swans

Whem i lved in germany the then wife and I rented a flat near a city centre for around DM600 per month,on a wage of around DM3-4000 per month(tax free status and depending on how much O/T I worked).Then it was around DM4 to the quid.

Moving around some houses would rent out rooms for DM 150 per week.these houses were huge mansions,far more luxurious than I ever dreamed existed.

Then I found out that germany had 100yr mortgages and possibly this funded such large mansions.Imagine buying a rock star mansion in the 60's in the Uk for 15000 quid on a 100yr mortgage.Some of the interest to be paid and some to be capitalised.

Flash forward to today,the capitalised interest has driven the mortgage up to say 200,000 quid,the mansion is worth whatever a rock star mansion is worth these days.even if the bank took half of the equity in the house in exchange for the risk you would still be laughing.

I never found out how a 100yr mortgage worked,so the above info could be a serious error on my part.

One thing that was real,in the mid 70.s Holland and Germany were far far ahead of the UK,it did lead to the dutch disease in Holland as they squandered the gains from oil and gas.

geordie downunder

Steve2009

I'm glad that you recognise that because your post did not seem to hint at these uncertainties.

Examples of same...

Predictions:
Rising Wages
Rising Rents
Rising House Prices

Flawed Assumptions:
Rent of $400 or Mortgage (C+I?) of $600

Invalid Comparison:
$400,000 in realised equity compared to $250,000 in rent payments while ignoring capital repayments and time value of money. EDIT: I may have misinterpreted this part but I think the figures and the relative scale of them need a bit of a reality check.

While your past experiences are a welcome and interesting anecdote they are no indicator of future circumstances or performance.

saoghalbeag

This is interesting reading as I had always seen it the other way around - that Aussies were more focussed on home ownership while Brits were happy to rent. It may be a case of your family's values rather than nationality?? I know my family are obsessed with homeownership - property is a big deal and my grandparents/parents/siblings have always owned their homes as well as having investment properties. As I've moved around a lot I have had to rent rather than buy - although I did purchase a home with my sister a couple of years ago, the sale of which has made my current relocation for a good job possible.

On the other hand the friends I met in the UK had no plans to own their own home as it seemed hopelessly out of their reach, and quite a few had grown up in council owned housing (something of a shock to me as at the time I had never heard of this except in the case of Indigenous housing in central Australia)

I spent most of my time in the NW of Scotland, so not sure if this has an impact on my experience??

It is interesting. Given my family pressure I am definitely saving towards buying my own place, but have read some interesting stuff along the lines of an earlier post about the real and imagined financial gains that come with home ownership. It did seem to be a far greater burden when we owned a house - rates and maintenance, then they added water charges.

I am currently trying to rent in Darwin and it is a nightmare - prices are exhorbitant and you get nothing for your dollar. I am looking at winding myself back to 1998 and having to get a flatmate...

millie20

Hi
We are moving to Darwin from Adelaide at the start of May and we are looking for a short term 3 month rent as we want to buy as soon as possible. If anyone out there knows of anything ( we have a dog) please let me know, I am getting desperate !!!!!

swans

So what would you expect to happen.over the coming 10 yrs wages will be less than today?

Rents will be cheaper than they are now?

House prices will be far less than now?

The repayment of capital over 10 yrs will be very small on a mortgage,as I said assumptions.

You don"t think that $400 per week is anywhere near what a house rents out at,what would you say rents are?

Say they borrow $400K @ 7% this is $28k per year in interest.At 8% this is $32 K per year in interest.Divide those by 52 and you don"t think the answer would be anywhere near $600?

As for house prices the 10 yrs is quite feasible,learn from history
$400K today

$200K in 2000

$100k in 1990

$50K in 1980

$25 K in 1970


$12.5 K in 1960 and so on,the last 2 look ridiculously high,which means a better return than 7.2% compounding over the last 50 yrs.None of those figures look anywhere near reality ,or it is a reasonable summarising of history? History is useful,but it does not dictate or predict the future

There is no time value to the money,it isn't a bond or an option with an expiry date where inflation and time and interest rates need to be taken into account.

A very simple equation,take reasonable numbers,say an average rent of $600 per week over the coming 10 yrs,round it to 50 weeks per year so (6 x 5) x10,they'll cough up $300k in rent.

mortgage ,well run the model @ 8% and add on a bit for rates etc 35 x 10,the owner will cough $350 k in 10 yrs.

Which numbers would you change,what do you think reality would be?

What would be the financial model you would run to explain it?

Geordie dowunder

Steve2009

I've no interest in getting dragged into yet another protracted discussion about semantics on this site. Yet hear I find myself again...

Main points:
A) No one can accurately predict the future with any degree of certainty. Past events/behaviour are not a guarantee of future events/behaviour.
B) A property that rents for $400 pw cannot be mortgaged for an interest and capital repayment of $600 pw*. If you were referring to interest only then this is equally implausible but the interest payments do not 'buy' the property, they only rent the money.
C) The value of money always has a relationship to time.

*Where most people want to live i.e. not in rural backwater mining towns.

swans

Keep fooling yourself that reality disappears if you refuse to see it

A0 Exactly as I said assumptions are not facts.

B) NAB give a repayment rate of $613 per week on a $400K loan over 30 yrs.What now,tell me again that it is implausable,$613 is nowhere near $600..Have you any ability in maths?
On an interest only loan you think that 7 x 4 could not be 28,this is iplausable.I can guarantee you 7 x 4 is 28,you can refuse to see it as much as you like,reality will not disappear.Then of course 28K divided by 52 is $538 per week.Tell me that this is nowhere near $600 in your fantasy world.

C) there is no time value to the money,inflation is your friend,wages will probably rise over 10 yrs,rents will probably rise over 10 yrs,and house prices will probably rise over 10 yrs.How does it work in your fantasy world.

I'll repeat,isn't it amazing how people detest reality,a lifetime refusing to see such easy things.That inability to do the maths that a 10 yr old could do instantly.

Simple question,why don't you answer it .What financial model would you run to explain it.You will never be able to answer such a simple question will you.



Goerdie downunder

Steve2009

You're are either missing my point or avoiding it:

A) You stated facts or what purported to be facts without leaving any hint of doubt. I have no such notions of my ability to predict the future with any degree of certainty.

B) This is most infuriating, I will try and maintain the civility that seems beyond you. It is highly unlikely that a property that can be mortgaged for $600 (100% mortgage or the comparison is invalid) can be rented for $400 dollars a week. I am well aware that one can have a mortgage of $600, it is that a mortgage of $600 can be compared to a rent of $400 that is in question. There are also other costs of ownership to be considered that are payable in addition to mortgage interest.

C) If you want to question the concept of time value of money then that is your prerogative. If this is from a position of ignorance then that is your loss.

FYI, I'm not sure you understand the meaning of the word 'assumption'. It is very much connected with taking something as fact.
http://www.thefreedictionary.com/assumption

swans

Reality still hasn't disappeared.I have not stated one fact as I cannot predict the future.I have ran a financial model that is house prices double in 10 yrs.This is a compound return of 7.2% per annum average This may or may not happen.

Repeating nonsense doesn't change reality.I'll do the maths for you and you will never be able to answer the simple question that follows it

A house renting out at $400 per week produces $20K per year in income (yield).The exact figure is $20800 (fact)

$20k is a yield of 5% on 400K.A gross yield of 5% seems reasonable to me,and highly unlikely to you

The question you will never answer..What yield would you expect on a $400K house.How much does it rent out at?

The exact yield of course is 5.2% (fact).I suppose in your world that is nowhere near 5%.

You come out with nonsense that a $400 k mortgage isn't $600 per week,I'll state again Nab give a figure of around $2650 per month to repay the mortgage over 30 yrs.Now the easy maths 2650 x 12 = $31,800 per annum.Divided by 52 this is $612 per week (rounded up)

A question yoy will never be able to answer What do you think the payments would be on a $400k mortgage/

The simple question you will never be able to answer.What financial model would you run to compare.

You will never be able to answer any question will you.

Geordie downunder

swans

So if I assume that newcastle will lose every game for the rest of the season in the tipping ,this will be a fact.Utter shite

If I assume that they will win 1 or 2, possibly draw some,and lose some this will be a fact.Utter shite,assumptions are not facts

Steve2009

You're losing the run of yourself a bit there swans.

First off, I never proposed a model, I highlighted simple and fundamental flaws in your model. I never purported to have one. If there were such a model then the majority would be rich rather than a small minority.

When your assumptions fail the model cannot be relied on and therefore cannot be valid. You have an assumption that property values double every ten years. This cannot be predicted with any degree of certainty and I believe it's highly unlikely to have been the average experience in the past.

A yield of 5% in the current market would be very good and in my opinion exceptional. I think yields are more likely to be of the order of 3.5%. It seems to be the first time you have asked this question or even addressed the point coherently.

I have never state that a $400,000 mortgage is not $600 per week. This is a fabrication on your part.

Steve2009

Have you read the definition?

No, your assumptions are not facts. They are things which you have taken to be fact. When you are proved wrong then these are invalid assumptions. If you are proven correct then they were valid assumptions.

Investing a large portion of your life's income is a little bit bigger of a commitment than entering a footy tipping competition and you should hope that your assumptions are a little more solid.