Amazulu

http://www.telegraph.co.uk/finance/e...ationwide.html

PS I, like all the 'experts' on here, don't know what will happen to house prices, so I am posting this to add to the newsgroup only - this is not my opinion.

Happy New Year.

WillBlack

Lego MockMansions:

Alfresco

Was on the news this morning that they have gone up by 5.9% in 2009.

http://www.nationwide.co.uk/mediacen...is.asp?ID=1504

There's hope.

sr71

So what does that work out as 7% per annum.

So you would have made a better investment finding savings accounts or term deposits that pay that or above.

Alfresco

Depends on how much money you put in to begin with. You could borrow 100% mortgage 10 years ago, but unlikely you would have got 100% capital to put into an investment fund from a bank. You would have had to use your own money.

I have bought all my properties so far on 100% mortgages i.e. haven't had to use any of my own money. When I sell them I have essentially made profit on borrowed money.

spartacus

Fark offfffffff!

BadgeIsBack

Always on about money. Is my house negatively geared, shall I sell up?
Will the girls like this, will the girls like that.

renth

"Residential property. The median Australian house price is up a whacking great 127% since 2000. That, for you maths fans, is a doubling in price in ten years.

Not bad. Although not quite as good as it sounds. Unless you paid the full purchase price in cash of course, then we'll admit you've 'done good.'

But for most people, they don't pay cash for a house. They take out a loan. And loans cost money, even when interest rates are low.

So if we assume a $150,000 loan on say a $160,000 house, then according to website yourmortgage.com.au, the average annual cost of 'owning' that $160,000 house is...

$13,672. Or, $136,720 over the last ten years. And that's not including the one-off costs for the initial purchase of $18,458.

Sooooo, the real return on that median Australian house - which is now supposedly worth $363,200 - over the last ten years is a not so impressive sounding 30%. Or 2.6% per annum.

It's no wonder the property spruikers are so keen for house prices to double every 7-10 years. When you're leveraged up to that extent, house prices have to double just for you to break even on your 'investment.' "

Better off in cash than property!

But let's not just poke a stick at the property spruikers. The share spruikers need a slap around the chops as well.

According to the Herald Sun, "The All Ordinaries index of 500 companies is up 49 per cent over the past 10 years."

Whoopee! That's the result of Craig James' buy and hold strategy for you. A 49% gain over ten years.

Or to put it another way, that's a 4% return per annum.

But let's put it in a different way. In a way that emphasises how disastrous the buy and hold strategy is for investors.

Funnily enough, the Herald Sun article doesn't mention what your return would be over the last ten years if you had just invested in cash. We wondered why. And then we did the numbers and worked out exactly why...

The second best performing investment - after gold - over the last ten years wasn't really property. And it wasn't even shares. It was... CASH.

The Herald Sun tells us the average annual return for cash has been 5.3%. That's better than the 4% per annum from shares, and it's double the 2.6% per annum net return from residential property.

http://www.moneymorning.com.au/20091...-for-2010.html

ABCDiamond

But if it is an investment property, the figures could well look like this:

Net total return, after loan repayment, tax, and selling costs, would be about $160,000. An after tax return of about 21% per year on your initial $25,000 investment.

On the grounds that this is new years day, I will not guarantee the accuracy of my thought process above, although it does sound about right to me at the moment.

Even for Residential Property, they should have taken account of the accommodation cost. Ie: They should reduce the costs by the amount that would otherwise be paid in rent.
That's $262 pw. How much would the cost have been if they hadn't owned it, but had been renting instead ?

NedKelly

It's not even that, when you sell it you can count on Real Estate agents fees, lawyers fees and if you have had it tenanted you will probably have to give it a good makeover and get a gardener in for a week. Budget on 5% for all this so your return is just 2.1%.

NedKelly

Not so fast, when you sell the ATO will add back your depreciation allowances to reduce your original purchase costs. They will do this whether you have claimed them or not. You may well find that your tax bill is a lot higher than you think.

Alfresco

Can someone please work out how much cash I would have had to invest (investment type fund) in Jan 2000 @ 7% in order to realise a nett profit of say $300 000 today (Jan 2010) after all taxes have been paid etc..

Thanks.

ABCDiamond

About $362,000

Alfresco

I thought so.

I'll stick to my property method.

renth

Karl Denninger has some interesting predictions for Australian housing in 2010

http://market-ticker.denninger.net/a...ding-2010.html

"China will lose control of their property and plant bubble - with horrible consequences. They're good at the game, but that which can't go on forever won't. I bet it blows up before the end of the year. If so, Australia's property market better watch out - they're levitating on the strength of China's commodity demand and pricing there is California-style.

Contrary to virtually EVERY "investment pundit" on the street today return OF capital will once again assert itself as the primary consideration. Sentiment indicators as of 12/31, along with 52-week highs, all are at levels that have been associated with tops on a historical basis. Treasury has to issue $2.5 trillion this year, while we all cheered when they issued $1.5 trillion last year - and got away with it. China has housing trading at 80x average incomes, Australia and parts of Canada have housing markets at 10x or more average incomes and the banksters and "investors" alike appear to have learned nothing, with "reaching for yield" coming back in force. Ponzi ponzi ponzi! Add to this geopolitical event risk and things get interesting. That which can't continue forever won't - we merely argue over timing, not outcome. I'll lay the marker on one or more of these timers reaching zero in 2010."