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July 8, 2011 - 6:21 am

emptyvessel wrote:

Small adjustment in perception for you my learned bear;
My reference to "black hat" was the Edward De Bono type described in "Six Thinking Hats"; http://en.wikipedia.org/wiki/Six_Thinking_Hats#Black_hat_.E2.80.93_Being_Cautious

I have a tendency to wear the blue and green hats by nature. When I am "down" I tend to wear the "black-hat" too much.

The economic world is a set of intertwined chaotic systems. All very, very imperfect and largely unpredictable except in terms of long-term trends. Much like the weather. I am very happy in your belief that you understand this game. I do not believe in your belief. The game doesn't seem to care.

Just for a bit of fun I tend to wear the blue, green and yellow hats in my own though process but am often wearing the black and white hats when it comes to main stream ideas.

As to the bull and bear comments – Being in the bear category on this forum, I don’t really care to argue points tooth and nail but I think I am right (if I didn’t I would change my opinion) and just make it know because I don’t want people to loose money.

Also it adds a bit of colour to a somewhat bullish forum.

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May 14, 2011 - 11:02 am

Inspiring Post

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May 12, 2011 - 11:28 pm

Love Buffet,

Blew my mind though that a pretty standard Buffet trait of buying something just after a massive correction/deflation, (US housing in this case) could be read as opportunities in the Australian housing market.

No doubt there are always opportunities if one does the research, knows the right people and looks hard enough. But is that a logical interpretation of Buffet’s statement in context with his style of investment?

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May 12, 2011 - 10:55 pm

If I had kids and was looking to provide them some stability I would be looking for a house to buy close to good schools and public transport.

But at the moment I am under30 and looking to travel via working and volunteering as much as possible, and will continue to do this while I can still get temporary work visas with ease. That’s why I like investments that don’t require constant servicing plus my tax isn’t too suffocating.

I invest most of the difference of renting and a mortgage, not all because whilst I value investing and hard work, I also value my youth and for the time being am enjoying the life of Dorian Gray.

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May 11, 2011 - 1:25 am

Good to see you are thinking and are definitely on the right track. What you have to do now is a bit of research on house price movements and then speculate.

If you decide the prices will go up in comparison to your alternative investment then you would buy.
If you decide the prices will go side ways in and your other investment will go up, then you wouldn’t buy.
If you decide the prices will go down then you wouldn’t buy.

Check out MattNZ, Unmester and to a lesser extent my on posts for reasons on not to buy.
Check out ALF1 and basically the rest of the forum for reasons to buy.

Have fun speculating let us know what you decide.

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May 10, 2011 - 4:36 am

To add some positive comments to the forum rather than just constant negative ones, and in an attempt to shed further light on my investing attitudes I will share an investment I have recently made.

I am now the owner of Paladin Energy (PDN.ASX), great depth can be taken in researching stocks and can be quite daunting if you know nothing about the sector. Obviously research everything and only invest when you feel comfortable, more importantly get professional advice (I did).

But my Macro thinking is this, I would like to think that I am fearful when others are greedy and greedy when others are fearful. I am optimistic about the inevitability of Uranium in the long term future 10+ years. I think recent circumstances (GFC + Japan) have pushed down related share prices but have in no way affected its practicability.

Thus I have invested a small amount 3 months wages to show my long term commitment to this company. I have no intention of realising any gains from this company for along time, but I think the timing of my entry is quite pivotal.

This Macro view does not carry to my view on housing, yes I am optimistic about Australia’s future and therefore the need of housing but I am quite fearful that Australian housing is incorrectly priced at the moment.

No financial experts predicted the GFC, a few economists of a certain school did. Those same economists can explain why Australian housing didn’t crash due to government stimulus and are now again predicting it to unless the government pumps an even larger stimulus package in. Therefore as buying a house is going to be a long term investment I am quite happy to wait a few years and see if a correction occurs. I believe the risk of sitting out (house values rising) is less then the risk of getting in (house values falling) at the moment.

Of course not every purchase is a financial investment i.e. a car. Whilst the majority of people need cars, the type of car they buy I would speculate would be more based on emotional needs rather than financial. If one is looking to make a home, risk of depreciation probably doesn’t come into the equation.

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May 9, 2011 - 1:40 pm

Read the book a while ago, great book.

But it doesn’t encourage blind optimism in the market, and ridicules concepts such as dollar cost averaging. It encourages research and accessing the knowledge of professionals.

So one could easily with the rich dad attitude choose not to invest in RE at the moment.

Are you willing to Change a Winning Strategy that has been working for the past 30 years if the evidence points against it? Or at least put in on hold of a year or two?

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April 4, 2011 - 8:04 am

Matt,

How are your views received at your workplace? If this does happen I hope Australia learns off Ireland and does not back the banks, but rather sets up its own bank or starts selling bonds to fund the drastic stimulus that will be required… Hopefully in infrastructure and not Harvey Norman.

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April 4, 2011 - 7:36 am

A lot of depth in your response fWord thank you.

At the end of the day the reason why I joined this forum is not to say Property Investing is wrong or doomed, as I have been perusing it for a few years. It was to give a genY perspective rather than let the belief flourish that we are all lazy whiners looking for spiteful lazy gains.

At the end of the day if you are investing responsibly, you are on the right track and will make money over the long run. The quickest or best way is really just a matter of individual preference, its my view that the real estate gravy train is definitely going to slow down at the least. But if that was my background I would probably still stick to it as that is where I would have a relative advantage over another not so astute investor. As apposed to gaining a new skill set in another sector.

Also it's interesting to note that instead of 25yr a 30yr loan is a better option. I would be willing to bet that if new/extended growth does come from the real estate sector it will be from an increase in the duration of the loans now that the reduced leveraging option has generally been eliminated.

Lastly IMO buying a house on an interest only loan is done on the same investment principle as investing in gold and therefore one maybe subject to be being called a "Jerk" from Charlie Munger. Maybe that is why there is such an Us vs Them mentality on this forum :p.

But my endgame is purely to show a GenY mind set, not ridicule and whine.

SmartGenY

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April 4, 2011 - 3:56 am

I feel this forum has a real us vs them attitude. "Us" the financially responsible, hard working property investors vs "Them" the lazy, free loading, whining have nots.

The point I was trying to make is maybe a lot of the "Them" are hard working and financially responsible but choose to invest elsewhere.

Of course property is a solid investment for any diverse portfolio, but I am at a strong disagreement that it is currently the place to start. (I am not saying its unatainable by any means, and there is no doubt overtime other currently attractive options will become not so attractive in future, that's when you sell   ).

Interestingly the private ownership of property has been brought up in relation to common land. Property at the moment is currently a stock, sold to the highest bidder. Food is another stock that has resulted in famines due to misappropriation when food has been abundant in the local region.

Now I am sure that we would all agree that the avarice storage of food by the wealthy during these times, is not a humane notion.

If home ownership is such an ingrained right in the human psyche, would not the above pertain to this stock aswell?

I am putting forth the challenge that home ownership is not necessary, just as much as I am putting forth that a neo-liberalism mindset if unchecked is unhumane.

Cheers,
SmartGenY

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April 2, 2011 - 7:00 pm

cuteyoungchic wrote:

Does anyone know the % of negatively geared investment properties, compared to those without negative gearing?

Also another interesting question, does anyone know what other countries have similar policies?

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April 2, 2011 - 6:58 pm

I can't really comment because I don't know anything about what happened in the 1980s.

But hypothetically there is a mass exodus by landlords as a result > housing prices fall (Win) > government buys up cheap housing > government gets passive income (Win) > prices eventually go up > government sells them for a profit. (Win. Kinda like what the US is doing with all the shares it bought atm).
The government would have a larger tax base due to negative gearing being abolished.
And more money from low wage house holds would be returned to the government, rather than the banks.
Obviously though if the government bought in before prices were rationalized as they do, it wouldn't quite play out as above, but honestly I couldn't see any action coming fast out of our current debacle of a government.

As to 30% of the street being housing commission, grew up in Ferny Grove, a lot of it still is housing commission, its not all bad

Aside from the above though a massive drop in prices would mean a huge chunk taken out of the economy, which would be devastating for the next couple of years. So yeah getting rid of negative gearing is just a pipe dream.

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April 2, 2011 - 6:31 pm

As a young GenY professional that thinks the Get Up campaign is great. Let me put forth a few provocative responses. I am not in the property industry so please critique my logic below as I wouldn't be surprised if it is not entirely accurate or representative.

@fword – There is more to buying houses than just supply and demand, there is also opportunity cost. (Not to mention that demand is dictated by credit).

Let's say a 500K house rents for 20k pa.
-If this 500k house is a home i.e. owner occupied the owner will need to pay about 40k per year for 25 years to own the house.
-If this house was rented and the renter invested 20K pa at a rate of return at just 5% in 15 years the renter would have enough invested to live financially free from rent. Obviously this doesn't include tax or inflation but a ROI of 5% is conservative enough IMO to account for this.
-Alternatively if this is a IP and negatively geared it therefore only cost 10k pa to service the loan(please correct me if I'm wrong here, I understood roughly 50% tax claimed back on amount paid to service the loan) then the ROI will be around about 5% (Not taking into account the increase in house value).

I think it would be a fair assumption that shares would go up reasonably in sync. with houses over the long term therefore making the two investments fairly comparable but a mortgage is a large commitment in comparison to shares/savings/bonds and could be argued with the current debatable housing bubble and rising utilities/rates a more riskier investment in light of the recent pop of the share market bubble.

@angelinsydney – In the coming years there will be a record numbers of retirees. I am willing to bet my future that there will be enough of them with negatively geared IP who wont have the option of holding and will "realize" their gains, resulting in an over supply of property on the market. Are you willing to bet there wont be? Alternatively if I'm wrong my "opportunity cost", I'm sure will be minimal, will yours if your wrong?

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April 2, 2011 - 4:32 pm

I signed up specifically just to comment on this after perusing these forums off and on over the past years.

I don't think a lot of you bulls understand the current mindset of the Professional Gen Y, I'm 23 recent graduate engineer and between me and my partner we net about 80k pa and that could easily double over the next 5 years if the hard yards are put in.

We currently pay $11,180 pa in rent and have no problems living off 30k pa (after rent). Buying a nice house or rather a innercity flat is definitely an option.

From our point of view however its just not a good investment. Look at the stockmarket in the past 3 years, I can look at that market and feel fairly confident that a bubble is not currently present and stocks are correctly priced. Look at our housing market over the past 8 years, increased 77% according to that article, do you really expect that to happen over the next 8 years? LVRs cant get any higher (comparatively to good ol 70%).

Add that to the burden of a mortgage in comparison to the freedom of stocks or bonds, look at the AUD and the IP opportunities overseas.

We (or at least my piers) are not whining about prices, We are saying the world is our oyster and house prices stink. The way things are going, by the time I want to settle down and make a home and family all the Boomers IPs will be flooding the market

From my point of view negative gearing needs to be removed in the future to up rent prices and force some of the Gen Y into the market, cause at the moment I would rather get my taxes back by taking a 3month holiday to the ski fields then paying interest to a bank for an overvalued asset.

Just an insight to a commonly held view amongst my piers, granted the viewpoint of a recent finance graduate may be a bit different.
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