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What's your favourite Somersoft thread?; Somersoft Property Investment Forums mass delusions
Topic Started: 18 Mar 2011, 10:48 AM (30,740 Views)
hoofarted
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... they're worse than our bulls ...


They have the more to lose than I have to gain by waiting to buy.

The cake is a lie!
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Yorke
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Mahamed
31 Mar 2011, 11:11 PM
If you try to argue with them too much the moderators can ban you very quickly !
Boo Hoo, the same happened to bulls on GHPC and CC but didn't hear you or any of your bearish buddies complain about it. If anything you were baiting the bulls and egging on the mods to ban ALL the bulls so toughen up princess and suck it up.
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Mahamed
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Morbidly Obese

One of the few voices of reason on the somersoft forum, hobo jo nails it in this thread, the somersofties have nothing in response !

Quote:
 
Five reasons FHBs should avoid buying now

GetUp! may have rejected the home buyers strike proposal, but that doesn't mean that FHBs can't look at the market objectively and decide for themselves that now is not a good time to buy. Of course some of these reasons are subjective, they also don't necessarily apply to FHBs only.

1. Renting is around half the cost of buying

As I recently covered in another post (Rent vs Buy: Cost Comparison) the cost of renting is significantly lower than it is to buy. With mortgage rates at 7% and yields at 4% the cost of renting is almost half that of maintaining the interest on the mortgage interest, let alone rates, building insurance, borrowing costs and maintenance.

Think about the money you could save by renting instead! In a situation where it might cost $500pw to buy, you could expect equivalent rent to be around $250pw. $250pw x 52 weeks in a year = $13,000pa. What could you do with that sort of extra money? That's an overseas holiday every year, a brand new car every 2 years or you could even just squirrel the money away into a term deposit or investments until a time comes that it makes financial sense to buy.

Have you heard the phrase before "rent money is dead money"? Well so is the interest on a mortgage and if the interest exceeds the rent you would pay for an equivalent home then you are paying more "dead money" to buy than you are to rent!

2. Falling prices will continue

The Herald Sun recently reported that, "Melbourne's property bubble is bursting, with $400 a day wiped off the average house price in the past three months."

There is no guarantee that prices will continue to fall that quickly, however even after a 6 percent slump (according to the REIV) in the first quarter of 2011, Melbourne prices and in capital cities all over the country continue to sit at ridiculous levels.

The credit bubble has inflated prices to a point where First Home Buyers are even struggling to afford prices in the new fringe suburbs. That begs the question, who is buying? With volumes having dipped significantly and stock on market up 50% on last years levels the answer is "not many".

Eventually vendors will realise they are going to have to start discounting more heavily to sell, that's when the real declines begin. This is likely to suck in even more sellers who have speculated on house prices increasing, they will leap frog over eachother on the way down just as they did on the way up, putting further pressure on prices and adding even more stock to the already over saturated market.

3. You may quickly outgrow your first home

One idea that I seem to hear repeated often is that you should just 'buy whatever you can afford' when it comes to your first home, just 'get your foot in the door' they say and work your way up the property ladder. What the older generations might be failing to remember is that you may outgrow your first home very quickly.

Imagine the situation where you've bought a 2 bedroom unit as your first home. Two years down the track and the casual relationship with your partner has taken a serious turn and you are looking to start a family (have kids). You may then be in a situation where you have to sell the existing property to fund the larger one. That likely means real estate commission costs (usually around 2% of sales price), stamp duty on the new home, possibly LMI (Lenders Mortgage Insurance) on the new loan if you will be borrowing on a LVR greater than 80% again. Not only that, but as per reason 1, you've possibly been paying a great deal more than renting to buy.

Do the sums. Make sure you consider all possibilities that arise. You may be a lot better off by renting until you can afford a home that will last years no matter what life throws at you.

4. Ownership ain't all it's cracked up to be

What are the benefits of owning? I mean besides bragging to your friends that you're now a proud home owner... can you really justify the extra cost?

The answer may be yes for some. For those that like to get hands on with their home, landscaping the garden, painting and renovations, extending the house & for those that need the security ownership (not relying on the landlord to renew a lease) then buying may be the best option. For me personally (and I'm sure many others) the benefits of ownership just do not outweigh the extra cost that comes with buying.

Personally I love the peace of mind that comes with renting. I know that if something breaks (aircon, heating, stove, plumbing, etc) then it's just a matter of calling the landlord to organise a fix.

Having owned before I know that owning isn't all it's cracked up to be. Council rates, water rates, building insurance, emergency levies, maintenance costs, fixing things when they break... it all adds up!

5. Living at home/renting = Freedom

Taking out a large mortgage is a yoke around the neck of the young. You should enjoy the freedom that renting/living at home provides while you can. Of course it would be prudent to put some of your income away for a rainy day or making a house purchase later in life, but don't give up your youth just so that you can say you own property.

Travel. See the world! You will find this much more difficult to do once you have a 30 year binding commitment to pay the mortgage on a house. You've got youth, money and an opportunity you may never have again in your life. Don't waste it!
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matthew_50
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nice.

I'd also add, with renting, you can easily share with other people, with little complication. you are all equals.

like, you can buy and rent out a room, sure (after you've hired the army of accountants to sort out the tax implications...)

but I don't know what it is... but take this for example, I have asked my friends if we want to rent together, they like the idea, I ask if they would like to live in a place I bought and pay *me* rent, and they seem insulted by the idea...
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Nelson
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http://www.somersoft.com/forums/showpost.php?p=792925&postcount=68

Quote:
 
"1. Renting is around half the cost of buying"

It has always been that way.

"2. Falling prices will continue"

That prediction has been constant for the last 10 years.

"3. You may quickly outgrow your first home"

It has always been that way.

"4. Ownership ain't all it's cracked up to be"

It has always been that way.

"5. Living at home/renting = Freedom"

It has always been that way.

So, why is it better to avoid buying now than it was any time in the past?
Hobo sore 'cus he sold his house to rent two years ago. It's gone up in price!
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Bandi
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matthew_50
12 May 2011, 11:46 AM
nice.

I'd also add, with renting, you can easily share with other people, with little complication. you are all equals.

like, you can buy and rent out a room, sure (after you've hired the army of accountants to sort out the tax implications...)

but I don't know what it is... but take this for example, I have asked my friends if we want to rent together, they like the idea, I ask if they would like to live in a place I bought and pay *me* rent, and they seem insulted by the idea...
WT..... sub-letting is generally a breach of contract for resi homes. renting out a room is merely an extra box to fill in on your tax return, unless of course it is cash, which in every circumstance i know of it has been.
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Bandi
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not hobo's best work. pretty lame summary really. i am fine with the overall "bearish" sentiment that prices will drop etc, but arguing that renting is preferable to buying is a bit of a stretch.

the bears used to criticize, and some still do, the mercenary behaviour of PIs, and the shortsightedness of investment in non-productive assets etc. now they sometimes argue that you can make even more money if you are renting. this is stupid. you can make even more money on high-risk derivatives etc etc. there is always a better option, especially in hindsight or making assumptions. the point is that it is a home, not a wealth generation strategy.

my nephew (FHB) last year bought a house in outer eastern Melbourne, borrowing 270K, over 30 years. his repayments (principal+interest) are less than they were renting 10 minutes closer to the CBD. inflation will make mortgage repayments in 10 years a non-issue, but rents will be the same proportion of his wage. additionally, in 30 (most likely 10-15 in his case) years he will owe nothing and have a roof over his head for life. and yes he saved, saved his arse off, so that he only had to borrow a small ammount. and yes he borrowed a small fraction of what the banks would lend him to buy a very modest 3*1, 30 kms from the CBD.


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davel
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Bandi
12 May 2011, 02:57 PM
not hobo's best work. pretty lame summary really. i am fine with the overall "bearish" sentiment that prices will drop etc, but arguing that renting is preferable to buying is a bit of a stretch.

the bears used to criticize, and some still do, the mercenary behaviour of PIs, and the shortsightedness of investment in non-productive assets etc. now they sometimes argue that you can make even more money if you are renting. this is stupid. you can make even more money on high-risk derivatives etc etc. there is always a better option, especially in hindsight or making assumptions. the point is that it is a home, not a wealth generation strategy.

my nephew (FHB) last year bought a house in outer eastern Melbourne, borrowing 270K, over 30 years. his repayments (principal+interest) are less than they were renting 10 minutes closer to the CBD. inflation will make mortgage repayments in 10 years a non-issue, but rents will be the same proportion of his wage. additionally, in 30 (most likely 10-15 in his case) years he will owe nothing and have a roof over his head for life. and yes he saved, saved his arse off, so that he only had to borrow a small ammount. and yes he borrowed a small fraction of what the banks would lend him to buy a very modest 3*1, 30 kms from the CBD.


Good for him, shame everyone else isnt so righteous - then we wouldnt have a massive private debt burden and a property market teetering on the brink.
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Trojan
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Rastus2
12 May 2011, 06:44 PM
Proof or just blind hope with yet more egg on your face ?
hobo-jo is a sore loser ... proof in link below.

http://forums.overclockers.com.au/showthread.php?t=937357

Btw, you will notice he has not changed his sig to "I was hopelessly wrong on house prices!" and he also didn't pay up the $100 he lost.
Edited by Trojan, 12 May 2011, 07:08 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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Shadow
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Trojan
12 May 2011, 07:04 PM
hobo-jo is a sore loser ... proof in link below.

http://forums.overclockers.com.au/showthread.php?t=937357

Btw, you will notice he has not changed his sig to "I was hopelessly wrong on house prices!" and he also didn't pay up the $100 he lost.
Can't open it... says I need to register an account. Can you post a summary...
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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