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  1. #81
    Legend minimoke's Avatar
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    quote:Originally posted by duncan macgregor

    MINIMOKE, Your arithmetic is so far out its unreal. $68k at 17pc over 11 years ?. No capital gains he is not a trader its not a business. Rural lifestyle land is and has skyrocketed they dont make it anymore, it will go up faster in the future. No upkeep, no mortgage, rates paid, he would be a dummy to sell. macdunk
    Sorry Duncan, my spreadsheet is a bit out. If I go to www.sorted.org.nz/calculator_index.html I get a more precise figure of 15.8% - still a figure not to be sneezed at. What are you looking for? I've also misunderstood the mans intent - I thought he intended to resell the property at some point at a profit for the kids education. Since its not a residential home, a business or farm I took it that he wouldn’t be CGT exempt. I’m sure there is a tax expert on ST who could clarify!. I think we all understand how lifestyle and all other properties have appreciated recently but as I mentioned before I think the gloss of this type of purchase will wear off thus lowering the expected rates of appreciation. To ensure he’s not a dummy he needs to make an informed choice and the questions seem to be: Will the land continue to appreciate at 15% - I don’t think so. Will there be a buyer around in 5 years time who will pay $680 – I don’t think so. How long will it take to cash up? I know of one property locally that has now been on the market for over a year and the price has dropped $50k. Can he improve on his $340 k current position – undoubtedly yes but where will he get the best return? Time will tell!

  2. #82
    Senior Member Halebop's Avatar
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    Capital gains in New Zealand is a sodding mystery but if he sells it as is without attempting to develop the site I'd be surprised if he ended up paying tax. He will pay a fair wad to sell it assuming he goes through an agent.

    His returns have been great and in the circumstances I think MacDunk gave the guy reasonable advice since he was apparently not the most financially savvy punter. However, 15%pa over the next 5 years is plenty ambitious and personally I think unlikely unless inflation gets back under control and immigration spikes again, and maybe even not then (That's +100% in the next 5 years Duncan).

    Assuming they need access within 5 years for the kids then surely it's time to start looking at his exit strategy? Can anyone guarantee where the market will be over that relatively short time frame? The property market is due a breather if not a correction. The current round of interest rate belt tightening with a rising currency impacting the productive sector and falling immigration is likely to be something of a bellweather. While I'm not sure anyone need mention the "R" word at this stage the negative consequences of the boom cycle could take just 6 months or could take 3 or more years to play out which would put a lot of pressure on that section to perform in the last few months.

    Even if he's restricted to $320,000 after agent fees and costs, that could earn a reasonable income for kids at University. With prudence there should be plenty left over for Mum and Dad to invest or use afterwards.

  3. #83
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    minimoke, I give in the land has appreciated five hundred pc in 11 years and you talk about 15 lousey pc. I expect the increase to slow down myself and only double in the next five years. You need a new calculator old son. macdunk

  4. #84
    Senior Member Halebop's Avatar
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    MacDunk I think you have problems with compounding? 15% per annum is almost the same as your "500%" over 11 years. 15.8% compounded for 11 years would generate a 5 fold increase

  5. #85
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    A lot of people do.

    Some real estate pushers claim 10% gains since the year 1086.

    If a house cost 1 cent in 1086 gained 10% a year it would cost $7.48x10 to the power of 35.

    The GDP of the USA is about 9x10 to the power of 12.
    \"The overweening conceit which the greater part of men have of their own abilities [and] their absurd presumption in their own good fortune.\" - <b>Adam Smith</b> - <i>The Wealth of Nations</i>

    The information you have is not the information you want.
    The information you want is not the information you need.
    The information you need is not the information you can obtain.
    The informaton you can obtain costs more than you want to pay.

  6. #86
    Senior Member Halebop's Avatar
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    Please, lets not use logic or hard data in the real estate returns debate.

  7. #87
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    one eyed property people are so annoying...

    house prices increase 2% a year in real terms.. same as population growth... simlpe as that.. look at 75 years of history and theres no dispute over that..

    current prices will revert back to that longterm trend - its just a matter of how. they either stay still for five years (so in real terms prices fall), or there is a big fall in prices and it happens sooner.

  8. #88
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    quote:house prices increase 2% a year in real terms.. same as population growth... simlpe as that.. look at 75 years of history and theres no dispute over that..
    This is correct, then extrapolate what is happening to population growth to see what is going to happen to house prices.

    Bambi

  9. #89
    Senior Member Halebop's Avatar
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    It's not fully correct. Propulation growth, employment, income growth, economic growth and productivity growth are all thought to impact real estate prices and inputs.

    Then within population growth you'll have subsets where the country overall might have an anaemic 0.5% population growth but Auckland for example might still enjoy 1%+

    Finally you'll have demographic changes. Having more children? Then bigger houses, large sections, multiple bedrooms etc are attractive. Aging Population? Painting weatherboards and rattling around an inner city bungalow worth high 6 / low 7 numbers while enduring a low fixed income probably doesn't make much sense.

  10. #90
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    yeah yeah of course...

    I'm just making the whole thing as simplified as it possibly can be... take the last 70 year of average house prices in NZ... then remove inflation... and you are left with 2% growth per annum... suspiciously that is also the long term population growth rate in NZ... maybe allt he swings and roundabouts you mentioned all smooth out over time and thats basically what it comes down to, on average...


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