"it will take 30 years to recover"

[Austrokiwi]

You havnt really made anything since its stealth inflation!

Exactly! Another way of understanding it better: the money in your pocket halves in purchasing power every 10 - 15 years ( Fuzzy maths and dependant on what the actual inflation rate is. So a house doubling in 10 years in dollar terms may only just be maintaining its real value.


On another matter:
I was reading a week or so ago how inflation figures are calculated. Seems a lot of discretionary items are in the basket, with non discretionary items ( food and accommodation) making up a relatively small proportion of the calculation. I suspect that if inflation was measured against non discretionary purchases I think the figures would be shockingly high.

[tricky]

Exactly! Another way of understanding it better: the money in your pocket halves in purchasing power every 10 - 15 years ( Fuzzy maths and dependant on what the actual inflation rate is. So a house doubling in 10 years in dollar terms may only just be maintaining its real value.

Which means a house with a 100% mortgage is a great investment thanks to inflation.
After 10-15 years your debt is halved.

[Gatekeeper]

Which means a house with a 100% mortgage is a great investment thanks to inflation.
After 10-15 years your debt is halved.

But house price inflation isn't a given.
Japan has suffered from house deflation for a decade++.
We are currently heading into house price deflation, so how do you know it'll be a good bet. It was for the last 30 years, but it's the changes in cycle that catch people out ultimately.

At the same time energy and food inflation push your costs the other way, doubling your losses from house deflation.

[Austrokiwi]

Which means a house with a 100% mortgage is a great investment thanks to inflation.
After 10-15 years your debt is halved.

Well that definitely puts tricky into the glass half full class!!! I can't fault your way of looking at it but it is a matter of tolerance of Risk. 100% leverage is great if property values are going up. If they are are heading down your loss's can be huge. We can see where property has been: but that doesn't mean it will continue the same trends.

My perspective is Property is exactly the same as any other investment, and like any other investment it can go down as easily as it can go up. Currently Property is out of sink with what the "normal buyer" can afford. As Gate keeper has intimated ( I hope I am not misquoting) times are very interesting at the moment. In my view the potential for loss's at the moment makes 100% financing a very high risk. I would even guess very few people could find a bank actually approving 100% mortgages now!

Obviously If you think Property never falls, your welcome to mortgage your life to the fullest!!!

[Austrokiwi]

I missed a point Trickys position seems to assume income will double in ten years as well!!!

[Gatekeeper]

times are very interesting at the moment

That's for sure. I don't think is a repeat of anything in the past few hundred years! Cycles are very interesting, but too many just look at one cycle, there are many going on at one time that affect each other.

The "Perfect Storm" has been quoted much over the past few years.
It's been fun watching it all come together.

[Tucker]

100% finance doesn't necessary mean the property is financed to RV. Maybe 100% financed means financed to 70 - 80% of RV because that's what it was bought for meaning there is some leeway for downward movements.

[Badger]

100% finance doesn't necessary mean the property is financed to it RV. Maybe 100% financed means financed to 70 - 80% of RV because that's what it was bought for meaning there is some leeway for downward movements.

Theres little if any leeway in the debt world!

Any investor with that kind of debt level is in trouble. Debts all good if you can service it and refinance it with more debt.

Unfortunatly for many there jobs will be dissapearing and the credit flow is drying up.

It (the cash) simply just does not exist never did!

[Tucker]

I was just pointing out that 100% financed doesn't necessarily mean the property is mortgaged to it's RV.

Badger some Lenders here have eased their lending criteria so I don't see it completely drying up. Matter of fact one of my banks called me yesterday asking if I was looking to buy anymore property as they are now looking for more business plus have dropped some of their restrictions they imposed last year.

[tricky]

In my view the potential for loss's at the moment makes 100% financing a very high risk. I would even guess very few people could find a bank actually approving 100% mortgages now!

Obviously If you think Property never falls, your welcome to mortgage your life to the fullest!!!

Don't make the assumption that a portfolio is 100% morgaged.
Inside your portfolio, you might have one property with 100% mortgage.
If the portfolio has a LVR of 50% then the 100% mortgaged property is probably pretty safe with medium-low risk.
I'm guessing most investor are in this position?

I missed a point Trickys position seems to assume income will double in ten years as well!!!

Not so fast - incomes tend to track inflation. Don't put words in my mouth.

[Austrokiwi]

Words in your mouth?

Don't make the assumption that a portfolio is 100% mortgaged.

I was not referring about a portfolio I was highlighting the very real risk of loss with 100% finance.

Not so fast - incomes tend to track inflation. Don't put words in my mouth.

On this one I wasn't putting words in your mouth; sorry I thought my wording was very clear with "seems to" and "Assume" All I was saying was that your position on this seemed to be based on an assumption, which you have reiterated: "incomes tend to track inflation"

I would suggest it is dangerous to make assumptions that incomes tend to track inflation. I am sure someone else will know the facts and may be able to point out times when wages did not track inflation. Even if they have in the past that does not guarantee they will in the future.

Some of the commentators I have been listening to are suggesting the current economic situation may see low wage/salary growth coupled with high inflation

[Green Fish]

Exactly: There is no reason why property values should not go through the floor, while, at the same time, the cost of living (rent excepted) goes through the roof.

[tricky]

I guess anything is possible but I don't share your pessimism.

[Austrokiwi]

I guess anything is possible but I don't share your pessimism.

Absolutely agree!

I am a risk intolerant investor so my views and more importantly actions, I suppose, are best described as defensive. That does not mean I haven't made money, but I would be the first to admit that my investing profile does not allow me to make the "killing" that others have when times are good. However, when times are bad I don't make the loss's that more offensive ( in the military sense) investors can realise.

Don't get me wrong I take risks, but my intolerance to Risk leaves me only risking funds that I can afford to loose.

[Badger]

I was just pointing out that 100% financed doesn't necessarily mean the property is mortgaged to it's RV.

Badger some Lenders here have eased their lending criteria so I don't see it completely drying up. Matter of fact one of my banks called me yesterday asking if I was looking to buy anymore property as they are now looking for more business plus have dropped some of their restrictions they imposed last year.

Yes they have to offer who ever is still standing more since they have run out of a steady supply of suckers..."THERE TAPPED OUT" in "DEBT"

There offering me $500,000 but its all debt created from fresh air and they want to charge me interest on fresh air?

Bankster criminals they should be in court for fraud concerning the current pyramid scheme and the transfer of wealth, resources and means of production theft!