Evidence WHY property prices won't perform as they have in the past

100% Agree, and this goes for anything you want to do. Find the best, study them and tailor what they have done for your own goals and personal situation.
You will note that none of the evidence I have provided is a prediction of the future. All I have provided is evidence of what has occurred in the past and asked readers to answer some questions on what they think at the end. This would be a perfect opportunity to quiz your mentors about their thoughts on the same questions and critically analyse their response, they should be able to provide sufficient justification of their answers. Then make your own decision.

Making money out of property involves both baseline value increases, and the value you add. The evidence provided only addresses the factors that have caused baseline value to increase. However, this baseline value increase has provided sufficient equity to enable people to use leverage to invest and add value elsewhere. If this baseline value of growth slows, it will impact the ability of people to borrow against it. The questions at the bottom are an opportunity for people to conduct their own assessment.

Remember, supply and demand includes the ability to pay. The evidence provided highlights the factors in the past that have improved the ability to pay, and thus caused increases in baseline price. You can review these factors and decide how big of an impact it will have in the future.

 

It will be interesting to see how gentrification works in the future. Current gentrification involves once undesirable inner city suburbs being transformed. The reason for this involves improved amenity and access to jobs, with the higher paying jobs in the city centre. I think a lot of this revolves around population growth and lack of infrastructure leaving those with the money to opt for a short commute and easy access to services/entertainment, rather than the big block in suburbs. While high paying jobs remain in the city centre this will continue, especially with population projections, anyone in the right mind with money would choose to pay more to live close to work. If employment trends allow more people to work remotely, why would people with money choose to move to blacktown (for example) and still have congestion when they want to get out and about for work/play, when they could move anywhere. Will outer suburbs have the same gentrification effect in the future? I think it is unlikely....
With competition for jobs and the ability of people to work anywhere, will employers still need to pay high wages to attract the right talent to the city? After all it is disposable income that improves your lifestyle...

 

At what age can you expect to receive an inheritance 60-70? How much of this inheritance will be beneficial for you to generate your own wealth for retirement through the power of compounding? Are you willing to bet your old age purely relying on receiving all of such inheritance? As a large portion of the population ages the infrastructure and health care requirements increase. This needs to be paid for. Inheritance taxes are not unheard of around the world. As wealth inequality increases the number of poor people (who vote) increases. Do you think they would vote for or against an inheritance tax for the wealthy? I don't know but I wouldn't be betting my old age on it.

I agree the price of Sydney and Melb property with most likely be higher in future, provided inflation continues. My question is which of the factors in the evidence I provided will allow people to pay more and allow the baseline price (value add excluded) in the future to go up at the same rate as it has in the past to beat inflation by sufficient margin to prove a good investment?

Sentiment only allows people to transfer the allocation of funds from disposable income towards the purchase of a more expensive property. It does not give them more collateral, lower debt payments or more money to spend overall. It is a trade off...


Estate and Inheritance Taxes around the World | Tax Foundation

 

I think this only works to a point. Although being rich affords you the opportunity to live in a nice area, this is a sliding scale. As wealth inequality increases the rich end up living in gated communities which ultimately restricts their lifestyle decreasing their quality of life. Sending their kids to school involves risk, recreational activities involve risk, you can't just go out to nice restaurants at night, there are robberies, car jackings etc. Just ask the many wealthy South Africans who have moved to Australia what it was like living in a country with high wealth inequality (hint...there is a reason they are in Australia).
Yes with money you can move to another country. But if you see a positive in cashing in on wealth inequality in Australia and then cashing your chips and running overseas I would question your ethics. I would also ask where you plan to run for a better quality of life given this appears to be a global problem...

 

"I think"....and "if this"..... and " why would"..oy yoy yoy! Too much ( imo) nonsense which drives the mind away from analysing good deals and into economic bankrupt land territory.

If Warren Buffett worried as much as you do about everything that could make his wealth creation plan fail, he'd probably jump off a cliff from all the noise.

This is it in a nutshell, and condensed. I guarantee you., most successful investors on this forum and anywhere else will be following a similar template with small variations here and there to suit their own niche/skillset/business contacts. This one is specific to me.

1. Understand your financial position and risk profile
2. Select strategies in line with your goals and risk tolerances.
3. Master the ins and outs of your chosen investment vehicle
4. Choose a niche area you understand well and master that.
5. Buy deals below what you believe to be market value
6. plus make sure the deal has room to add value
7. Plus make sure the asset is in a highly desirable S/D area, OR strong indication it could be in the next 5 years.
8. Have exit strategies in place
9. Adequate cash buffers.
10. Most importantly, invest according to what specifically is best for your financial situation. It's irrelevant how others are doing, what they're saying, who is going bankrupt, backwards etc etc. All totally irrelevant to me. Maintain a resilient and steadfast mindset towards keep moving forward.

 

@Sackie, nah, that is too much work and takes too long .

I want something that is simple, requires no effort and is guaranteed to work .

And I want it now .

 

There ya go

 

Do you disagree with the thoughts? I raised some general considerations around gentrification and how it may occur in the future compared to how it occurred in the past, with some thoughts on why. What are your thoughts?
Lets start at the top of the pyramid rather than the bottom.
Difficult to accurately attack the person when you have no idea of their position...

 

You're asking the wrong sorts of questions, questions which I've never been concerned with for wealth creation.

These sorts of questions are far more useful. And I'm not speaking from a theoretical viewpoint, but from actually doing and achieving. Here are just a few.

1. What quantitative metrics can you analyse to determine if the S/D equation of a particular suburb or groups of suburbs are changing. For the better ( showing opportunity) or the worse ( indicating increased risk in the area.

2. What qualitative data can I look at to ascertain the same.

3. Which players on the ground can I talk to get further corroborating data to support my investment decision.

4. What kinds of DD can I do on a state/city/suburb/dwelling level to further investigate price disparities in markets, possible ripple suburb effects and BMV deals which may be of interest to me.

5. How can I identify possible add value deals where the profit potential exceeds the identifiable risks.


You're coming from a philosophy which wants to understand ( and often the exact mechanism is never truly known) what is going to make a market behave a certain way or not. I'm not interested in exactly WHAT it is, I only care to know how to look for the signs that opportunities may me arising. Then pounce.

By the time the post mortem is done on why X,Y, Z happened. It's all over red rover.

And that's where we'll have to leave it. Peace out.

 

Oh geez, here we go, professor keen is back Looking for an argument.

 

Umm...we need to build a bigger jail!

 

@Ummm Look and you shell find. So be careful of what you are looking for.

Echoing @Sackie
If you look for reasons for not investing RE and you will find plenty of reasons. If you want to look for opportunities then there are plenty locations to make a killing too. There are other cities other than Sydney and Melbourne. Places like Brisbane, Perth and Adalaide are more affordable than 15 years ago...

 

A minute error in the basic premise.

Was the average house worth $180k in 1980? I don't think so. You were still able to purchase in Mosman for $180k up to around 1987/88, that same house would be in the high $2m today.

A brand new Falcon XD or @datto's Commodore was only worth $8k new.

The size of Sydney has more than doubled in that period. Strathfield was in the western suburbs and selling for around $100-120k, you could buy in Hoxton Park for about $25k/acre.

The expectation of the average house has changed, no longer 2/3 bedroom b/v, poorly insulated dogbox to a 4 bed, multiple bathroom edifice.

Just my 2 cents.

 

Melb is up 5.5% for the quarter. Good enough for me

 

People need a roof over the head unless they all will be now living under the bridges????
No one has a crystal ball into ANY asset class where it will be in the future (property, shares, cash, gold, etc...), do you?
During the period of 40 years or so you illustrated, many, many, many laws, rules and regulations have changed (wages, interests, deposits required, population, government/finance regulations, family assistance, etc...).
To dismiss the whole asset class seems a bit naive to me. I have no doubt government, finance institutions, banks, etc...will also continue to change over the next years, the next challenges (QE, moving towards 0% or negative interest rates, multiple dual living, splitters, group households (more or less people living together), new economies/wages created, etc...
I could say that shares may never rise again in the future too based on such logic, because if say 27% of baby boomers population are approaching age 65 and our Super system is designed to withdraw more as they age (not all will be re-invested back), there may be less tax payers unless significant working population increase or gaps may form), so money will be leaving the stock market?
So tell me where will you invest in the current economic climate, what asset class?

 

Only trolls live under bridges

 

But you forget one thing, laws and rules and regulations can change. What was applied for the last 40 years may not all apply in the future. The economics are changing too.
Have you considered negative interest rates, where actually part of your mortgage is paid off by financiers?
I am not implying this is good economics just that things change...so very intersting times ahead indeed. However, if you use property as a business this may not apply to many.
Danish bank launches world’s first negative interest rate mortgage

 

I agree with the fundamental point that the game is always changing, those who adapt the best will win. Those that do nothing, as always will end up on the sideline with what they've always had (which if often nothing). No risk no reward!

 

Only when they're slumming it

 

This is not EVIDENCE, irrespective of how many underlines you have against your keywords... To call assumptions as evidence is in by itself a disingenuous play at-best and blatant misleading at its worst.

EVIDENCE comes AFTER the event... anything prior is crystal ball gazing, hoping or guessing...

This is a HYPOTHESIS, generated with some good data and some wild assumptions, most of which I have seen repeated ad nauseam for the past 20 years from a dime a dozen quasi-economists with no investments or wealth of their own.

Repeating same stuff over and over again wouldn't make reality go away. For those who are prepared to risk getting into IP for a long play, let it be. It's their risk.

Best to keep that $2000 in savings locked away in a 1.1% cash return in the bank in the hope that when property crashes 85%, you can use that to buy your dream home in Mosman with that deposit down.

Good luck champ...