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Housing Statistics are Rubbish thread

Discussion in 'Investing Strategies' started by Redwing, 27th Dec, 2006.

  1. Redwing

    Redwing Well-Known Member

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    housing statistics are rubbish . - Finance News - Australian Finance Message Boards

    An interesting read above about housing statistics but then gets down to Shares and property with some interesting thoughts from various posters

    have a read and let me know what you think (link is for page 3 where it gets into shares and property)

    here's an interesting post from another page located on the thread;

     
  2. Simon Hampel

    Simon Hampel Co-founder Staff Member

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    I think one of the key phenomenons that many people dismiss during a comparison of shares and property is that both are cyclical - and often these cycles are opposing (shares and up when property is down and vice versa).

    There is always new money entering the investment world that needs to find a home - and as mentioned in the post above, it will tend to gravitate towards the market segment which is currently performing well.

    When interest rates are low, people tend to upgrade their PPORs (renovating and/or trading up) and this starts prices rising - as prices rise, more people tend to start investing.

    As more people buy property, they tend to pull money from other investments such as shares to fund it. This is, of course, a fairly small percentage of the overall sharemarket - so it doesn't have a huge impact, but there is a bit of a downward pressure.

    The good thing about the sharemarket is that there is a very large pool of new money each year from compulsory superannuation which needs to be invested - and the main place that goes is into the sharemarket. This keeps the sharemarket pretty bouyant.

    As interest rates start to rise and housing markets start to cool down a bit - people will turn their attention to other investments, and so the sharemarket will start to get a lot of other new money. If property has done really well - people may even sell out to realise a profit, and some of that money may well make its way to the sharemarket too, if it is doing well.

    If you are observant and watch the interaction between the various markets, you can see where the money is going, and profit from it.

    There are times where I think real estate is by far the best investment, and other times where I think shares are the best investment - so the solution is to invest in both and get the best of both worlds !!!!!

    Indeed, the capital growth in my real estate portfolio is currently funding the acquisition of shares, which are generating cashflow which I will use to purchase more real estate, which produces capital growth for more shares and so on ...

    As for the posts about costs and such - they are correct in that there are many costs in holding real estate that you don't have with shares, and this makes the potential returns look more attractive for shares ... but the fact is that you can buy property with a much smaller capital outlay than you generally can with shares - and that makes all the difference in a growth market ... leverage is the key.
     
  3. Mark Laszczuk

    Mark Laszczuk Well-Known Member

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    This statement sums up perfectly why I will never understand why so many investors are exclusively into property or exclusively into shares.

    Mark
     
  4. Redwing

    Redwing Well-Known Member

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    I found this post interesting on that thread as well regarding Shares and Gearing..


     
  5. Redwing

    Redwing Well-Known Member

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    Had to drop out there as guests dropped in ;)

    I found the above strategy interesting; with his strategy of regular gearing (every five years a Margin Loan top-up)to increase the total portfolio of CBA shares and net worth, starting with $20k in 1996 and achieving a net worth of over $1M by 2006 by selecting a quality share and regularly investing/gearing into it.....imagine how he would've gone if he purchased CBA when it first floated; from memory it was around $3.50 or so wasn't it?

    he's now sitting on a dividend income of around $100k p/annum at an age of 38 (good on him for sticking with his strategy).

    maybe something applicable to a quality managed fund or two ;o)
     
  6. Redwing

    Redwing Well-Known Member

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    Just did a search on Growth and Dividend, Top Shares over 5yrs showed:

    PBD Port Bouvard Limited 27.5% 18.00%
    CIY City Pacific Limited 92.2% 10.07%
    RPG Raptis Group Limited 25.5% 9.80%
    TLT Tourism & Leisure Trust 19.3% 8.53%
    FLK Folkestone Limited 24.2% 8.33%
    CMI CMI Limited 17.1% 7.89%
    MPH Magna Pacific (Holdings) Limited 17.6% 7.83%
    TMO Tomato Technologies Ltd 17.5% 7.69%
    DVN Devine Limited 16.1% 7.69%
    SFC Schaffer Corporation Limited 26.4% 7.16%
     
  7. Redwing

    Redwing Well-Known Member

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    This from the same thread and some interesting observations within; certainly had me thinking about the effect of Time/Rate/Return and the Power of Compounding

    Of course this is applied to one share only in this example ..

    See attached spreadsheet as well





     

    Attached Files:

  8. tropic

    tropic Well-Known Member

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    Few things I like to mention:
    10 years ago margin lending would have been 11-13%? Defintely not 8%. Even now most are higher than that.
    7% dividend maybe when you used to pay 10% IR not now, unless you count the franking.
    Will you sleep well at night if you invest like that?

    Fantastic result though!
     
  9. petros

    petros Member

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    I would disagree with the calculation that the sum of population growth, GDP growth and inflation will give you a forecast of how much property values with grow. I struggled for years with systems of econometric equations forecasting growth in rents and values and I tell you getting a reliable forecast of how much values will be growing just in the the next three years is way more complicated than the simplistic approach described. Furthermore the assumption that supply is fixed is quite questionable unless the calculations refer to an area where development is prohibited by law or there is no land available for development. In fact studies have shown that within a 5-8 year horizon supply not only is not static but it overreacts to increases in rents and values.


    Petros
    Profitable Property Investing in Perspective