Negative gearing question?

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#1219831 22-Jan-2015 10:01

networkn:
he past, but getting your foot in the door can be difficult.

I do think that perhaps sometimes people look at the house they want, and say "I can never afford that"; instead of working out what they CAN afford and looking at that section of the market. It is still very difficult though.

I agree with this part of your statement. People today want lots of bedrooms, usually big houses in nice "safe" areas. When I looked at the house my wifes parents lived in when they first got married, I couldn't imagine anyone buying a place like that and actually living in it today, but they attribute it as the first step in
the building of their current wealth profile.

You don't even need to go back that far.

My first home back in early 2000, was a 145 square meter house 3 bedroom on 650 sqm in Cambridge East right on the greenbelt. $116,000. About $10,000 into renovations (new carpet, paint, polished floors, bathroom, landscaping, deck) and it returned $245,000 in 2005.

All I did was stick a homemade sign out the front, and had it signed and sold 2 weeks later.

Neither my partner or me were on stunning incomes. $25K and 34K = $59K combined.

I cant understand why more people my age arent in an equivalent or better position becuase there were plenty of opportunities like that available back in 2000 when you had 0% deposits + good house supply in desirable areas.

Batman

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#1219845 22-Jan-2015 10:14

i agree with networkn.

when i was a student i only bought clothes on clearance and only bought food on special.

priorities, needs vs wants

mudguard

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#1220078 22-Jan-2015 13:28

I don't have any issue with the 20% deposit, as people mentioned, buying your first house is hard work. What I'd don't like is going to auctions and seeing houses go for $150k more than expected. I can't see why LIM's etc aren't mandatory for the seller to provide and publish.
However I think we'll be avoiding the auction process.

Geektastic

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#1220108 22-Jan-2015 14:08

mudguard: I don't have any issue with the 20% deposit, as people mentioned, buying your first house is hard work. What I'd don't like is going to auctions and seeing houses go for $150k more than expected. I can't see why LIM's etc aren't mandatory for the seller to provide and publish.
However I think we'll be avoiding the auction process.

Part of the problem is in my view a lack of a proper valuation regime.

In a former life, I was a qualified Chartered Surveyor (the profession that, amongst other things, carries out valuations in the UK).

When a house is sold in the UK, no bank will lend a bean against it until they have had a Chartered Surveyor visit the house and carry out a mortgage survey to ascertain the value and whether it at least appears reasonably sound structurally etc. This means that, every time a house is sold, a proper valuation is done. That is a PROPER valuation - not just a QV software program having a guess.

Many estate agents in the UK (but by no means all) are also Chartered Surveyors.

The normal way of things is that almost no house will ever go on the market there unless someone has valued it and put a price on it. So if you look at a UK agent's window, it will have the same kind of cards in with photos and brief details but also the price of the house. Now, of course people negotiate and sometimes it goes for less and sometime for more, but it does mean that everyone knows what ballpark to start with.

Houses that are auctioned always have a guide price that is equally sensible.

From conversations with agents here, I learned that it is common practice to dupe potential buyers into attending an auction (and paying for all the due diligence just in case) by telling them that the agent expects the sale to be around $x when he knows full well it is far more likely to be $x + 30%.

Given the vast sums charged here by estate agents the level of skill and professionalism they have is woeful and their business practices often verging on the dodgy I think.

heylinb4nz

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#1220134 22-Jan-2015 14:40

Geektastic:
mudguard: I don't have any issue with the 20% deposit, as people mentioned, buying your first house is hard work. What I'd don't like is going to auctions and seeing houses go for $150k more than expected. I can't see why LIM's etc aren't mandatory for the seller to provide and publish.
However I think we'll be avoiding the auction process.

Part of the problem is in my view a lack of a proper valuation regime.

In a former life, I was a qualified Chartered Surveyor (the profession that, amongst other things, carries out valuations in the UK).

When a house is sold in the UK, no bank will lend a bean against it until they have had a Chartered Surveyor visit the house and carry out a mortgage survey to ascertain the value and whether it at least appears reasonably sound structurally etc. This means that, every time a house is sold, a proper valuation is done. That is a PROPER valuation - not just a QV software program having a guess.

Many estate agents in the UK (but by no means all) are also Chartered Surveyors.

The normal way of things is that almost no house will ever go on the market there unless someone has valued it and put a price on it. So if you look at a UK agent's window, it will have the same kind of cards in with photos and brief details but also the price of the house. Now, of course people negotiate and sometimes it goes for less and sometime for more, but it does mean that everyone knows what ballpark to start with.

Houses that are auctioned always have a guide price that is equally sensible.

From conversations with agents here, I learned that it is common practice to dupe potential buyers into attending an auction (and paying for all the due diligence just in case) by telling them that the agent expects the sale to be around $x when he knows full well it is far more likely to be $x + 30%.

Given the vast sums charged here by estate agents the level of skill and professionalism they have is woeful and their business practices often verging on the dodgy I think.

At the end of the day though people will pay what ever they can afford to live in the place they WANT, that's why prices are so out of control. The true value should be based on

a) land value set by someone like QV
b) house value set by registered valuer
c) legislation that states a house cannot be sold for more than 20% of the total values above combined

This would always ensure the house would be worth at least what it cost to build \ improve, would also allow wiggle room for marketing factors like school zoning, proximity to amenities etc. Would be interesting to cover scenarios and see how such a model would perform at keeping things realistic.

richms

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#1220136 22-Jan-2015 14:42

I don't support any limitations on the price 2 parties agree to sell things for when it is negotiated between them so no thanks to that.

Richard rich.ms

heylinb4nz

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#1220157 22-Jan-2015 15:02

richms: I don't support any limitations on the price 2 parties agree to sell things for when it is negotiated between them so no thanks to that.

The current model for housing supports people with the most physical money, or the people who can borrow the most, the only real winners are banks and the rich ...this has got to change.

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networkn

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#1220162 22-Jan-2015 15:11

Another thing I see stupid money spent on : Weddings and Engagement rings. One youngish guy I know spent 20K on the ring and 30k on the wedding. He was complaining about house prices and I couldn't help but laugh out loud.

mudguard

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#1220242 22-Jan-2015 16:53

When I was doing mortgages at Westpac I used to wonder how people on the one hand would love the increase in their GV so they could borrow more, then would complain about their annual rates increasing! I like the solution proposed above, that a valuation is mandatory. I live in a unit in Royal Oak, surrounded by million dollar villas. One of the units is on sale, and has a low GV (for Auckland) of about $470k, so many people have come to see it, and I've been asked questions as I mow the lawn, one woman was shocked when I thought it would go for $650-$700k. For a two bed, one bathroom unit.
I have friends who have attended nearly 40 auctions in the past year, he is amusing, when it exceeds their budget, they walk out. Once as he was walking out the auctioneer called out "sir, the auction hasn't finished yet" to which he retorted, "it has for us". Made me laugh.

afe66

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#1220269 22-Jan-2015 17:39

heylinb4nz:
networkn:
he past, but getting your foot in the door can be difficult.

I do think that perhaps sometimes people look at the house they want, and say "I can never afford that"; instead of working out what they CAN afford and looking at that section of the market. It is still very difficult though.

I agree with this part of your statement. People today want lots of bedrooms, usually big houses in nice "safe" areas. When I looked at the house my wifes parents lived in when they first got married, I couldn't imagine anyone buying a place like that and actually living in it today, but they attribute it as the first step in
the building of their current wealth profile.

You don't even need to go back that far.

My first home back in early 2000, was a 145 square meter house 3 bedroom on 650 sqm in Cambridge East right on the greenbelt. $116,000. About $10,000 into renovations (new carpet, paint, polished floors, bathroom, landscaping, deck) and it returned $245,000 in 2005.

All I did was stick a homemade sign out the front, and had it signed and sold 2 weeks later.

Neither my partner or me were on stunning incomes. $25K and 34K = $59K combined.

I cant understand why more people my age arent in an equivalent or better position because there were plenty of opportunities like that available back in 2000 when you had 0% deposits + good house supply in desirable areas.

My first house $380k 2004, total renovation 20k, sold 2013 $720k,

so thats' 340k - 20k, $320k profit for doing nothing all tax free over 9 years.

So the house, there's no way I would have bought the same house 9 years later...... so I think there's more going on than people spending all their money of "iphones".

A.

Bobdn

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#1220341 22-Jan-2015 19:52

networkn: Another thing I see stupid money spent on : Weddings and Engagement rings. One youngish guy I know spent 20K on the ring and 30k on the wedding. He was complaining about house prices and I couldn't help but laugh out loud.

That really is funny. I hear similar stories all the time. It's like "high house prices" is just the excuse people need to blow serious cash on cars and holidays because, hey, houses are so expensive so why even try?

Edit: 20K on a ring is insane. On the Warehouse website today they have a lovely looking ring for $2400 reduced from $8000! He should have just gone for that one and use the change to put a deposit on a house in Wanganui.

http://www.thewarehouse.co.nz/red/catalog/product/1-Carat-Diamond-Solitaire-18ct-Gold-Diamond-Ring?SKU=1784413

alasta

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#1220392 22-Jan-2015 21:17

afe66: My first house $380k 2004, total renovation 20k, sold 2013 $720k,

so thats' 340k - 20k, $320k profit for doing nothing all tax free over 9 years.

So the house, there's no way I would have bought the same house 9 years later...... so I think there's more going on than people spending all their money of "iphones".A.

Market related capital gains are a strange beast because people feel good about it, but in reality you only realise the gain if you sell up and don't buy another house. So, in most cases the gain is theoretical rather than real.

That's why I have ignored capital gains when performing my own analysis, however it's still important to factor in the inflation shield that goes along with propery ownership.

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#1220394 22-Jan-2015 21:20

all gains are realised eventually. unless one dies with a pot of gold, but those that are left fighting for the pot are the ones that gain.

alasta

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#1220395 22-Jan-2015 21:22

joker97: all gains are realised eventually. unless one dies with a pot of gold, but those that are left fighting for the pot are the ones that gain.

If it's not in my lifetime then it doesn't count! ;)

Batman

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#1220398 22-Jan-2015 21:25

I would suggest that passive income (collecting rent) is a gain, and so is not paying a cent on mortgage once you own 100% of the house is another form of passive gain

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