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The high cost of snake oil
Topic Started: 7 Jan 2017, 10:18 AM (10,303 Views)
Chris
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Khaderbhai
8 Jan 2017, 12:53 PM
The word is "you're" (short for "you are") and yes, my net wealth is the value of my assets less my debt.
Blame the spelling on predictive text, what do you blame your deception on?

You avoided the question, you know that's not what I asked you but I guess that's the point. I have hit at the heart of all the property BS and that states you are wealthier because you own a home or have a PPPOR you OO.

This is the greatest fallacy of all. You cannot deny that without using the equity to buy other assets/investments the value of your PPOR as an OO is completely meaningless. House price rises are billed as a good thing for OO but it doesn't make a licking difference and you know it and so does everyone reading this forum. Are you saying a pensioner living in Potts Point in a house she has owned for 50+ yrs is worth millions? She has no mortgage but lives solely on a pension, is she a multi millionaire because her house is worth multi millions?


Rufus
7 Jan 2017, 10:18 AM
Here's a story about housing and snake oil.
The Kouk
Link
Back in late 2009, there were two Sydney based couples looking to buy their first first home.


Fast forward to the end of 2016.

The value of Couple 1’s house is now $882,000, which is a neat $299,000 tax free gain from the purchase price. Following average wages growth and a bit more seniority at work, Couple 1’s household income has risen to $125,000 a year. They have been able to negotiate a mortgage rate of 4.5% and based on constant repayments of $2,881 a month, their mortgage has dropped to around $375,000. This means that the $116,600 deposit in 2010 has turned into just over $500,000 of tax free wealth in their house which they have enjoyed living in.
This ignores the fact that equity is theoretical and based on an opinion. Losses are compounded by gains, how much more devastating is a 20% drop at $882k. You wipe nearly $200k from the price, take into account Stamps, legal, rates, cost of the remaining mortgage and maintenance and the renter could actually be in front after 7 yrs.

And as I've said the $299k gain in value is not net wealth unless it is realised through a sale and putting it in the bank. The only way to turn it into potential net wealth is to use it to invest in property or shares. If they do this then they become wealthier when the value of those investments rise, short to medium term they are heavily dependent on capital gains to realise any escalation in wealth.

The greatest suburbanite lie is the belief that people are richer because their homes rise in value, if they have a PPOR as an OO and no other assets or investments then house price rises are not making them richer at all as long as they are living in the home.
Edited by Chris, 8 Jan 2017, 02:04 PM.
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Sydneyite
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Chris
8 Jan 2017, 01:51 PM
The greatest suburbanite lie is the belief that people are richer because their homes rise in value, if they have a PPOR as an OO and no other assets or investments then house price rises are not making them richer at all as long as they are living in the home.
So you would argue a person who owns a PPOR / 2 bedroom fibro house in Mt Druitt, with no other investments, is equal in wealth to a person also with no other investments who owns a PPOR / 5 bedroom waterfront federation house in Mosman? :wak:
Edited by Sydneyite, 8 Jan 2017, 02:11 PM.
For Aussie property bears, "denial", is not just a long river in North Africa.....
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Khaderbhai
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Terry
8 Jan 2017, 01:36 PM
Little point mother cat. Neither won a Nobel prize in economics. You can have all the rods and gloves singing in unison, but it's fruitless troll bait.
A little history lesson for you Roddy. There's no Nobel prize for economics.

The five Nobel Prizes are for physics, chemistry, literature, peace, and medicine/physiology. They were established in 1895 on Alfred Nobel's death.

The economics prize was created by Sweden’s Central Bank in 1969 (against the wishes of the Nobel family) and it's called the Sveriges Riksbank Prize in Economic Sciences.

You've fallen for a marketing and PR gimmick Roddy.

There's no requirement for Nobel Prize winners to conduct "breathtaking research". That was another one of your blunders.


Chris
8 Jan 2017, 01:51 PM
is she a multi millionaire because her house is worth multi millions
Yes, if her house is worth multi millions (with no mortgage) then her net wealth is multi millions.

Even with no other income or investments/savings, she could live extremely comfortably by tapping into her vast wealth using a reverse mortgage, or by renting out a couple of rooms.

Clearly someone who owns a multi-million dollar home outright (with no other investments) is in a much stronger financial position than a renter (with no other investments) or someone who owns a 1BR unit in Blacktown (with no other investments).

PPOR wealth is very real.
Edited by Khaderbhai, 8 Jan 2017, 02:31 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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Rufus
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Chris
8 Jan 2017, 01:51 PM
This ignores the fact that equity is theoretical and based on an opinion. Losses are compounded by gains, how much more devastating is a 20% drop at $882k. You wipe nearly $200k from the price, take into account Stamps, legal, rates, cost of the remaining mortgage and maintenance and the renter could actually be in front after 7 yrs.

And as I've said the $299k gain in value is not net wealth unless it is realised through a sale and putting it in the bank. The only way to turn it into potential net wealth is to use it to invest in property or shares. If they do this then they become wealthier when the value of those investments rise, short to medium term they are heavily dependent on capital gains to realise any escalation in wealth.

The greatest suburbanite lie is the belief that people are richer because their homes rise in value, if they have a PPOR as an OO and no other assets or investments then house price rises are not making them richer at all as long as they are living in the home.
I think that as a minimum people should aim to buy a house to live in and pay that house off over their working life. If that is all they do then yes the value of the house is a bit hypothetical. Someone happily living in a paid off house in the bush with a value of $100,000 is equally as well off as someone living in equally modest paid off accommodation in Sydney even though that house is worth maybe $1,000,000.

But both of them are much better off than a person who at the end of their working life has no house and no prospects of owning one. I think that is self evident, therefore buying a house at the right time in your working life is a step towards future financial security.

Rising asset values can offer a home owner additional options though, like the ability to use that house as security for a business and other investments, borrow against it in the event of an emergency (medical, loss of employment, financial loss etc) and reverse mortgage it to supplement the pension when they retire.

I don't think you can just dismiss those advantages.
Take risks - if you win you will become wealthy, if you lose you will become wise
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Terry
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Khaderbhai
8 Jan 2017, 02:17 PM
A little history lesson for you Roddy. There's no Nobel prize for economics.

The five Nobel Prizes are for physics, chemistry, literature, peace, and medicine/physiology. They were established in 1895.

The economics prize was created by Sweden’s Central Bank in 1969 (against the wishes of the Nobel family) and it's called the Sveriges Riksbank Prize in Economic Sciences.

You've fallen for a marketing and PR gimmick Roddy.

There's no requirement for true Nobel Prize winners to conduct "breathtaking research". That was another one of your blunders.



Yes, if her house is worth multi millions (with no mortgage) then her net wealth is multi millions.

Even with no other income or investments/savings, she could live extremely comfortably by tapping into her vast wealth using a reverse mortgage, or by renting out a couple of rooms.

Clearly someone who owns a multi-million dollar home outright (with no other investments) is in a much stronger financial position than a renter (with no other investments).
OK mother cat. Here's a little exercise. Name all the Nobel Prize winners in the physical and social sciences whose research was not a considering factor in their receiving of a Nobel award.

Good luck.
Rufus
8 Jan 2017, 02:31 PM
I think that as a minimum people should aim to buy a house to live in and pay that house off over their working life. If that is all they do then yes the value of the house is a bit hypothetical. Someone happily living in a paid off house in the bush with a value of $100,000 is equally as well off as someone living in equally modest paid off accommodation in Sydney even though that house is worth maybe $1,000,000.

But both of them are much better off than a person who at the end of their working life has no house and no prospects of owning one. I think that is self evident, therefore buying a house at the right time in your working life is a step towards future financial security.

Rising asset values can offer a home owner additional options though, like the ability to use that house as security for a business and other investments, borrow against it in the event of an emergency (medical, loss of employment, financial loss etc) and reverse mortgage it to supplement the pension when they retire.

I don't think you can just dismiss those advantages.
For the majority of the suburbanites, yes, this is correct. Kooky's blog was more about windfall profits from buying houses, which wouldn't have happened if they listened to and let their behavior be influenced by Steve Keen.
Edited by Terry, 8 Jan 2017, 02:36 PM.
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Chris
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Sydneyite
8 Jan 2017, 02:08 PM
So you would argue a person who owns a PPOR / 2 bedroom fibro house in Mt Druitt, with no other investments, is equal in wealth to a person also with no other investments who owns a PPOR / 5 bedroom waterfront federation house in Mosman? :wak:
Until they sell the home outright or use its equity to buy further investments/assets then yes, they are no more or less wealthy than each other if they just live in the home and live off a pension.

Lifestyle in Potts Point would be notably nicer but net worth would not be realised until the homes were sold and a lump sum of varying values realised and banked .

Are you saying an older pensioner living in a $10mil home in Potts Point but living solely off the pension is worth $10mil? Does she die a millionaire but spends decades in abject poverty?
Edited by Chris, 8 Jan 2017, 02:46 PM.
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Trollie
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Chris
8 Jan 2017, 11:52 AM
I'm not surprised at you stupidity because you flaunt it on a regular basis, your last comment was case in point. Super is a form of savings, it is not the basic amenities like the roof over your head you idiot. You must live in a PPOR as an OO at some stage, the value of that home is irrelevant if it is your one sole investment or asset, whether it is worth $6m or $300k it was make no difference as it's meaningless.

House values rises does not make people in the aforementioned position (PPOR nil other asset/IPs) richer, this is a suburbanite illusion. The appreciation of a home and subsequent equity derived from it needs to be put into investments that appreciate to realise any real wealth. All of these have significant risk and do not work short/medium term without continual price escalation.

Are you so financially inept you can't understand this? f***, are you the Kouk?





Again, you are an insipid little turd smear.

My comments are basic economical observations and has nothing to do with anything other than that, observations.
Shit don't tell pauk the value of a PPOR is irrelevant. According to many bears it can make you a millionaire.


Of course the PPOR's value is important, it's usually the largest asset people own yet a clown like you wants to convince us it's irrelevant? If I sell my PPOR and choose to down size when i'm older, is it's value still irrelevant?

The value of ALL your assets matter, get it through that thick head.
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Terry
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Chris
8 Jan 2017, 02:45 PM
Until they sell the home outright or use its equity to buy further investments/assets then yes, they are no more or less wealthy than each other if they just live in the home and live off a pension.

Lifestyle in Potts Point would be notably nicer but net worth would not be realised until the homes were sold and a lump sum of varying values realised and banked .

Are you saying an older pensioner living in a $10mil home in Potts Point but living solely off the pension is worth $10mil? Does she die a millionaire but spends decades in abject poverty?
Well based on Kooky's blog, if the hypothetical suburbanites had bought as per Kooky's illustration, they would be better off. Would they not?
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Khaderbhai
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Terry
8 Jan 2017, 02:33 PM
OK mother cat. Here's a little exercise. Name all the Nobel Prize winners in the physical and social sciences whose research was not a considering factor in their receiving of a Nobel award.

Good luck.
Roddy, we were discussing your blunder when you said "Nobel prizes require a body of groundbreaking research" and your subsequent blunder when you said there's a Nobel prize for economics.

Asking me to name prize winners isn't going to make your blunders go away.
Edited by Khaderbhai, 8 Jan 2017, 02:56 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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Chris
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Trollie
8 Jan 2017, 02:46 PM
Shit don't tell pauk the value of a PPOR is irrelevant. According to many bears it can make you a millionaire.


Of course the PPOR's value is important, it's usually the largest asset people own yet a clown like you wants to convince us it's irrelevant? If I sell my PPOR and choose to down size when i'm older, is it's value still irrelevant?

The value of ALL your assets matter, get it through that thick head.
You keep proving time and time again you just don't get it, leave this discussion to the grown ups ok.
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