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Bought average house in Melbourne a year ago in June? You've lost $36,604 by June 2012!; Melbourne house prices plunge 6.6% in 12 months!
Topic Started: 3 Dec 2012, 04:01 AM (4,571 Views)
Trev
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frankrider
3 Dec 2012, 11:54 PM
Say you bought a house for $400,000 on a 25 year mortgage, and 5 years later ones just like it down the street are selling for $200,000. Every month you are making around twice the repayments you could have been making if you had rented and waited and you still have 20 years to pay.
You still haven't "lost" anything apart from opportunity. This, I suppose, is where the couldashouldawoulda comes into play. What would the person be thinking if they'd rented 5 years and the house was then $600k?
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Timo
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mel
4 Dec 2012, 07:00 AM
That statement was rhetoric - what does it mean to you when the biggest bear finally accepts the possibility prices could rise, even for a short while?

How were you feeling about the markets in 2008 and what happened thereafter? There will be no crash Timo - at least within the next couple of years.
The complete opposite is true, the strongest likelihood of a crash and declining property values is in the next few years? Take your head out of the price line catalog and sand, and take a look at whats happening around you? My guess is that you got suckered into some overpriced, poorly built development that snakey real estate agents saw you coming for. Sad really.
After a bubble has burst, no one denies that it existed. But before it does, the popular refrain is that though bubbles existed elsewhere in the world, “there’s no bubble here”. So housing bubbles are admitted to have existed in Japan, the USA, Spain and Ireland – because they’ve already burst.
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stinkbug
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It's kinda strange having Timo around, a bit like having an untrained pet.
---------------------------------------------------------------

While it's true that those who win never quit, and those who quit never win, those who never win and never quit are idiots.

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NotFooled
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The Bear Whisperer

stinkbug
5 Dec 2012, 01:56 PM
It's kinda strange having Timo around, a bit like having an untrained pet.
An untrained pet that craps on the carpet and nips at the guests.
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miw
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NotFooled
5 Dec 2012, 02:03 PM
An untrained pet that craps on the carpet and nips at the guests.
Moops on the other hand looks for the maiden auntie and humps her leg. Much funnier and less mess.
The truth will set you free. But first, it will piss you off.
--Gloria Steinem
AREPS™
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peter fraser
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stinkbug
5 Dec 2012, 01:56 PM
It's kinda strange having Timo around, a bit like having an untrained pet.
Perhaps, but Timo can spell, he is articulate, and I don't need a Jibberish to English translation manual like I do sometimes for Ted and Danno. Those manuals can be hard to find and there is nothing on Google.

Keep posting Timo - I'll read it.

Any expressed market opinion is my own and is not to be taken as financial advice
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frankrider
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Trev
4 Dec 2012, 08:19 AM
frankrider
3 Dec 2012, 11:54 PM
Say you bought a house for $400,000 on a 25 year mortgage, and 5 years later ones just like it down the street are selling for $200,000. Every month you are making around twice the repayments you could have been making if you had rented and waited and you still have 20 years to pay.
You still haven't "lost" anything apart from opportunity. This, I suppose, is where the couldashouldawoulda comes into play. What would the person be thinking if they'd rented 5 years and the house was then $600k?
Your maths skills are a bit suss? The person in my example that bought 5 years later only owes $200k+interest over 25years. The person who bought in the bubble top owes $400k+interest over 25 years minus whatever they have paid in 5 years. So the person who boght at the top has lost $200,000 plus whatever interest they would have saved on the cheaper loan. Here a $400k home rents for less than $400/week so they would not have spent more than 100k over 5 years in rent and saved a bigger deposit with the spare money.

couldashouldawoulda? No, didahasawasa if you bought in America, spain or Ireland at their bubble tops. I know most here think Australia is protected by God's Holy Providence and prices will never fall as far as elsewhere but the precident has been made, is still being made in 2012 with the netherlands bust well underway. They never had a construction boom either, so no oversupply excuse.

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Unlike Spain and Ireland, where collapsing house prices have similarly threatened household and bank solvency, the Netherlands did not experience a construction boom that would have sent joblessness skyward when the real-estate bubble popped. Dutch unemployment is, for now, below 5%. But private debt has sapped consumption and investment, putting the country into recession since the third quarter of 2011. The country's fiscal troubles are a consequence of its broader economic woes, not their cause.
http://online.wsj.com/article/SB10001424052702303459004577359552117811814.html


Australia is in a recession and I don't care what the papers say, all I have to do is look around at collapsing industry, collapsing retail, and COLLAPSING HOME PRICES. . They will admit it in a year or so, when it's so obvious a blind bad could see it.

Negative gearing is a form of leveraged speculation in which a speculator borrows money to buy an asset, but the income generated by that asset does not cover the interest on the loan

A negative gearing strategy can only make a profit if the asset rises so much in price that the capital gain is more than the sum of the ongoing losses over the life of the speculation. http://en.wikipedia.org/wiki/Negative_gearing
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Trev
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Quote:
 
Your maths skills are a bit suss? The person in my example that bought 5 years later only owes $200k+interest over 25years. The person who bought in the bubble top owes $400k+interest over 25 years minus whatever they have paid in 5 years. So the person who boght at the top has lost $200,000 plus whatever interest they would have saved on the cheaper loan. Here a $400k home rents for less than $400/week so they would not have spent more than 100k over 5 years in rent and saved a bigger deposit with the spare money.


I don't think we're on the same page here. I'm not denying your maths. I'm not denying that either person paid more (or less) than the other scenario, but no money has been lost - i.e. "crystalised", hence my shouldacouldawoulda statement. I think I'm just using the term lost differently, my way is "I spent $100k on a house, sold it for 50k, and lost 50k" whereas your way (I think?) is "I spent 100k on a house, similar houses are now selling for 50k, I lost 50k"
The point I was (clumsily) trying to make is that when you purchase you lose opportunity, but you don't lose money until you sell.
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frankrider
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Ok, I see your point now. Thanks for elaborating.

Negative gearing is a form of leveraged speculation in which a speculator borrows money to buy an asset, but the income generated by that asset does not cover the interest on the loan

A negative gearing strategy can only make a profit if the asset rises so much in price that the capital gain is more than the sum of the ongoing losses over the life of the speculation. http://en.wikipedia.org/wiki/Negative_gearing
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Timo
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stinkbug
5 Dec 2012, 01:56 PM
It's kinda strange having Timo around, a bit like having an untrained pet.
If we are using the pet analogy, I'm more like a hunting dog, grabbing you disgusting property pigs by the ear, impervious to your rampant squealing, until the hunter, in this case the market forces, does away with you. The more feral hogs I dispose of, the sooner the environment can return to its normal balanced self.
After a bubble has burst, no one denies that it existed. But before it does, the popular refrain is that though bubbles existed elsewhere in the world, “there’s no bubble here”. So housing bubbles are admitted to have existed in Japan, the USA, Spain and Ireland – because they’ve already burst.
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