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First home buyers could soon use superannuation to buy property; Nick Xenophon will introduce legislative changes in the spring session of parliament
Topic Started: 28 Jul 2014, 05:33 PM (16,485 Views)
Jimbo
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stinkbug
1 Aug 2014, 11:22 PM
I understand you think property is expensive, but what are your thoughts on the alternate strategy I presented above.

Bear in mind that time is your friend in that inflation pushes nominal prices and rents up, and pushes the real value of debts down.

If you never plan to sell your properties, but simply own them outright and collect rent, are medium term price fluctuations a problem? Consider too that well bought property provides you with an upgrade path (reno, redevelopment, etc), whereas shares and commodities don't.

Your thoughts?
It works for a while.

You buy, prices go up, rentals go up and you have a positive cashflow forever.

But you could buy, prices could drop, rents could drop, vacancy rates could increase. There is no reason that couldn't happen (ask any Perth investor who bought in the last six months).

You are lucky (maybe shrewd) in that you got in early but for any speculative investment to grow it needs new capital input at the base of the inverted pyramid to keep it going.

Real economic growth requires value adding. Turning dirt into steel is value adding. Turning wheat into bread is value adding.

Buying and selling and renting out property is purely speculative and although you have done well from it, someone else further down the line is going to get badly burned. I sold 200 oz of Gold at $1800 an ounce having bought for $450 an ounce. I chickened out before it hit $1950 oz but I am not complaining. I made a bloody fortune. The person I sold my gold to at $1800 oz got burned.

The trick is to understand your market. Understand that shit happens and prices drop. Understand that what is true today may well not be true in the morning.

If you have an attitude that property can only ever go up, you will not see the flashing red lights telling you to sell. Conversely, if you are holding off buying until after the correction, you may hold out too long and there may not be a correction.

A good investor knows that the market has two directions and that it can change direction in a flash.

I am not in the bull or the bear camp. I am in the middle watching and waiting.
Matthew, 30 Jan 2016, 09:21 AM Your simplistic view is so flawed it is not worth debating. The current oversupply will be swallowed in 12 months. By the time dumb shits like you realise this prices will already be :?: rising.
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bob
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Jimbo
2 Aug 2014, 12:20 AM

The trick is to understand your market.
And if there is one thing the bears have displayed in abundance, it's that they don't understand the housing market.
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stinkbug
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Jimbo
2 Aug 2014, 12:20 AM
It works for a while.

You buy, prices go up, rentals go up and you have a positive cashflow forever.

But you could buy, prices could drop, rents could drop, vacancy rates could increase. There is no reason that couldn't happen (ask any Perth investor who bought in the last six months).

You are lucky (maybe shrewd) in that you got in early but for any speculative investment to grow it needs new capital input at the base of the inverted pyramid to keep it going.

Real economic growth requires value adding. Turning dirt into steel is value adding. Turning wheat into bread is value adding.

Buying and selling and renting out property is purely speculative and although you have done well from it, someone else further down the line is going to get badly burned. I sold 200 oz of Gold at $1800 an ounce having bought for $450 an ounce. I chickened out before it hit $1950 oz but I am not complaining. I made a bloody fortune. The person I sold my gold to at $1800 oz got burned.

The trick is to understand your market. Understand that shit happens and prices drop. Understand that what is true today may well not be true in the morning.

If you have an attitude that property can only ever go up, you will not see the flashing red lights telling you to sell. Conversely, if you are holding off buying until after the correction, you may hold out too long and there may not be a correction.

A good investor knows that the market has two directions and that it can change direction in a flash.

I am not in the bull or the bear camp. I am in the middle watching and waiting.
How can buying, holding and collecting rent be speculative? Speculation, by definition, means buying and selling. Speculating is what you have done with gold.

Buying, upgrading or developing, and then using the rent to pay for the asset is practically the opposite of that. If I buy and hold forever, eventually living off rent, how does anyone else get burnt?

It seems as though you're a bit stuck in the buy/sell mindset.
---------------------------------------------------------------

While it's true that those who win never quit, and those who quit never win, those who never win and never quit are idiots.

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Jimbo
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stinkbug
2 Aug 2014, 07:55 AM
How can buying, holding and collecting rent be speculative? Speculation, by definition, means buying and selling. Speculating is what you have done with gold.

Buying, upgrading or developing, and then using the rent to pay for the asset is practically the opposite of that. If I buy and hold forever, eventually living off rent, how does anyone else get burnt?

It seems as though you're a bit stuck in the buy/sell mindset.
I didn't buy gold to speculate with. I bought it as an insurance policy.
Property "investors" push up prices for everybody else. This forces people who would have bought, to rent. This increases rental demand and forces rents and yields up. This encourages further "investors" to buy......... rinse and repeat.
Housing costs for people who actually live in houses become a greater proportion of income and this reduces spending in the rest of the economy. It also increases wage demands on employers and makes Australian labour uncompetitive.
Property investment benefits a few at the expense of the remainder.
bob
2 Aug 2014, 12:41 AM
And if there is one thing the bears have displayed in abundance, it's that they don't understand the housing market.
I am not a bear or bull on property in general. I am a bear right now on Perth property.
The difference between a bull and a bear should not be a mindset. The difference should be the prevailing market conditions at the time.
If you are a perma bull or bear on property then you are a fool.
I am bearish Perth property at this moment because the market conditions do not appear to support price increases over the coming year or so.
All markets have their good times and bad times and property is no different.
I may post in six months that Perth property is set for an upswing. I don't know yet though because I don't know what market conditions will be like in six months time.
Edited by Jimbo, 2 Aug 2014, 09:19 AM.
Matthew, 30 Jan 2016, 09:21 AM Your simplistic view is so flawed it is not worth debating. The current oversupply will be swallowed in 12 months. By the time dumb shits like you realise this prices will already be :?: rising.
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Dave
Unregistered

Jimbo
2 Aug 2014, 09:06 AM
I didn't buy gold to speculate with. I bought it as an insurance policy.
Insurance against what event?

Quote:
 
Property "investors" push up prices for everybody else.
How's this different to gold "investors" ?
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stinkbug
Member Avatar


Jimbo
2 Aug 2014, 09:06 AM
I didn't buy gold to speculate with. I bought it as an insurance policy.
Property "investors" push up prices for everybody else. This forces people who would have bought, to rent. This increases rental demand and forces rents and yields up. This encourages further "investors" to buy......... rinse and repeat.
Housing costs for people who actually live in houses become a greater proportion of income and this reduces spending in the rest of the economy. It also increases wage demands on employers and makes Australian labour uncompetitive.
Property investment benefits a few at the expense of the remainder.
I disagree on both your points. Buying an asset in the hope it rises is speculating, not insurance. And plenty of people would rent regardless of price point. That's why the ratio of owners to renters hasn't changed meaningfully in decades.
---------------------------------------------------------------

While it's true that those who win never quit, and those who quit never win, those who never win and never quit are idiots.

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Jimbo
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Dave
2 Aug 2014, 09:31 AM
Insurance against what event?
I had a large amount of liquid capital sitting in the bank. I bought gold as a hedge against a weak Aussie dollar or a large scale financial crisis. I made a lot of fiat currency when I sold my Gold but that was just pure luck. I have been out of Gold for a few years now but I bought Gold again yesterday for exactly the same reasons as before. I haven't bought as much this time and I am not looking for big growth, again it is just to protect other liquid capital.


Dave
2 Aug 2014, 09:31 AM
Insurance against what event?
I had a large amount of liquid capital sitting in the bank. I bought gold as a hedge against a weak Aussie dollar or a large scale financial crisis. I made a lot of fiat currency when I sold my Gold but that was just pure luck. I have been out of Gold for a few years now but I bought Gold again yesterday for exactly the same reasons as before. I haven't bought as much this time and I am not looking for big growth, again it is just to protect other liquid capital.

Edited by Jimbo, 2 Aug 2014, 01:48 PM.
Matthew, 30 Jan 2016, 09:21 AM Your simplistic view is so flawed it is not worth debating. The current oversupply will be swallowed in 12 months. By the time dumb shits like you realise this prices will already be :?: rising.
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Timo
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Dam
28 Jul 2014, 05:45 PM
if this proposal is serious, it will be an opportunity to buy few cheap ones and flip them to the FHB after the change, easy cash.
Perhaps use your superannuation to go back and finish school?
After a bubble has burst, no one denies that it existed. But before it does, the popular refrain is that though bubbles existed elsewhere in the world, “there’s no bubble here”. So housing bubbles are admitted to have existed in Japan, the USA, Spain and Ireland – because they’ve already burst.
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herbie
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Timo
3 Aug 2014, 09:29 PM
Perhaps use your superannuation to go back and finish school?
I'd incline to becoming some sort of a tradie these days Timo.

Though there's still plenty of medical fields sound promising as well I guess - 'Course the stuff I read recently about the HECS on doc type quals being upped to $250K sounds like a bit of a bummer though?
A Professional Demographer to an amateur demographer: "negative natural increase will never outweigh the positive net migration"
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Bond
Unregistered

I must confess I had the impression that Mr Xenophon was a bit more credible than this.

If affordability is his concern why on earth would he want to publicise on his own website that his ill considered “raid your super and use it to secure a big fat debt” plan is very popular with the debt spruikers.

Talk about clueless.

Either Nick or his policy advisers have been sleeping under a rock for the last 15 years.
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