Australia has a sh!tstorm waiting to happen!
Sep 15th 2009, 11:41 am
#122
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Thread Starter
Joined: Feb 2008
Posts: 421
Re: Australia has a sh!tstorm waiting to happen!
hmm... I don't think that's a good idea mate. I reckon you could probably afford to spend about $1,200 a week and it would all be gone in 25yrs. But money loses its value over time. That $1,200 will only be able to buy $600 worth of goods in 25 years time... that'll barely pay for the rent.
Lets say your rent is $300 a week now... that leaves you only $900 to 'live it up'.
Lets say your rent is $300 a week now... that leaves you only $900 to 'live it up'.
Capital amount = $800k
Yield return after tax = 3%
Inflation per annum = 3%
Annual % yield can rise and fall with annual inflation.
Initial weekly pay = $700.00 rising 3% per month
Years until cash runs out = 23 years and four months.
So with my calculation, $800K will last 23.3 years, so taking $700.00 for the first week, and this amount rising 3% every month until the capital has gone. You are recieving 3% interest on the remaining capital after each month amount has been paid out.
A very realistic example. Net yield after tax in my example will always match the annual inflation rate.
Year Capital Year Interest Year Pay Left after year
1 800000 23829 0 -36499 787330
2 787,330 23,429 0 -37,609 773,150
3 773,150 22,982 0 -38,753 757,378
4 757,378 22,486 0 -39,932 739,932
5 739,932 21,938 0 -41,147 720,724
6 720,724 21,337 0 -42,398 699,663
7 699,663 20,678 0 -43,688 676,654
8 676,654 19,960 0 -45,016 651,597
9 651,597 19,179 0 -46,386 624,391
10 624,391 18,332 0 -47,796 594,927
11 594,927 17,416 0 -49,250 563,093
12 563,093 16,427 0 -50,748 528,772
13 528,772 15,362 0 -52,292 491,842
14 491,842 14,217 0 -53,882 452,176
15 452,176 12,988 0 -55,521 409,643
16 409,643 11,671 0 -57,210 364,104
17 364,104 10,262 0 -58,950 315,415
18 315,415 8,756 0 -60,743 263,428
19 263,428 7,149 0 -62,591 207,987
20 207,987 5,437 0 -64,494 148,930
21 148,930 3,613 0 -66,456 86,087
22 86,087 1,674 0 -68,477 19,284
23 19,284 106 0 -19,390 0
Sir Rover!
P.S.
The reason i want it all spent, or would want it all spent, is when i wake up and read tales like these; it just confirms my beliefs that retirement and old age are not always a dead certainty? Enjoy it why you have it, because it ain't no rehearsal!
http://news.bbc.co.uk/1/hi/uk/8256260.stm
http://news.bbc.co.uk/1/hi/entertainment/8256033.stm
Its funny really, that amount would be just perfect for me, take me nicely into old age at 65, let the state deal with me then hey?
.
.
Last edited by brendarover; Sep 15th 2009 at 11:51 am.
Sep 15th 2009, 12:44 pm
#123
Lost in BE Cyberspace
Joined: Feb 2005
Posts: 15,526
Re: Australia has a sh!tstorm waiting to happen!
I decided to have a look at you example, i am time rich!
Capital amount = $800k
Yield return after tax = 3%
Inflation per annum = 3%
Annual % yield can rise and fall with annual inflation.
Initial weekly pay = $700.00 rising 3% per month
Years until cash runs out = 23 years and four months.
So with my calculation, $800K will last 23.3 years, so taking $700.00 for the first week, and this amount rising 3% every month until the capital has gone. You are recieving 3% interest on the remaining capital after each month amount has been paid out.
A very realistic example. Net yield after tax in my example will always match the annual inflation rate.
Year Capital Year Interest Year Pay Left after year
1 800000 23829 0 -36499 787330
2 787,330 23,429 0 -37,609 773,150
3 773,150 22,982 0 -38,753 757,378
4 757,378 22,486 0 -39,932 739,932
5 739,932 21,938 0 -41,147 720,724
6 720,724 21,337 0 -42,398 699,663
7 699,663 20,678 0 -43,688 676,654
8 676,654 19,960 0 -45,016 651,597
9 651,597 19,179 0 -46,386 624,391
10 624,391 18,332 0 -47,796 594,927
11 594,927 17,416 0 -49,250 563,093
12 563,093 16,427 0 -50,748 528,772
13 528,772 15,362 0 -52,292 491,842
14 491,842 14,217 0 -53,882 452,176
15 452,176 12,988 0 -55,521 409,643
16 409,643 11,671 0 -57,210 364,104
17 364,104 10,262 0 -58,950 315,415
18 315,415 8,756 0 -60,743 263,428
19 263,428 7,149 0 -62,591 207,987
20 207,987 5,437 0 -64,494 148,930
21 148,930 3,613 0 -66,456 86,087
22 86,087 1,674 0 -68,477 19,284
23 19,284 106 0 -19,390 0
Sir Rover!
P.S.
The reason i want it all spent, or would want it all spent, is when i wake up and read tales like these; it just confirms my beliefs that retirement and old age are not always a dead certainty? Enjoy it why you have it, because it ain't no rehearsal!
http://news.bbc.co.uk/1/hi/uk/8256260.stm
http://news.bbc.co.uk/1/hi/entertainment/8256033.stm
Its funny really, that amount would be just perfect for me, take me nicely into old age at 65, let the state deal with me then hey?
.
.
Capital amount = $800k
Yield return after tax = 3%
Inflation per annum = 3%
Annual % yield can rise and fall with annual inflation.
Initial weekly pay = $700.00 rising 3% per month
Years until cash runs out = 23 years and four months.
So with my calculation, $800K will last 23.3 years, so taking $700.00 for the first week, and this amount rising 3% every month until the capital has gone. You are recieving 3% interest on the remaining capital after each month amount has been paid out.
A very realistic example. Net yield after tax in my example will always match the annual inflation rate.
Year Capital Year Interest Year Pay Left after year
1 800000 23829 0 -36499 787330
2 787,330 23,429 0 -37,609 773,150
3 773,150 22,982 0 -38,753 757,378
4 757,378 22,486 0 -39,932 739,932
5 739,932 21,938 0 -41,147 720,724
6 720,724 21,337 0 -42,398 699,663
7 699,663 20,678 0 -43,688 676,654
8 676,654 19,960 0 -45,016 651,597
9 651,597 19,179 0 -46,386 624,391
10 624,391 18,332 0 -47,796 594,927
11 594,927 17,416 0 -49,250 563,093
12 563,093 16,427 0 -50,748 528,772
13 528,772 15,362 0 -52,292 491,842
14 491,842 14,217 0 -53,882 452,176
15 452,176 12,988 0 -55,521 409,643
16 409,643 11,671 0 -57,210 364,104
17 364,104 10,262 0 -58,950 315,415
18 315,415 8,756 0 -60,743 263,428
19 263,428 7,149 0 -62,591 207,987
20 207,987 5,437 0 -64,494 148,930
21 148,930 3,613 0 -66,456 86,087
22 86,087 1,674 0 -68,477 19,284
23 19,284 106 0 -19,390 0
Sir Rover!
P.S.
The reason i want it all spent, or would want it all spent, is when i wake up and read tales like these; it just confirms my beliefs that retirement and old age are not always a dead certainty? Enjoy it why you have it, because it ain't no rehearsal!
http://news.bbc.co.uk/1/hi/uk/8256260.stm
http://news.bbc.co.uk/1/hi/entertainment/8256033.stm
Its funny really, that amount would be just perfect for me, take me nicely into old age at 65, let the state deal with me then hey?
.
.
Now everyone is different. That 700 bucks per week would seriously lower our standard of living, so we would need a chunk more than that at least 80 pct more. Our house is more or less paid off, guess where the bulk of our money goes now.... on our kids. The more you have the more you spend, Its very hard to knock back kids when it comes to "educational expenses"
To rent a similar house as ours at present would cost at least 450 bucks, so thats at least half a wage on housing per pweek. We are looking at lowering our working week hours not bloody raising them.
Everyones an indvidual like I said before.
Good luck with your choices.
Last edited by ozzieeagle; Sep 15th 2009 at 12:51 pm.
Sep 15th 2009, 8:03 pm
#124
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Thread Starter
Joined: Feb 2008
Posts: 421
Re: Australia has a sh!tstorm waiting to happen!
You could be talking yourself into an early grave, so be careful with this. The Retirement age in Aus is already 67 so you need to make an adjustment for that. It could well be higher by the time you reach it.
Now everyone is different. That 700 bucks per week would seriously lower our standard of living, so we would need a chunk more than that at least 80 pct more. Our house is more or less paid off, guess where the bulk of our money goes now.... on our kids. The more you have the more you spend, Its very hard to knock back kids when it comes to "educational expenses"
To rent a similar house as ours at present would cost at least 450 bucks, so thats at least half a wage on housing per pweek. We are looking at lowering our working week hours not bloody raising them.
Everyones an indvidual like I said before.
Good luck with your choices.
Now everyone is different. That 700 bucks per week would seriously lower our standard of living, so we would need a chunk more than that at least 80 pct more. Our house is more or less paid off, guess where the bulk of our money goes now.... on our kids. The more you have the more you spend, Its very hard to knock back kids when it comes to "educational expenses"
To rent a similar house as ours at present would cost at least 450 bucks, so thats at least half a wage on housing per pweek. We are looking at lowering our working week hours not bloody raising them.
Everyones an indvidual like I said before.
Good luck with your choices.
You sound like a family man with commitments in a good position, like you say all different.
But this was from 18 months ago;
http://www.shelteroffshore.com/index...operty-prices/
Gobsmacked on how anyone can actually state that property in Australia is relatively good value in comparison to a wage, and will not have a big effect on long term happiness for the country?
Strange one, really is.
Sep 15th 2009, 10:35 pm
#125
Lost in BE Cyberspace
Joined: Feb 2005
Posts: 15,526
Re: Australia has a sh!tstorm waiting to happen!
One of the worst feelings I've ever had in my life was around 4 weeks after I took a substantial redundancy package after 16 years at the Gas and Fuel here in Vic, after they became privatised. I joyously paid out my House.
For Two weeks everything was fine. Then the slow realisation hit after 3 or 4 job knockbacks, that at age 41 It was possible that I may never find full time employment again. It was just on the start of the last recession, which was far worse in Australia than this one. That was almost 14 years ago.
I had a 1 year old child and two older kids to look after. 6 months it took me to get a job not only was I cacking it, I was getting depressed as well. Sure I could have sold the house, but without work as a solid base then things start to look bleak.... that can happen to anyone I've realised. My House has probably tripled in value since that time. Luckily one of my contacts came though with the Post office job... just as casual to start off... then I was up and running again.
I never want to have that financial insecurity again. Even though the wife had a decent nursing job, It still felt very dicey.
So in a way I can almost say, been there done that.
For Two weeks everything was fine. Then the slow realisation hit after 3 or 4 job knockbacks, that at age 41 It was possible that I may never find full time employment again. It was just on the start of the last recession, which was far worse in Australia than this one. That was almost 14 years ago.
I had a 1 year old child and two older kids to look after. 6 months it took me to get a job not only was I cacking it, I was getting depressed as well. Sure I could have sold the house, but without work as a solid base then things start to look bleak.... that can happen to anyone I've realised. My House has probably tripled in value since that time. Luckily one of my contacts came though with the Post office job... just as casual to start off... then I was up and running again.
I never want to have that financial insecurity again. Even though the wife had a decent nursing job, It still felt very dicey.
So in a way I can almost say, been there done that.
Last edited by ozzieeagle; Sep 15th 2009 at 10:39 pm.
Sep 15th 2009, 11:09 pm
#126
Account Open
Joined: Jan 2005
Location: Brisbane
Posts: 4,298
Re: Australia has a sh!tstorm waiting to happen!
P.S.
The reason i want it all spent, or would want it all spent, is when i wake up and read tales like these; it just confirms my beliefs that retirement and old age are not always a dead certainty? Enjoy it why you have it, because it ain't no rehearsal!
http://news.bbc.co.uk/1/hi/uk/8256260.stm
http://news.bbc.co.uk/1/hi/entertainment/8256033.stm
Its funny really, that amount would be just perfect for me, take me nicely into old age at 65, let the state deal with me then hey?
.
.
The reason i want it all spent, or would want it all spent, is when i wake up and read tales like these; it just confirms my beliefs that retirement and old age are not always a dead certainty? Enjoy it why you have it, because it ain't no rehearsal!
http://news.bbc.co.uk/1/hi/uk/8256260.stm
http://news.bbc.co.uk/1/hi/entertainment/8256033.stm
Its funny really, that amount would be just perfect for me, take me nicely into old age at 65, let the state deal with me then hey?
.
.
Don't count on reaching 65 and suddenly thinking "time to kick the bucket now". You might just reach 65 and think to yourself - hang on a minute, it isn't that bad after all !
heh heh..
Sep 16th 2009, 12:06 am
#127
Guest
Posts: n/a
Re: Australia has a sh!tstorm waiting to happen!
I decided to have a look at you example, i am time rich!
Capital amount = $800k
Yield return after tax = 3%
Inflation per annum = 3%
Annual % yield can rise and fall with annual inflation.
Initial weekly pay = $700.00 rising 3% per month
Years until cash runs out = 23 years and four months.
So with my calculation, $800K will last 23.3 years, so taking $700.00 for the first week, and this amount rising 3% every month until the capital has gone. You are recieving 3% interest on the remaining capital after each month amount has been paid out.
Capital amount = $800k
Yield return after tax = 3%
Inflation per annum = 3%
Annual % yield can rise and fall with annual inflation.
Initial weekly pay = $700.00 rising 3% per month
Years until cash runs out = 23 years and four months.
So with my calculation, $800K will last 23.3 years, so taking $700.00 for the first week, and this amount rising 3% every month until the capital has gone. You are recieving 3% interest on the remaining capital after each month amount has been paid out.
Buy 2 properties for $400,000 each (ie about 80% of median price)
Rent both out at $350 pw each, with rent increasing at 3% or inflation
Assume that property values dropped by 40% the next year, but then rose at 3% per year to keep pace with inflation
These two properties would be worth $864,000 between them after 23 years.
Net result, only slightly less income for those 23 years, but an asset of $864,000 still available
At that point you could do a reverse mortgage, which allows you to spend your asset in old age, whilst still receiving the rent as well.
Even if property was to drop 'another' 50%, (down to 1.5 times average wage) the asset would still be worth $432,000, whilst your example has nothing left...
But imagine if property didn't drop, and just stayed at the current wage multiple...
Something to ponder on ?
I compare myself to another specific person, we both had the same chances in life.
I bought a house, then upgraded etc.
He rented and paid the landlords mortgage for him.
Now at retirement, I own my place to live.
He is in council accommodation.
Choices. He may actually be happy with his choice. I know I am.
Sep 16th 2009, 12:06 am
#128
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Joined: Feb 2008
Posts: 421
Re: Australia has a sh!tstorm waiting to happen!
You would have more than $700 per week because your interest would usually be paid on a monthly basis and tax on an annual basis. I reckon $870 per week rising at 3% per annum is roughly right.
Don't count on reaching 65 and suddenly thinking "time to kick the bucket now". You might just reach 65 and think to yourself - hang on a minute, it isn't that bad after all ! heh heh..
Don't count on reaching 65 and suddenly thinking "time to kick the bucket now". You might just reach 65 and think to yourself - hang on a minute, it isn't that bad after all !
heh heh..http://www.mutualofomaha.com/tools/c...tors/?id=bud05
Like for like US/Oz Dollar?
Sep 16th 2009, 3:23 am
#129
BE Enthusiast
Joined: Mar 2009
Posts: 704
Re: Australia has a sh!tstorm waiting to happen!
Something to ponder on ?
I compare myself to another specific person, we both had the same chances in life.
I bought a house, then upgraded etc.
He rented and paid the landlords mortgage for him.
Now at retirement, I own my place to live.
He is in council accommodation.
Choices. He may actually be happy with his choice. I know I am.
I compare myself to another specific person, we both had the same chances in life.
I bought a house, then upgraded etc.
He rented and paid the landlords mortgage for him.
Now at retirement, I own my place to live.
He is in council accommodation.
Choices. He may actually be happy with his choice. I know I am.
I'm a serial expat, and likely to continue to be (Australia is my 4th country of residence, and I'm currently negotiating on my 5th). I've long since recognised that making the "renter" lifechoice pay off requires stringent redirection of current-expense savings into longterm, preferably tax-sheltered, savings vehicles.
The good news is that a market like Australia's -- a very attractive place to live -- also features rent-minimising elements like negative gearing for landlords. In my 4 years here I have yet to pay rent of more than 4% of the current capital value of my residence. In most locations in North America or Europe I would pay 5-7%.
Real-estate investment has had longterm payoffs in some (but by no means all) markets, but it incurs high transaction costs. In my case I haven't been resident in any one place for long enough to offset those.
It isn't all gravy. *My* difficulty is cross-border pension portability, and I would readily admit that I would lose my Renter's advantage if I didn't carefully maneuver my savings within tax-sheltered environments.
But even if I didn't plan to move any further for the rest of my life (i.e. zero transaction costs), there is No Way in Hell I would invest in Australian property right now. Whether or not there is a proper "bubble" here, property is now fully-priced-and-then-some in post-GFC terms.
Sep 16th 2009, 4:31 am
#130
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Re: Australia has a sh!tstorm waiting to happen!
If someone buys a 400k house now, with a 100% deposit they will be paying:
$2,515 pm for 25 years, or a total of $753,841 (at 5.74% p.a)
or
$3,205 per Month for 15 years and $2,843 per Month for 10 years (15 years at 8.44% p.a. and 10 years 5.74% p.a.), or a total of $918,000
The renter, paying $350 pw with 3% increases per year, would pay $664,000 over those 25 years and end with nothing.
However, if they paid the difference between the higher cost of $918,000 and $664,000 into a savings scheme, they could have a final investment of $528,000 if they average 4% net growth per year.
This would compare to the house, that the owner still has, which would only need an annual growth of 1.17% to reach the same value.
After that 25 years, the owner has no more mortgage to pay, whilst the renter continues paying.
If we extended those figure to a 40 year period, the result would be very different.
In your shoes, with moving a lot, I can fully understand your preference. And I would say that I would be the same if I was a 457 visa holder for example.
Sep 16th 2009, 4:42 am
#131
Lost in BE Cyberspace
Joined: Oct 2008
Location: Perth
Posts: 6,775
Re: Australia has a sh!tstorm waiting to happen!
Right, there is no yes or no answer here!
I would rather have $800k worth of cash at present, without question, but no i would not leave it in the bank and withdraw it in 30 years.
I would stick it in the bank, get say at present 5% yield and rising soon. Use this for now to cover my rent, work part time, enjoy the sun and the beer but more importantly the touch of my woman.
Forget the money for a while, leave it, just enjoy life. Now i am not a owner of a house, nor do i want to own a house. But if in the future you did want to buy a house, remember NOT ME here folks. Then there will be some wonderfull oppurtunities in the future, say five years or more.
But as long as you do not spend your capital, only the interest, then you lump sum will not depreciate against property, because property is falling and will keep falling until value again is shown.
Exit timing is crucial, but so is entry should you wish to buy back in at the bottom?
A rough guess, in five years time, you will get a $1.3 million dollar property for your $800k. A guess, but i will not be here in five years, so you will just have to take my word hey?
Me i would use the $800k to fund my lifestyle until it has all gone, i would not work until it has all gone, i would hate the thought of passing on without spending it all, that would be a shame now?
I reckon with interest i could make that last 25 years, i will be dead or too old to enjoy it then in 25 years, but i would have some great memories. You cannot put a price on them.
Rover
I would rather have $800k worth of cash at present, without question, but no i would not leave it in the bank and withdraw it in 30 years.
I would stick it in the bank, get say at present 5% yield and rising soon.
Use this for now to cover my rent, work part time, enjoy the sun and the beer but more importantly the touch of my woman.Forget the money for a while, leave it, just enjoy life. Now i am not a owner of a house, nor do i want to own a house. But if in the future you did want to buy a house, remember NOT ME here folks. Then there will be some wonderfull oppurtunities in the future, say five years or more.
But as long as you do not spend your capital, only the interest, then you lump sum will not depreciate against property, because property is falling and will keep falling until value again is shown.
Exit timing is crucial, but so is entry should you wish to buy back in at the bottom?
A rough guess, in five years time, you will get a $1.3 million dollar property for your $800k. A guess, but i will not be here in five years, so you will just have to take my word hey?
Me i would use the $800k to fund my lifestyle until it has all gone, i would not work until it has all gone, i would hate the thought of passing on without spending it all, that would be a shame now?
I reckon with interest i could make that last 25 years, i will be dead or too old to enjoy it then in 25 years, but i would have some great memories. You cannot put a price on them.
Rover
Plenty of places i know in the world that sort of money or the interest would last one a life time.
Talk about the housing market be it here in Oz or Britain gets a right royal pain. Hope the lot comes down then perhaps we can move on and life a bit.
Sep 16th 2009, 4:54 am
#132
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Re: Australia has a sh!tstorm waiting to happen!
Similar things were said back in the peak days of the early 70's and the late 80's
But big drops didn't happen. Growth just slowed dramatically, until things levelled out. Will it be the same this time, or is it different this time ?
That graph definitely shows one thing though, no stability, but the 1990's and 2000's missed out on the big jumps that were seen in the 70's and 80's.
But big drops didn't happen. Growth just slowed dramatically, until things levelled out. Will it be the same this time, or is it different this time ?
That graph definitely shows one thing though, no stability, but the 1990's and 2000's missed out on the big jumps that were seen in the 70's and 80's.
Sep 16th 2009, 5:20 am
#133
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Joined: Mar 2009
Posts: 704
Re: Australia has a sh!tstorm waiting to happen!
Similar things were said back in the peak days of the early 70's and the late 80's
http://www.retireonproperty.com/prop...age_2481_1.png
But big drops didn't happen. Growth just slowed dramatically, until things levelled out. Will it be the same this time, or is it different this time ?
That graph definitely shows one thing though, no stability, but the 1990's and 2000's missed out on the big jumps that were seen in the 70's and 80's.
http://www.retireonproperty.com/prop...age_2481_1.png
But big drops didn't happen. Growth just slowed dramatically, until things levelled out. Will it be the same this time, or is it different this time ?
That graph definitely shows one thing though, no stability, but the 1990's and 2000's missed out on the big jumps that were seen in the 70's and 80's.
e.g. after the peaks of 1953, 1976, and 1992, it took 3-5 years for the market to stop declining, and more than a decade to recover the previous peak values...
Sep 16th 2009, 5:41 am
#134
Guest
Posts: n/a
Re: Australia has a sh!tstorm waiting to happen!
It's far more interesting and useful to look at inflation-adjusted values...
http://www.whocrashedtheeconomy.com/...1880to2008.gif
e.g. after the peaks of 1953, 1976, and 1992, it took 3-5 years for the market to stop declining, and more than a decade to recover the previous peak values...
http://www.whocrashedtheeconomy.com/...1880to2008.gif
e.g. after the peaks of 1953, 1976, and 1992, it took 3-5 years for the market to stop declining, and more than a decade to recover the previous peak values...
The point being that in those earlier years people said the same things, they expected prices to drop, but they didn't.
The question is... will it be different this time ?
It is irrelevant as to if, and when, and how long it takes, to peak again.
Will prices drop, or will they just stagnate again until they reach a figure of say 3 x average household salary again ?
Working on these figures:
A ratio of Median House Price to Median Household income.
A house is "Affordable" if the ratio is 3.0 or less.
It's "Moderately unaffordable" if the ratio is 3.1 to 4.0.
It's "Seriously Unaffordable" if the ratio is 4.1 to 5.0.
It's "Severely Unaffordable" if the ratio is 5.1 or more.
A house is "Affordable" if the ratio is 3.0 or less.
It's "Moderately unaffordable" if the ratio is 3.1 to 4.0.
It's "Seriously Unaffordable" if the ratio is 4.1 to 5.0.
It's "Severely Unaffordable" if the ratio is 5.1 or more.
If your household income is $100,000 then an affordable house is under $300,000
If your household income is $150,000 then an affordable house is under $450,000
Sep 16th 2009, 5:58 am
#135
Lost in BE Cyberspace
Joined: Feb 2005
Posts: 15,526
Re: Australia has a sh!tstorm waiting to happen!
Affordable Mortgage I think you mean