RBA Suggests Review of NG Laws

What I have posted is fact and your anecdotal ramblings do nothing to refute them.

 

Well, mine may be anecdotal; I'm sure the multitudes of investors that have bought and paid over the odds will be along shortly to support your claim and refute mine.

What you have posted in that last graph shows that PPoR buyers are still way more than investors.

A graph might state true numbers, but is not necessarily accurate data.

For eg; the average wage figure....the volume of workers at the highest level and middle management - who are also the highest earners - are the minority. Yet; their numbers easily account for the majority of workers that earn a lot less. (It is a pyramid)

The resulting figure is actually a lot lower for the majority of folks. That is what a stat can do.

I'm sure you believe all of these figures, but seriously; do you really think every investor wants to buy at any cost just to get into the market? Or; even the majority?

No; they move on to the next deal because another one turns up every few hours.

What percentage of those investor loans in that graph might have been refi's and not purchases?

 

Sure, but the stats show investors are a larger portion of the pie (now, relative to Owner Occupiers) than they have been in the past, so they would be having a greater impact on price now than anytime in history (for the time we have reliable statistics anyway). Also the finance figures are Australia wide, the concentration of investor finance is in Sydney & Melbourne.

Are you implying owner occupiers don't refinance?

 

Guest Why don't you just join the bright side mate. Get on the property rocket, build some wealth, have a fabulous financially secure outlook and live happyily ever after!

Common mate seriously..while some in Australia are squabbling over NG etc etc other people are just going from riches to riches securing theirs and their families future so they don't have to worry about housing prices for their kids etc.

You can't change the seasons mate. Gotta learn to use what we are given and make the best with it for ourselves and our loved ones.

 

I won't and don't limit myself to a single asset, but do intend on buying back into the Adelaide property market in coming years, hopefully timed around the bottom of the next cycle low

 

Real prices have fallen since you sold in 2010.
http://www.bullionbaron.com/2013/08/whats-next-for-adelaide-property-prices.html

When do you predict that Adelaide's house prices will bottom out? Personally I'm in the 'acquisition stage' of investing so if prices stay down that's a good thing for me as it gives me time to save cash and avoid lining the banks pockets!

 

Guest I know very little about SA but this suggests its at the bottom or starting to rise.

 

A small percentage do, but the process is so arduous and often not worth the saving in cost after all the refi fees and so forth.

Granted, the percentage is a bit higher these days with the Tsunami of the MB industry, but realistically; most folks just buy a house and start making payments. Honest.

You assume that the average PPoR buyer is fin savvy and thinking like an investor - like all of us here.

This is a fishbowl, BB. We are in a different world with a different outlook than Joe Average.

This place is not representative of normal society financial activities.

 

I'm not debating the use of it as a tax concession - simply as a dud investment strategy.

no investment that returns -70% is a good one.

 

I will be watching closely, but my guess would be 2016-2017 with a higher unemployment rate and shuttering of Holdens which I expect might form a low in sentiment. Slow recovery from 2018-2019 forward. But don't expect growth of past to repeat itself. I will be buying for yield and looking to generate capital growth through improvements, etc.

 

Totally agree.

By the way; my opinion is that economy sentiment is already down near the ess-bend.

Good to hear you talking about a buying plan, BB - but you are not off the hook; I want to hear a date.

 

You won't have a purchase date until the right deal presents & one of my lowball offers are accepted @Bayview But I expect the first to be within 1-2 years.

 

And I thought I was a vendors worst nightmare,

 

nothing wrong with waiting for the right moment and the right property.

has taken me forever, but i think i'm there for a solid foundation.

 

Negative gearing discussions produce the same contradictory response:

Negative gearing doesn't increase property prices at all, no effect

But-

You can't get rid of it at all no matter what!

It somehow simultaneously has zero effect on inflating property prices but is defended 100% anyway...

 

It's a dud policy defended by gutless self interested politicians. Encourages speculation, inflates prices, reduces yields, pushes first home buyers out of the market. It's rubbish, will be good to see the end of it.

 

Does the above apply to shares, wine, artwork and other investment classes which may also be negatively geared

 

What would you have us all do, W?

If you take away tax deductions from all investments which earn income for you - and I include all things such as running a business as an investment - where is the incentive to bother?

If I can make a profit out of running a business, and if I can build it up to be more valuable so I can make money from selling it (or shares in it) then there is an incentive to bother doing it; irrespective of any tax deductions....other wise I won't bother - and neither will anyone else.

The Gubb realises this, and that is why there are various tax deductions for running a business, or making investments where the earning of income from that investment is involved.

Apply those same principles to IP's.

1.With an IP, you get rent = income. But not much.
Unlike a business, it is almost impossible to make a nett profit cashflow on an IP if you buy it with borrowed funds - unless you can pay for a significant part of the purchase price with cash.
With a business, you can borrow the entire amount to buy it, and still be making a nett profit from day 1 which you can live off.
2. With an IP, you get CG = added value to make it profitable to sell; same as a business.

Can you see the problem here?

With your model; if we treat the IP the same as a business, eventually the rents will need to go up significantly to cover the borrowings and holding costs, otherwise noone would bother buying one, or only the seriously high income earners who can save enough cash deposit, and/or who could carry the neg cashflow if they borrowed the entire amount.

The ramification of that will be no/very few rental properties available, and the rents will go up a significant amount anyway due to decreased supply...

Increased rents make it even harder for folks to save a deposit to buy the houses which - by your model - should eventually be cheaper due to no NG.

But, let's assume the houses do become cheaper, and everyone could buy one. We still have the problem of noone trying to provide for their own future through investing in real estate other than their own home, and we end up with an ever-increasing population of pensioners at retirement.

I guess they could start up their own business; but that has no guarantees of an income or cashflow at the start or even in the future. Folks will opt to be an employee.

There has to be incentive to invest, but if the entry into the investment means that the owner of the investment will be out of pocket by a large amount, they won't be able to do it, generally.

We already have a system where the weight of increasing welfare recipients is about to burst it.

Of course; you could use the strategy of paying off one house at a time, then buy another one after that after you have saved enough deposit for the 2nd house; most folks would be very, very old by then.

 

I think you might have paralysis analysised yourself to death.

You'll never look down the street and see only green lights, BB.

What percentage off asking price are you trying to lowball these people by?

 

400%. If they won't give me at least 300% of the asking price, cash, to take the property off their hands then I won't be giving it a look.