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If you don't own a home by your 40s, you never will. And you'll end up poorer than those who do.; Silly bears who think they can rent their way to wealth are only fooling themselves...
Topic Started: 10 Oct 2016, 07:29 AM (8,615 Views)
Bardon
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foxbat
11 Oct 2016, 10:18 AM
How much did the currency they value those houses just drop???

http://www.xe.com/currencycharts/?from=GBP&to=USD&view=5Y

So yes in the local currency they have done ok.

I dont see the relevance of bringing forex into it.
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Khaderbhai
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Terry
11 Oct 2016, 10:36 AM
Well yes they do mother cat, however you will not know how much they have to pay for the privilege
Well Roddy, I do know that it's going to cost them more to rent than buy over 70 years, assuming inflation is either flat or positive.

Even at 1% pa deflation, buying still wins.

If we have 2% pa deflation, then the total cost for each option is roughly the same over 70 years.

So it would take average deflation greater than 2% pa for 70 years in order for renting to be the better alternative.

But given that the RBA has a mandate to inflate by 2-3% pa on average, I think 70 years of >2% pa deflation is unlikely.
Edited by Khaderbhai, 11 Oct 2016, 10:44 AM.
Banks can't repossess your home simply because the market value falls. Australia's Consumer Credit Code says consumers aren't liable for things ordinarily outside their control and can't be held to obligations that could only be met by selling their home. Click for details.

"The truth is that there are no good men, or bad men. It is the deeds that have goodness or badness in them. There are good deeds, and bad deeds. Men are just men."
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Terry
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Khaderbhai
11 Oct 2016, 10:41 AM
Well Roddy, I do know that it's going to cost them more to rent than buy over 70 years, assuming inflation is either flat or positive.

Even at 1% pa deflation, buying still wins.

If we have 2% pa deflation, then the total cost for each option is roughly the same over 70 years.

So it would take average deflation greater than 2% pa for 70 years in order for renting to be the better alternative.

But given that the RBA has a mandate to inflate by 2-3% pa on average, I think 70 years of >2% pa deflation is unlikely.
Well there you go again mother cat. Assumptions as empty and as narrow as a test tube. Doesn't make enough for much of a comparison.
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Khaderbhai
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Terry
11 Oct 2016, 10:49 AM
Assumptions as empty and as narrow as a test tube.
Roddy, you can perform calculations for whatever inflation figures you choose.

I've worked various assumptions, and my calculations show that buying wins if average inflation is higher than -2% pa.

-2% is breakeven. Lower than -2% and renting wins.

Math 101 Roddy.

But I'm happy for you to keep renting forever.
Edited by Khaderbhai, 11 Oct 2016, 10:56 AM.
Banks can't repossess your home simply because the market value falls. Australia's Consumer Credit Code says consumers aren't liable for things ordinarily outside their control and can't be held to obligations that could only be met by selling their home. Click for details.

"The truth is that there are no good men, or bad men. It is the deeds that have goodness or badness in them. There are good deeds, and bad deeds. Men are just men."
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Terry
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Khaderbhai
11 Oct 2016, 10:55 AM
Roddy, you can perform calculations for whatever inflation figures you choose.

I've worked various assumptions, and my calculations show that buying wins if average inflation is higher than -2% pa.

-2% is breakeven. Lower than -2% and renting wins.

Math 101 Roddy.

But I'm happy for you to keep renting forever.
You have no idea about inflation for the next 70 years mother cat. What's more important, you have no idea of inflation as to how it pertains to the cost of accommodation over that time period. So many variables with so little understanding.
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Khaderbhai
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Terry
11 Oct 2016, 11:01 AM
You have no idea about inflation for the next 70 years mother cat.
That's why assumptions are useful Roddy. If average inflation is higher than -2% pa then buying wins compared to renting over 70 years.

You can perform calculations assuming whatever inflation figures you choose.
Banks can't repossess your home simply because the market value falls. Australia's Consumer Credit Code says consumers aren't liable for things ordinarily outside their control and can't be held to obligations that could only be met by selling their home. Click for details.

"The truth is that there are no good men, or bad men. It is the deeds that have goodness or badness in them. There are good deeds, and bad deeds. Men are just men."
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Terry
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Khaderbhai
11 Oct 2016, 11:03 AM
That's why assumptions are useful Roddy. If average inflation is higher than -2% pa then buying wins compared to renting over 70 years.

You can perform calculations assuming whatever inflation figures you choose.
Assumptions are only useful if they're robust MC. If you can explain how those assumptions are representative of the future, I will listen to you.
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Khaderbhai
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Terry
11 Oct 2016, 11:32 AM
Quote:
 
If average inflation is higher than -2% pa then buying wins compared to renting over 70 years.
If you can explain how those assumptions are representative of the future, I will listen to you.
Roddy, if you can't figure out why inflation must be either greater than, equal to, or less than -2%, then you need to work on basic numeracy before tackling anything more complex.
Edited by Khaderbhai, 11 Oct 2016, 11:53 AM.
Banks can't repossess your home simply because the market value falls. Australia's Consumer Credit Code says consumers aren't liable for things ordinarily outside their control and can't be held to obligations that could only be met by selling their home. Click for details.

"The truth is that there are no good men, or bad men. It is the deeds that have goodness or badness in them. There are good deeds, and bad deeds. Men are just men."
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Terry
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Khaderbhai
11 Oct 2016, 11:38 AM
Roddy, if you can't figure out why inflation must be either greater than, equal to, or less than -2%, then you need to work on basic numeracy before tackling anything more complex.
Sure MC. Just asking why inflation is -2% as set out in the assumption. It makes you look credible if you can answer and adds some weight to the repertoire. Remember, this is one variable, but it's your show MC, so I'm happy to follow the script (within reason).
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Khaderbhai
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Terry
11 Oct 2016, 11:57 AM
Just asking why inflation is -2% as set out in the assumption
Inflation isn't assumed to be -2% Roddy. It's a conditional statement.

If average inflation is higher than -2% pa then buying wins compared to renting over 70 years.

If I say "if it rains tomorrow then I'll get wet", I'm not assuming it will rain tomorrow. I'm making a conditional statement.

Logic 101 Roddy.
Edited by Khaderbhai, 11 Oct 2016, 12:02 PM.
Banks can't repossess your home simply because the market value falls. Australia's Consumer Credit Code says consumers aren't liable for things ordinarily outside their control and can't be held to obligations that could only be met by selling their home. Click for details.

"The truth is that there are no good men, or bad men. It is the deeds that have goodness or badness in them. There are good deeds, and bad deeds. Men are just men."
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