"it will take 30 years to recover"

[67910241]

Exnzpat

As far as my limited understanding goes, there are a number of people here and elsewhere that have an issue with HOW the Richmastery folk do their stuff, not precisely with what they're doing in general.

A few other object the fact they simultaneously cover several activities that they think involve plenty of potential conflict of interest, and engaging Kieran would open another gate to a new potential conflict of interest involving a purely commercial informative entity (which Kieran is supposed to be, and a well respected one at that) closely cooperating with a mixed-operation commercial educational/advisory/RE supply entity, such as Richmastery.

There are also some who no doubt know more about the history between Kieran and Phil J than I do, and they're finding it hard to believe that Kieran would suddenly start cooperating in any form with a former (externally perceived) enemy of his. In this respect, I have no knowledge or understanding of my own, so I have no opinion whatsoever.

Finally, there's surely at least a bit of envy or dislike of competition directed against RM, but I am still way too insignificant to partake in this.

I haven't fully made up my mind on either KT or RM, but I still respect KT's analytical work a lot (I have read a couple of his books and I found them fairly informative and well devised), which is why a statement like that would come as a complete surprise to me.

I've now also spotted him saying he saw inflation as a potential "liferaft". It might well be one, but just for the amateurs who would and probably should be burnt. The more seasoned investors will see inflation for what it is - a potentially dangerous smoke granade that's really hard to clean up after being detonated and adversely affects a whole lot of innocents, and may only keep you alive long enough for the sharks to enjoy a fresh meal instead of settling for a rotting amateur investor corpse or a few.

[BTDT]

House prices

this graph show that property values in the 70s were almost the same as in Early 2000.

definitely contradict the theory that P.I values duple every 10 years.

say a property was worth 50k in 1975, and 100k in 1985, 200k in 1995.

am I missing something?

The claim re house prices doubling reads like this; "House prices have doubled in AUCKLAND, ON AVERAGE, every 8 yrs (approx) over the past 30 yrs" and stats will back this up. This is excluding inflation, after all (in simple terms) when you buy a house you pay the $ asking price or thereabouts, irrespective of what inflation has done/is doing.

[67910241]

When you buy a house

The claim re house prices doubling reads like this; "House prices have doubled in AUCKLAND, ON AVERAGE, every 8 yrs (approx) over the past 30 yrs" and stats will back this up. This is excluding inflation, after all (in simple terms) when you buy a house you pay the $ asking price or thereabouts, irrespective of what inflation has done/is doing.

You don't often pay entirely - the bank normally pays most of it for you. You're then at the mercy of their interest rate, which is very directly correlated to the inflation rate.

So there's not much entirely irrespective of what inflation is doing.

[BTDT]

Inflation

True but one can mitigate the effects of this to an extent, interest only, fixed rates etc. However the point I was trying to make (tho not too well perhaps) is that inflation is not a thing one can do a lot about, and it can "cloud" investing issues depending on whether it is included or not.

For example the managed fund industry stays away from it when quoting the returns on their funds as it can confuse the everyday investor.

[67910241]

I fully agree

True but one can mitigate the effects of this to an extent, interest only, fixed rates etc. However the point I was trying to make (tho not too well perhaps) is that inflation is not a thing one can do a lot about, and it can "cloud" investing issues depending on whether it is included or not.

For example the managed fund industry stays away from it when quoting the returns on their funds as it can confuse the everyday investor.

For the purpose of comparing it with another liquid investment type, such as shares or managed funds, nominal values are absolutely relevant, accurate and dependable.

[halfempty]

So the end of the boom was mis judged by everyone, there's a long list of people who called it and missed some by years.

Is it any surprise the end of the slump has been judged at anything from 18 months to 30 years.

Does this just mean that nobody really knows, or is everyone having a guess so that if there right they can say "Told ya so"?

If so my guess is 2 years 7 months 4 days and 20 minutes.

Might be 25 minutes in a down wind.

[kieran]

'Real vs Nominal' Education 101

Orkibi made this point...

this graph show that property values in the 70s were almost the same as in Early 2000.

Checking the graph it clearly reveals that APPARENTLY (according to the quoted 'REAL house price growth graph') we could buy houses in 1994 for LESS than in 1974... 20 years earlier... Yeah right! (My parents $12,000 in Three Kings purchased around 1974 was only worth thw same in 1994 BASED ON the 'REAL' theory but in reality was actually worth over $150,000 by 1994...). That will never be revealed in the graph enclosed because its not about actual $ value growth, its actual dollar value growth LESS 20 years of the annual inflation rate...

and BTDT put it well...

when you buy a house you pay the $ asking price or thereabouts, irrespective of what inflation has done/is doing.

Please show me the evidence of ACTUAL house prices moving according to the 'REAL' growth rate in the graph in this thread...

What I meant by 'academic' was that the 'REAL' price growth data is not a true reflection of actual $ price growth when you go to sell or buy.

Anyone... please provide evidence that proves otherwise.

[Monid]

Kieran
You are confusing me. I thought you were making the sophisticated point that averages (real or nominal) conceal the actual movements of the market in terms of individual properties.

But it now looks like you are saying that real values don't matter only nominal values. Which seems obviously false if you want to measure actual growth (which you should if you are going to compare asset classes for example)

So could you define ACTUAL house prices please?

If you mean nominal house prices then the connection between the two graphs will of course be a function of inflation, should be pretty easy to show given your data.

But anyway if you want the simple explanation:
How many loaves of bread could the sale of your parents house buy in 1974 vs the number of loaves in 1994? If the real value theory is correct it should be about the same number of loaves in 1974 than in 1994. (obviously this is a fudge since the price of bread is hardly likely to be representative of inflation but you should get the idea) Real values reflect the purchasing power of an asset and if you are counting profits this is what you should look at...

Cheers
David

[kieran]

So could you define ACTUAL house prices please?

Also known as Market Value (yes and nominal).

I'm not talking about purchasing power here and never was (although of course its also important to consider) just trying to cut through the confusion that many seem to have when economists start talking about 'REAL' values which many seem to think are the actual values of properties that you have to pay to buy them.

No-one values their properties (no not even registered valuers) on a 'REAL' basis when they go to sell them.

[Austrokiwi]

Also known as Market Value (yes and nominal).


No-one values their properties (no not even registered valuers) on a 'REAL' basis when they go to sell them.

I am not sure I totally agree. Yes if you refer to the average home owner. No for IP The reason I say this is I assume the aim of every investor to beat the rate of return they could get by just putting their money in the bank.

It is a matter of perspective and what each investor sees as important. It took a bit of digging but the house Kierans parent's purchased in 1974 cost them 428 Gold ozs' The value of the property in 1991 was 230 oz gold. I think that is what the real growth graph shows.

The figures are approximate and are based on 1974 NZ$gold price as being $28.00 oz and 1991 NZ$650.00 oz

[PerryAF]

just trying to cut through the confusion that many seem to have when economists start talking about 'REAL' values which many seem to think are the actual values of properties that you have to pay to buy them.

So you were just saying that people are confused that the term 'real' might mean nominal?

Then what did you mean by real prices are just academic?

[muppet]

Who cares?

People still need somewhere to live.

[Austrokiwi]

Who cares?

People still need somewhere to live.

I appreciate the sentiment! However I still think the discussion is worth while.

[Gatekeeper]

So do I!
Really Kieran, it's a valuable thing to know and understand.
What say the Govt didn't back out inflation on our GDP growth figures, do you think that would be honest? But of course they do, as the the $ is constantly being devalued. So why do you think it's honest with house prices?

The spruikers wouldn't get away with their "Growth" and "Housing doubles in VALUE every ten years" rubbish!!

[kieran]

The reason I say this is I assume the aim of every investor to beat the rate of return they could get by just putting their money in the bank.

And how much leverage does that give you..?

Sure you can leverage commodoties but I prefer an asset that provides a basic human need and is always in demand to some degree, driven by population growth.

Thats my opinion and the end of my discussion on this topic.