What Is Best To Buy?

[Halebop]

Thanks Winston. Not sure all the property bulls will agree with your last statement!

As a disclaimer the data and analysis referring to residential property and not commercial property. Commercial is much more supportive of a debt load even if the banks don't like lending as much against it.

[trackers]

(one example, straight off the top of my head)

New Zealand's richest man (or close?), that guy that died of a heart attack or w/e in Fiji - he made millions starting off buying student flats in dunedin, one at a time....

Its a good way to get good returns on low investments, what you then do with your money is the question.

Perhaps I'm one of the luckier ones, but I brought a house using 90% leverage 4 months ago, and have a 100% return on it already (valuation after a number of small, but necessary improvements) - I don't expect this sort of return to happen every day, but it can and does happen...

[Bel]

Have you actually got your return on it already (refinanced using the gain or sold the house) or are just pulling fanciful figures out of a hat?

No offense of course.

[trackers]

quote:Originally posted by Bel

Have you actually got your return on it already (refinanced using the gain or sold the house) or are just pulling fanciful figures out of a hat?

No offense of course.

Well I believe I mentioned it was a valuation, didn't I? I fail to see how refinancing would show the profit either? I know what my property's worth, and what I would get for it if I sold it...It's really not altogether that difficult - Thanks for your opinion.

[Bel]

The person who told you how much your property is worth is actually a person willing to pay that price with his own $$$ or someone elses?

[stevieb]

quote:Originally posted by Bel

The person who told you how much your property is worth is actually a person willing to pay that price with his own $$$ or someone elses?

This would seem to be an overly cynical view. Clearly valuers can get valuations wrong and you never really know until you sell but seems like an extreme action to actually go and sell the place just to show some doubting thomas on a chat forum it really is worth that.

In general terms valuers put conservative valuations on places as they are less likely to get sued if a property sells for more than valuation than vice-versa.

At the end of the day I think we should accept valuations for what they are, a reasonable approximation for the value of a place.

[Halebop]

quote:Originally posted by stevieb

In general terms valuers put conservative valuations on places as they are less likely to get sued if a property sells for more than valuation than vice-versa.

This is the theory. In practice I've seen valuers say "How much do you need for it?". Always follow the money is my motto.

[Bel]

Exactly and do valuers follow the market trend?

Yes i guess i am a cynic, works well for me because if i take a on paper loss i don't immediatly go and throw myself out of a tall building. I prefer to count my money once its actually in my hands or taken from it.

[trackers]

Oh ok, yeah really good strategy there. Well in that case looks like I'm down the full amount (100%!)

I gave it out, I've got none of it back...-100% over 4 months, looks like this is going to be -300% returns every year.

Oh NO!

[Dough Boy]

The assumption of property price increases of 7% or more over the last 10 or 20 years is valid but lets remember salaries have not increased to the same degree so what gives?

Well since the 70's society has changed a whole lot with the 1.5 to 2.0 income household now common. So when you look at the traditional 'average salary to house value' ratios they are no longer are valid, rather the 'household income to house value' ratio should be considered.

And this brings us back to how house values have managed to climb ahead of salaries, that is, the second income earner in the household has been the one to allow/push prices to climb as they have.

So can the 7.2% growth continue? Yes, for sometime as the worker participation rate inceases to it theoritcal limit. But not forever, as the need for sleep and relaxation overrides the consumer's addition for money. However the productivity of the household could be extended with drugs that limit the need for sleep (don't laugh people 'need' there coffee to get them thru' the day so its only a small step to medication to limit your sleep).

Then we will have a true or nearly true 24/7 society and property prices will keep rising for the time being, just not forever.