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The high cost of snake oil
Topic Started: 7 Jan 2017, 10:18 AM (10,280 Views)
Khaderbhai
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Wealthy Suburbanite

Chris
14 Jan 2017, 12:17 PM
Although that 30k ignores the costs to get into it.

You are just a filthy deceptive liar. Anyway why haven't you presented a chart for 2015-16
The chart shows that even after those costs, net wealth (assets less debt) is much higher for homeowners than renters at all stages of life.
Edited by Khaderbhai, 14 Jan 2017, 12:24 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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Terry
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Khaderbhai
14 Jan 2017, 12:18 PM
The chart shows that even after those costs, net wealth (assets less debt) is much higher for homeowners than renters at all stages of life.
Well there's a simple reason for that mother cat. Most ne'er -do-wells are likely to be renters. Not sure if you want to par yourself on the back too much for having more wealth than a ne'er-do-well.
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Chris
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Khaderbhai
14 Jan 2017, 12:18 PM
The chart shows that even after those costs, net wealth (assets less debt) is much higher for homeowners than renters at all stages of life.
That is wrong and you know it.

If I retain my 20% deposit and keep adding to it over 12 months I will be invariably wealthier than a counterpart who purchased. Even If values rise 15% if they were to cash out of the home 12 months later the would blow most of the deposit in stamps and entry exit costs. This gets worse the lower the deposit and if it's IO.

It's pure logic, home owners are only wealthier once they have had 5-7yrs to make ground on the loan and some capital gains.

Besides if this data includes all renters it would be taken into account government housing tenants as well so it is an extremely distorted view of what's reality but that's what I expect from you deceit and lies
Edited by Chris, 14 Jan 2017, 12:56 PM.
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Terry
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Chris
14 Jan 2017, 12:54 PM
That is wrong and you know it.

If I retain my 20% deposit and keep adding to it over 12 months I will be invariably wealthier than a counterpart who purchased. Even If values rise 15% if they were to cash out of the home 12 months later the would blow most of the deposit in stamps and entry exit costs. This gets worse the lower the deposit and if it's IO.

It's pure logic, home owners are only wealthier once they have had 5-7yrs to make ground on the loan and some capital gains.

Besides if this data includes all renters it would be taken into account government housing tenants as well so it is an extremely distorted view of what's reality but that's what I expect from you deceit and lies
That all depends. If those 5-7 years occur during a bubble, the property-owning would feel much wealthier. But let's say those 5-7 years were "post bubble." The suburbanite is unlikely to feel "rich". What's even worse, their daily existence is likely to be far more mundane after the bubble. By the way, note the huge demand for cocaine in Sydney at the moment and those chasing their dreams by trying to import it.
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Sydneyite
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Chris
14 Jan 2017, 12:54 PM
That is wrong and you know it.

If I retain my 20% deposit and keep adding to it over 12 months I will be invariably wealthier than a counterpart who purchased. Even If values rise 15% if they were to cash out of the home 12 months later the would blow most of the deposit in stamps and entry exit costs. This gets worse the lower the deposit and if it's IO.

It's pure logic, home owners are only wealthier once they have had 5-7yrs to make ground on the loan and some capital gains.

Besides if this data includes all renters it would be taken into account government housing tenants as well so it is an extremely distorted view of what's reality but that's what I expect from you deceit and lies
Complete rubbish!

Stamp duty and buying costs is around 5%. Selling costs are only 1-2%. So total costs to buy and sell in a 12 month interval = 6-7% of the house value. If the value increased 15%, then there is absolutely no doubt that the person who purchased the home would end up wealthier than the renter, to tune of 8-9% of whatever the house was worth - so that would be over $60k in front on a $700k house. Back to maths school for you Chris!

But it's all moot anyway - the chart K posted shows that despite whatever it costs to buy/sell houses (which most home owners only do from time to time), homeowners in every age bracket, on average, are way wealthier than non home-owners on a net asset value basis (ie value of assets less any debt/liabilities). Among other reasons, this happens because:

1) Homeowners tend to be forced to "save" by having to pay their mortgage down over time come what may, whereas renters have to be very disciplined to save any cash left over after paying rent
2) The cost of accommodation for home owners generally goes DOWN over time, until it approaches zero (or at least just the cost of rates/insurance and upkeep), whereas accommodation costs for renters goes UP over time, forever, soaking more and more of the households earnings over time.
3) The value of housing assets tend to increase over the long term

These are facts that are borne out by every survey ever done on household net wealth in Australia by anyone.

So you can cherry pick a specific short term period (like the first year of a household after they have bought vs staying renting), and if you assume no or low house price growth or sky high interest rates etc then sure over that year an equivalent renting household might accumulate more net wealth than the buying household - but so what? There's only ever a small proportion of households in their first year of ownership - probably less than 100,000 in the whole country, in any given year (FHBs are only 15% of total property turnover). So that leaves the other 9.9M households who have built up much stronger balance sheets over time still in the aggregate stats. And after a few tears every first year homeowner will move into those ranks as well (as they pay down their mortgage, see their home value rise and so on) - hence they will in all likely-hood end up with a much higher net worth than if they had kept renting over all those years instead. I would have thought all this should be self-evident?
Edited by Sydneyite, 14 Jan 2017, 01:30 PM.
For Aussie property bears, "denial", is not just a long river in North Africa.....
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Tommy
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Sydneyite
14 Jan 2017, 01:26 PM
Complete rubbish!

Stamp duty and buying costs is around 5%. Selling costs are only 1-2%. So total costs to buy and sell in a 12 month interval = 6-7% of the house value. If the value increased 15%, then there is absolutely no doubt that the person who purchased the home would end up wealthier than the renter, to tune of 8-9% of whatever the house was worth - so that would be over $60k in front on a $700k house. Back to maths school for you Chris!

But it's all moot anyway - the chart K posted shows that despite whatever it costs to buy/sell houses (which most home owners only do from time to time), homeowners in every age bracket, on average, are way wealthier than non home-owners on a net asset value basis (ie value of assets less any debt/liabilities). Among other reasons, this happens because:

1) Homeowners tend to be forced to "save" by having to pay their mortgage down over time come what may, whereas renters have to be very disciplined to save any cash left over after paying rent
2) The cost of accommodation for home owners generally goes DOWN over time, until it approaches zero (or at least just the cost of rates/insurance and upkeep), whereas accommodation costs for renters goes UP over time, forever, soaking more and more of the households earnings over time.
3) The value of housing assets tend to increase over the long term

These are facts that are borne out by every survey ever done on household net wealth in Australia by anyone.

So you can cherry pick a specific short term period (like the first year of a household after they have bought vs staying renting), and if you assume no or low house price growth or sky high interest rates etc then sure over that year an equivalent renting household might accumulate more net wealth than the buying household - but so what? There's only ever a small proportion of households in their first year of ownership - probably less than 100,000 in the whole country, in any given year (FHBs are only 15% of total property turnover). So that leaves the other 9.9M households who have built up much stronger balance sheets over time still in the aggregate stats. And after a few tears every first year homeowner will move into those ranks as well (as they pay down their mortgage, see their home value rise and so on) - hence they will in all likely-hood end up with a much higher net worth than if they had kept renting over all those years instead. I would have thought all this should be self-evident?
Your right. Property is only profitable at 6% plus ? So is it fair to assume anything under on average would be considered a loss?
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Terry
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Sydneyite
14 Jan 2017, 01:26 PM
Complete rubbish!

Stamp duty and buying costs is around 5%. Selling costs are only 1-2%. So total costs to buy and sell in a 12 month interval = 6-7% of the house value. If the value increased 15%, then there is absolutely no doubt that the person who purchased the home would end up wealthier than the renter, to tune of 8-9% of whatever the house was worth - so that would be over $60k in front on a $700k house. Back to maths school for you Chris!

But it's all moot anyway - the chart K posted shows that despite whatever it costs to buy/sell houses (which most home owners only do from time to time), homeowners in every age bracket, on average, are way wealthier than non home-owners on a net asset value basis (ie value of assets less any debt/liabilities). Among other reasons, this happens because:

1) Homeowners tend to be forced to "save" by having to pay their mortgage down over time come what may, whereas renters have to be very disciplined to save any cash left over after paying rent
2) The cost of accommodation for home owners generally goes DOWN over time, until it approaches zero (or at least just the cost of rates/insurance and upkeep), whereas accommodation costs for renters goes UP over time, forever, soaking more and more of the households earnings over time.
3) The value of housing assets tend to increase over the long term

These are facts that are borne out by every survey ever done on household net wealth in Australia by anyone.

So you can cherry pick a specific short term period (like the first year of a household after they have bought vs staying renting), and if you assume no or low house price growth or sky high interest rates etc then sure over that year an equivalent renting household might accumulate more net wealth than the buying household - but so what? There's only ever a small proportion of households in their first year of ownership - probably less than 100,000 in the whole country, in any given year (FHBs are only 15% of total property turnover). So that leaves the other 9.9M households who have built up much stronger balance sheets over time still in the aggregate stats. And after a few tears every first year homeowner will move into those ranks as well (as they pay down their mortgage, see their home value rise and so on) - hence they will in all likely-hood end up with a much higher net worth than if they had kept renting over all those years instead. I would have thought all this should be self-evident?
Actually, in property bubbles, the suburbanites are not "forced to save." In fact, the majority of h'holds don't have two sticks to rub together, something like about 3 months of h'hold income at their disposal. Furthermore, consumer debt is rampant during bubbles. That's why govts usually like bubbles as consumer spending is one of the primary drivers of the economy.
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Sydneyite
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Tommy
14 Jan 2017, 01:34 PM
Your right. Property is only profitable at 6% plus ? So is it fair to assume anything under on average would be considered a loss?
Simplistically, you only need to see a *total* return of 6% appreciation over a given total ownership period (whether that be 1 year or 10 years) to (nominally) offset buying/selling costs, yes. Obviously more precise rent-vs-buy calculations are little more complex than that (factoring in maintenance and other ownership costs, expected CPI, interest rates, moving costs of renting, rental yields and so on and on....), and have been covered many times on the forum including with accompanying spreadsheets and so on, so feel free to DYOR. :D However the general upshot from memory is that about 1.5-2% average house price appreciation is needed over periods of 10 years or so for an owner to end up in front of a renter, all other things being equal, and assuming the renter has the discipline to save/invest the deposit cash and 100% any difference between rent cost and mortgage costs consistently over the period. That's using what most I think would deem "reasonable" assumptions based on the current economic environment, but of course the result depends a lot on those assumptions made - eg expected interest rates, investment returns, inflation / rent increases and so on.
Edited by Sydneyite, 14 Jan 2017, 01:50 PM.
For Aussie property bears, "denial", is not just a long river in North Africa.....
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Terry
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Sydneyite
14 Jan 2017, 01:43 PM
Simplistically, you only need to see a *total* return of 6% appreciation over a given total ownership period (whether that be 1 year or 10 years) to (nominally) offset buying/selling costs, yes. Obviously more precise rent-vs-buy calculations are little more complex than that (factoring in maintenance and other ownership costs, expected CPI, interest rates, moving costs of renting, rental yields and so on and on....), and have been covered many times on the forum including with accompanying spreadsheets and so on, so feel free to DYOR. :D However the general upshot from memory is that about 1.5-2% average house price appreciation is needed over periods of 10 years or so for an owner to end up in front of a renter, all other things being equal, and assuming the renter has the discipline to save/invest the deposit cash and 100% any difference between rent cost and mortgage costs consistently over the period. That's using what most I think would deem "reasonable" assumptions based on the current economic environment, but of course the result depends a lot on assumptions made about expected interest rates, investment returns, inflation / rent increases and so on.
You also have to make the assumption that the suburbanite will accept the constraints of the house's location. For example, if for any reason, incomes are stagnant, or even fall, there is likely to be some impact on house prices. You wouldn't even know where to start when inputting that into your spreadsheet.
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Trollie
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Tommy
14 Jan 2017, 01:34 PM
Your right. Property is only profitable at 6% plus ? So is it fair to assume anything under on average would be considered a loss?
Only if you're a twit and compare year 1 costs only. It's basic finance that the first year of an asset purchase is expensive.
Terry
14 Jan 2017, 01:54 PM
You also have to make the assumption that the suburbanite will accept the constraints of the house's location. For example, if for any reason, incomes are stagnant, or even fall, there is likely to be some impact on house prices. You wouldn't even know where to start when inputting that into your spreadsheet.
Go for it then roddy, show us your analysis.

Edited by Trollie, 14 Jan 2017, 01:56 PM.
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