As to miw's claim that I would be eating dog food if I don't own a property in retirement, well, it could be true. I happen to like caravans, they are easy to look after, and they are close to the beach, and once the Boomer generation is finishing up, there will be an absolute glut of them. And who knows, with a little garlic and a little salt, Pal may just be the most nutritious thing around.
You misrepresent me sir. I was saying that if you don't do something strategic about saving, you will be eating dogfood. It doesn't have to be property. In my view property is a good choice for someone who wants to stay unsophisticated. But you should do whatever you think will work for you.
To me, sitting around waiting for a 40% drop without doing something else then in my view you are just living in hope that the world will give you a living.
And BTW I am not making any assumptions about what anyone is doing, least of all you. You seem financially literate enough to have got this a long time ago.
I do think that banking on super to pay off in 20 years is like people in my parents' generation and believing that they would be able to live well on a pension come retirement. (Hint: It didn't work out)
Or put another way: If you don't look after yourself, nobody else is going to. That is a statement of how things are, not how they should be. But you can't eat "should".
Hey stinkbug, we haven't got the moops on this thread so it's a little more serious and a lot less entertaining
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Compulsory savings is actually a pretty good for most people, I reckon, simply because so few people care genuinely save for long periods of time.
Compulsory savings used to be called taxation, but it got privatised at the end of the 20th century so we could employ the armies of B.Econ graduates coming out of Uni with their useless degrees.
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Superannuation balances are finally growing because of compulsory super savings.
So that makes two savings schemes, one compulsory (if you are an employee) and one 'voluntary' if you can resist relentless marketing/propaganda from the housing industry/banks/gov. I am currently enrolled in one compulsory savings scheme, and I don't expect to see much from it when I retire, but there is nothing I can do about that. The second compulsory saving scheme I have opted out of until now, because I thought it would probably do as well at maturity (25-30 years) as the first one.
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It will be interesting to see how taxation in that area changes over the coming years and decades. This is one area where I agree with you that the baby boomers have a serious advantage over the rest of us.
Compulsory superannuation was created in it's entirety to pay for the Boomer generation's retirement. When you have rising aged care costs and diminishing tax receipts to look forward to, it is probably fiscally responsible for the government to prepare for that. But to sell it as a scheme that would benefit ALL Australians is just dishonest. Necessary perhaps, but dishonest all the same. Current Super funds in Australia are net negative on returns, but continue to grow their assets from ongoing contributions. This is known as a ponzi scheme, and as with any ponzi scheme, those who exit first exit best Hint: that won't be you or me
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Getting rich for free from property, another interesting issue. The point of any investment is to own an asset (or assets) that either increase in value, generate regular yield, or both.
The point of any investment is to generate a return, otherwise you would just spend the money before it got inflated away. Assets do not increase in value by themselves, they need human intervention to do that. In the case of manufacturing, farming or even a service, some activity has been carried out by someone to add value to the asset, whether that is creating a new product, producing more grain for the same area of land, or improving productivity through better processes or ideas. In the case of property, there is no value add. Nothing is done and nothing is produced, and it costs money to maintain. This is known in the accounting world as a liability. It's price only goes up due to speculative fever. Also known as the greater-fool-theory.
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Property is just one of many assets that can be chosen.
Property is not an asset.
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And yes, a well chosen investment will create value for the owner of the investment without that person working.
Yes, this is the basis of capitalism.
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There are plenty of property investors who don't seem to make much money, for a variety of reasons.
The main reason is that property is a liability, not an asset. The market in which it trades is so distorted by zoning, building approvals, tax concessions, grants and other government intervention, it creates the illusion that it is an asset that is appreciating in value. In truth, all of the price gains are balance sheet transfers from the productive people in society via taxes so that the activity of building houses obtains capital that in an otherwise free market it would not (or would be prohibitively expensive).
As you misrepresented me when you suggested I was waiting for a 40% drop so life would deliver riches to me for free.
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To me, sitting around waiting for a 40% drop without doing something else then in my view you are just living in hope that the world will give you a living.
To me, sitting around waiting for ANYTHING to happen, whether that is house prices to the moon, or vulture profits from a crash, is a fool's errand, and I never once suggested that is what one should do. You know my position from our other conversation, so I was surprised to see you claim this.
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I do think that banking on super to pay off in 20 years is like people in my parents' generation and believing that they would be able to live well on a pension come retirement. (Hint: It didn't work out)
We are in complete agreement on that, I just think that claiming it will be worth dog food is probably as extreme as expecting a 40% crash. I think I will at least be able to buy CAT FOOD on my allocated pension.
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Or put another way: If you don't look after yourself, nobody else is going to. That is a statement of how things are, not how they should be. But you can't eat "should".
There is always communism. Seems to be popular choice when the clueless have lost ALL of their money.
Translation: People are irresponsible and dumb, so it's better to funnel them into a compulsory savings scheme so they have something to show for 40 years of being irresponsible and dumb.
See above.
There were once towns in Europe where the same family had rented the same house for 15 generations. They are gone now of course because of the credit bubble at the end of the 20th Century. That's 15 generations of people renting and living and not getting all bent out of shape because their neighbour had a 15 property portfolio and was making money without doing anything.
So instead of self-discipline, you outsource fiscal discipline to a financial institution and the government. Fair enough, specialisation and all that.
That's pretty rich. Isn't that exactly what the property bulls are claiming? That their growing equity in their property investments is making them rich for free?
Given that I will be collecting a SIS minimum of 6% of my Super at that age, are you saying that my Super will only cover Pal and not lattes?
On the other hand, instead of chasing down some pipe dream of being a property millionaire without any work on my part, I've spent time with my children and treated them well. Maybe they will repay that kindness when I am older, but I guess for those who abandoned their children to the state while they concentrated on their portfolio are not counting on it. Probably just as well.
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Translation: People are irresponsible and dumb, so it's better to funnel them into a compulsory savings scheme so they have something to show for 40 years of being irresponsible and dumb.
Wrong! Translation: "I am irresponsible and weak, so I will sign up for an enforced savings plan."
You can go to hell in your own handbasket for all I care. I am most certainly not advocating any coercion or even market-distorting incentives here.
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So instead of self-discipline, you outsource fiscal discipline to a financial institution and the government. Fair enough, specialisation and all that.
Que? Where was I advocating that? I certainly didn't advocate, and in fact I wouldn't.
If you want to find a situation where that is happening, you need to look no further than compulsory superannuation. It seemed like a good idea at the time, but what we have is a scheme that costs more in foregone tax than it would to pay everyone a decent pension. And most super funds aren't exactly setting the world on fire return-wise. Did wonders for shareholders and the financial industry for a while though.
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That's pretty rich. Isn't that exactly what the property bulls are claiming? That their growing equity in their property investments is making them rich for free?
Fuck! You mean those bloody boomers got their property for free? Thieving scumbags. I had to pay good coin for mine, and I had to give things up to make the mortgage payments. I could had a BMW instead of a 12-year-old second-hand Ford Telstar fer Chrissake!
Many of your posts make a lot of sense. This post was, to use an investing analogy, a 40% intellectual drawdown. (Which means you have to put 66.7% more thought into your next post just to break even. )
The truth will set you free. But first, it will piss you off. --Gloria Steinem AREPS™
As you misrepresented me when you suggested I was waiting for a 40% drop so life would deliver riches to me for free.
Huh? I wasn't even replying to one of your posts when I wrote that. How could you assume I was representing anyone in particular at all, let alone you? I mean even Ted Bullpit and Audas have their massive warchests.
It was a general comment about a certain kind of defeatist, none of whom read this forum. If I want you to take it personally, I'll take your name in vain.
Compulsory savings is actually a pretty good for most people, I reckon, simply because so few people care genuinely save for long periods of time. Superannuation balances are finally growing because of compulsory super savings. It will be interesting to see how taxation in that area changes over the coming years and decades. This is one area where I agree with you that the baby boomers have a serious advantage over the rest of us.
Depends which end of the boomer generation you are in. Early boomers really got the rough end of the pineapple when Hawke/Keating for all intents and purposes got rid of the pension, because they were already 40-45 when it happened. If you were retired in the 70s, if you owned your own residence free, then you could live adequately if frugally on a pension, and the more you had put aside the better off you were because there was no assets test.
The very generous tax terms for super in the early days was a tacit admission of that, I think. "OOPS. We squandered all that tax you paid while we were telling you we'd give you a pension. OK. Tell you what. You can pay it all again and make the guys who own shares rich, but we'll let you pay it tax-free."
Now that these guys are all retired, you can see the tax benefits of super being cut back step by step. The ATO never gives up a single shekel without a fight.
The truth will set you free. But first, it will piss you off. --Gloria Steinem AREPS™
Huh? I wasn't even replying to one of your posts when I wrote that. How could you assume I was representing anyone in particular at all, let alone you?
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You can do your spreadsheets based on other ways of saving/investing, ...
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The spreadsheets will certainly tell you the optimum property strategy ...
Let me see if I can find anyone else in this thread that attached a spreadsheet ..... Nope. Found none. You were referring to spreadsheets on other threads I assume.
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It was a general comment about a certain kind of defeatist, none of whom read this forum. If I want you to take it personally, I'll take your name in vain.
I'd rather you did. It may not have been intentional, but your mention of spreadsheets APPEARED to be aimed at me. If it wasn't I would be interested to know what spreadsheets you were referring to.
As to your other points, if you look at my reply to stinkbug, I think you will find that we are in complete agreement on most of them.
DINK? If so I think you could afford a lot more than I could 6 years ago in the inner west. Work in the City? 15 minutes on the moto would could be as far out as Enmore or Leichardt.
Glad things worked out for you. The price of your property may stay ahead of interest and inflation, I hope it does for your sake. For me though, it would be great if it dropped a little
6 years ago we were DINKs Now we have a 3 year old and a 3 month old. Wife stopped working when the first kid arrived so single income since then. We couldn't afford our dream home in that suburb so we settled on the "worst house" Many first home buyers today wouldn't touch it because it was so run down - including asbestos and external dunny (seriously, no internal bathroom when we bought it - I had to shower with thongs on)
Yes I work in the city and 15min via motorbike goes far enough to find a house we can afford.
Let me see if I can find anyone else in this thread that attached a spreadsheet ..... Nope. Found none. You were referring to spreadsheets on other threads I assume.
I'd rather you did. It may not have been intentional, but your mention of spreadsheets APPEARED to be aimed at me. If it wasn't I would be interested to know what spreadsheets you were referring to.
As to your other points, if you look at my reply to stinkbug, I think you will find that we are in complete agreement on most of them.
Fair enough. It occurred to me afterwards that it may have been my reference to spreadsheets. Seriously, It wasn't on my mind when I posted. I do spreadsheets. You do spreadsheets. For all I know Ted Bullpit does spreadsheets as well. I was just using it as a proxy for "unemotional business case."
I didn't even read your spreadsheet because I had assumed you got it right and because the results were unexceptionable, given sustainable assumptions.
The truth will set you free. But first, it will piss you off. --Gloria Steinem AREPS™
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