Property vs. PMs from an Australian perspective, which is better?

Discussion in 'Wealth Creation & Management' started by SpacePete, Nov 29, 2014.

  1. SpacePete

    SpacePete Well-Known Member Silver Stacker

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    Given the nature of the Australian real estate market, our national obsession, government policy, tax policy, population growth, constraints on supply in centres of employment, and the evolution of housing away from primarily being a place to live in and instead becoming an investment vehicle marketed to the world, how would people here compare investment in property vs. investment in silver and gold?

    It would seem that given all the factors above, especially those unique to the Australian market, property is a far better investment with massive price growth in major cities guaranteed, especially inner suburbs and around transport hubs.

    One of the primary focuses of government, no matter which party, is to maintain and grow the value of real estate. This is something not true with PMs. In fact, governments may come to see PMs as a threat to their control of the monetary system so we'll never see policy support for PMs in the way we see for real estate.

    Thoughts?
     
  2. SilverDJ

    SilverDJ Well-Known Member

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    I think you'd be quite foolish to think that house prices can continue to rise and give record capital gain indefinitely. Esp after already the biggest price boom in history.
    The smart money has also gone for long term best % rental return over capital gain.
     
  3. SpacePete

    SpacePete Well-Known Member Silver Stacker

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    What's the alternative in a world flooded with easy money chasing yield across all asset classes? What other investment provides all the benefits of well located property including yield, potential for capital gains, active government policy protection, government-backed artificial scarcity and growing demand?

    The key here is that I'm talking about the Australian property market exclusively.
     
  4. willrocks

    willrocks Well-Known Member Silver Stacker

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    [​IMG]
     
  5. SpacePete

    SpacePete Well-Known Member Silver Stacker

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    But we've been seeing similar cartoons for maybe 15 years. Just a quick google brings up some old ones:

    [​IMG]

    [​IMG]

    [​IMG]
     
  6. 97guns

    97guns New Member

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    from what ive been reading abut the AU RE market now is not the time to get in. i would have my money on the sideline waiting to pounce.

    buy the low and sell the high is the name of every investment game, if you are to buy now your buying the high
     
  7. petey

    petey Active Member Silver Stacker

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    Given this is the wealth creation and management section I'd say RE any day over PMs.

    Buy low sell high is the name of the speculation game. Unfortunately buy "low", hold lower and see no holding profits has been the name of the PM game for some time now.

    Even if you buy RE high, so long as you aren't forced to sell you can see income from holding it.
     
  8. dozerz

    dozerz Well-Known Member Silver Stacker

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    i don't see the big dips in the re market compared to pm. pm seems much more volatile and open to manipulation. many more people in the re game than pm ;)
     
  9. long88

    long88 Member

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    for any transaction in the RE, goverment benefit out of it (stamp duty, taxes), then there is employment benefit to the overall economony (from the demand to furnish the house, or build the house).

    so every single goverment and almost everyone benefit from this RE activity, therefore it is in goverment interest to make sure the price keep going up (by controlling supply of the land to the developer).

    another aspect to this is, cash flow created if you buy the rent the property out, if you buy smart/below market value, then you stand an opportunity to make money from your investment. (and tax law are written in your favor as well).

    with PM, there is no majority benefit to the masses, apart from the dealer, and if we go to gold standard, the currency creation will be limited, and it will be hard to create inflation.

    inflation is the key here, as the price of the goods and services goes up.. somehow we all revolt/demo for higher salary, when those are catching up.. the new norm of the higher price will be acceptable (including property, PM), then the cycle starts again.
     
  10. 97guns

    97guns New Member

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    but do the numbers work? i have a cousin that lives in hawaii, he has been accumulating properties for the past 10-12 years but he can not turn a positive on them, rental income barely make the bills and often times they do not. his sole purpose for investing in hawaii is for capital appreciation. when i ran my numbers from the mainland by him he couldnt believe it, im invested for the rental income which has allowed me to retire 5 years ago at 39. any capital appreciation is pure gravy in my eyes, just dont mess with my income
     
  11. long88

    long88 Member

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    that is why the saying "Cash flow is king"

    if the numbers doesnt work, why do you dip the money in ? that is just a pure speculation.. and he could be there waiting for the capital gain that never happen in his life time (or before his time run out or run out of capital to feed the property).

    numbers dont lie, and US is one of the biggest market in RE, especially what happens in the 2008, and wish i get more of those when those dips time and allocate more money to it.

    any CG that comes after the monthly +ve Cf is your bonus..


     
  12. SilverDJ

    SilverDJ Well-Known Member

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    And that is the difference, and it's a huge one.
    Property (most of it anyway) is an income producing asset, like (most of) shares with their dividends, or even lowly cash interest in the back.
    PM's are NOT income producing, they only have capital gain or loss, so are generally an entirely different class of investment.
    Of course, you can choose to do any of them for purely capital gain purposes, but with PM's you don't have that choice.

    Metals can actually be more profitable than shares if you are short term trading them. Pick it right and you can gain (or lose) many % in a day (yesterday alone was a 4.5% change).
    Property is not easy to flip like PM's and shares, so once again, different investment classes from that aspect.
     
  13. willrocks

    willrocks Well-Known Member Silver Stacker

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    15 or 25 years is about right according to the stats. It all depends on how much higher that red line can go. Historically its mean is somewhere around 20%.

    [​IMG]
     
  14. SpacePete

    SpacePete Well-Known Member Silver Stacker

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    Thanks. The private debt looks very concerning. But if I were to look at that from the perspective of someone able to make government policy, I'd look at opening up the market further to overseas buyers and relax restrictions (or not enforce existing ones) so the debt can be shifted outside of Australia.
     
  15. SilverDJ

    SilverDJ Well-Known Member

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    And shoot ourselves in the foot long term. Make that both feet, and lop our testicles off while we are at it. Great, lets do that.
     
  16. SpacePete

    SpacePete Well-Known Member Silver Stacker

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    I'm not saying its a good thing. You're looking at it from the perspective of the longer term good of the nation rather than from the perspective of a policy maker with a vested interest in the property market and in getting elected by pandering to the desires of the electorate. I was trying to get into the mindset of such a person to understand what possible futures may play out.
     
  17. willrocks

    willrocks Well-Known Member Silver Stacker

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    That depends on whether you believe the market is supported form the bottom up, or the top down. Personally I think it's supported from the bottom.

    From what I can gather most foreign investors are high net worth investors looking for luxury properties. Even then they only account for less than 3% of total sales. I just can't see foreign investors supporting the market if/when it collapses.

    https://au.pfinance.yahoo.com/money...foreign-investment-in-australian-real-estate/
     
  18. phrenzy

    phrenzy In Memoriam - July 2017 Silver Stacker

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    Here in Adelaide I wouldn't want to be buying a house anytime soon. Holden choosing drown, ASC likely not far behind if the (federal) libs get their way, going to be a lot of people selling their houses to close out their mortgages, especially in the northern suburbs. I happen to live a little north of town, it's sad really but I'm sure it's going to be a buying opportunity.

    There are loads of small pockets of nice areas already undervalued. This could end up being one of the last genuine opportunities to buy a reasonable 3 bedroom "Australian dream" type house for 250k within 30 mins of any Australian capital CBD (Hobart doesn't count, it's basically New Zealand).
     
  19. brisbanecoin

    brisbanecoin New Member Silver Stacker

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    In my opinion the Car factories and mining decline will decrease housing prices in towns where there is the main source of jobs. However most cities here will continue to rise, where people argue that Australia is not different just remember we still have some of the highest interest rates on housing loans (About 4.5%) compared to 2-4% in the UK, Canada and the US. As well as the minimum Adult wage in the US is $7.25 an hour While Australia has a minimum wage of $16.87. So two adults in the US make $551 per week before tax where in Australia they could make $1282 (Both based off a 38 hour week) So with reduce interest rates here pretty much any couple in Australia can afford to purchase property.

    Add to that higher savings rates the countries world wide will allow most people if the live modestly to afford to purchase property and start generating income while also receiving more tax benefits then PM's. In my opinion they are a good hedge against a down turn in the market however Property has led a lot more people to be able to create wealth then PM's.
     
  20. trew

    trew Active Member Silver Stacker

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    Wonder how Japanese property investors have done over the past 30 years.
     

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