysis I’ve undertaken prior to seeing the bank next week has been highly worthwhile. Considerably cheered by it… . I think DRA’s continual pessimism was starting to jade me a little, Ned!!~ ๐Ÿ˜‰

  • 734 Senator13 // May 15, 2010 at 9:19 pm

    Yes, good points Ned. I like lots of buffer. I’m looking at a 10yr time frame for my next place but always like to keep on eye on what is going on. I’m only in the very very early stages at the moment so am happy just paying down this loan at the moment and maybe renting it out in the 2nd half of this year.

    So much can happen in a year so I figure paying off as much as I can right now while I’m able is the safest option.

  • 735 Ned S // May 15, 2010 at 9:42 pm

    “spend $360K, rent for $360 pw” etc – That’s baseline re rental income I think Biker. The one property I’ve really killed the pig on over the years was bought at maybe $82.5K and promptly rented out at $140 per week – Now (15 years later) it’s worth $500K plus – But only pulling $345 per week rent. It was a land value thing.

    DRA – Yes, I scan the emails is about all these days. KS wanted to give me some “prizes” today I think? A bit commercialized for my liking I’m afraid.

    Could the EU parties part ways? Yes, that is actually possible given their rather different approaches to fiscal responsibility. But at least this recent turn out is putting the wood on them – Think you know my feelings about the West starting to live within its means. (Even Bernanke is telling the Yanks that is required – But they don’t seem to be great listeners? ๐Ÿ™‚ )

  • 736 Ned S // May 15, 2010 at 10:14 pm

    It’s really quite difficult to make a “fundamental” mistake paying down debt in this country where the option of walking away from it scot free doesn’t exist I think Senator. Although debt is what the world has (and will continue) to run on – And as such, the way to make money. But just don’t load up on more than one might reasonably expect to be able to handle given at least one “shock” maybe?

  • 737 Senator13 // May 15, 2010 at 10:29 pm

    Yes, I have more then enough debt at this stage that’s for sure.

    I think one of the advantages that I had was having zero debt going in. Also, Lots of research and now that I am committed – paying off as much as I can while rates remain relatively low is a very high priority.

    I think in another post we spoke about both inflation and rates being back on the march in the upwards direction – so anything that I can do to get a buffer now is a good thing.

    I might have to revise my estimate upwards as to where interest rates will be at. I think my original prediction was that rates would level off around about now – but I think there still might be another few quarter of a percent increases to go now…

    Australian property is still looking a pretty good pick especially over the turmoil of Europe. It looks right on the edge at the moment and could send the stock marked into a dive at the drop of a hat…

  • 738 Anon // May 16, 2010 at 8:57 am

    “Beijing Home Prices Plunge 31.4%”

    “May 11 — The average transaction price of commercial residential properties in Beijing for the week ended May 9 fell 1,790 yuan per square meter or 9.6 percent week-on-week to 16,898 yuan per square meter, reports The Beijing News, citing statistics released by Beijing Real Estate Information Network.

    Compared with the week ended April 11, the average transaction price of commercial residential properties in Beijing plunged 31.43 percent or 7,744 yuan per square meter.

    In the last weeks of April, the transation volume of commercial residential properties in Beijing decreased by 10.34 percent, 11.39 percent and 30.82 percent respectively. Average transaction price was flat at between 22,000 yuan to 23,000 yuan per square meter.

    The share price of Poly Real Estate (600048) was down 2.65 percent to close at 10.66 yuan today.

    The share price of Beijing Capital Development (600376) was down 4.16 percent to close at 13.26 yuan today.”

    http://www.capitalvue.com/home/CE-news/inset/%4010063/post/1185337

    None of my posts constitute financial advice, just chit chat. Always see a financial advisor for decision making / advice / info.

  • 739 Anon // May 16, 2010 at 9:27 am

    Wish I could join you guys in home ownership, but I will patiently wait on the sidelines.
    Still too expensive in my eyes (altho we all have differing views on this and I accept that). I wish the best for those already owning property and do hope my predictions are wrong!
    I will probably short Australian housing in the next 12-24 months (even sooner depending on if the housing data continues to worsen and other circumstances).
    Housing will have mean reversion…like it or not…it will occur and god help us when it does lol. The indirect consequences are just mind boggling.

    Interesting comments by a hedgefund manager that predicted the 2007 credit crisis:
    “Edward Chancellor, of US investment management firm GMO, says the Australian economy is yet to emerge from the global financial crisis, despite the widespread belief it has escaped the worst of it ahead of the rest of the world.

    โ€œAustralia is in the midst of an unsustainable housing bubble that could burst at any timeโ€ and that โ€œhouse prices are more than 50 per cent above their fair value — a once in 40-year event.โ€

    None of my posts constitute financial advice, just chit chat. Always see a financial advisor for decision making / advice / info.

  • 740 Biker Pete // May 16, 2010 at 11:14 am

    “Think you know my feelings about the West starting to live within its means. (Even Bernanke is telling the Yanks that is required โ€“ But they donโ€™t seem to be great listeners? ๐Ÿ™‚ )”

    Their overwhelming problem is that any politician who takes a hardline approach will very quickly cease to be a politician. The best any president could ever do is _regulate_ to minimise the risk of a re-occurrence. How long would Obama last if he: a.) raised interest rates; b.) and eight million were ejected from their homes, onto the streets; c.) and 25 more US banks failed as a result? They’re stuck with this; and can only print money (and eventually hyperinflate) until debt is reduced!!!~ And that is, of course, the goldbugs’ thesis… .

    China? I wouldn’t wipe them off the whiteboard too soon, Anon.
    Compare their _long-term_ position to that of the US.

    Chancellor? Along with _many_ others, he predicted the GFC. Our move to cash prior to the GFC saved us immense cash. Does that make me the fount of all wisdom? Nope. It just meant we read the trends and signals correctly… but as Greg has inferred, several times, anyone who _claims_ they were CERTAIN the GFC was coming should be a billionaire by now.

    Look at Keen. He acted on his beliefs, too. He generalised NH property outcomes to SH property. As an academic, he ignored the most _fundamental_ of the eight threats to validity.
    Don’t lose any sleep over an APC, Anon… lol… .

  • 741 Anon // May 16, 2010 at 11:35 am

    “Look at Keen. He acted on his beliefs, too. He generalised NH property outcomes to SH property.”

    Yeah Keen just got it so wrong. In hindsight he would have been better betting with shorts/puts against Australian REITS that had too much leverage (to hedge his own house). So even if housing didn’t fall off a cliff the REITS were going to tank anyways. Didn’t make sense to rent – given the options. I think that was basically gambling. Altho that strategy may not work this time round.

    “Chancellor? Along with _many_ others, he predicted the GFC. Our move to cash prior to the GFC saved us immense cash. Does that make me the fount of all wisdom? Nope. It just meant we read the trends and signals correctly”

    I thought you said you exited shares because DR gave the info you needed. Also I think from memory you said you exited your re-entry into the XAO way too early Biker – so obviously you arn’t reading the trends correctly all the time – perhaps it was a fluke? who knows? And one has to question your reading of the trends with an obvious bubble in Australian housing (albeit there may be pockets of value here and there – altho i find that unlikely in this environment).
    I data mine my info Biker so I dont listen to everything thrown at me…you should know that by now ๐Ÿ˜‰ Sometimes I will do the opposite of what is being said. I think what the Chancellor discussed has merit, irrespective of his track record from prior calls.

    None of my posts constitute financial advice, just chit chat. Always see a financial advisor for decision making / advice / info.

  • 742 Biker Pete // May 16, 2010 at 11:37 am

    Ned: “The one property Iโ€™ve really killed the pig on over the years was bought at maybe $82.5K and promptly rented out at $140 per week โ€“ Now (15 years later) itโ€™s worth $500K plus โ€“ But only pulling $345 per week rent.”

    Good one! That rent seems a little low, but some of ours are a little too reasonable, too. ๐Ÿ™‚

    We haven’t had any such major wins in the thirty months, Ned!*

    That house seems similar to our situation with the beach house… the D/S one I posted a link to. We paid $375K in 2005 and it’s worth $750 – $800K now. It fetches just $450pw. While that’s a reasonable return on our _outlay,_ it’s a criminally poor situation until we sell. Far better to sell now and build two rentals at around $740K total; and pull in $740pw total in rent. We’d be almost $300pw better off… .

    My chief advisor watches property in this close-to-the-beach zone rising steadily, however… and she won’t allow me to sell! She believes it’s a million-dollar-property (850m2) and wants to hold it… . Sacre bleu!~

    *Despite everything I read, I think the market here is still pretty flat; although we haven’t really tested it for some time. Got a strong bite on the project we’re completing, but the interested party wants to see it totally completed. She may not believe we’re really serious about all the goodies: top-quality artificial turf, reflective window treatments, dishwasher, etc, etc… .

  • 743 Biker Pete // May 16, 2010 at 12:03 pm

    “I thought you said you exited shares because DR gave you the info you needed.”

    If you go back and look, you’ll find that I credited DR(US) as one of a number of sources, including family brokers in North America. The UN’s broadcast prediction was, however, the final decider for us. We were on a yacht off Victoria at the time.

    “Also I think from memory you said you exited your re-entry into the XAO way too early Biker โ€“ so obviously you arnโ€™t reading the trends correctly all the time โ€“ perhaps it was a fluke?”

    Yep… and perhaps Chancellor fluked his GFC call, too! ๐Ÿ˜‰

    I mistimed my first sell by 600 pts (6840 – 6250). I timed my buy-back-in almost perfectly (3200). Yes, I mistimed my sell, getting out at 3800. Result? My Super funds are fairly impre$$ive! Only one of our friends or colleagues managed to time the first sell better than we did… but he didn’t buy back in at all… just pulled all his Super… ! ๐Ÿ™‚

    “…there may be pockets of value here and there โ€“ altho i find that unlikely in this environment…”

    So do we. We found two bargains. Blew another buy… paid too much! We’re probably $25K or so ahead, on balance, in those three transactions. The big water-view block will have the quickest capital gain growth of the three blocks, anyway.

    Like Keen, Chancellor is _wrong_… and for almost the same reasons. I recall Chancellor calling an Australian crash around the same time Keen did, in fact! ๐Ÿ™‚

  • 744 Ned S // May 16, 2010 at 12:07 pm

    50% makes for a good press headline Anon – But Chancelor is basing his storey on the tired old average income yarn. And even he really only says “prices would have to fall by more than a third to reach fair value – although some of this fall would be cushioned by income growth”.

    Looking at his fundamental premise doesn’t inspire confidence. And neither does the fact that he wrote a book which gets a plug in the article. Nor does the fact that Biker and Senator and me (and possibly you?), will all be getting hot to trot to up our property holdings if even a 15 or 20% “crash” should come our way. Which it probably won’t as by then Rudd and the RBA will be pulling out all stops to save the banks. Despite the fact that in a somewhat saner world, 10, 15 and even 20% property price corrections just shouldn’t be that big a deal to people who buy property with a 10 year minimum time frame and a bit of a buffer built into their calcs – Which is just commonsense for mine.

    $345 per week rent is about all that property of mine is worth Biker – It’s a classic case of the value being in the land rather than the house. Which is why it’s performed as well as it has regarding capital growth. Similar to your beach front property as you say.

  • 745 Ned S // May 16, 2010 at 12:19 pm

    A thought just occured to me – Is it possible that property markets that are based primarily on apartments have more potential instability than those based on stand alone housing? (My personal bias may well be showing through – I’m not a big fan of apartments generally as investments – Leastways not the ones where their location puts them in my price range! ๐Ÿ™‚ )

  • 746 Anon // May 16, 2010 at 12:28 pm

    “Nor does the fact that Biker and Senator and me (and possibly you?), will all be getting hot to trot to up our property holdings if even a 15 or 20% โ€œcrashโ€ should come our way.”

    You betcha lol ๐Ÿ˜›

  • 747 Biker Pete // May 16, 2010 at 12:40 pm

    “Iโ€™m not a big of apartments generally as investments…”

    Funnily enough, I posted a DRA comment about apartments just minutes ago, Ned.

    Our beach house* situation is a little different. It would cost over $500K to replace the house. The land might be worth $300K. Our problem is that few tenants want to pay what the house is _worth._ We declined a $500pw offer, from a noisy doctor, who demanded that the main upstairs bedroom be repainted in a colour more to his liking… and insisted he would mount a wall-size TV in one of the three lounge rooms. It wasn’t, in fact, the _changes_ to the house which annoyed us, but his manner.

    He hounded us for weeks, while it stayed vacant… and I finally reminded him he would be _renting_ not BUYING the house… and told him to buzz off to wherever he came from!~ No more calls after that! ๐Ÿ™‚

    We like our current tenants. Nice people. I think they’re surprised we don’t put up the rent each year… .

    * Nine of our properties are ‘beach’ locations. We call this one ‘the beach house’ because it’s so very close to the water… .

  • 748 Ned S // May 16, 2010 at 12:49 pm

    “a wall-size TV” – And he chooses to pay rent – Wonder why? ๐Ÿ™‚ (Takes all types eh!)

  • 749 Anon // May 16, 2010 at 12:55 pm

    “Nor does the fact that Biker and Senator and me (and possibly you?), will all be getting hot to trot to up our property holdings if even a 15 or 20% โ€œcrashโ€ should come our way.”

    I will buy Ned, if we crash. But prices will take along time to comeback once they tank (and possibly never see these highs for along time). Just like stocks, confidence will be shattered as the “safe as houses” philosophy goes out the window. And one would suspect if people fear house prices to continue to drop – pent up demand will continue to rise, causing houses to fall further.
    I would buy after the dust settles, a couple of years after the bulk of the damage is done. I’ll avoid catching falling knives at all costs.
    Plus need to learn abit about housing over the next 48 mths so I can avoid getting burnt…would hate to buy incorrectly and then be stuck in something ridiculously illiquid that requires additional capital overtime.

    “But Chancelor is basing his storey on the tired old average income yarn. And even he really only says โ€œprices would have to fall by more than a third to reach fair value โ€“ although some of this fall would be cushioned by income growthโ€

    Have you read his book? I might buy it and take a look at it to understand his arguments further.
    In any event theres copious amounts of data out there (and on here posted by Greg et al) thats supports a housing overvaluation in Australia. Likewise you and Biker have presented pro-housing arguments which we agree to disagree on.
    At the very least one must have measures in place to avoid severe capital loss. What happens if this once in a 40 year event occurs? Do you just let your capital evaporate and wait possibly decades for it to recover? These types of events have humbled many longterm investors over the years…hence why it is much more difficult to maintain wealth rather than accumulate it.

    None of my posts constitute financial advice, just chit chat. Always see a financial advisor for decision making / advice / info.

  • 750 Biker Pete // May 16, 2010 at 1:03 pm

    Ned: “And he chooses to pay rent…”

    My _guess_ is it was/is a Visa situation, Ned.
    Either that or he was a very, very, very tanned reincarnation of Edward Chancellor…

    Mate, you’d have _loved_ this bloke!
    Effusively and very loudly introduced us to his young blond GF, half his age and well over a _metre_ taller: “This is my beautiful girlfriend!!! Isn’t she _beautiful_ ???!!!!!~”
    (It would be racist to inflect/inflict his accent here.
    I’ll leave it to your imagination… .)

    We both suppressed a giggle, but I heard my missus choke in astonishment, as she caught her breath…!~

    Wagged his finger up at me, as he loudly explained what he wanted. I’m not really all that deaf!
    I was pretty patient, all things considered… . ๐Ÿ™‚

  • 751 Anon // May 16, 2010 at 1:13 pm

    Is this the article you are refering to in your arguments Ned?
    http://www.news.com.au/money/property/housing-market-will-implode-warns-edward-chancellor/story-e6frfmd0-1225861377051

    I’m sure he’s gone into more depth outside of these selected quotes. Be interesting to see the bulk of his analysis on the Australian Housing Market.
    As a general rule I try to avoid listening to newspapers as they tend to be at the end of the news cycle…i.e. we are dumping as they are reporting something positive lol. Albeit this article seems to be useful!

    None of my posts constitute financial advice, just chit chat. Always see a financial advisor for decision making / advice / info.

  • 752 Biker Pete // May 16, 2010 at 1:21 pm

    Yes, our positions _are_ totally opposed, anon.

    Granted, there will be falls and plateaus… and _quick recoveries,_ in my view. You’ll miss both getting cut AND carving up some great opportunities for yourself.

    You’ll perceive a totally different scenario, I know. These little ‘lols’ you add express your hopes that there’s no property crash convincingly. ๐Ÿ˜‰

    Your timeframes are interesting: “Plus need to learn abit about housing over the next 48 mths…” Extraordinary!
    “I would buy after the dust settles, a couple of years after the bulk of the damage is done.” Fantastic!

    Where are your investments placed in the meantime?

  • 753 Anon // May 16, 2010 at 1:41 pm

    Biker not really looking to disclose my investment positions. I dont think thats a sound idea given everyone has different financial circumstances and goals.
    However, i’d rather miss the upside (and sit out and do nothing) if it means my perceived risk is far too high!

    “Your timeframes are interesting: โ€œPlus need to learn abit about housing over the next 48 mthsโ€ฆโ€ Extraordinary!
    โ€œI would buy after the dust settles, a couple of years after the bulk of the damage is done.โ€ Fantastic! ”

    Well they are just speculative guesstimates…but I will adapt to the situation and not stay in denial for long if my assumptions (based on historical housing crashes) are wrong. Most people get married to ideas and then go down with the ship, unwilling to change. Seen and experienced this for myself many times!

    “Granted, there will be falls and plateausโ€ฆ and _quick recoveries,_ in my view. Youโ€™ll miss both getting cut AND carving up some great opportunities for yourself.”

    You accuse me of making questionable time frames…but you are making assumptions that recoveries will be quick? Why would housing recover quickly? Shares haven’t…they are still well below historical highs. US, UK, Japan, NZ, Ireland housing markets haven’t — yet we will supposedly have this miracle recovery in oz housing, post crash/correction.

    None of my posts constitute financial advice – so do not act on it in that manner. Its just chit chat. Always see a financial advisor for decision making / advice / info.

  • 754 Ned S // May 16, 2010 at 1:59 pm

    I haven’t read his book Anon – Just looked at the following:

    http://www.news.com.au/money/property/housing-market-will-implode-warns-edward-chancellor/story-e6frfmd0-1225861377051

    I was in the 15% fall camp around November 2008 – 20% for some of the more expensive properties maybe. Never eventuated for the reasons we all now know about now of course. I’m still not bullish on Oz property short term. But having noted for myself what government responses to property price corrections are (overseas as well as here) there is no way I’d stick my neck out and call a correction of any more than 15% now. And they could putter along OK – I simply accept that I don’t know.

    Wealth preservation – I have a pretty basic home I live in – Puchased in early 2008. If I renovate it (free labour by myself and materials purchased on the cheap) I could probably increase the value by a good bit of any correction amount that might come our way. And the investment property I bought 15 years ago doesn’t frighten me – While it isn’t inner city it’s inner middle ring nowadays; And is actually a big old house on two blocks of land – So it’d hold up better than most in any correction. The one in my super fund (also purchased pre-GFC in 2008) could be a bit more problematic – But given that I’m not expecting 25 and 30% falls, I simply don’t see any value flicking it in the hope I might be able to buy in cheaper later – Heck, they might NOT even fall. (As stated, I don’t know.)

    I see you just said you don’t see value in disclosing investment position – No probs – It doesn’t worry me though …

    The super fund one is also inner middle ring but nothing like the land value of the investment I bought 15 years ago – But has been doing it’s job so far – Bringing in some rent for the fund without causing me any stress and (to date) has appreciated maybe 11% total over 2 years – Nothing to write home about, but my aim in purchasing it was really just to have an honest little earner that would pay me out rent on a house tax free through super when I hit 60 (plus have built up a bit of cash in the fund in the interim that I could also take as needed).

    And like Biker, I have cash as a buffer – Which I’d use to buy more if we did get a correction.

    One thing I’d note – Yes, property does correct and plateau for a number of years; But historically during those plateaus (in Oz with our love of stand alone housing and increasing population I fully suspect), over the years of the plateau, the closer in suburbs become inherently more valuable. So when it takes off again, 20% increases in a year frequently occur.

  • 755 Ned S // May 16, 2010 at 2:26 pm

    Just out of interest, what DID you say to the DRA blokes re apartments Biker?

  • 756 Biker Pete // May 16, 2010 at 4:24 pm

    Well, our ol’ mate Steve throws ‘abit’ (note that, BTW) of bread on the water from time-to-time… and generally tries to set the hook two posts later. ๐Ÿ˜‰

    My comment in response was my ol’ friendly self, of course:

    “I can never understand why property auctions appear to _thrive_ in your big eastern cities. The only thing which might explain this phenomenon is high demand. I’m not saying this is about ‘a shortage of property’, but rather that the _shortage of ‘highly-desirable’ property_ may be an issue.

    We advised our son (your age) to _buy_ the beautiful 38th floor inner-city apartment he was renting in Melbourne just over two years ago. He had the cash, but believed as you do, it was too high-risk. That same unit is now worth well over $200K more. He’s not concerned… he _lost_ nothing.
    But it’s interesting, nonetheless… .”

    Now Steve’s putting the argument that I should donate our properties. ๐Ÿ™‚

    Anon, I think we’re done, son. I’ve been happy to offer you some of our perceptions of property… and you’re withholding the secrets of your own success. What dills* like you fail to appreciate is that if the F Team (Keen, Karan, Chancellor, Bonner, Denning, etc) are finally ever correct about Oz housing, they’ll also be correct about _very_ low interest rates, too. Folk with property will simply hold… . Some, like us, will snap up any bargains ad infinitum… . ๐Ÿ™‚

    * Far more polite than the m-word, i-word, or DH-word… ๐Ÿ˜‰

  • 757 Ned S // May 16, 2010 at 4:44 pm

    “I should donate our properties” – I fully concur Biker. ๐Ÿ˜‰ And he should donate his cash. All to the poor and underprivledged of the world. Plus share his job. And all of his future earning potential. So we’ll all be equal in our perfect siblinghood of worldwide socialist poverty.

    But he gets to go first of course! (Plus his mum and dad and all the rest of his family and friends.) As some of them socialists have bin known to have bit of a cheat if ya don’t watch them mate! ๐Ÿ™‚

  • 758 Ned S // May 16, 2010 at 5:08 pm

    Remember picking up a link of your’s a while back that indicated apartments were NOT the answer to affordable housing Biker – As an apartment in the city cost more to build than a house in the ‘burbs. Must admit I’m not convinced – Wonder what the size of said apartment was – Compared to a house. This is only a suspicion, but I do suspect there’s a “structural” issue re Oz housing prices – Namely that we don’t have (or especially seem to want?) lots of little structures available on the market.

  • 759 Biker Pete // May 16, 2010 at 5:40 pm

    I’m learning all the time, Ned. For kids, apartment life in the inner city seems to have its attractions.

    _With_ kids, it would seem a poor substitute for a stand-alone home.

    APM has just today forecast a further 21.4% growth in our preferred beach area. I’m skeptical, but if they’re correct, that would give us 47.9% growth in two years. Makes Keen’s 40% fall prediction laughable, whether Australian property crashes, or just bubbles ๐Ÿ˜‰ happily along… .

  • 760 Ned S // May 16, 2010 at 5:58 pm

    “For kids, apartment life in the inner city seems to have its attractions.

    _With_ kids, it would seem a poor substitute for a stand-alone home.”

    Nothing much has changed since I was a lad then Biker – In that sole regard! It’ll be interesting to see how it pans out.

    But all in all I’m happy enough being invested in housing and cash than anything else right now. Lots of money to be made (or lost) in stocks and bonds and bullion though – Was talking to my accountant last week; He has 10% of his super in stocks – No blue chip stuff; All high risk – Figures he can afford to lose 10%. And IF he gets lucky he just might kill the pig – Good for him! ๐Ÿ™‚

  • 761 Biker Pete // May 16, 2010 at 7:24 pm

    “Was talking to my accountant last week; He has 10% of his super in stocks โ€“ No blue chip stuff; All high risk โ€“ Figures he can afford to lose 10%.”

    Our accountant has totally pulled out of shares… and amped property.

    We’re thinking that we may leave 20% of our Super intact, simply in case the ASX drops out of the sky; to repeat a cash-to-ASX transaction, then another ASX-to-cash conversion.*

    We think it’s far more likely than a property crash… and we’d probably exercise the same, very conservative moves we did last time: back into the ASX at around 3200, out at 3800 again.
    No question that our eldest will _again_ advise us to ride it higher, but we’re (still) happy with that kind of gain.

    * Then totally bail…!!~

  • 762 Ned S // May 16, 2010 at 7:41 pm

    “Then totally bail” … I’m still happy enough in super Biker [NOT that I have a choice!] – But either way that one little house to top up a pension (should worse come to worst) still sounds OK for now.

    “back into the ASX at around 3200, out at 3800 again” – Yep, it’s still ugly out there. Freddie Mac is still needy; Mr O is still a socialist [Mr Rudd always was!]; And Merkel dieHun seems confused – Although only temporarily maybe? ๐Ÿ™‚

  • 763 Biker Pete // May 16, 2010 at 9:25 pm

    “And Merkel dieHun seems confused โ€“ Although only temporarily maybe? :)”

    HaHa…!~ That reminds me: I just sold the vintage bike to the pretty German fraulein. I have to sell at least one more before I’m allowed to access a Multistrada… . ๐Ÿ™‚

  • 764 Biker Pete // May 17, 2010 at 2:28 pm

    Wonder how outdated _this_ is:

    http://en.wikipedia.org/wiki/List_of_countries_by_public_debt

  • 765 Greg Atkinson // May 17, 2010 at 2:31 pm

    I am probably becoming more bearish on housing now because the Government seems so bullish on the economy. This means they are not taking the measures needed to protect the Australian economy from any economic slowdown in China. Personally I think that is a pretty scary way to manage the economy.

  • 766 Ned S // May 17, 2010 at 2:58 pm

    It’s the private debt in Oz that is the real concern Biker. Which is why Rudd/Swan not encouraging bank deposits seemed stupid to me (a 50% rebate on the tax on the first $1,000 worth of bank interest to be introduced in 2011 IF they are still there maybe, is NOT “encouraging saving” … ๐Ÿ™‚ ) Suited me well enough though – I wasn’t really looking forward to the decision of whether I sat in cash waiting for inflation – With tax on only 60% (???) of that income maybe being the bait. Just dump into super to decrease the tax rate to 15% is fine.

  • 767 Anon // May 17, 2010 at 5:45 pm

    “Wonder how outdated _this_ is:

    http://en.wikipedia.org/wiki/List_of_countries_by_public_debt

    Heres something alittle more up to date:

    “Fiscal Deficits and Public Debt and Expected Changes”

    http://www.pimco.com/NR/rdonlyres/DC2F0D9D-25CB-4950-BF22-5802C5FE541C/8432/Chart3IO.jpg

    None of my posts constitute financial advice โ€“ so do not act on it in that manner. Its just chit chat. Always see a financial advisor for decision making / advice / info.

  • 768 Julian // May 17, 2010 at 8:47 pm

    Hi Guys

    Haven’t visited this forum in a couple of weeks. And it’s funny that my opinion matches Greg’s post today, but is probably stronger(!)

    I nearly bought a house, but now I’ve gone back to thinking it’s a speculative bubble. I think I am going to save myself a lot of money.

    Many reasons for this opinion. Some of the main ones:

    The psychology I observe of people in the market (the reasons they tell you for buying a house): it just screams speculative bubble, the way Robert Shiller defines it.

    The 120 year Australian real house price index graph: it screams bubble. The idea that our moderate population growth and (very recent) modest under supply of housing can explain continuous large magnitude price rises is (way) out of proportion. According to ABS stats: percentage growth in dwellings exceeded percentage growth in population right up to 2006, when the graphs then crossed over. So how can the supply/demand argument explain the first 7 years of this bubble (1999-2006), when dwelling growth exceeded population growth? It can’t. Maybe it’s speculative demand? Oops sorry I just blasphemed.
    This page on bubblepedia is very informative on the “shortage myth”: http://www.bubblepedia.net.au/tiki-index.php?page=HousingShortage

    The high growth in empty dwellings (ABS stats) is another sign of a housing bubble.

    Rents have not kept up with house prices. On a rental yield basis Australian housing is a very poor investment. Of course nobody cares because of the capital growth – another sign of a bubble?

    The type and huge number of people buying investment properties. 18 year-olds working at Brumbies bakery “owning” 3 investment properties. A lot of these people know next to nothing about investing – but together they fuel a speculative bubble.

    The fact that the whole world economy is still in quite big debt trouble. Australia will be affected by that. In fact we are more vulnerable than we think: we have a huge private citizen debt, due to huge mortgages.

    And now for some intuition: I just look at that 120 year graph and say “no way”. Unless the fundamental laws of economics have changed in Australia, this is possibly the biggest nation-wide housing bubble in modern world history! (someone fed that graph meth-amphetamine) (I don’t know what the Sumerians or Egyptians experienced – those pyramids would have been damn expensive but they were “not for sale”!). I think one of the reasons we don’t get that impression is we are on the inside, living in Australia. We naively believe the “it’s different here” argument. Kangaroos can’t save us from speculative bubbles.

    (I borrowed the last line for bubblepedia – a great website).

  • 769 Biker Pete // May 17, 2010 at 9:02 pm

    “Itโ€™s the private debt in Oz that is the real concern Biker.”

    And yet there’s virtually no private debt in Zimbabwe, Ned! ๐Ÿ™‚

    Totally agree that the proposed no-interest-on-savings plan is a joke. One thing they _are_ remedying is the First Home Savers Account fiasco. Good for the kids, anyway… . And it may also be possible to not only score 17% interest, tax-free; but also minimise tax annually on the 6% additionally paid. I’ve tried to assist our old mate in that direction, but his surly responses persist (abit). ๐Ÿ˜‰ I’ve cheated him out of a cheap home in Sydney… .

    Today we researched Contributions Splitting… and tomorrow the missus will transfer her $50K 2010 Super contribution to me. She pays no tax on it, I pay 10% on it… and I pull it _this year._ Best of all, because it’s a private contribution, it lowers the tax on my whole Super bill. As they say, info = $$$$.

    Hitting the sack. Studied the little intricacies of Super Splitting from around 2:00 am. Just one of those light-bulb bright ideas you suddenly wake up with… . ๐Ÿ™‚

  • 770 Ned S // May 18, 2010 at 5:13 am

    “cheated him out of a cheap home in Sydney” – Now, now Biker, surely you can see that you are personally responsible for the actions of everyone from Emily Pankhurst to Alan Greenspan? – Plus the failure of mankind to cure the common cold – In the opinion of all those who have ever had or ever might get one! ๐Ÿ˜‰

    I do take the point that houses seem a bit dear. But I must admit the logic of why things should be “the same” as they were 10 and 30 and 100 years ago still eludes me – When it’s patently obvious that they aren’t – And never will be.

    And that said, I’m pretty sure regardless, that my brother’s bother-in-law who is trying to migrate here, would love to get the opportunity to buy a house in Brisbane for 6 or 7 times the average Brisbanite’s wage. From his perspective, it’s just a matter of taking the good with the bad I guess. But if a few long term residents choose to take a different approach to things, then I reckon that’s their perfect right! ๐Ÿ™‚

    Good score re super – I’ll remember it – Ta!

  • 771 Greg Atkinson // May 18, 2010 at 9:19 am

    Julian thanks for your comments. I think your point about inexperienced investors leaping into property is one of the “red flags” we should not be ignoring.

    These investors seem to be counting on no bumps in the road and one wonders how much financial pain they could manage before their little property empire unfolds.

    The stock market is still in recession territory, companies are finding business conditions tough and yet people are still taking on debt and buying property. It is a situation that makes me feel a little nervous.

  • 772 Biker Pete // May 18, 2010 at 9:41 am

    “…one wonders how much financial pain they could manage before their little property empire unfolds…”

    There will always be those hopeless naifs who don’t know what they’re doing, whether it’s buying property, shares, or gold. I’m yet to meet anyone who lost 54.5% in property, as did many who were caught out by the ASX crash… and most of them are still 2300 points down from the ASX high. Think how gleeful our mates at DRA would be if that kind if crash hit property!!~

    During my Super phonecalls yesterday, one hopeful offered her financial services for “…just five thousand dollars…” I reminded her that her company has previously advised us: 1.) Not to continue to buy property; and 2.) To keep our Super in ASX, rather than switch to cash(!!!!!!!!!!!!!!!!!) Had we acted on her advice we’d be many _hundreds_ of thousands of dollars behind today.

    Since our main home is a series of pyramids locked together, I appreciated your timeless analogy, Julian. You’re wise to continue renting. How could you relax in your new home home worrying about Assyrians coming down like a wolf on the fold?
    We keep a keen watch out for them!~ ๐Ÿ™‚

  • 773 Greg Atkinson // May 18, 2010 at 10:09 am

    Actually Biker to lose that much in stocks you would have had to buy everything at the market peak in 2007 and then sell right at the bottom of the market in 2009. If you buy high and sell low, you can rack up massive losses in any investment class.

  • 774 Ned S // May 18, 2010 at 10:37 am

    “to lose that much in stocks you would have had to” – Not if one was leveraged and copped a margin call (like with Storm Financials) or maybe had just a few too many stocks in the likes of GM Greg? (Remember those dot com things – LOTS of them went broke I gather.)

    Of course, the great majority of housing investors are leveraged too. But barring job losses and/or higher interest rates than they’ve bargained on as a worst case scenario, the equivalent of margin calls just don’t come their way.

    I recall the last big bubblepedia fan who blogged on here musing that Oz housing was going to go down – 40%, 50%, 70% even, or more? – Who’s to know just how much really, seemed to be the attitude. Stuff like that is a real worry. Because of the disconnect from reality. It creates some pretty unrealistic expectations. IMO.

  • 775 Greg Atkinson // May 18, 2010 at 11:11 am

    Ned even with a margin loan you would have had to buy stocks near the peak to get a nasty margin call unless you were silly enough to really gear yourself up.(and even if you got a call, if you has some cash you would have avoided a nasty sell-off)

    But again, you can do that sort of damage with property, just have a look at some of the sad faces on some former Gold Coast based property developers ๐Ÿ™‚ If you borrow to invest and have no back-up plan then you are asking for trouble.

  • 776 BP // May 18, 2010 at 3:23 pm

    “…the disconnect from reality…” Nice.

    Yes, Greg, some of it’s just a paper loss, I agree. Those older folk who ‘thought’ they had a couple of million in Super, for example… watched it all falling out of the sky… were told to “hang in there” by their funds… and woke to find they had $912K one morning, might not see it just that way!~

    Some, encouraged by John & Peter, had recently committed over a million in cash to Super, too, remember?!

    Haven’t a great deal of time for developers. We use them, they use us. Same for realtors. Both parties are _sometimes_ a necessary evil.

    Greg: “If you buy high and sell low, you can rack up massive losses in any investment class.”
    BP: “There will always be those hopeless naifs who donโ€™t know what theyโ€™re doing, whether itโ€™s buying property, shares, or gold.”

    But the nice thing about property is the rents still flow in, fortnightly, even if the capital gain is on hold for a while.
    And when you drive around the corner, the houses are still there… . They haven’t disappeared into thin air… !!~ ๐Ÿ™‚

  • 777 Greg Atkinson // May 18, 2010 at 3:45 pm

    Biker stocks also provide income and some do this via fully franked dividends. On the flip side stocks basically don’t cost anything to maintain.

    As I have said before, the stocks versus property debate is pretty boring. Investors who have owned both over many years will realise they both have their merits/demerits.

    Then there is good old cash and bonds..or fine wine!

  • 778 BP // May 18, 2010 at 4:50 pm

    “…the stocks versus property debate is pretty boring…”

    No less fascinating than the property vs gold debate; or the property vs cash debate!~

    Our eldest would agree on the bonds issue… and as he lives happily on his interest, he’d be sure to agree on that, too.
    I was going to infer that you’re both as dull as dishwater, but then noted your closing words… ! ๐Ÿ™‚

    Wine auctions I’ve attended are a great deal of fun. Unlike a close friend, I’ve never sold any of mine.

    We’ll only move to cash if/when there’s a better after-tax return. ‘Retirement’ enhances that likelihood, as the tax concessions are suddenly appreciable. Meanwhile, interest is increasing in two properties we have ‘on the market’* at present. There’s possibly increased interest from punters who believe the recent APM figures for this area… . ๐Ÿ˜‰

    * Not prepared to negotiate with callers; although I offered one hopeful a $1500.00 discount this afternoon… . I’ll be given a good *smack* for that…. ๐Ÿ™‚

  • 779 BP // May 18, 2010 at 8:42 pm

    Nope… she says I handled it well.
    Too far away to be ‘smote’ anyway…. ๐Ÿ™‚

  • 780 Ned S // May 19, 2010 at 7:21 pm

    Been reading about government’s vision for the future. High(er) density living is definitely the way they want to see things go:

    http://www.reia.com.au/userfiles/SSpeech.pdf

    Where Plibersek says ( top of page 8 ) “Most people in the room will agree that increasing density in some locations is important โ€“ it will be even more important in the future to help our children find a home that they can afford.”

    Don’t quote me on this, but I’m about as sure as I can be that I saw some figure that at some point in the future, about 40% of our accommodation will need to be for “singles”?

  • 781 Julian // May 19, 2010 at 7:23 pm

    “Iโ€™m yet to meet anyone who lost 54.5% in property”

    You might have a point Biker. Ask any grandparents and they could tell you about the 1951 property crash, where Oz property abruptly fell 50% after a huge precipitous boom, similar to the pace and magnitude of this boom. http://www.bubblepedia.net.au/tiki-browse_image.php?imageId=2

    In the late 1970’s Oz property fell 25%. And the 1890’s Oz property crash was devastating: a 60% initial crash and you didn’t get your money back permanently until 1963. That’s an awful long time to be earning effectively zero % return on investment, ouch.

    I know these crashes were a long time ago. But this boom is extraordinary, so you might have to go back that far to get another extraordinary boom, like 1950.

    When I look at this 120 year graph I just can’t believe that the recent stratospheric rise has all been due to fundamentals. I think there is a lot of speculation in the rise, especially given the popularity of property investing with the average Joe Blow. How long does Joe Blow resist when he sees all his friends clearing upwards of $30,000 per year from an initial deposit of $10,000? (depending on leverage and interest rates)

    Worst case scenario (sorry to be so negative!), we could have another 60-year property bear market, as we had from 1890 – 1950. Japan is having something similar now?

  • 782 Anon // May 19, 2010 at 7:27 pm

    “Worst case scenario (sorry to be so negative!), we could have another 60-year property bear market, as we had from 1890 โ€“ 1950. Japan is having something similar now?”

    oh god! Julian I sure hope not! Japan housing is arguably comming out of a housing bear market, but Greg is the one who is very familiar with that market.

    None of my posts constitute financial advice โ€“ so do not act on it in that manner. Its just chit chat. Always see a financial advisor for decision making / advice / info.

  • 783 Ned S // May 19, 2010 at 8:02 pm

    Glanced at something recently Anon that reckoned Japan was maybe 25% undervalued? (Just something I noticed at the time and have no recollection of details.)

    50% crashes in basic Oz houses are just a bit too incredible for words IMO Julian. We are at maybe 8 times annual income? Whilst on low interest rates. With two people working. And things like the gold standard are gone – So the potential for inflation is a free for all. (Well, “free” for all debtors anyway! ๐Ÿ™‚ )

    One can still buy a house in SW Sydney for maybe $350K I gather? With ma ‘n pa both working and earning $100K plus total, it isn’t that big an ask – Again, IMO. But if one wants to live close in, yep, it would seem that the competition could make things difficult. (I’m a Brisbane boy, so Sydney etc don’t especially interest me and my facts are a bit sparse.)

    But we aren’t doing 3 generation loans (as Japan is reputed to have been doing at the height of their boom.) Nor have we accepted the concept of families living in 60 and and 70 m2 residences like much of the world – So we get to pay for that choice it seems?

  • 784 Anon // May 19, 2010 at 8:15 pm

    “50% crashes in basic Oz houses are just a bit too incredible for words IMO Julian. We are at maybe 8 times annual income? Whilst on low interest rates.”

    If we had a 50% crash in housing we would be in a prolonged depression! And to be honest for us to crash 50% in a short period of time (like years not decades) we would need to have an absolutely incompetent government (but hey we might??). Government stimulus tends to be reactive, not pre-emptive – so housing would arguably need to fall significantly, before the government would have public support to step in with stimulus (esp with the public upset about government deficits/spending/debt)…but if government let housing fall 50% then they must have closed their eyes and put their heads into the ground and gone ostrich.

    “Glanced at something recently Anon that reckoned Japan was maybe 25% undervalued? (Just something I noticed at the time and have no recollection of details.)”

    Have no idea how much its undervalued…have you got that link? You probably would know more than me given your experience in housing Ned.

    None of my posts constitute financial advice โ€“ so do not act on it in that manner. Its just chit chat. Always see a financial advisor for decision making / advice / info.

  • 785 BP // May 19, 2010 at 8:48 pm

    “In the late 1970โ€™s Oz property fell 25%.”

    Yes, we know a couple who bought every absolute beachfront lot they could find. Those they didn’t personally own were owned by friends and rellies. Then they recorded every single sale and resale until 1990, to gauge values. They made up to 800% per block!~ ๐Ÿ™‚ ๐Ÿ™‚ ๐Ÿ™‚ ๐Ÿ™‚ ๐Ÿ™‚

    “Japan is having something similar now?”
    Landlords have probably been laughing their heads off, with almost zero interest rates for two decades… !

    Nigel Satterley, WA’s largest developer, today warned that the new mining tax would add 10% to the cost of a house. (P. 10, “The West Australian”, 19th May 2010.) I guess that means we made another quarter mil, today?!~ ๐Ÿ˜‰ Seriously, I wish I’d gone heavily into the ASX, instead… .

    Abbott, what have you done?! Hockey… ya dropped the ball!!!
    Looks like another decade of property-interventionist Labor, dammit! ๐Ÿ™

  • 786 Ned S // May 19, 2010 at 9:11 pm

    The RBA obviously monitors housing extremely closely. It accounts for 70% of Aussie’s “wealth”, a large percentage of employment (9% ?), and the banks are up to their necks in it; Plus if that isn’t all enough, it is known (by the RBA), that significant decreases in housing prices are very bad for the economy – Worse than stock price devaluations. (They sent a delegation to the US in 2003 or somesuch which came home with that thought – Is my recollection of it.)

    I couldn’t find the link Anon – But this one gives a similar guestimate (33.7% under) – Whilst being general rather than focused on Japan – And based on price to rent ratios – As stated I simply don’t recall the specifics re the original article I mentioned:

    http://www.economist.com/business-finance/displaystory.cfm?story_id=15911113

    Also says Oz is 56.1% over – But, I’ve already stated my thoughts on that.

  • 787 Greg Atkinson // May 19, 2010 at 9:12 pm

    If you want to speak to a person who has lost more than 50% on property then speak to one of the ex-high flying Gold Coast property developers. Also there are a few in Sydney I know of that suffered a similar fate.

    As for Japan, well land values were creeping up before the GFC but they have since come down again. So who knows what is next?

    Are landlords laughing in Japan? Well probably not. Interest rates are low but you still have outgoings which need to be covered by rent. (and rents are falling)

    Also many property developers in Japan have gone under despite low interest rates, even in Tokyo where the population is still growing.

  • 788 Ned S // May 19, 2010 at 9:31 pm

    Developers – And builders; They both go broke regularly in recessions Greg – As they are loaded up on debt. But it’s my impression we are talking ma ‘n pa type house prices here. So to be saying they can be expected to fall by 20% or more in nominal terms over the next 10, 5 or even 2 years, seems extremely unlikely to me?

  • 789 Ned S // May 19, 2010 at 9:40 pm

    Well, not “extremely” unlikely over the next 2 years – 80/20 against maybe??? ๐Ÿ™‚

  • 790 Greg Atkinson // May 19, 2010 at 10:17 pm

    Ned well it all depends on China to a large extent. If the Chinese economic bubble were to burst then the fallout for the Australian economy would be very nasty.

    I really don’t know where house prices will go, but if demand for commodities falls for a few years then property prices in Oz will follow, unless the Government jumps in again and props them up.

    The scary thing is, that just before any asset bubble bursts, it actually looks like it never will.

    As I have mentioned before, we in Oz are effectively borrowing to fund our lifestyles even now in the midst of a commodities boom. How do you think it will look if that sector rolls over and heads south? Is tourism going to save us?

  • 791 Ned S // May 19, 2010 at 10:34 pm

    “we in Oz are effectively borrowing to fund our lifestyles even now in the midst of a commodities boom” – We are actually borrowing to fund the buying of votes by politicians I suspect Greg? (But, at the end of the day, yes, it boils down to the same thing.)

    Heard a really sad storey recently – A bloke had a marriage breakup, and went a bit crazy; Then a car hit him and he had a plate embedded in his head, and got a bit sillier; Then the plate shifted in one of his drunken punchups, and he went insane – But it all ended well … We voted him in as a pollie! ๐Ÿ™‚

  • 792 BP // May 20, 2010 at 8:09 am

    “If the Chinese economic bubble were to burst then the fallout for the Australian economy would be very nasty.”

    I think everyone agrees this would be so. Where _would_ one’s assets be safe? Probably in two areas we know there would be intervention: banks and property. Super and shares would head south to Antarctica, fast. We still haven’t recovered from that last meteoric plunge, which, to this day, affects both adversely.

    And this is what we tend to overlook. The Property Crash buffoons rejoice in that prospect, believing they have immunity.
    The widespread economic chaos of China’s fall would be far more precipitous for the planet than these blinkered clowns imagine…

  • 793 Greg Atkinson // May 20, 2010 at 9:14 am

    As Jim Rogers stated the other day, Europe, the US & Japan combined are a vastly bigger economic bloc than China.

    A slowdown in China would be bad for Oz, but it won’t necessarily be bad for the planet.

    For one, commodities prices would fall and this would actually help nations like Japan, Korea & Germany.

    So if the US crawls out of a hole, this would more than compensate for a slowdown and maybe even a bust in China.

    The world got over the Japan bubble bursting, so I don’t see why a China bubble would lead to the end of the planet.

    But for Australia, the fallout would be much more severe because we have banked on this not happening.

    Where would you assets be safe? Outside Oz perhaps?

  • 794 Biker // May 20, 2010 at 11:38 am

    “Outside Oz perhaps?”

    But where?

    “Europe, the US & Japan”

    Yes, all thriving economies, I must admit… . ๐Ÿ™‚

    The sealant fumes from sealing driveways, patios, alfrescos and pathways must be affecting my equilibriumumum… but I think I’ll keep our stuff well south of those strongholds of sovereign excellence, Greg.

    Good ol’ Oz. Sunny one day, fine the next. Lots of issues, but she’ll be right, ocker-cobber-digger-sport-mate!~ ๐Ÿ˜‰

  • 795 Greg Atkinson // May 20, 2010 at 12:48 pm

    Biker we are now in the top 20 as far as foreign debt is concerned so I would not be so confident about our sovereign excellence.

    Seen our balance of trade figures lately?

  • 796 Ned S // May 20, 2010 at 12:53 pm

    I tend to agree that Oz will be OK Biker. But I’m not sure about Aussies who aren’t charity cases. I suspect socialists outnumber capitalists in this country.

  • 797 Firebug // May 20, 2010 at 1:42 pm

    My concern is that as a nation with low savings, we need to import capital from overseas. There may well be a day when the international money market demands higher interest for borrowing. The day could be interesting.

    Also, we are far too socialist. Whatever we’re going though now, it is not the end of capitalism, rather, it is the end of socialism. A danger child of the marriage between democracy and socialism is that the nation eventually goes broke as politicians keep bribing the masses into voting for themโ€ฆ

    But the end of the day weโ€™ll be alright. A period of hardship isnโ€™t bad for a nation. As always, some people will grow richer, some will be poorer, some sitting on the sidelineโ€ฆ

  • 798 Biker // May 20, 2010 at 2:42 pm

    “My concern is that as a nation with low savings, we need to import capital from overseas.”

    Totally agree, FB.

    Far better that we print our own, like everyone else!~

  • 799 Biker // May 20, 2010 at 8:49 pm

    Good grief… I think, I think…I’ve been CONROYED!!~ ๐Ÿ˜‰

  • 800 Greg Atkinson // May 22, 2010 at 1:21 pm

    By the way, for those who want to get a different angle on the house prices debate it might be worth having a look at the “Australian Bubble Forum

  • 801 Ned S // May 22, 2010 at 4:00 pm

    You’re just trying to cheer me up I take it Greg?

    Heck, even just one little bubblepedia style crash of a paltry 50% would mean I could gallop out and buy 4 more houses with my cash – Rather than a miserable two. So instead of trying to retire on 5, I could retire on 7. (According to the We wanna cheap house now Oz populist version of economic theory.)

    That version of the theory would be nice though – I might even start believing in the Tooth Fairy and Santa Claus – Which would be a bit of a turnaround for me; Given that I’m about as sure as I can be, that I never ever did! ๐Ÿ™‚

  • 802 Ned S // May 22, 2010 at 4:52 pm

    โ€œMy concern is that as a nation with low savings, we need to import capital from overseas.โ€

    Just playing devil’s advocate in some ways – But our “savings” aren’t actually all that low maybe? Some (albeit overlapping) asset bases for perspective with any guestimate numbers thrown in same in as I recall them:

    * We have maybe 1.3t in super (largely in Oz stocks I suspect; But some in cash and housing; Plus a bit in international stocks)

    * The All Ords is worth maybe 1.25t

    * We have maybe 3.5t in housing (on present values anyway); With the very great bulk being owned outright I’d expect; And the equity in that which is investment housing representing “savings” anyway

    * Plus some cash – Not sure how much?

    * And a few bucks equity in private businesses and farms and commercial buildings I imagine

    Plus we also have a rather considerable untapped minerals resource sitting in the ground as a bit of a hedge/hope for the future

    I don’t like those big foreign financials – I’d love to get my fingers into Oz’s books and see how our figures really balance out. And if all possible, make them balance out! So we could then say, We don’t need ya foreign loot – Bugger orf and use your freshly printed paper to buy stocks and bonds from countries that do!

    Just a thought? ๐Ÿ™‚

  • 803 Ned S // May 22, 2010 at 5:06 pm

    I suspect it would also sum up “the big foreign financials'” response to my thoughts? ๐Ÿ™‚

  • 804 Anon // May 22, 2010 at 7:03 pm

    Thanks Ned!
    Wont need to do much now that everything has been set – so can go and rest and hopefully this flu will pass.

    Looks like banks across the board have dropped those 8% for 5 year term deposits! haha what a bad mispricing.

    http://www.infochoice.com.au/banking/savings-account/term-deposit-interest-rates.aspx

  • 805 Anon // May 22, 2010 at 11:30 pm

    It looks as tho the Consumer Metrics Growth Index is getting worse!
    End of July US GDP may follow the path of the CMGI? The problem with this is will the correlation hold up…who knows?

    In any event, it looks like theres a several month lag so we might have till end of July to work out what to do…

    Also note it contracted in 06 and the market just went sideways … with rallies in between.

    http://www.consumerindexes.com/commentary_2010_dailygrowthindexvsgdp.png

    None of my posts constitute financial advice โ€“ so do not act on it in that manner. Its just chit chat. Always see a financial advisor for decision making / advice / info.

  • 806 Ned S // May 23, 2010 at 12:00 am

    I just had a significant breakthrough re what I’m gunna do with these few insignificant little properties of mine Biker. It’s taken 18 bloody months of chewing around the edges and hehawing it all up and down. (Whilst also waiting for the KHR [response] in case it counted … Which it didn’t if one was in property and cash. Nevermind.)

    But yes, I finally have a damn plan and can begin to execute same. What a very, very, very nice feeling!

  • 807 Ned S // May 23, 2010 at 12:29 am

    It’s the stuff that isn’t specifically relevant that’s specifically most useful I suspect? ๐Ÿ™‚ No value in trying to keep info in a box. And Greg has certainly never shown any inclination to do that – And it’s appreciated!

  • 808 Anon // May 23, 2010 at 12:31 am

    Yeah I know…thats what separates this blog from other sites…the ability to post outside a thread topic in addition to positing topic related posts.
    Hate to see that lost.

    But we probably do need to cut out the unnecessary chatter. Altho I must admit the unnecessary chatter is the reason why I come on here more often…entertainment ๐Ÿ™‚

  • 809 Anon // May 23, 2010 at 12:42 am

    Also arguing small discrepancies in arguments and proving you are more intellectually superior to one another is boring zzz.
    It really adds no value in terms of market execution and your ability to generate higher returns on investment than the index offers – over the longterm.
    I’ve seen lots of people argue the most indepth, carefully measured, ridiculously meticulous and intellectual arguments…only to bomb on execution and delivery.

  • 810 Ned S // May 23, 2010 at 1:00 am

    If I recall correctly, Sir Isaac Newton blew his bucks on the “market” – And I don’t recall anyone ever feeling especially inclined to question his IQ? ๐Ÿ™‚ Different people just have different skill sets maybe.
    Ghandi mightn’t have been good at stock market picking either maybe. Or Churchill, or Stalin, or Hiltler … Or Coppernicus or da Vinci – Each to their own perhaps? ๐Ÿ™‚

  • 811 Anon // May 23, 2010 at 1:05 am

    “If I recall correctly, Sir Issac Newton blew his bucks on the โ€œmarketโ€ โ€“ And I donโ€™t recall anyone ever feeling especially inclined to question his IQ? ๐Ÿ™‚ Different people just have different skills maybe.”

    Yep he got swept up into stock mania. I guess thats why university lecturers are usually bad investors aswell ๐Ÿ˜‰

  • 812 Ned S // May 23, 2010 at 1:32 am

    Agreed – The likelihood of those who seek security in truth suceeding in making a buck from stocks is low … ๐Ÿ™‚

  • 813 Greg Atkinson // May 23, 2010 at 8:45 am

    All views welcome here. That is why I have included links to other sites although I may not necessarily agree with much of the content on those sites.

    Anyway, the reason I started talking about house prices is that they have an impact on the economy and hence also on the stock market and shares.

    When I first started focusing in on the Australian residential market it was just as the U.S housing market was imploding and my view at that time was, that there was no reason why prices in Australia should just simply follow that lead.

    During 2008-2009 I stood my ground; basically I said that I did not expect to see the housing market crash, that talk about a global depression was rubbish and that stocks would climb again.

    So here we are now. No global depression, stocks are a lot higher than the lows of March 2009 (despite the current correction) and house prices have actually risen.

    So now as you might have guessed from my recent comments, I have become somewhat bearish about house prices. Why is that?

    Well basically because I see a big disconnect between what the stock market is telling me about the health of the Australian economy and the housing market.

    Yes commodities exports are doing well, but basically all our other exports are down, our balance of trade is not in our favour and the nation is racking up more debt everyday. Yet people still want to take on bigger mortgages and buy bigger homes.

    While the corporate sector is trying to pay down debt, Australian households seem quite willing to still take on more long term debt..why? Why are individuals so confident about the economic outlook when businesses are not?

    Yes I know there is suppose to be a housing shortage in Australia, but frankly I wonder if that is true. Where are all these people who apparently cannot find a home?

    Something just doesn’t add up and it makes me worried.

  • 814 Biker Pete // May 23, 2010 at 12:36 pm

    “Greg can I ask a question. Have people emailed you complaining the threads are not exactly relevant to the topics?”

    Just checked. Yep, right at the top of this column, it reads
    “Can Australian home prices keep rising?”

    Yet we continually read comments like:

    “It looks as tho the Consumer Metrics Growth Index is getting worse!

    End of July US GDP may follow the path of the CMGI? The problem with this is will the correlation hold upโ€ฆwho knows?

    In any event, it looks like theres a several month lag so we might have till end of July to work out what to doโ€ฆ

    Also note it contracted in 06 and the market just went sideways โ€ฆ with rallies in between.”

    I take it that your references here are to the _property_ market, then, Anon?

    Be careful with the flu tablets… . ๐Ÿ˜‰

  • 815 Anon // May 23, 2010 at 1:13 pm

    That was arguably a mistake, should have posted that in another thread. I will work on that. Sometimes I get abit caught up with an idea and am more concerned about posting it than fiddling around with where things needs to go…and I understand that would make Gregs moderating abit of a hassle. Additionally it would make the readability of a thread a nightmare. Obviously there have been complaints and I accept that.
    Appologies
    Altho Biker its not like you have been precise with your posts in terms of their relevancy of where you post them. So abit hypocritical there no? If I go back i’m sure i’d find lots of posts of yours that are in incorrect spots ๐Ÿ˜‰
    And also that index could arguably be related to the Australian Housing market in terms of how Americas stimulus wearing off indirectly affects our Housing markets. So its not a black and white error ๐Ÿ˜‰

    None of my posts constitute financial advice โ€“ so do not act on it in that manner. Its just chit chat. Always see a financial advisor for decision making / advice / info.

  • 816 Anon // May 23, 2010 at 2:11 pm

    Anyways I know people may want me to stop posting (or reduce posting)…but alas I will do the opposite ๐Ÿ˜› Dont really give a damn what people think in all honesty ๐Ÿ˜‰
    I will make an effort to conform to the moderation policies setout by Greg.

  • 817 Biker Pete // May 23, 2010 at 5:30 pm

    “If I go back iโ€™m sure iโ€™d find lots of posts of yours that are in incorrect spots ๐Ÿ˜‰ ”

    Doubt it. I get obsessed and stay obsessed. Property is my thang. I do get a little conversational at times, since I’ve developed an online friendship with one of you; but like you, prefer to remain anonymous for very good reason; in my case, my profile in my home community. I’d rather these folk don’t know we own a large number of properties.

    “Anyways I know people may want me to stop posting (or reduce posting)โ€ฆbut alas I will do the opposite ๐Ÿ˜› ”

    Truly, it has never crossed my mind _once._ Feel free to post twenty blogs per day. Every now and again you offer something relevant… the five year fixed interest rate pullback, for example. Sent the link to our son, who appreciated the information, especially as he’s locked in to 6.8% and the Greeks are offering 6.6%… .

    “Obviously there have been complaints and I accept that.”

    Only one of which I’m aware. (818)

    In conclusion, if Greg objects to anything I write, it quickly disappears. That’s his right. I’ve never objected and I find it both educating and amusing to ponder which of several inappropriate remarks I made in that post got me sent to the corner! ๐Ÿ™‚

    Greg has also very kindly ‘pulled’ a link which identified me; posted after I’d exceeded the recommended 250mL of daily shiraz. Thanks, Greg! ๐Ÿ˜‰

  • 818 Biker Pete // May 23, 2010 at 5:44 pm

    Ned: “I just had a significant breakthrough re what Iโ€™m gunna do with these few insignificant little properties of mine Biker. …I finally have a damn plan and can begin to execute same. What a very, very, very nice feeling!”

    Great to hear, Ned. Was just saying today how brilliant it will be to have this particular project completed within the fortnight.

    Yes, the KHR slowed it all down to walking pace. I needed to catch my breath anyway… . As you say, it’s nice to be going forward!~

    I get a real buzz when a plan comes together as well as this one has…. on budget, when the budget is so low… and such a neat concept that around 2% of passing drivers come back for a second look!!~ Neither event has ever really happened before. Must admit we have been a little lucky. The quality of home which has risen around us totally amps up the halo effect. It’s just a sweet location: park, lake, little stone bridge…
    and all the houses are singing the same song… .

    I’ll miss it in a coupla weeks. The old drama of evacuation…

  • 819 Anon // May 23, 2010 at 6:00 pm

    โ€œAnyways I know people may want me to stop posting (or reduce posting)โ€ฆbut alas I will do the opposite ๐Ÿ˜› โ€

    Truly, it has never crossed my mind _once._ Feel free to post twenty blogs per day. Every now and again you offer something relevantโ€ฆ the five year fixed interest rate pullback, for example. Sent the link to our son, who appreciated the information, especially as heโ€™s locked in to 6.8% and the Greeks are offering 6.6%โ€ฆ .”

    Well thats good…i do post the links/comments on here to help others – so its good that some of it can be useful ๐Ÿ™‚ It doesn’t benefit me really in anyway, but if it helps others – it was worth it.
    Although I must admit I do withhold some of the stuff I find (as most of us do). It is very competitive out there of course!

    None of my posts constitute financial advice โ€“ so do not act on it in that manner. Its just chit chat. Always see a financial advisor for decision making / advice / info.

  • 820 Greg Atkinson // May 23, 2010 at 10:18 pm

    By the way, and totally off the subject at hand, let me just say that my tweaks of the moderation system were not aimed at anyone in particular. So please relax lads ๐Ÿ™‚

    Sorry for any comments that were deleted or moved or otherwise messed up over the last few days.

    I am an engineer by background remember, so I have to keep making adjustments or I cannot sleep ๐Ÿ™‚

  • 821 Ned S // May 23, 2010 at 11:58 pm

    I’ve got a few reservations about this:

    http://www.news.com.au/money/property/revealed-the-home-loan-that-could-save-you-a-fortune/story-e6frfmd0-1225870019522

    Anon: “I must admit I do withhold some of the stuff I find” – Seems reasonable – If I found a property I was hot to trot to buy, I wouldn’t be giving the vendor any free advertising until I’d at least had my best offer declined. ๐Ÿ™‚

    A 250 ml rule Biker? – I breached that rather spectacularly last night!

  • 822 Biker Pete // May 24, 2010 at 8:58 am

    Interesting read, Ned. Thanks. I’ve sent the link home for some further analysis.

    We pay a sizeable deposit and then interest only, on every block we purchase, in the first stage of each project. Then, at the point of construction, we switch to an offset account, cash it up, and repay principal and interest (which is minimised).

    I was pleased to see Noel Whittaker advocating a similar strategy in yesterdy’s Sunday Times, mainly because every now and then, it occurs to me we’re hardly leveraged, tax-wise.
    Mind you, we need no tax relief whatsoever… .

    Yes, I overdid it, too, at my son’s thesis party Friday night. Eight Mexican beers and a bottle of good red. Had to drive the missus to a Maths Conference the next day. I was OK, but I might have been just a little over the limit… .

  • 823 Greg Atkinson // May 24, 2010 at 11:01 am

    It seems even people on fairly good incomes are getting into trouble at an increasing rate according to this story in the SMH: http://www.smh.com.au/business/rise-in-middleclass-bankrupts-20100523-w41p.html

    I found this paragraph particularly interesting:

    A major cause of rises in bankruptcy among the middle class, said Professor Ramsay, has been due to unsustainable home loans. Excessive use of credit as a cause of bankruptcy has jumped significantly in recent years, he added.

    Looks like another red flag to me.

  • 824 Greg Atkinson // May 24, 2010 at 11:05 am

    Oh I just read the article posted by Ned and nearly fell off my chair laughing when I read this:

    “It has worked fantastically in Europe as a way for people to get home ownership and build wealth throughout their lives. It just requires a change in mindset about how you live with debt,” Mr Koch said

    Yes, let’s follow the European example of managing debt! Are these people serious?

  • 825 Biker Pete // May 24, 2010 at 12:34 pm

    Yes, I too had a good laugh reading your comments, Greg. ๐Ÿ™‚

    Middle class debt is an interesting concept. In an earlier post I briefly recounted the tale of two MC families who overextended.

    In both cases they had:

    * Beautiful ‘resort-style’ homes;

    * Expensive vehicles;

    * Several investment properties (few income-producing);

    * Countless luxury items of all kinds;

    * Incredibly expensive lifestyles: “I want that, now.”

    When the slump hit, both couples were forced to sell the main home. Three $100K+ cars also went. So did one marriage.

    Interestingly, no-one went bankrupt(!) In both cases, the sale of that single large asset, the family home, got them (all) totally out of debt. And one family went straight back in again, picking up a fantastic high block above the water.

    Not my way of doing things at all!!!~ But it brought home to me what a safety net their equity in those palatial homes was, even during a plateau.

    Has either couple learned anything from what would be, to our family, a very major trauma? I very much doubt it.

    What was reinforced, for us, was that there’s a tendancy, even here in Australia, to use home equity as an ATM to fund the cars, the wall-size TVs, the expensive lifestyles.

    I’d argue that _this_ is where the nouveau riche most frequently become unstuck.

  • 826 Ned S // May 24, 2010 at 2:02 pm

    For anyone who has followed the GFC, the article has all the makings of a parody – Even the bit where the CEO of a bank tells the yarn with a straight face.

    What would it mean for house prices? Well, to the extent that it becomes accepted, it’s obvious it will push them up – Same old storey of more capacity to borrow feeds higher house prices. At least until something breaks. And then the debt gets socialised. And everyone pays. Except the banks. Who obviously know that’s how it works too.

    Whenever I see anything written about regulating Financials, I just naturally assume it must be a good thing these days. But don’t trust the pollies to really do it; Despite their rhetoric. If only for the simple reason that the economy of the US is so heavily reliant on the Financial sector.

    The banks have got us all by the throat – Even if we don’t personally owe them anything.

  • 827 Biker Pete // May 24, 2010 at 4:37 pm

    “The banks have got us all by the throat โ€“ Even if we donโ€™t personally owe them anything.”

    I see it in less threatening terms, Ned. Our relationship with the ANZ has been a productive partnership. Having said that, our mistrust and hatred of Westpac is infinite!~

    When interest equals rent… and there’s expertise in taxation matters… the partnership can be quite beneficial and productive.

    I see this thread has been bumped… ! ๐Ÿ™‚

  • 828 Greg Atkinson // May 24, 2010 at 4:49 pm

    Biker I couldn’t agree more with your comment about people using their home loan like an ATM.

    Your observation that “….thereโ€™s a tendancy, even here in Australia, to use home equity as an ATM to fund the cars, the wall-size TVs, the expensive lifestyles.”

    Is a very important one in my opinion.

    This is one of the things that worries me about the level of household debt in Australia.

    People are not always borrowing to get a roof over their heads, they are often borrowing to fund a lifestyle which for me, is not a very sensible thing to do.

    So the question is, what % of home owners are doing this and does this present a threat to house prices?

    I don’t expect canny players like yourself to get into trouble if property prices slip a bit and the economy hits a rough patch, but I would guess there are plenty of property investors and home owners out there that have over extended themselves.

    But how do we get a handle on what the situation is really like out there?

    Remember, people who have over extended themselves don’t need to default on their loans to cause problems for the economy, they just need to stop spending as much.

  • 829 Ned S // May 24, 2010 at 4:55 pm

    If I recall correctly, it was a top Brit banker, who in the first half of the last century, passed a comment to the effect, that If people understood the banking system, they’d riot in the streets! (With Karl Marx being one example of a chap who had a bit of an understanding of it maybe? ๐Ÿ™‚ )

    Given that Marx’s solution sucked, and that knowledge is supposed to be power (whilst also bearing in mind the old storey about what Absolute Power does – And the fact that the banks have it), I guess the trick really is to figure out how one makes the best of it all? (As you imply.)

  • 830 Ned S // May 24, 2010 at 5:23 pm

    I was talking to a young bank employee a few months back – About the issues youngies face getting a home. We were going just fine (with me making the appropriate commiseration type noises – with same being honestly felt), until she mentioned, that To top it all off, one has to buy a houseload full of nice new furniture too – At which point, My eyes popped open and I said Gawd NO … You go to Vinnies and get it all for under $1K !!! (The conversation just sort of died at that point.)

    I’m definitely NOT saying all youngies think that way! But, one’s who’ve had nothing but happy experiences with banks to date might? There’s potentially useful debt, and pretty bloody useless debt maybe?

  • 831 Ned S // May 24, 2010 at 5:44 pm

    “people who have over extended themselves donโ€™t need to default on their loans to cause problems for the economy, they just need to stop spending as much” – Which is why house prices are so important to an economy. (And the fact that houses are the source of collateral for a lot of private “business” loans maybe?)

    It is still a bit ugly “out there” – For small businesses – Another “I was recently talking to” yarn goes along the lines of a local businessman I deal with, whom I’d actually guess is in way better shape than a lot(?), but is still feeling a bit insecure seeing others fold, and as part of his business gets to see old pensioners’ bank balances sometimes – The chap (late 50’s ?), commented to me what a waste it is to have these old buggers sitting on big amounts like $40K – As they don’t need it; And will never spend it! ๐Ÿ™‚

    Gawd, even our businessmen are bloody socialists!

  • 832 Ned S // May 27, 2010 at 11:36 am

    Terry Ryder (of hotspotting.com.au reknown) reckons ‘The “chronic housing shortage crisis” is a myth’ – And also gives his thoughts on affordability plus a report on each state:

    http://www.jenman.com.au/news_subscribers_item.php?id=25&Section=Reports

    I’m not quite sure what to make of some of his thoughts on affordability.

  • 833 Biker Pete // May 27, 2010 at 11:58 am

    “You go to Vinnies and get it all for under $1K !!!”

    I hunt for Arabia Ruska there, Ned. With folk my age dropping like flies, the kids don’t recognise its value… and I now have quite a collection of my favourite dinnerware.

    Visited the next door neighbours recently… couple about 26, I guess. Every single item in the house brand new… and very expensive. Mind you, they’re on around $220K per year. They could no more imagine stepping inside Vinnies or Sammies than they could landing on the moon…

    As Greg notes, there’s very little data about the group who, leveraged out to the max, don’t actually get to the ‘bankruptcy’ stage, but simply reduce spending. One of the two couples I mentioned did that. When the fancy cars went, along with the main residence, the flow of luxury items dried up. No more toys. What is interesting, however, is that they immediately bought two more properties with the proceeds of the Big Fire Sale! And one of those blocks is a humdinger!!!~

    Read recently that there are now well over 1500 Perth streets where the median is a million plus. Now _that’s_ inflation…

  • 834 Ned S // May 27, 2010 at 1:03 pm

    Hmmmm …

    http://www.businessspectator.com.au/bs.nsf/Article/Housing-affordability-has-remained-steady-over-6-y-pd20100122-ZX524?OpenDocument

    Christopher Joye is the Rismark CEO – And while I don’t know much about him, I do know he isn’t the property bears’ most favourite fellow.

  • 835 Biker Pete // May 27, 2010 at 1:38 pm

    Two thought-provoking links, Ned. I’ll forward them.

    You’re right, the Bears hate Joyeboy, as they call him.

    Some quick responses:

    * Over the road from our current project, two full families share a house. Four late model cars, including a Merc.

    * We know of half a dozen ‘Steven cases’ where mid-twenties remain at home. These tend to _not_ be happy families… .
    If it’s by choice, it tends to not be the parents exercising that option… . ๐Ÿ™‚

    * We currently have two ’empty’ homes, according to the criteria. One is our guest cottage… the other this project, which should be ready for occupancy 14th June. 99% complete, gets daily mail, ready for occupany… but empty. Tradies are so bloooody slow. Too much work on… . But technically, we contribute two homes to the ‘pool available’…

    * Just three houses in this suburb vacant, waiting for tenants:
    $420 pw, $400 pw, $350 pw. All will go withing a month. A few weeks back, _none_ were listed at all.

    I see Rudd is backing off the mining taxes. ๐Ÿ˜‰

  • 836 Ned S // May 27, 2010 at 4:28 pm

    The follwing is taken from an article posted by Joye today:

    “The latest auction results from RP Data provide us all the evidence we require to know that house price growth is going to slow right down.”

    http://christopherjoye.blogspot.com/2010/05/housing-market-cooling.html

    That doesn’t sound like the ravings of a totally unbalanced property bull to me?

    This is also an interesting graph:

    http://3.bp.blogspot.com/_5ko-n37P8OI/S_KdxfvxPLI/AAAAAAAAAZg/_fcWkfg9eAU/s1600/afr6.bmp

    Taken from the following article where Joye talks about Housing Risk:

    http://christopherjoye.blogspot.com/2010/05/so-how-risky-is-your-home.html

    Might try to read a bit more of Joye’s stuff.

  • 837 Greg Atkinson // May 27, 2010 at 5:05 pm

    Hi all. I have set up a forum area where those who wish to, can expand the discussion regarding house prices.

    See: http://www.shareswatch.com.au/blog/discussion-forum

    If you are a registered/sign in user you can add topics, post items etc.

  • 838 Biker Pete // May 27, 2010 at 6:06 pm

    Among the best links you’ve ever posted, Ned. Thanks!
    I’ve sent them to family members and a couple of friends.

    Auctions? Attended one in my whole life. Highest bidder, too.
    Never again. B*stard withdrew it from sale! ๐Ÿ™‚

    850 posts! Fairly popular topic I’d have thought… . ๐Ÿ˜‰

  • 839 Anon // May 27, 2010 at 6:36 pm

    Great blog link there Ned, thanks.

  • 840 Ned S // May 27, 2010 at 10:36 pm

    Thanks fellahs.

    As Greg has said, there seems to be dearth of decent info/stats on Oz housing. So it’ll be interesting to go through the Rismark stuff. On the chance Joye is trying to come up with unbiassed stats – Why would he do that? Well, it is my understanding there is the possibility of the ASX and Rismark working together to set up some sort of virtual housing market. (Senator and Greg will recall me mentioning the possibility of using it to “short” housing as a hedge many months ago I fully suspect?) So maybe Joye figures if he can put together some reasonable indexes, he can make his fame and fortune that way? Rather than by necessarily going out of his way to especially back any bias or lobby group??? His yak here would certainly seem to try to give the impression he is out to develop (has developed?) some pretty respectable indexes:

    http://christopherjoye.blogspot.com/2010/01/house-prices-for-dummies.html#more

    And based on same, I do note that he says: “The ABS only examines detached house in capital cities and therefore excludes all โ€˜attachedโ€™ forms of accommodation such as apartments, terraces and semis (which account for around one quarter of the housing stock).”

    I’ve also had a look at the Demographia stuff again – And they could certainly be seen as having an axe to grind? They make no secret of the fact that they are anti high density dwelling; With the preface being written by Dr. Tony Recsei, President, Save Our Suburbs, Sydney. And they don’t exactly seem embarrassed to state “The Demographia International Housing Affordability Surveys, with their focus on the relationship between household incomes and house prices, have been instrumental in stimulating public discussion of housing affordability, especially in Australia and New Zealand.” Plus I’ve got to admit, that if there is anything in their “survey” to indicate they include apartments (which have been bouncing around in the back of my mind as being important for a while now), as opposed to the detached housing they have a stated preference for, it hasn’t hit me in the face yet?

    A problem for another day perhaps? ๐Ÿ™‚

  • 841 Biker // May 28, 2010 at 11:08 am

    Well, apartment living certainly appeals to the young. Both our kids could buy beachfront homes, but prefer to rent apartments.

    And, yes, as you say, the data seems skewed, Ned. And you probably have figured out Joye’s angle.
    (Follow the dollars… . ๐Ÿ™‚ )

  • 842 Ned S // May 28, 2010 at 3:39 pm

    A few more numbers:

    http://www.numbeo.com/property-investment/rankings.jsp

  • 843 Biker // May 30, 2010 at 11:11 pm

    Another brilliant link, Ned.

    Sent it to The Montreal Kid. The rental returns there look impressive… but I guess that if Canada raises its interest rates to our level, returns will shrink somewhat.

    Mind you, a couple living in Canada can accumulate quite a nest egg, saving tax-free (and compounding) $10K annually. Makes Rudd’s token gesture look feeble in comparison… .

  • 844 Ned S // May 31, 2010 at 12:01 am

    It’s just so difficult to get good numbers Biker. (I don’t have a opinion about that last lot – And can only say that I looked at a blog where they squabbled over same and at the end of it they seemed to settle for saying that in the absence of evidence to the contrary, they figured the numbers could be OK.)

    Either way, it’s pretty obvious that your market in WA is different to that in SEQ. But irrespective, at the end of the day I reckon it’s still about how to have enough coming in off rent that one can retire – Outside of returns that bounce around based on other asset classes.

  • 845 Biker // May 31, 2010 at 8:01 pm

    Good points, Ned. Valid data is very difficult to come by… .

    Spent part of the weekend talking to our tenants (also ‘checking the traps’). One of them, the fella with rentals up north, has a tax refund of $44K due from 2009. That’s over double ours.. . And this bloke is pulling $245K pa in rent from just TWO of his houses up north.

    WA is a strange set of marketS. When I told our agent we were looking at three new blocks and two houses on the weekend, she was gobsmacked. Her problem is that she’s too close to a very parochial set of markets… and simply can’t see beyond that narrow field. Because we’re immersed in two _very_ different areas, we can see how brilliant our new area is. She simply hasn’t looked (in any depth) _anywhere_ else.

    Despite all that, I think I can see the writing on the wall for two of our major developers… . They’re working just too far from the action, too soon. May be some very cheap stuff on the horizon, but it would be a l-o-n-g wait for profit…. .

  • 846 Ned S // Jun 1, 2010 at 2:35 am

    Yes. It’s not much fun trying to do international comparisons. I just pulled up the ABS stats:

    http://www.abs.gov.au/AUSSTATS/abs@.nsf/DetailsPage/6416.0Mar%202010?OpenDocument

    Sydney was an eye opener. For all the stuff one reads on it, the fact of the matter is that their established house prices basically went nowhere for 5 and a bit years until Mr Rudd waved his magic wand and gave them a 20% kick along over the 12 months to March this year. But that still only put them about 16% higher than they were back in late 2003 – When their last “bubble” failed to “burst” I guess.

    The stuff that has doubled or a bit more over the last 7 years has been Perth and Darwin. With both of them having their own particular reasons for that pretty obviously.

    Brisbane has gone up by a much more conservative 55% over the last 7 odd years. Pretty much what one would expect I’d imagine – Being about 6.5% pa compounding when averaged out. I don’t find that extraordinary for established houses.

    Melbourne is the one that’s probably been putting real pressure on price perceptions overall though. It’s only about half a mill behind Sydney population wise now – I hadn’t realised that.

    The Sydney figures made me think of a comment in the Demographia report where they were complaining about so little new land being released there – Down from 10,000 lots pa to 2,000 or some such.

    Very probably a method in that – Why cut your own idustry’s throat by releasing heaps more land when existing house prices are struggling? Don’t know about the Yanks but apparently the Spanish have got about 6 years worth of housing supply on their hands and the Irish are owning up to maybe 3 years.

    As to those 800,000 vacant houses we read about in Oz, I know of two of them. But they are pretty special cases. The owner would be crazy to rent them as he’d expose his one hectare PPR that they are on to CGT. And selling them isn’t an option or even something he wants to do would be my guess. Apart from those, I don’t know of any others sitting around here vacant.

  • 847 Biker // Jun 1, 2010 at 7:02 pm

    “The stuff that has doubled or a bit more over the last 7 years has been Perth and Darwin.”

    And some of the regional stuff in WA trebled between 2004 – 2007, Ned. We sold one block right at the top-of-the-market. Bought for $125K, sold for $310K. Then the GFC hit. The buyer, a Perth accountant, must have been expelling his cornflakes…

    There is just SO MUCH data. Interpreting it seems to be the issue. Take the latest WA news… . Construction has dropped 8% in April… latest figures. Probably too early for mining taxes. Certainly some of the FHB drift. Interest rates, too.

    Walked over one of our blocks on the weekend… and found that someone has dug four holes on it… probably representing the four corners of a proposed dwelling. So we’re waiting for a phone call. In the past, I’d have raised the stakes, marking our sign significantly higher… then accepting the original sign price. But I don’t have the confidence to repeat a strategy which has worked 95% of the time, in the past!!~ ๐Ÿ™‚

    See support has dropped for both major parties.
    Interesting times!~

  • 848 Ned S // Jun 1, 2010 at 7:42 pm

    “There is just SO MUCH data” … AND SO MUCH gum flapping info/crap from the various interest groups that one can’t even dignify by calling data that journos regurgitate irrespective because it sounds scarey and sells newspapers! ๐Ÿ™‚

    “See support has dropped for both major parties” – Yep, my inclination is towards being a conscientious objector as you know. Or as another blogger recently recommended people do on their ballot papers – A little line drawing with the comment “Foo was here!”

    On another issue – Can I run a thought past you re super? :

    Say a bloke is 60 and about to retire and on maybe $60,000 pa income. To dump $25,000 into super will cut his tax rate on it from 30% to 15% – A tax saving of $3,750. But he doesn’t have a spare $25,000 of his own loot he especially feels to drop into super.

    Can you see any issues with borrowing it (at 10% pa for argument’s sake) and dropping that borrowed $25,000 into super on say 30 June of the year and then announcing he is retired on 1 July of the year. So he can say to his super fund I’ll have $25,000 cash please – To pay the lender back the principal in as little time as possible obviously. So minimal interest is charged. Effectively picking himself up near enough to $3,750 for squat. Am I missing something – I can’t see what?

  • 849 Ned S // Jun 1, 2010 at 8:26 pm

    I see you haven’t had any breakthroughs with our mate elsewhere – He obviously struggles with the concept that it’s not necessarily reasonable to expect all things to be identical in all respects to what they were in 1990; And 1970; And 1950; And 1930 etc … Good luck with it! (I’m keeping my head down!!! ๐Ÿ™‚ )

  • 850 Biker // Jun 2, 2010 at 2:03 pm

    On Super: Getting the timing right is critical, Ned. Yes, our understanding is that it is worthwhile borrowing to get that result. I’m seeing a FA 16th June, to ascertain if we’re _exactly_ right. In my case it means dropping the tax payable from around 12% down to 10%. Still very much worthwhile.

    We’ll simply pull a handful from our largest offset… then repay it two months later. It will cost 16% of 6.7%, nothing at all really, considering we’ll get a tax claim on the extra amount paid in mortgage interest for two months. ๐Ÿ™‚

    But everyone’s situation is different. We have three super accounts each, two which get hit for 10 – 14%; two which have paid tax already (TTRs); and two which are to be hit for 15%, but which we think we can reduce to 12%. What truly _sucks_ is that our Super Fund wants $$$$$ to advise us on this kind of stuff. ($4 – 5K at last count! I’d rather pay an FA by the hour… and save $4K!!~)

  • 851 Ned S // Jun 2, 2010 at 7:28 pm

    “What truly _sucks_ is that our Super Fund wants $$$$$ to advise us on this kind of stuff. ($4 – 5K at last count! I’d rather pay an FA by the hour… and save $4K!!~)” – The bloody leeches – That’s scancalous!!! Any decent business would be sending it’s clients that sort of info for free – And proactively if they have reason to suspect it is something the clients might be able to benefit from. Not hard to see whose benefit super funds are run for is it?

    I’m actually feeling a bit miffed that my accountancy firm charged me about $1K to do up (unasked!) some statements from my SMSF Trustee (that’s me – with my brother as a “sleeper”) to the fund’s sole member (who is also me of course) advising “the member” of the fund’s financial position – Which I know pretty well and could have whacked up in a few hours if I had the templates to fill in.

    While I have the templates now of course, it still isn’t that much help as the auditor has advised that if I do the fund’s paperwork, he whacks HIS fee up! AND they add insult to injury by requiring the “trustees” to sign a statement that it is their opinion that the financial statements are all just wonderful – Which one can only do if he thoroughly reviews them; In which case he might as well have done the damn things himself!

    The financial service industries are not my favourite fellows right now! ๐Ÿ™‚ Although my accountant himself is just fine – Problem goes back to the fact the business was sold to one of those corporate monstrosities I guess.

    I see the predictions are for housing to maybe quieten down a bit. I do hope Rudd doesn’t go and stimulate it again unless it is really necessary.

  • 852 Biker // Jun 3, 2010 at 1:25 am

    Ned: “Any decent business would be sending its clients that sort of info for free โ€“ ”

    Exactly what I told them. I share your feelings about these hangers-on who try to bleed us dry… .

    I think the cooling property market is a very temporary pause; but who really knows? Having paid $1500 for the new house plans… and signed a contract to have them drawn up… we’re pausing ourselves. Not normal for us.

    I think this lethargy is borne of data-saturation! Information is too immediate; too conflicting; too ‘gains’-driven. The viruses of ‘what-ifs’ seem to create an inertia neither of us have experienced before. Conversations seem to confirm neither of us really cares if the next project proceeds or not… Crazy!-
    Are we catching pessimism from the news media, the blogs, the goldbuggers?!~ ๐Ÿ™‚

  • 853 Ned S // Jun 3, 2010 at 11:58 am

    There is certainly information overload Biker. And the fact that some pretty smart cookies like Marc Faber are still making some pretty dire predictions are damn difficult to totally ignore given some obvious truths about both minor and major bits of the global economy. And even in Oz, in the midst of putting a happy face on the intergenerational report, Mr Rudd’s basic answer was a pretty nebulous We’ll just all have to be more productive – Which didn’t especially inspire confidence.

    It is certainly conceivable that the world could be in for a rough decade or more. And in that case, to me, the basic question becomes will Oz cop inflation or deflation? To which I don’t have an answer. But in the absence of an answer, being hedged across cash and property (which both of us are), seems like a reasonable approach to me.

    Like you, my personal guess is that we’ll cop more inflation. But, given that there is even a bit of risk of deflation, a bloke would be pretty brave to not have a reasonable amount of cash. Wonder what rocket science the G20 will come up with later this month? ๐Ÿ™‚

  • 854 Biker // Jun 3, 2010 at 5:15 pm

    Ned: “…given that there is even a bit of risk of deflation, a bloke would be pretty brave to not have a reasonable amount of cash…”

    More reason for us to opt for offsets, rather than SMSFs, we think, Ned. Certainly leaning that way.

    We may see price deflation continue in electrical and electronic goods*… and inflation in everything else. We were both extremely interested and annoyed to see Chinese goods on sale in Canada for less than half the price in Oz. Competition with US manufacturers, I guess. But it didn’t make a lot of sense to then find many consumer goods so highly priced in Mexico! Must admit I have difficulty understanding how trade agreements north and south of the US can affect prices so differently.

    * But our falling dollar may stall this trend… .

  • 855 Biker // Jun 5, 2010 at 1:38 pm

    Offests: “Itโ€™s the obvious (read cheap) way to get access to funds for everything…”

    Agreed.

    I’m home again. Long weekend here. Missus and I went over the plan again this morning. Her take on offsets is that ‘you can have your cake and eat it, too’.

    In many respects that’s also been true of TTRs. We pull only $50K tax free per year (all we need); but our capital there is working in a tax-free environment. We don’t _dent_ the principal… and the other four accounts keep rising steadily.

    I expect that once we a.) pull Super out; b.) transfer nearly all* to offsets; c.) lose both TTRs; we’ll actually dent principal a little… but if rents rise at all, there will even better income… and principal will remain totally intact… despite our increased mobility.

    Have to giggle a little when it’s suggested on DRA (helpfully of course) that changes to company tax might wipe us off the map. We’ve always found that if we’re not too greedy and if we play with a straight bat, property is a great game.

    Lots of action and interest in our No 1 zone, as it’s nearly built-out. Holding a couple of good blocks, we’re enjoying a lot of inquiries lately, but we don’t need a bidding war. If anyone wants a block, the price is fixed… .

    * We’ve decided to leave some funds in Super, to take advantage of any Black Swan events; our old cash-to-ASX-then-back-to-cash-trick. It has worked twice now… maybe we can do it again… Maybe not… ! ๐Ÿ™‚

  • 856 Ned S // Jun 5, 2010 at 9:23 pm

    “Weโ€™ve decided to leave some funds in Super, to take advantage of any Black Swan events” – Must admit, “Black Swans” to date, re stocks, have been reasonably transparent to those who follow the international news reports. Although I’ve been “bumfuzzled” by Oz housing at least once! ๐Ÿ™‚

    “if weโ€™re not too greedy and if we play with a straight bat” – Was talking to my accountant over a year ago about same (and how come a dill like me had gotten away “relatively” unscathed – As did he apparently?) – To which he just replied WE weren’t greedy! ๐Ÿ™‚ ???

  • 857 Biker // Jun 6, 2010 at 11:44 am

    Talking to interested buyers… couple actually very much like ourselves, continually buying and selling… who related a couple of horror stories related to rip-off-realtors gazumping them. I had a couple of my own. My view is that once you’ve told a genuine buyer what you want… and you’ve shaken on the deal, you honour that deal, regardless of who turns up with a fistful more dollars… .

    It appears someone might be taking your name in vain over at DRA… but I’m used to fielding that stuff… and had a couple of rounds ready!~

    Re-reading this I just realised it’s very Clint Eastwood, so my DVD collection must be clickin’ in… ! ๐Ÿ™‚

  • 858 Ned S // Jun 6, 2010 at 3:08 pm

    “someone might be taking your name in vain over at DRA” – Nah, that’s just me being a smart arse Biker. And using a ๐Ÿ™‚ when I should have used a ๐Ÿ˜‰ maybe?

    Interesting article where the Indian Finance minister seems to be advocating acting to withdraw stimulus before being forced to do so by the markets:

    http://www.thehindubusinessline.com/2010/06/06/stories/2010060650830100.htm

  • 859 Senator13 // Jun 8, 2010 at 9:34 pm

    It will be interesting to see what the new incentives to build new houses in NSW will do to the house prices.

    Will other States follow their lead?

  • 860 Biker // Jun 8, 2010 at 10:24 pm

    “It will be interesting to see what the new incentives to build new houses in NSW will do to the house prices.”

    One of the reasons we build, rather than buying existing houses, is to avoid stamp duty. Whenever we locate a really superb home we _know_ we cannot build for the asking price, my missus reminds me to add in the stamp duty. Most of the time we don’t proceed. WA _already_ has NO stamp duty paid when you build. This really was no _first_ for NSW, as claimed.

    And in a state where there’s much more coastline and cheaper land close to beaches, construction is rife.

    I suspect that NSW’s move may mean the following:

    * Sale of existing homes eases or even plateaus a little;

    * Price of premium blocks rises significantly;

    * Construction increases;

    * Housing shortage (?) eases a little;

    * Rents ease a little.

    Four of these five effects align with Labor policy. No doubt Labor will point out that the policy eased the median price; without pointing out that sought-after blocks rose in price.
    Employment in the building trades is also likely to increase.

    Finally I suspect you’ll see more people camping out a couple of days prior to land release, as we do _every_ time a new subdivision occurs. There are usually scores to hundreds of people who miss out… .

  • 861 Ned S // Jun 9, 2010 at 2:30 pm

    Anna Bligh wants to build three new “cities” in QLD’s SE corner – Largely along the historical detached housing lines I fully expect? And relocate some guv departments to places like Townsville maybe? At least partially to avoid going into bat against NIMBY voters and their local guv councillors I imagine.

    I seems to me, that in many ways, many East Coast Aussies haven’t got our heads around the fact that the 4 bedroom 2 Bathroom 2 Car accom homes in the ‘burbs with lots of lawn to mow, aren’t the only way to do things. Or even what lots of us will really be screaming out for in a few years time.

    There are some pretty obvious solutions; But our guv regs at NONE of the three levels seem very supportive – Yet? With any that are implemented needing to be thought through VERY thoroughly to avoid crashing housing prices, the building industry, the banks, and thus the economy.

    Car (and boat and winnebago and motorised scooter and wheelchair) accomodation has still got me a bit tricked though – Not sure how much of that we’ll want – Not that there’s any shortage of space to put it all even in existing subdivisions – Given that we’ve had pretty big vacant front yards for many years now. Except the regs aren’t supportive of one building covered and fully enclosed secure accomodation of any sort in that vacant space – Which I must admit seems a bit strange to me – Outside the fact that our regs still reflect our current aspirations rather than our future needs maybe?

    Current plans I’m working on are very much orientated towards redevelopment of existing property to provide accomodation for singles and childless couples. But as stated, the regs aren’t supportive – To the point of being actively anti even? With the danger being that I’ll end up with something that is a dog’s breakfast. Bouncing the ideas around is a bit of fun though.

  • 862 Senator13 // Jun 10, 2010 at 5:37 pm

    โ€œโ€ฆ Outside the fact that our regs still reflect our current aspirations rather than our future needs maybe?โ€ – I think you hit the nail right on the head, Ned. I think there is definitely an instant gratification mentality that sees people get into a lot of debt that they can not manage.

    Also a lot of little yuppie type suburbs are popping up that have a lot of expensive building requirements. A simple house on some land does not cut it any more โ€“ but instead need to be of a particular standard. Drip feed of land release and high spec building requirements does not help the situation.

  • 863 Ned S // Jun 10, 2010 at 8:54 pm

    I’d have trouble finding a house that really suited me personally I think Senator. Historically I doubt we’ve ever really made a habit of building them. My “needs” would go along the following lines:

    Low set (no value walking up stairs if one doesn’t have to)
    Large kitchen (with eat in dining being convenient – So no need for a seperate dining room as such)
    Lounge room very much optional – Handy as a place to sit and chat with visitors one doesn’t feel comfortable having see the mess in one’s kitchen/dining room maybe? Or if one has a TV fancier in the house???
    A small study/office
    No need for a laundry – A washing machine in either the kitchen or bathroom is fine
    A bathroom with a toot in it
    A separate toot (being told “Hang on!” is not a lot of fun for the “elderly” ๐Ÿ™‚ )
    3 car accom (Not that I have 3 cars but I sure do have a lot of “stuff” – Workbench, tools etc – So lots of singles/couples would probably be happy with 2 or even 1.5 car accom)
    2 decent sized bedrooms (one of which would be a bit of a “necessary” luxury given that it would pretty much just be for guests and/or to store indoor type stuff and/or to give a missus a place to go and sulk whenever I wasn’t doing what I was told quickly enough (the “boss’ study” perhaps?)
    About 1.5 meters all around the house as “yard”

    But the temptation to build such stuff is low. Partly because I question it’s resale value – Given that it is atypical. And housing lots that support it just aren’t what we have in SE QLD anyway – Maybe 220 square meters would be ideal? With the building being maybe 140 m2 tops – Not many 220 m2 blocks available in our land of sweeping plains and far horizons though. (Or regs that support building 140 m2 houses on them.)

  • 864 Ned S // Jun 10, 2010 at 11:46 pm

    “high spec building requirements” – In the bad old days when affordable accomodation was required, I gather a reasonable number of large homes were pretty much just split down the middle, developed under etc. I rented in one for a while – I had half the lower floor (2 BR, combined bathroom + toot, combined lounge/kitchen/dining – About 50 m2 all up I guess. With shared laundry out the back as well as some corrugated iron roofing to park cars under.

    If memory serves me correct there were 2 flats downstairs and 3 upstairs? Worked well for everyone I suspect – At $75 per week (it was 1987) I was paying maybe 23% of my take home pay on rent (and living a bit higher than I really needed being there on my own). While the old boy who owned the property was probably going close to pulling a livable income off it after expenses and tax. But it wouldn’t happen nowadays is my understanding – Even if the zoning was right, one would hit the hurdle that there were unacceptably combustible materials used in the original home – So a conversion to flats wouldn’t be goer I guess.

    Is that a bad thing? Probably not! But everyone sure does pay for it. ๐Ÿ™‚

    And yes, I fully expect it WAS reasonably common – I had a good mate living close by. And my recollection is that his digs were a 1 BR upstairs flat in an old house that had been divided up.

  • 865 Ned S // Jun 24, 2010 at 11:44 pm

    Found the following interesting re a comment made by Watcher elsewhere Biker:

    http://en.wikipedia.org/wiki/Triffin_dilemma

    http://en.wikipedia.org/wiki/Bancor

    I posted same on Greg’s most recent article but suspect you aren’t hooked into comments on it yet.

    KHR Recommendation 13: Widow’s mite – $2 or $25? (again elsewhere) – No idea what might have been going through Henry’s mind – Which is one of the hassles of the very, very, very great bulk of even the recommendations never having come to the public’s attention:

    http://taxreview.treasury.gov.au/content/FinalReport.aspx?doc=html/publications/papers/Final_Report_Part_1/chapter_12.htm

  • 866 Ned S // Jun 25, 2010 at 1:53 pm

    My suspicion is that any of the real forced growth that governments push into North QLD will probably go to Townsville rather than Cairns direct Biker.

    Travel – Yes, I’d go by plane! (If I had to go at all. ๐Ÿ™‚ )

  • 867 Ned S // Jul 12, 2010 at 4:16 pm

    Investors are still keen:

    http://www.smh.com.au/business/home-loans-on-the-rise-20100712-106hy.html

    Although, yeh, the Melbourne real estate industry might be cooking its figures a bit re auction clearance rates (which are low anyway):

    http://www.smh.com.au/business/property/clearance-rates-fall-under-50-in-sydney-as-market-cools-20100712-106h4.html

    Must admit, if we get any sort of significant price increase over the next 6 months it’ll catch me with my panties down – Not that that’d be unusual of course! ๐Ÿ™‚

    Some are thinking along the lines that we’ve skipped a business cycle. With the thought being that when the correction comes at the end of this cycle, it could be nastier than normal.

    Mind you (as Greg has been pointing out), we’ve got to make it into the next business cycle proper yet:

    http://www.couriermail.com.au/business/mills-steel-themselves-for-a-fall-in-third-quarter-as-demand-plunges/story-e6freqmx-1225890472397

    Not easy investing these days. At least as much about which governments one figures will do what, as anything else. And on that score, my feel is to agree with Biker that unless the world loses it in a deflationary death spiral, Oz housing will continue to benefit from government protection as and if required.

  • 868 Ned S // Jul 18, 2010 at 2:28 pm

    Melbourne and Brissy down. Perth flat and Sydney up a bit are the latest predictions I’ve read based on amounts of stock on the market.

  • 869 Biker // Jul 18, 2010 at 5:10 pm

    The Barefoot Investor had a nice piece about the ‘kidults’today, Ned. It’s rare that I find any of his stuff on track, but his supposition that the ‘generation-that-stays-put-at-home’ save very little of their ‘savings’ made us wonder if this is, in fact, helping to soften the market. This ‘kidult generation’ not only _can’t_ buy, they don’t rent. ๐Ÿ˜‰

    You may recall that was this one of the property bears’ original propositions for market failure. Some, like Keen, even argued that it was a laudable arrangement. Have to wonder how long Aussie parents will accept this state of affairs, particularly where’s there’s minimal contribution and _very little actual accumulation_ by offspring… . ๐Ÿ™‚

  • 870 Biker // Jul 18, 2010 at 5:47 pm

    Alternative (additional?) viewpoint to the ‘kidult’ theory:

    http://www.perthnow.com.au/business/young-plump-for-inner-city-pads/story-e6frg2ru-1225891485450

  • 871 Ned S // Jul 18, 2010 at 6:25 pm

    I’ve seen three generations of ladies and the paterfamilias of that middle class family living together in a two bedroom apartment overseas – Granny’s health was OK and she was out in the village – But came home later for an extended stay when it wasn’t. While it’s handy to be able to do such stuff when one has to, it is not ideal in my opinion? ๐Ÿ™‚

    And cultures differ perhaps – I read a while back about an Italian lass who was 34 or somesuch with a degree and figured she could sue mater and pater for chucking her out. While the Germans seem stronger on mutter und vater being able to sue the kinder who don’t provide for their dotage.

    Aussies – We’re a more mixed bag perhaps? But so long as a kid can still head over your way and make $100K pa plus driving a truck, I really don’t think the average ma ‘n pa should feel especially obligated to help them out.

  • 872 Biker // Jul 19, 2010 at 9:49 am

    These days it’s hard to know what’s ideal… and what’s not.
    We certainly don’t expect to be supporting our offspring in our later years, but, as loving parents we’d find it difficult to say no. I expect most families would feel the same.

    The family ‘next door’ (800m further up the hill) have an older daughter staying on. I once offered the suggestion that she was paying board… and was stunned at the logic of their response.
    “No way! If she paid board, she’d assume she had a say in the ‘House Rules’. This way, we can determine what’s acceptable and what’s not!~”

    I’ve thought about that proposition a lot. It seems illogical to provide for kids long after they reach 21, but, on the other hand, these parents retain almost as much control as if the child was a pre-teen. There are pluses and minuses in that situation, I guess… .

  • 873 Vince L // Jan 18, 2011 at 3:53 pm

    I see the house prices debate is still alive and well in the newspapers. I wonder what Steve Keen is doing these days?

  • 874 Biker // Jan 18, 2011 at 5:47 pm

    Vince, for several years now we’ve read in Daily Reckoning Australia that property investment is a major mistake…
    a losing proposition.

    Finally we’re seeing a change at DRA headquarters. Clearly, from the dates, it’s concerted:

    Bill Bonner, 5th Oct 2010: “What to do now? Find solid businesses at bargain prices. Invest in real estate with good cash. Buy collectibles… jewelry…art – things you want to own no matter what the price.”

    Ronan McMahon and Margaret Summerfield, 14th Jan 2011, actually recommended buying-off-the-plan(!)

    Chris Mayer tells us, 11th Jan 2011: โ€œReal estate, after a long absence from the menu, is back on.โ€

    Hell ๐Ÿ˜€ even Skayce, 15th Jan 2011, commented: โ€œYou should start doing the groundwork and research on buying property. Whether itโ€™s for a place to live, or whether itโ€™s just an investment.โ€

    We’ve that rare occurrence, a bidding war, currently fought over one of our beach blocks. It’s AWFUL!~ ๐Ÿ˜‰

  • 875 Greg Atkinson // Jan 24, 2011 at 6:24 pm

    I see the main stream media is stirring the real estate/home price pot again. Today in the SMH: House prices to flatline this year: ANZ

    I have been neutral in regards to Australian residential real estate prices for a while and nothing I see makes me change that view either to the upside or downside.

    I did expect home prices to slip back last year around 10% or so if they rise again this year then I will be trying to hide somewhere.

    Still I am way ahead of Steve Keen..and he is suppose to be an expert on the subject! ๐Ÿ˜‰

  • 876 Biker Pete // Jan 29, 2011 at 6:15 pm

    All the action here seems to be from 457 Visa holders and FHBs.
    Just sold this latest block to the first of three interested parties who submitted a formal offer. All three were prepared to pay full price.

    I believe the ANZ and any other financial institutions talking (WA) property down are wrong. We’re seeing unprecedented action at the low end of the market.

    Once good blocks in the $170K – $300K range all disappear, we think this will escalate to homes in the $390K – $460K range.

    Maybe we’ve got the timing right… . ๐Ÿ˜‰

  • 877 Greg Atkinson // Jan 29, 2011 at 6:41 pm

    I am getting a bit worried about the Baltic Dry Index and if this keeps heading down then it could have a serious impact on commodities prices. It would not take much of a fall in iron ore prices for example to spook the market and this would then flow across into the overall business and consumer confidence in Australia.

    How that would play out in the housing market is anyone’s guess.

  • 878 Biker Pete // Jan 30, 2011 at 9:16 pm

    The rise and rise of India seems to provide a ‘second wind’ should China’s growth decline. We also expect a resigned cessation of new immigration policies, unless more t’othersiders are prepared to move west!

    Already it appears changes to mandatory detention policies may impact on accommodation shortages in some areas. No shortage of accommodation? Surplus housing? Perhaps in cities experiencing high unemployment and low wages… .

  • 879 Brian L // Jan 31, 2011 at 3:06 pm

    G’day Greg

    I also follow the BDI and finding it hard to correlate the index to commodity prices and the general market indicators. Do you have an opinion on what may be unfolding?

  • 880 Greg Atkinson // Jan 31, 2011 at 4:45 pm

    Hi Brian,

    The correlation between commodities prices and the BDI is pretty loose that’s for sure, but I do think the two are worth watching together.

    The BDI is tricky because shipping supply can be taken out of the system through scrapping or laying vessels up so there is more at play than just the demand for moving dry goods around.

    But it puzzles me why it has kept falling.

    My ‘gut’ feeling is that the Chinese economy is coming off the boil.

    I will have to write something more detailed about this soon.

    Cheers!

  • 881 Chris Y // Apr 25, 2011 at 1:51 pm

    You are right to distinguish short-term from long-term trends. In looking to the long term, I do not plead a case for higher capital city RE prices, but note the single most important factor – land supply. Competition for urban land is the sole underlying reason I can identify for inveterate faith in real estate investment. (Do not forget that land is needed for purposes other than housing.) It is also painfully obvious that the closer you get to the inner suburbs of the big cities, the more acute competition for land becomes. So look for at least 2 real estate paradigms at work in each big city. (I concentrate on Sydney and Melbourne)
    In past decades, inner urban land price growth has generally exceeded inflation, while building costs have risen pretty much in line with inflation.
    In fact, between 1975 and 2005, nominal land prices in Sydney apparently grew by a factor of 50!
    So can we expect similar future price growth? Return to my point (above) of 2 paradigms – inner and outer city. It becomes hard to see enormous differences in land values between inner suburbs and the outermost suburbs being sustained. If employment centres mushroom at the outer edges of these big cities, it will reduce the incentives to live near the CBDs, and justify buying value properties out at the city peripheries. Not to be ignored are other lifestyle attractions to buying houses in quiet outer fringe towns instead of within the suburban mass, for those with good jobs and a taste for bigger dwellings. Providing governments encourage such industrial parks in outer suburbs, do not be so sure of a continuation of the steep growth slopes seen in past decades – at least in the leading big cities.

  • 882 Biker // Apr 26, 2011 at 7:52 pm

    Chris: “…building costs have risen pretty much in line with inflation…”

    I’m interested in your comment, Chris. Do you have any available data on that, please? Our own building experience in the last decade indicates building costs have risen over twice the rate of inflation, annually, in WA.

    In the case of two of our projects, this may have really amped our gains. In the first case, our original total project cost was $375K (replacement cost now $880K). In the second, our total cost was $258K (replacement cost now $550K).

    These are, admittedly, unusual examples I’ve cherry-picked, but in _all_ cases, annual building costs seem to have risen well over 6%.

  • 883 Greg Atkinson // Apr 27, 2011 at 3:08 pm

    Thanks for your comments Chris. I often think that high land prices are actually a reflection of how poorly we have planned our cities in Australia and not something we should necessarily be pleased with. For some reason we don’t seem to be able to develop a major city, apart from Canberra, away from the coast.

    My current thinking is that our property market is basically linked to the fortunes of the Chinese economy. If China keeps importing our coal and iron ore for example in large volumes (and at current prices) then perhaps home prices will continue to head upwards.

    But if the Chinese economy was to slow or enter a recession could this trigger a fall in Australian residential homes prices?

    Maybe a lot of the supply/demand fundamentals when it comes to housing and home prices are being distorted by the China boom?

  • 884 Biker // Aug 31, 2011 at 12:36 am

    The Economist’s recent report that four Australian cities rank in the world’s top ten for livability must cheer all those who claim that Oz really is ‘different’. The table at http://en.wikipedia.org/wiki/World's_most_livable_cities
    provides a quick view. Interesting to see Auckland make the Top Ten… and Vancouver pushed down the list by Melbourne!~ ๐Ÿ˜€

    Biker, Vancouver

  • 885 Stillgotshoeson // Aug 31, 2011 at 12:57 pm

    House prices extend falls in July

    http://www.theage.com.au/business/house-prices-extend-falls-in-july-20110831-1jkvh.html

  • 886 Biker // Sep 1, 2011 at 12:32 am

    And, contrary to contrarian predictions, owners’ costs continue to fall:

    http://www.perthnow.com.au/money/interest-rates/home-loan-providers-fix-rate-at-a-discount/story-fn3izto3-1226120957147

  • 887 Veggiegardener // Sep 23, 2011 at 12:52 pm

    Ive read a number of threads on this site to do with a) increased demand for housing
    b) increased migration
    c) houses building rates not keep up with growth
    d) and even some studies quoting homelessness

    Demand for housing does not automatically mean rising prices if there aren’t the people willing to buy them.
    IN 1911 there was an average of 4.6 people per house in Australia -houses that were smaller than todays. This has steadily fallen to 2.3 people/house and could be headed even lower while economics hold up. But take a walk in Woodridge Brisbane and see what is happening to the so called “refugee increased demand” and you will see dozens of small double storied houses with over 12 people living in each. Some of you might have seen on the news the tragic fire recently where 11 people died in a relatively small double story house. Whats this got to do with demand? A lot -stick with me here. If unemloyment rises because of world economic directions and (dare I say it?) a drop in Chinese demand for our resources (check our burgeoning debt of local govt in China)then we could be facing an increase in housing defaults and mortgage stress. I see a few families already escaping rent and mortgage stress by 2 families living in one house. Doubling up and going home to mum and dad and friends is a real and probable option for people whose part time work hours have dropped. I for one am considering renting out a room at home just to cover the rediculous hikes in regos water and electricity in wonderful Queensland. If our occupancy rates of houses crept from 2.3 back to 4.0 how many thousands of houses would there now be empty that are currently lived in and how many landlords would be stuck with their investment property scrambling to sell it in a fire sale market?

    Lets look at 100 homes with 2.3 in each -thats 230 people in 100 houses. Now if they move to 4 people a house then only 58 houses are needed and 42 percent of the houses are now vacant! Where did all that demand go to? Even if the move to friends and relatives makes the 2.3 per house go up to 3.0 people (less than one person a house extra!) a house -24 houses out of the 100 would be empty. Make a minor move from 2.3 people in each house to 2.6 people and still 12 percent of houses are left vacant. Yes there are more small apartments and dwellings in Australia but the average size is much bigger than even 20 years ago.

    Watch peoples ability to BUY. if you think you might lose your job your not gonna outlay 300 000 plus borrowings for a small house. If you have lost your job your going to look for the cheapest place to rent or ways of doing it. If you have an investment property your going to watch what happens if just a few people move in with mum because your house could be one of the ones that becomes suddenly vacant.

    I hope this never happens but do the maths. We depend far too much on China and the rest of the world. In the end we have to do more than just sell dirt if we want to be strong. Its time to capitalize on world food shortages and look at becoming farmers once again and help feed the world. We have built this housing bubble on massive debt and its beginning to look very weak. Pity we neglected farming and manufacturing as we pumped billions into First home buyers and tax incentives for those buying houses. Markets will have their way in the end despite all the best stimulus that Govt think will rescue us. In the end it just increases our increasing debt and borrows from our children. Only Aussie pride says what happened in the USA and UK etc cant touch us or our weakening banks.

  • 888 Ned S // Sep 23, 2011 at 5:38 pm

    Check with your tax accountant if renting out a room will subject your home to capital gains tax before you do it perhaps Veggiegardener? If it does, and it very well could(?), you may not find it’s an extremely attractive proposition depending on your particular personal circumstances.

  • 889 Greg Atkinson // Sep 23, 2011 at 7:12 pm

    Thanks Veggiegardener for you comment. I tend to agree with a lot of what you say. I think we have become hooked on a lifestyle which simply may not be sustainable. For example our homes are getting bigger but productivity gains have stalled and our national debt is rising.

    As you say, we have a lot riding on the fortunes of China which also means we have a lot to lose if the China boom comes to an end.

  • 890 Ned S // Sep 23, 2011 at 10:23 pm

    “I think we have become hooked on a lifestyle which simply may not be sustainable” – Got to live within your means – Unless you are a bank or a political party in a democracy that is chasing votes. Or the holders of the world’s reserve currency MAYBE???

  • 891 Biker // Sep 24, 2011 at 1:09 am

    Lots of ‘if’s there, VG.

    Here are a few more:

    * What if interest rates continue to fall?

    * What if population continues to rise?

    * What if the new economic migration is (again) from Europe,
    rather than Asia?

    * What if rents continue to rise?

    I accept that these all are quite fanciful notions. You’re probably right. We should have bought shares!~ ๐Ÿ˜‰

    Interesting to see how the GFC has affected LV. Properties are (still) down 61%. Looking at the location, what’s on offer, the unemployment rate (15%), the median wage ($35K) and the incredibly cheap rents, it is hard to make comparisons, say to Sydney, Melbourne, or Perth.

    Meanwhile it’s hard to go wrong growing your own fruit, veges, eggs, nuts, etc. ๐Ÿ˜€

    Biker, Vancouver

  • 892 Ned S // Sep 24, 2011 at 1:44 am

    The Green’s senator from over your way actually wants the handout for being a welfare type tenant upped very significantly Biker. (Fine by me as a landlord???) But I’d be a bit POed if I was a worker and a taxpaying type tenant trying to compete with the welfare subsidised type tenants?

    It’s all very strange??? (Well, to me it is anyway?)

  • 893 Biker // Sep 24, 2011 at 2:40 am

    “Greenโ€™s senator from over your way actually wants the handout for being a welfare type tenant upped very significantly Biker.”

    Funny you should mention that, Ned. I just responded to a ‘Your Opinion’ survey, which included that exact issue as one of fifty or so questions.

    The bear mentality is often amusing. Enjoy comment # 100, here:

    http://www.perthnow.com.au/business/wa-facing-severe-housing-shortgall-by-2020-housing-industry-association/comments-e6frg2ru-1226127950925

    Our expiring leases involving _vacating_ tenants have all been raised 10% this year, Ned. One hopeful tried the NF trick (“Offer half or a third the increase requested…”)

    We rejected his offer outright. He raised his offer to our price, dropped all his demands. We declined his application. More respectful applicant applied. Game over… . ๐Ÿ˜‰

  • 894 Ned S // Sep 24, 2011 at 9:23 pm

    Comment # 100: “I remember the last recession we had to have, and this will be the same as the next one thats coming. House prices plunged by 30% back then. I sold out, then like millions of others, lost my job, so I rented. Best thing ever. With the economy going down, rents got cheaper and as an added bonus, I got a centrelink payment to assist with the rent! You cant get that when you have a mortgage!” is a pretty sad (but true) indictment on our society I’d say Biker.

  • 895 Stillgotshoeson // Apr 14, 2012 at 8:48 am

    Another Rent vs Buy article…

    http://news.domain.com.au/domain/home-investor-centre/rent-your-way-to-real-wealth-20120409-1wkec.html

  • 896 Greg Atkinson // Apr 14, 2012 at 9:51 am

    Is there any consensus on how much house prices fell in 2011? I have read one article that said the nationwide fall in home prices across capital cities in Australia was 4.4%.

    Anyone have some reliable information that is not tainted by bias from either the property bulls or bears?

  • 897 Stillgotshoeson // Apr 14, 2012 at 10:11 am

    I can not speak for other areas or statistics, just from my own eyes in the area I live, prices are down about 10% across most of the nearby suburbs. 1 I would even say closer to 15% and a couple of others have defied the national/local trend and still managed to go up 5% to 10%.

    A year ago you could not get a 4 bedroom house under 400k near me. Low to mid 400’s were around, now they can be had under 400k

    The 15% one is also the most expensive local suburb… The gap between it and the suburb next door has closed significantly.

    A little further out there is a house that has been on market for a while now, On over 10 acres was advertised at a million + and is now down to 800k + and still no takers…

  • 898 GoWest // Apr 16, 2012 at 4:44 pm

    I can only speak for Perth – The inner city areas are going very well keeping their value or increasing (15%). Apartment buildings are filling up as they are built – $500/week or better in the outer parts of the city. Lots of demand. Fly in fly out is increasing the demand and rents are increasing. Lots are building solar panels to keep their power costs down. Most are doing renovations. Multiple re-developments are still popular except margins are tighter. The old holiday locations like Mandurah and Rockingham are going dirt cheap despite the trains and the banks continue to push property valuations down for equity grazers demonstrating their adversity to risk. The credit squeeze continues. Probably another year of flat and lower prices.
    Should call it “Julias depression we had to have to pay for the green vote”!

  • 899 BP // May 20, 2012 at 10:04 am

    http://www.perthnow.com.au/business/rents-hit-the-roof-in-wa/story-e6frg2ru-1226360925959

  • 900 Ned S // May 20, 2012 at 7:35 pm

    “Anyone have some reliable information that is not tainted by bias from either the property bulls or bears?”

    I simply work off the ABS figures for established houses in the capital cities Greg? First MS Excel download on the following link. Go to Sheet called “Data1” and look down Column J once downloaded – 89% increase by my calcs over the last decade:

    http://www.abs.gov.au/AUSSTATS/abs@.nsf/DetailsPage/6416.0Mar%202012?OpenDocument

    For significantly longer term stuff try googling “nigel stapledon australian house prices” – He’s the only bod that’s tried doing very long term analysis in Oz that I know of?

  • 901 Greg Atkinson // May 21, 2012 at 7:36 am

    Thanks Ned. I have read a few industry types questioning the ABS data but it seems some of the best out there I guess. I will have a look through it and see if there is there anything I can untangle.

  • 902 BP // May 21, 2012 at 9:53 am

    Useful stats, Ned.

    Lachlan’s comment regarding an increased flood of economic refugees is cogent. Around a third of our tenants fit this profile. Many have considerable cash assets. Most who eventually leave our rentals purchase existing homes, although in recent years, two families have built new homes.<