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Good News: Treasury pushing remodel of Negative Gearing for only new homes!; Corrupt and vested real estate interest run for cover!
Topic Started: 14 Aug 2014, 09:26 PM (33,860 Views)
propertymogul
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Shadow
28 Aug 2014, 05:02 PM
It doesn't say a 'further' 50% at all. It says 50% within 5 years, which would include the 25% within 12 months.

'According to Mr Matusik’s findings, about 25% of the investors decided to sell within 12 months of purchasing the property and 50% sold within five years'

Still seems too high to me, I'd like to see the source data.


The article doesn't say 75% within 5 years. You made that up.


My logic is that owner occupiers tend to upgrade to bigger homes as their family grows, and move home if they get a job in a new location, or just upgrade as they earn more income and desire a better place, and also downsize later in life when the kids move out. However those life changes don't affect investment properties. Once you have an IP there is really no need to swap it for a different one.
Looks like you are mixed up, it does indeed say 75% sell within 5 years. A quote below from the article.

"Given that most investors understand that property is a long term investment, and buy with the intention of realising long term capital gains, 75% will sell within the first five years. Ironically, it is generally after 5 years that property investments begin to truly realise their capital growth potential."

You say - "Once you have an IP there is really no need to swap it for a different one." There are many reasons for selling for both OO and PI however as the PI does not live in the property it is an easier decision to sell. Additional reasons to sell for PIs vs OOs are as quoted in the article "About one third of investors sold because they needed the money, a quarter due to disappointing capital growth, 20% because of low rental returns, and one in six because they believed owning an investment property was simply too much hassle." On top of these reasons PIs may sell to realise a capital gain if it becomes available where an OO is less likely to do so. And since most PIs are running at a rental loss, many will sell to relieve the drain on their cash flow.
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Shadow
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propertymogul
28 Aug 2014, 05:17 PM
Looks like you are mixed up, it does indeed say 75% sell within 5 years. A quote below from the article.

"Given that most investors understand that property is a long term investment, and buy with the intention of realising long term capital gains, 75% will sell within the first five years. Ironically, it is generally after 5 years that property investments begin to truly realise their capital growth potential."
No, that just means the author who wrote the second hand account of Matusik's survey made the same mistake as you.

25% within 12 months and 50% within five years does not make 75% within five years.

It's nonsense anyway. There are ten million households in Australia, three million of which are investment properties.

If a quarter of them were selling every year as the article claims, that would mean 750,000 investment properties being bought/sold every year.

The total sales volume in Australia is only 500,000 per year (IPs plus OO homes).

Your report from 'Equiti' (whoever that is) is nonsense.
Edited by Shadow, 28 Aug 2014, 05:26 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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propertymogul
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Shadow
28 Aug 2014, 05:23 PM
No, that just means the author who wrote the second hand account of Matusik's survey made the same mistake as you.

25% within 12 months and 50% within five years does not make 75% within five years.

It's nonsense anyway. There are ten million households in Australia, three million of which are investment properties.

If a quarter of them were selling every year as the article claims, that would mean 750,000 investment properties being bought/sold every year.

The total sales volume in Australia is only 500,000 per year (IPs plus OO homes).
Perhaps the author made the mistake of not saying, "an additional" 50%, and the 75% in the article is the correct number. Do you have the results of the survey which could determine which number is correct?

However lets assume that it is 50% that sell within, that is a hell of a lot lower than you anticipated thinking that PIs would hold for longer than 10 years on average.

The 25% churn rate is out of the stock that is bought each year (not out of total PI stock). So if 150,000 PIs (hypothetical) are purchased in a given year, 25% (being 37,500) are then sold within 12 months and make up part of the following years 150,000 (hypothetical) PI purchases.
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Trojan
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propertymogul
28 Aug 2014, 04:54 PM
http://www.equiti.com.au/who-is-the-adverage-australian-property-title/

This link says 75% of PIs sell within 5 years. About 25% decide to sell within 12 mths and a further 50% sell within 5 years. Just as expected. Your claim that PIs would hold for longer than the average OO is ridiculous (what is your logic there?). Nearly 75% of investment properties are held by people aged 45 and over.

A quote from the article re: the 75% selling within 5 years "About one third of investors sold because they needed the money, a quarter due to disappointing capital growth, 20% because of low rental returns, and one in six because they believed owning an investment property was simply too much hassle."
Did you do any investigation to verify the claims?
Maybe 25% of property investors sell within 12 months (I have no stats to prove either way) but that is very different to 25% of investment properties are sold every year.
I personally find 25% of investment properties selling within 12 months very hard to believe.

There are roughly 9 mil properties in Australia.
Roughly 1/3 are investment properties or 3 mil.

Do you think 25% of 3mil properties (750,000 properties) sold every year are by property investors who held for less than 12 months?

Yet RBA's 2010 figures show the total number of properties sold every year is roughly 500,000 .... and that includes all property investors and all owner occupiers.
http://www.rba.gov.au/publications/bulletin/2010/jun/1.html
Even if you allow for rounding errors and growth since 2010, I find it very hard to believe that every single property sold on the market is by a property investor who held for less than 12 months and no one else is selling.

This doesn't pass basic sanity check.
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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propertymogul
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Trojan
28 Aug 2014, 05:33 PM
Did you do any investigation to verify the claims?
Maybe 25% of property investors sell within 12 months (I have no stats to prove either way) but that is very different to 25% of investment properties are sold every year.
I personally find 25% of investment properties selling within 12 months very hard to believe.

There are roughly 9 mil properties in Australia.
Roughly 1/3 are investment properties or 3 mil.

Do you think 25% of 3mil properties (750,000 properties) sold every year are by property investors who held for less than 12 months?

Yet RBA's 2010 figures show the total number of properties sold every year is roughly 500,000 .... and that includes all property investors and all owner occupiers.
http://www.rba.gov.au/publications/bulletin/2010/jun/1.html
Even if you allow for rounding errors and growth since 2010, I find it very hard to believe that every single property sold on the market is by a property investor who held for less than 12 months and no one else is selling.

This doesn't pass basic sanity check.
I agree and I never claimed that 25% of investment properties are sold every year, and neither did the article. That is the conclusion that Shadow (and it seems yourself) are drawing. I understand it as the article reads i.e. "about 25% of the investors decided to sell within 12 months of purchasing the property " The only way to interpret that (I think) is that out of the property investors that buy in a given year, 25% sell within 12 months. Wouldn't you agree?
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Shadow
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propertymogul
28 Aug 2014, 05:31 PM
However lets assume that it is 50% that sell within, that is a hell of a lot lower than you anticipated thinking that PIs would hold for longer than 10 years on average.

The 25% churn rate is out of the stock that is bought each year (not out of total PI stock).
In that case the survey is of no use to this debate. If it ignores the vast bulk of existing investment properties (3 million of them) and only focuses on IPs that transacted around the year of the survey, then all the long term buy and hold investors were excluded from the survey. There are millions of investment properties in Australia. I expect the bulk them have been held for decades and were cashflow positive a long long time ago by the time they sell. Your survey is focusing on the 'churn' rather than the entire stock of IPs.
Edited by Shadow, 28 Aug 2014, 05:55 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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Trojan
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propertymogul
28 Aug 2014, 05:38 PM
I agree and I never claimed that 25% of investment properties are sold every year, and neither did the article. That is the conclusion that Shadow (and it seems yourself) are drawing. I understand it as the article reads i.e. "about 25% of the investors decided to sell within 12 months of purchasing the property " The only way to interpret that (I think) is that out of the property investors that buy in a given year, 25% sell within 12 months. Wouldn't you agree?
Initially you were using that article to extrapolate how long an typical investment property is held (and therefore never reached positive gearing)
Now you are saying this only applies to a tiny sub-section?
Edited by Trojan, 28 Aug 2014, 05:44 PM.
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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propertymogul
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Shadow
28 Aug 2014, 05:39 PM
In that case the survey is of no use. If it ignores the vast bulk of existing investment properties (3 million of them) and only focuses on IPs that transacted around the year of the survey, then all the long term buy and hold investors were excluded from the survey. There are millions of investment properties in Australia. I expect the bulk of them have been held for decades and were cashflow positive a long long time ago. Your survey is focusing on the 'churn' rather than the entire stock of IPs.
The problem with your theory is that the average PI is negatively geared. If the bulk of PIs have been "held for decades and were cashflow positive a long long time ago" then there would be a net rental gain across all properties.

You are making claims that conflict with the data Shadow. On the one hand you think most PIs hold for decades and are cashflow positive, and yet 62% of properties are negatively geared. Either one (or both) of your two assumptions can't be true for 62% of properties to be negatively geared. Either PIs don't hold for as long as you think on average, or PIs take much much longer than you think to become positively geared. Or both. I think it's both, but what do you think?
Trojan
28 Aug 2014, 05:43 PM
Initially you were using that article to extrapolate how long an typical investment property is held (and therefore never reached positive gearing)
Now you are saying this only applies to a tiny sub-section?
What is your position then Trojan? Australia wide all PIs are claiming a net rental loss in the billions. 62% of properties are negatively geared. Do you think that most PIs hold for longer than 10 years? If that is the case then why are most negatively geared?
Edited by propertymogul, 28 Aug 2014, 05:54 PM.
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Shadow
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propertymogul
28 Aug 2014, 05:52 PM
You are making claims that conflict with the data Shadow. On the one hand you think most PIs hold for decades and are cashflow positive, and yet 62% of properties are negatively geared. Either one (or both) of your two assumptions can't be true for 62% of properties to be negatively geared. Either PIs don't hold for as long as you think on average, or PIs take much much longer than you think to become positively geared. Or both. I think it's both, but what do you think?
I mean by the time they sell - i.e. I expect the bulk have held for at least a decade and are cash flow positive by the time they sell.

The average holding time for all properties is ten years, and I expect this would be longer for investors since they don't need to change houses for personal reasons - growing/shrinking family, change of workplace location etc.
Edited by Shadow, 28 Aug 2014, 05:58 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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propertymogul
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propertymogul
28 Aug 2014, 05:52 PM
The problem with your theory is that the average PI is negatively geared. If the bulk of PIs have been "held for decades and were cashflow positive a long long time ago" then there would be a net rental gain across all properties.

You are making claims that conflict with the data Shadow. On the one hand you think most PIs hold for decades and are cashflow positive, and yet 62% of properties are negatively geared. Either one (or both) of your two assumptions can't be true for 62% of properties to be negatively geared. Either PIs don't hold for as long as you think on average, or PIs take much much longer than you think to become positively geared. Or both. I think it's both, but what do you think?

What is your position then Trojan? Australia wide all PIs are claiming a net rental loss in the billions. 62% of properties are negatively geared. Do you think that most PIs hold for longer than 10 years? If that is the case then why are most negatively geared?
Having said that I will agree with both of you that the survey is of limited use if it applies to the transactions in a particular year. On the flip side, there is still a flaw in both of your arguments where you believe that the average PI - holds for greater than 10 years, and is turning a rental profit, as detailed above.
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