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It's a common misconception that property is a hedge against inflation. One of the biggest property slumps in "living" memory was during a highly inflationary period in the late 70s.
While property will catch up with inflation it won't necessarily do this in a concurrent manner, often waiting for inflation to recede and better economic times to begin before playing catch up. The problem with inflation is that it impacts productivity and financing costs, two key ingredients for a robust property market.
MacDunk's 10% contention (I won't bother arguing that one right now!) is actually better supported by the more recent low inflationary period. Here productivity is at least stable to modestly growing, interest rates more affordable, GDP growth relatively robust by NZ standards, employment has risen and our collective pocket books suitably bulging with both cash and confidence to coax us into mutli decade loan commitments.
Alas like all cycles the miracle of continously rising productivity, low inflation, easy credit and rapid GDP growth will invariably become a victim of its own success. From a New Zealand perspective Inflation and Balance of Payments problems seem the enemy right now - a potentially heady "stagflation" combination. And just a short time ago people were accusing the Reserve Bank of getting things wrong with a rate rise... Be glad Bollard runs the bank and not the communal board of ShareTraders.
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Member
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Good on you WNS, I know lots of people with similar stories. You will find the brain dead will argue against it. Keep it going good times coming up with a buyers market. macdunk
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Member
Just received the latest Govt valuation in the mail.
On purchase price and latest valuation the home has appreciated at 6.5% per annum compounding for the last 11 years. As it is a home and is intended to provide accomodation plus a solid base for many aspects of our life I think this is OK.
What do others think?
Cheers
Tinker
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quote: Originally posted by Tinker
Just received the latest Govt valuation in the mail.
On purchase price and latest valuation the home has appreciated at 6.5% per annum compounding for the last 11 years. As it is a home and is intended to provide accomodation plus a solid base for many aspects of our life I think this is OK.
What do others think?
Cheers
Tinker
I think it's fantastic! Over the time frame it's probably more representative of recentish longer term returns achieved than the 10% theory. Just like the financial planners though, I'd hasten to add that past performance is no indication of future returns.
Compounded 6.5% is almost exactly double the purchase price over 11 years. Assuming you've made a dent in the mortgage (or at least refinanced for investment purposes only) it represents a substantial base for financial security.
In terms of wealth though it can be a bit of an illusion because if you intend to remain an owner occupier you can only swap the home for other homes at similar purchasing parity values. This is the danger of the "my overcapitalised house is my retirement scheme" plan, particularly for Baby boomers who may realise it is their only asset at the same time their peers do and attempt to "trade down" en masse.
I note recent data showing that outside of home ownership the average Kiwi has some $37,000 in financial assets at age 60 (I'm sure even modest Sharetrader members could beat this currently or at least on a time series valuation for younger/newer investors). Little wonder our sharemarket is so thinly traded - very few of us could even afford to own shares on that savings data.
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Haletop, You cant take it with you what better way to save up for your old age than over capitalize with a large house for the family. When the kids flee the coop move into a smaller property in an area where work dousnt dictate where you live. Reverse mortgage if you want for a better lifestyle. Most working people cant save as much as the value in their house increases so what better way?. My property has increased in value four times as much in 12 years without paying tax on the capital gain i would have been stupid to rent. macdunk
ps the bare paddock next door has increased in similar fashion with the farmer on the other side paying the rates to graze it.
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quote: Originally posted by duncan macgregor
...You cant take it with you what better way to save up for your old age than over capitalize with a large house for the family...
Dare I suggest there are plenty of better ways?
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quote:What was the average inflation rate? Possibly 2.5% so a gain of 4% annual which still is not bad..... except for rates, any maintenance etc.
Apparently taking out inflation, prices for real estate acually decrese 40% of the time. OK the other 60% they stay steady or rise so we are on to a winner.
Inflation probably closer to 2% as it has only recently gone high/ I should actual cheak the calculator on the RB website.
Yes to rates and maintenance but no to rent.
The number isnt as high as 40% but again to lazy to find the cpi adjusted graph.
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quote: Originally posted by Tinker
Just received the latest Govt valuation in the mail.
On purchase price and latest valuation the home has appreciated at 6.5% per annum compounding for the last 11 years. As it is a home and is intended to provide accomodation plus a solid base for many aspects of our life I think this is OK.
What do others think?
Cheers
Tinker
I guess you could take out 2 - 4% PA in Maintenance / Depreciation. Your rates are probably worth a months rent and your insurance is a couple of weeks. If you sell and buy again you are doing so in the same market so no increase in value there. Trouble is the real estate commisions and advertising costs are probably worth another years rent. Add in legal fees, there's another months rent there. Throw on your mortgage costs and how is the picture looking now?
On the contra side you would need to add the value of having a solid home base and only you can put a value on this. But the value would have been the same if you could have found a landlord who was committed to a long term tenancy arrangement.
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MINIMOKE, What a load of rubbish. What one eyed waffle it is obvious you have never been in the property business. macdunk
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I guess you could take out 2 - 4% PA in Maintenance / Depreciation. Your rates are probably worth a months rent and your insurance is a couple of weeks. If you sell and buy again you are doing so in the same market so no increase in value there. Trouble is the real estate commisions and advertising costs are probably worth another years rent. Add in legal fees, there's another months rent there. Throw on your mortgage costs and how is the picture looking now?
On the contra side you would need to add the value of having a solid home base and only you can put a value on this. But the value would have been the same if you could have found a landlord who was committed to a long term tenancy arrangement.
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