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The Gold Bubble... Just how badly have the silly goldbugs failed?
Topic Started: 21 Jun 2014, 11:46 AM (27,190 Views)
Rastus2
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Shadow
9 Dec 2015, 08:07 AM
In the context of this discussion, you described both gaps as 'huge'. In reality, the gap between property yield and gold yield is huge, but the gap between property holding costs and gold holding costs is small. Therefore it's only a partial offset. Holding costs on property are tiny fraction of the rental income.


If you want to apply leverage in each case, then the income return on property is still far higher than on gold. With leveraged property, the rent fully or partially covers the interest repayments. With leveraged gold, there's no yield to cover the interest repayments.

lol, it was a typo... "huge gap between holding and maintence costs."

I did not say that it was equally huge... I think your reading too much into my post.

The gap between gold holding costs and property holding costs are not that small in my opinion... a factor of 3 or 4 is not small.


I accpet your point about borrowing gold and property -> holding costs of gold equally skyrocket... it's certainly not an asset that is bought for yield.... you can have that point :D


so it seems we are in violent agreement.

Gold has zero yield, property has some, but it is offset by it's holding costs which are more than gold's holding costs... you consider the diff. in holding costs to be small, I consider them to be significant.

Holding costs are significant for property.. over time, they really add up...

You seemed to ignore my point that property improvements are what drives yields so they have to be included in the holding costs... this usually means you know you were wrong and don't want to talk about it, so I'll take that point. :D


Over 100 years, the real holding costs of property (even one that is not mortgaged) are significant... if, by that 100 years, like most properties around Australia, it is knocked down and rebuilt, that is today's value of the property, it delivers today's yield... and all the costs of those years of repairs, maintence, gardening, landscaping, major reno's, insurance, rates, etc, etc, etc are the real holding costs.. cherry picking select items and ignoring the real costs is simply not realistic.

Gold's holding costs are what they are... there were not reno's, repairs, rates, landscaping, maintence, etc etc etc costs... although there are obviously some minor costs associated with secure storage (unless you know someone who has a bank valut and can ask them to throw it in for you).
Shadow - Defrauded his Bank ? 2015 I have 9 different loans and my bank had no idea which ones were personal and which were investment. They had half of them classed incorrectly. When this change came in they asked me to tell them if any personal loans were incorrectly classed as investment, which I did, and they switched them to personal for the lower rate. They also had a couple of investment loans incorrectly classed as personal. They didn't ask me about those. So they stay on the lower rate too. Worked out pretty well. :)
Shadow - 2008 Sydney Median House Price 1.25M by 2014-2015

Shadow : I think this boom has already begun in several cities. My prediction :
Peak of boom: 2014-2015. Sydney Median Price: $1,250,000 Bottom of bust: 2017-2018. Sydney Median Price: $1,100,000

Shadow's Original 2010 House Boom and Crash prediction http://s836.photobucket.com/user/rastus22/media/shady-orig-2010-chart.png.html?sort=3&o=0

Shadow's attempt to edit his 2010 chart in 2015 and replace it with one that does not show a crash in 2013 http://s836.photobucket.com/user/rastus22/media/Screen%20Shot%202015-06-06%20at%207.12.52%20pm_1.png.html
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Ex BP Golly
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Trollie
8 Dec 2015, 03:27 PM
Who gives a fuck if it's in a shit area, all I care about is the money it pays me. All mine are low cost and cash flow positive at this point.
Interesting investment strategy. Worst house in the worst street in the worst suburb.

I can see it now!
WHAT WOULD EDDIE DO? MAAAATE!
Share a cot with Milton?
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Shadow
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Evil Mouzealot Specufestor

Rastus2
9 Dec 2015, 08:48 AM
You seemed to ignore my point that property improvements are what drives yields so they have to be included in the holding costs
Improvements are optional. Increasing yield is optional. The yield still exists without improvements.

Quote:
 
Over 100 years, the real holding costs of property (even one that is not mortgaged) are significant
Rent collected on a $1M property over 100 years will be roughly $12.5M, assuming 4% rental yield and only 2% house price growth.

Any holding costs pale to insignificance.
Edited by Shadow, 9 Dec 2015, 09:33 AM.
1. Epic Fail! Steve Keen's Bad Calls and Predictions.
2. Residential property loans regulated by NCCP Act. Banks can't margin call unless borrower defaults.
3. Housing is second highest taxed sector of Australian Economy. Renters subsidised by highly taxed homeowners.
4. Ongoing improvement in housing affordability. Australian household formation faster than population growth since 1960s.
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Strindberg
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On another thread here it has been shown that over the last 115 years the capital growth of Auissie houses has been ~6% pa and that for gold to be ~4.5% pa, resulting in Aussie house capital growth since 1900 being about 857 fold and that of gold about 170 fold, ie house capital growth has been about five times that of gold.

This advantage is further increased by the greater net yield of houses over gold.

Typical gross rental yields in Australia are ~4%. Maintenance, rates and insurance for a typical $500k house amount to about $5k ie about 1% of the value of the house.

Thus net rental yield for a house is about +3% of the value of the house.

According to this Bloomberg article the cost of storing and insuring gold is about 0.5% to 1.0% of its value each year. So the net yield on gold is let's say minus 0.5% pa.

Summary

Average capital gain per annum since 1900:
- Aussie houses +6%
- Gold +4.5%

Typical net yield today:
- Aussie houses +3%
- Gold minus 0.5%

Edit add: We can also consider a situation where the house and gold are purchased with leverage. Interest charges for a housing loan are typically about 5% per annum. It may be possible for a gold purchaser to obtain a similar interest rate. In that case the leverage would make no difference to the comparison between an owner occupier purchaser and a gold purchaser - both would pay a similar interest rate. However, as houses are income earning assets, an investor would typically be able to reduce his 5% interest charges to about 3% through negative gearing. Such option is not available to a gold purchaser. Thus the leveraged gold investor would pay more than the house investor - typically 2% more each year.
Edited by Strindberg, 9 Dec 2015, 10:24 AM.
Housing costs to Income broadly unchanged since 1994 - re-ratified here
The People of Australia have the highest median wealth in the World
2002-2012 10 year house price growth the SLOWEST since 1952-1962
"There are two kinds of people in this world: ones that fiddle around wondering whether a thing's right or wrong and guys like us." (Hugo to Gagin in Ride the Pink Horse)
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Rainbow
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Rastus2
9 Dec 2015, 08:48 AM
Over 100 years, the real holding costs of property (even one that is not mortgaged) are significant... if, by that 100 years, like most properties around Australia
100 years, we'll all be dead, clutching at straws much lol?
how about we study the last 7 years, sydney property price doubled and gold price went backwards :D
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Trojan
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The mere fact there are so many threads by goldbugs whinging about high house prices and none of house owners whinging about high gold prices says spades about which asset has earnt the owner more money.
I put trolls and time wasters on my ignore list so if I don't respond to you, you are probably on it ....
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GloomBoomDoom
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Shadow
8 Dec 2015, 07:44 PM
Are you now claiming renters spend $0 on any expense related to the lawn or garden... ever?
I've never spent a cent on the garden or outdoor areas in about 15 years. Someone eventually deals with it but I'm not sure who or when :) Normally I notice the light through the curtain is brighter or the street noise is a bit louder. I look outside and everything is stripped right back.
MSE
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Rastus2
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Shadow
9 Dec 2015, 09:32 AM
Improvements are optional. Increasing yield is optional. The yield still exists without improvements.


Rent collected on a $1M property over 100 years will be roughly $12.5M, assuming 4% rental yield and only 2% house price growth.

Any holding costs pale to insignificance.
Both are optional, both happen, both are expenses that are related to holding a house.

If you wish to cite yields that are happening in the real world (which you did), you need to understand that to achieve those yields, real world improvements also happened.


Yes, the renovations, improvements etc were optional... but since they were done, they delivered the yield that you are clinging to... they cost money.

Quote:
 

Any holding costs pale to insignificance.



Do they ? oh good.

So you have calculated 12.5M return (assuming you do not let the property fall into dissrepair, and assuming you do enough reno's/extensions to match the average house over 100 years)... you have also taken a 2% rise per year calculation..

Sooo... what what, exactly, is the value of the holding costs when you add up everything associated with owning ?

How pale is it ?
Shadow - Defrauded his Bank ? 2015 I have 9 different loans and my bank had no idea which ones were personal and which were investment. They had half of them classed incorrectly. When this change came in they asked me to tell them if any personal loans were incorrectly classed as investment, which I did, and they switched them to personal for the lower rate. They also had a couple of investment loans incorrectly classed as personal. They didn't ask me about those. So they stay on the lower rate too. Worked out pretty well. :)
Shadow - 2008 Sydney Median House Price 1.25M by 2014-2015

Shadow : I think this boom has already begun in several cities. My prediction :
Peak of boom: 2014-2015. Sydney Median Price: $1,250,000 Bottom of bust: 2017-2018. Sydney Median Price: $1,100,000

Shadow's Original 2010 House Boom and Crash prediction http://s836.photobucket.com/user/rastus22/media/shady-orig-2010-chart.png.html?sort=3&o=0

Shadow's attempt to edit his 2010 chart in 2015 and replace it with one that does not show a crash in 2013 http://s836.photobucket.com/user/rastus22/media/Screen%20Shot%202015-06-06%20at%207.12.52%20pm_1.png.html
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Shadow
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Evil Mouzealot Specufestor

Rastus2
9 Dec 2015, 03:25 PM
Yes, the renovations, improvements etc were optional... but since they were done, they delivered the yield that you are clinging to... they cost money
No. Only maintenance is required to maintain the quoted yield.

Renovations and extensions might increase the yield, but not necessarily, since they would also increase the property value.

Quote:
 
Sooo... what what, exactly, is the value of the holding costs when you add up everything associated with owning ?
A lot less than the rental income.
Edited by Shadow, 9 Dec 2015, 05:50 PM.
1. Epic Fail! Steve Keen's Bad Calls and Predictions.
2. Residential property loans regulated by NCCP Act. Banks can't margin call unless borrower defaults.
3. Housing is second highest taxed sector of Australian Economy. Renters subsidised by highly taxed homeowners.
4. Ongoing improvement in housing affordability. Australian household formation faster than population growth since 1960s.
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Rastus2
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Shadow
9 Dec 2015, 05:25 PM



Quote:
 
No. Only maintenance is required to maintain the quoted yield.


Right, so let me get this straight, you are now claiming that all of the IP's that have their current yield, but who had work done to improve them from their original purchased condition to their condition today, would have had today's yield regardless... okay... well your wrong.
Quote:
 

No. Only maintenance is required to maintain the quoted yield.

Renovations and extensions might increase the yield, but not necessarily, since they would also increase the property value.

You also seem to be now claiming that if I spend 1M to buy a property, and have a yield of 2%, then when I spend another 500k improving it, and the yield on the purchase price is now better (thanks to the improvements), it should somehow be measured against the costs of improving the property.

On the face of it, that seems reasonable... however, you are forgetting that there was a cost to improve that property value were part of the holding costs.. .they did not magically happen... if the yield today is due to the current condition of the property, then that cost contributed towards it's yield, and is part of the holding costs.

You don't necessarily need to buy a house for 1M, but if you do, your purchase price was 1M... you don't necessarily need to improve that 1M property to one that costs you another 500k, but if you do, that was part of the costs you incurred... it's part of the holding costs.

The current yield of any property that had improvements did not come without some cost...


Now you are free to equate that to gold holding costs if you discover a large number of people who buy gold then 'improve' on it somehow (perhaps they make little coins with their head stamped on it, perhaps they melt it down and make a bath)... however, I think you'll find that the zero yield on gold ensures that improvements are, for the most part, pointless.


Quote:
 

A lot less than the rental income.


Yes, but that's hardly very factual... I thought you were a numbers man, how much less ...
Shadow - Defrauded his Bank ? 2015 I have 9 different loans and my bank had no idea which ones were personal and which were investment. They had half of them classed incorrectly. When this change came in they asked me to tell them if any personal loans were incorrectly classed as investment, which I did, and they switched them to personal for the lower rate. They also had a couple of investment loans incorrectly classed as personal. They didn't ask me about those. So they stay on the lower rate too. Worked out pretty well. :)
Shadow - 2008 Sydney Median House Price 1.25M by 2014-2015

Shadow : I think this boom has already begun in several cities. My prediction :
Peak of boom: 2014-2015. Sydney Median Price: $1,250,000 Bottom of bust: 2017-2018. Sydney Median Price: $1,100,000

Shadow's Original 2010 House Boom and Crash prediction http://s836.photobucket.com/user/rastus22/media/shady-orig-2010-chart.png.html?sort=3&o=0

Shadow's attempt to edit his 2010 chart in 2015 and replace it with one that does not show a crash in 2013 http://s836.photobucket.com/user/rastus22/media/Screen%20Shot%202015-06-06%20at%207.12.52%20pm_1.png.html
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