HH: Certainly many foreigners in Taiwan could save a decent amount though. Including one private, I take home about 77,000NT/month. My wife doesn’t work. There’d have to be plenty of foreign couples, or even couples with one Taiwanese member that would take home at least 50% more than that. Compared to the West, what I earn is pitiful (although of course, the cost of living is lower, but then so are the living standards in many ways).
As a good example of this, two of my friends (one of whom is foreign and earns more than I do) got married a year ago, but had to save for a year for their wedding banquet, which cost them an arm and a leg. One year’s savings got eaten and drunk in two hours by a bunch of free-loaders (some of whom demanded extra wedding cakes, despite giving the bare minimum hongbao, and many of whom couldn’t grab enough shit to stuff in bags on their way out) just so they could satisfy the vanity of her mother in “saving face”. To make matters worse, the woman is pregnant and will give birth in the second half of this year, but will be unable to take much time off work to raise the baby (who will presumably be raised by her mother who lives nowhere near them). I worked it out that if they had had a modest wedding, she probably would have been able to take eight or nine months off to spend with the baby. Feed a bunch of free-loaders for two hours or allow your daughter to spend eight months with her kid? What a wicked woman her mother is! To make matters even worse, the guy is about fifteen years from retirement (well, he’ll probably have to keep working, but he will become considerably less employable as time goes on in this industry). Therefore, could they afford to drop a year’s worth of savings on a meal? Yet it’s what everyone does, so it’s what they had to do, right? Between them, they probably earn well over 50% more than we do, yet it slips through their fingers like water. All well and good, but what will they do in retirement, which will, incidentally, coincide with the time they’ll be hit with university fees? Unless you’re living in Bangladesh on less than $1/day, it has a lot less to do with how much you earn than how you choose to spend it.
As for investing, mutual funds are a road to ruin, I believe. They’re a massive scam designed to make fund managers (who are too stupid and lazy to do some real research and put their balls on the line rather than blindly following the herd) rich regardless of whether their clients take a hit or not, and take a hit they often do. However, if people are willing to do the research and not get caught up in the emotional rollercoaster that is the market, then there are good investments to be found. Indeed, it’s precisely because most people are so driven by impulses no more rational than their dog (i.e. greed and fear) and that such people (including the so-called experts) have no real understanding of randomness and risk that there’s money to be made by others who can keep their heads and turn down the volume when the so-called experts come on the boob tube to read the augeries.
Namahottie: Some very easy practical ways to save that money:
Read The Richest Man in Babylon to change the way you think about money. To give you the summary of that, pay yourself first (save at least 10% of your income) and live within your means.
Write down every single thing you spend for an entire month or two, including every visit you make to an ATM. Every single thing. Even 10NT. Certain patterns will begin to emerge as to where the holes are in the bucket.
Based upon the above, make a budget with a certain amount of fat built into it for entertainment or so on, but also be a bit ruthless in plugging some of those holes.
Either set up your bank account so that a certain amount gets deduced automatically each month and redirected into another account or investment, or do it manually as I do. If you are to do it manually, discipline yourself to only go to the ATM once per month. Do not use things such as EFTPOS or other direct debit systems as you will overspend and lose track of spending. Do not use credit cards unless you can, and will, pay them off immediately from an online account.
In terms of the savings/investments, you can set up two or more accounts depending upon how complicated you want it to be. One account would be purely for investing. Another account would be for saving for things you want to buy (either for yourself, or for instance, Christmas presents) that require several months to save for. The point is to make a distinction between three categories: living expenses, short to medium term purchases with cash (you can divide this into smaller categories if necessary) and investments. Once you set up a system like this, it pretty well takes care of itself.
You’ll also need to build an emergency fund of three to six months’ living expenses (and by living expenses that really means everything, including rent/mortgage, medical bills, etc. that could or would come up in that time). Another thing that needs to be considered is insurance against serious illness, disability and even death because aside from any medical costs involved, the loss of income could be devastating. I don’t have to pay that much for my insurance, but it does give me peace of mind knowing that if anything were to happen to me, I’d be taken care of, and because I’ve since married, my wife and future kids would also be taken care of.
Those are just some pretty simple ideas about how to save money. After about six months, a person should have a decent amount in their account for investing. During those six months, such a person should be fairly proactively reading about investing, not necesarily with a view towards managing his or her own investments but so as to be able to make fairly informed decisions and ask the right kind of questions of others.
All of the above is very doable for the average foreigner living in Taiwan, and probably many other places also.
EDIT: Another thing to read that will change how people think about money is Robert Kiyosaki’s concept (that I think he calls the Cashflow Quadrant). He’s a bit of a snake-oil salesman, but that is one good thing I got from him.
In short (I may get the terms slightly wrong), these are:
Income (pretty self-explanatory)
Assets
Expenses (also pretty self-explanatory)
Liabilities
The problem a lot of people have is in distinguishing between assets and liabilities. An asset is something that generates a net income, which can then be used to acquire more assets which leads to an exponential compounding effect of wealth. A liability is something that generates a net expense. The point that Kiyosaki makes is that poor people have expenses, the middle class have liabilities and the rich have assets. The really important distinction is that the middle class have a whole lot of things that they incorrectly think of as assets, but are really liabilities because they require constant cash to be injected into them, either through ongoing running/maintenance costs or depreciation. Cars are the really big one here, but for many people, a house can also be a significant liability under certain circumstances (especially if a lot of debt was incurred in obtaining it and so there’s a lot of interest on that, but also for maintenance costs, taxes and even things people don’t think of such as literally requiring a bigger house – which must be heated/cooled and maintained – just to store all the extra crap people accumulate).
There’s a certain school of personal finance that advocates a 75-20-5 rule, where at least 70% of your net worth should be in assets, no more than 20% should be in your primary residence, and no more than 5% should be in everything else you own (including vehicles).
Once you start to look at things from these kinds of perspectives, you realise that Kiyosaki is indeed correct in that the middle class have massive money pits which is why even though many are professionals who have considerable income, many also never seem to move forwards.
Well here’s the thing. Neither you nor Sandman nor anyone else here knows what my ‘level’ is but both of you seem to have decided for yourselves that I am on a different planet and need immediate professional financial advice. You are both out of order trying to paint me as some kind of out of touch prick.
I admire GuyInTaiwan’s attitude and realize only recently that is the way we all need to think to get ahead. While he is on a good wage by Taiwan standards $70k is not a huge amount of money to support his family but he still maintains an impressive saving regime. He knows that it’s not your income that counts but what you do with it and it sounds like he already has his money working pretty hard for him.
The fact is that most of us here have at least some options about how far to take frugality in the quest for a better retirement or just more security.
I think it comes down to the whole pain / pleasure principle. If the pleasure of knowing you have a nice nest egg waiting for you in the future is greater than the pain you will encounter of giving up eating out and vacations, then go for it.
If on the other hand, saving up for the future causes your standard of living to greatly suffer because of no vacations and eating bian dangs every day, then I would question if it’s worth the trouble.
Obviously somewhere in there lies a balance that we need to find for our own situations.
llary: I am on a good salary by Taiwanese standards, but my wife doesn’t work. Thus, our family income from work is probably about average compared to the average Taiwanese family that has two working adults. The difference is that we also have considerable assets.
Also, another thing I wanted to comment on was dollar cost averaging, which I believe you mentioned before. It’s better than nothing, especially if it’s set up as an automatic deduction, but it’s actually a really inefficient way to invest. Here’s why:
If we say, for argument’s sake, that a share in a company is worth $1 based upon liquidation value, it seems slightly odd to pay more than $1 for it because we’re not looking at the most conservative, worst-case scenario (having to liquidate the company) and we’re relying on the greater fool theory, i.e. that if we pay $1.10, we can find someone to sell the share to for at least $1.11 (without even considering transaction costs and opportunity costs), who then needs to find someone to sell to at a higher price, etc. This is what happens when we just blindly throw money at the share in dollar cost averaging because we’re looking at the market price, not the underlying value. At some point, just like with a game of musical chairs where someone gets stuck without a chair when the music stops, someone gets caught out having paid too much for the share, which is what drags their returns down (this greater fool theory is what largely caused the recent GFC).
If we pay $1.10 for something that’s worth $1, then it means at some point we need to buy another share for $0.90 just to break even and not get ripped off. If we know that at some point we’re going to have to pay less than its value, why not just sit on the money until the $0.90 market price comes along? That way, we can buy two shares at that price. So, instead of paying $2.00, we only pay $1.80. There’s this really bizarre contradiction at the heart of dollar cost averaging where people acknowledge that at some point in the future they’re going to get a good deal, but they don’t have the patience to strike with everything they’ve got at that point, and so are willing to get part of a good deal then and part of a bad deal now just for the sake of being active now. It’s more than a little absurd. The need for activity is probably the greatest enemy of any investor. I bolded that because this is a really fundamental concept that people simply don’t get. If you do get it and can exercise restraint, there is considerable money to be made from the irrational behaviour of others.
Buffett likens this situation (investing) to swinging at baseballs, except that you can only strike out if you swing and miss. If you refrain from swinging, there are no strikes. In such a situation, rationally, you’d only swing at what you were pretty certain were going to be home runs. Yet people strike out all the time because they swing at really bad balls when they should have just let them through. The opportunity cost of refraining from swinging at bad balls (investments) and waiting for the good balls (investments) is infinitely smaller than feeling compelled to swing at bad balls (investments) and striking out (doing your shirt or getting mediocre returns).
A further comment. Better than even paying $0.90 per share, because our valuation could actually be way off, we need to have a considerable margin of safety. Aiming to buy at a conservative $0.70 or much less is the way to go.
It requires a different conception of risk and reward that those typical questionnaires given by financial planners do. Those operate on a mammalian brain fear-greed axis driven by watching which way the herd is running and hoping/praying it’s not off a cliff. The solution to the fear-greed axis is not more fear or greed because such things are irrational and rely upon the irrationality of others. A different paradigm is required.
one approach is to aggressively save. another approach is to aggressively pursue incremental or massive improvements to income. better both.
i think the key is to honestly figure out the level of lifestyle where we are not just content, but really happy, and where we feel we are not missing out on anything because of a self-imposed saving plan. this includes things like hobbies and vanity. if we can get to that point and maintain it, then if we die tomorrow, then we didn’t deprive ourselves. the key consideration is as income goes up, whether we decide to improve our “quality of life” rather than maintaining what we told ourselves we were happy with. if were true to ourselves at first, then it’s at that point we can save every penny above that level. or invest at a reasonably safe risk/return point. if income and saving/safe investment gets high enough that there is excess for more speculative uses, i believe those shots should be taken. whether as an entrepreneur or a financier, no has ever built anything without taking a shot.
to put in other terms, i like the same approach to eating and exercise. i eat whatever and as much as i want. but i exercise my ass off.
Huh? Where the hell did you glean that from?[/quote]
Thank you. If you can make it on 15,000nt a month or whatever engurlish teachers make these days and retire by 40 then I bow deeply to you. No sarcasm. And make sure you write book about it. It could be the next “poor dad, rich dad” success!
[quote]1. Read The Richest Man in Babylon to change the way you think about money. To give you the summary of that, pay yourself first (save at least 10% of your income) and live within your means.
[/quote]I’d add to that “Your Money or Your life”. Suggested to me by Miltownkid. I’ll admit that I didn’t finish it. But it got the lightswitches turned on. My situation is slightly different. I’m self-employed. So, until Dec2010 that 10% was going to Uncle Sam. I was living hand to mouth. Now, I have a bit of breathing room. Still not able to do all of the 10% but stashing it away. Because taxes are almost nil for me, I’m looking at “can’t touch this” options that he doesn’t take.
[quote]2. Write down every single thing you spend for an entire month or two, including every visit you make to an ATM. Every single thing. Even 10NT. Certain patterns will begin to emerge as to where the holes are in the bucket.[/quote] Doing that religously. Have a great iPhone app for it. “Home Budget” it’s free. But it only works if you make it work.
[quote]3. Based upon the above, make a budget with a certain amount of fat built into it for entertainment or so on, but also be a bit ruthless in plugging some of those holes.
[/quote]Working on that yet still confused about how to make it work without feeling confined. Suggestions? THanks.
[quote]4. Either set up your bank account so that a certain amount gets deduced automatically each month and redirected into another account or investment, or do it manually as I do. If you are to do it manually, discipline yourself to only go to the ATM once per month. Do not use things such as EFTPOS or other direct debit systems as you will overspend and lose track of spending. Do not use credit cards unless you can, and will, pay them off immediately from an online account.[/quote] Doing that.
I think you’re talking in Taiwanese to me. :raspberry: Seriously, when it comes to investments, how they work and how I fit in whole scheme of things is absoultly confusing to the point of causing me to cry. Anyone have a “Investments for seriously stupid people” book suggestion,post it.
[quote]6. You’ll also need to build an emergency fund of three to six months’ living expenses (and by living expenses that really means everything, including rent/mortgage, medical bills, etc. that could or would come up in that time). Another thing that needs to be considered is insurance against serious illness, disability and even death because aside from any medical costs involved, the loss of income could be devastating. I don’t have to pay that much for my insurance, but it does give me peace of mind knowing that if anything were to happen to me, I’d be taken care of, and because I’ve since married, my wife and future kids would also be taken care of.[/quote] That’s slowly but surely happening.
[quote]Those are just some pretty simple ideas about how to save money. After about six months, a person should have a decent amount in their account for investing. During those six months, such a person should be fairly proactively reading about investing, not necesarily with a view towards managing his or her own investments but so as to be able to make fairly informed decisions and ask the right kind of questions of others.[/quote]I’ve been hunting for advisors, reading online, etc. Still doesn’t add up. It would be nice to talk with someone face to face about these things. But I’ll keep tapping at it.
[quote=“headhonchoII”]It’s obviously a lot easier to save if you are making more money, I only started saving after I started making more money, there was no way in hell I could do that properly before working for Taiwanese and not being some type of engineering genius. Even now it is hard to save of course…I’m working on running my own business so I can really start saving someday (by making more money!). Governments worldwide disciminate against workers with income tax meanwhile business owners can stash their cash far from the taxman.
Saving decades ago and saving now are two completely different things due to interest rates. The ‘miracle of compound interest’ doesn’t really exist anymore. Many accounts have a negative interest rate if you take into account inflation and currency fluctuation and transaction charges. Compound interest is sure hard to find uness you live in India or Australia (I was in India recently and they were offering 9% interest on savings accounts…some dude came up to the exhibition booth I was at and tried to get me to sign up to a ‘company loan’ , never mind that I was obviously not Indian…bit of a bubble there!).
Then there’s stocks and mutual funds. How many mutual funds made money over the last few years? It would obviously have been great to sock some money into Taiwanese stocks 2 years ago…unfortunately I didn’t. Now…a lot of stocks look they topped out to me. Then you look at commodities…a lot of them seem overvalued too…speculative money driving them up. Gold and silver and oil and food…they are all pumped up multiples of what they were a couple of years ago, great if you bought them then, hard to see much gain now and actualy high risk and not such ‘preservers’ of value anymore. Oil might be a good bet though.
The game is fixed by hedge funds…they pump up individual stock markets (most of Taiwan’s stocks are owned by foreign investment funds or at least the actively traded ones are) and commodities and then sell when they get enough retail investors to follow their lead and have pumped the currency up. I guess the game there as a smal time investor is to look at which stocks can give good dividends or to really know the company you want to invest in. It’s no use saying I invest in mutual funds if the mutual funds are invested in crappy stocks and stock markets or you started at the wrong time. I guss what I am saying here is that you’ve really got to go into things with your eyes open.
Anyway…going back to saving, CDs seem like the best of bad options for people who want to at least preserve the value of their money.
There are other way to make life easier though. Many jobs and careers are unstable these days, change is so quick. Maybe one partner has a government job and pension and benefits etc. Taiwanese public workers get 18% on their retirement accounts. So you want to be a good saver, ensure a good steady income first![/quote]
HH, these are exactly the points I was wondering about. I make a decent wage and am able to save most of it (i’m single, no mortgage, and don’t spend much). So I have cash sitting in the bank mostly. I put a small part of that into stocks, but only 1 or 3 that I like. so 90% cash. what do I do with it? Time deposit? I have no clue.
Lots of interesting points in this thread. I just want to comment on two of them.
I agree with whomever said not to count on the guaranteed magic of compound interest. I agree that seems to be something of the past. Stocks, bonds and mutual funds are most definitely NOT guaranteed to go up, not even a modest 5 or 6% per annum. Prepare for the definite possibility of negative returns, which screw up the whole magical theory.
But the OP is apparently less than 30 years old and hard core serious about saving/investing and mentioned somewhere a 30-year horizon (in addition to the shorter horizon of age 40 that he mentioned). Good for him. At age 30 I was burning cash by the bong-load and otherwise failing to prudently prepare for the future. Now at age 50 it takes a lot more saving and less faith in the magic of compounding interest. In other words, it only gets harder the longer you put it off.
As for me, my wife and I both work and are quite careful with our money (except on our very expensive trips to the States). We’re socking it away at a steady rate, as I hope to retire by age 60 or 65 and we’re creating a decent college fund for our girl. But my wife is completely miserable with her job, has been for many months and it’s not likely to improve, so I told her please quit and I think she’s about to. So our earnings will drop considerably, as she’ll stay home, go to the gym and spend time with our girl instead of working. But you know what – I don’t care about that loss of income; it’s much more important for me for her to be happy. Working like a dog and saving like mad is fine if you can hack it tolerably well, but if it makes your life miserable it’s just not worth it. This is life right here right now. Make sure you enjoy it.
In most cases, you should buy property because you want to have a place that you can decorate as you please. In a lot of cases, it’s a bad investment. Check this web site out: patrick.net/housing/market.html
I believe most property in Taipei to be a bad ‘investment’ if you look at rent vs buy calculations. The short version is: You can generally rent a cheaper than an equivilent mortgage. If you take the difference and invest it wisely, you will almost always come out ahead. That’s because the housing market has bubbled, and rent prices stabilize much faster to fair market value. Of course, all markets are local, and if you do your research you can make money, but don’t fall under the common delusion that “buying a house is a good investment” because that is very very wrong.
I think you’re talking in Taiwanese to me. :raspberry: Seriously, when it comes to investments, how they work and how I fit in whole scheme of things is absoultly confusing to the point of causing me to cry. Anyone have a “Investments for seriously stupid people” book suggestion,post it.[/quote]
Here, I was basically talking about setting up accounts for saving and investing, not investing.
You set up three accounts (or do it manually):
Living expenses
Things you need/want to buy with cash, but can’t afford out of one pay cheque. For instance, Christmas presents, or if you’re saving up for a holiday. If you want to get fancy, you can split this category down into several accounts.
Money for investing.
Number 1 and Number 3 are self-explanatory. Number 2 is a series of short-term goals you’ll work towards. So you might decide that you’re going to spend four months saving towards a super-duper pogo stick, if that’s something you really want. By not just buying it now, it keeps you off credit, it keeps you from blowing the rest of your budget, and because you have to wait for it, it forces you to think about whether you really do in fact want that super-duper pogo stick and how much you will use it. If you do in fact really want it, then at the end of the four months, you’ll be patting yourself on the back for having the discipline to do it this way, and it probably will become something that you really cherish. You set the accounts up so that the deductions for Number 2 and Number 3 are made automatically, which is what you’re already doing, so it’s just slightly more complicated than that.
I would say in terms of investments and getting a financial advisor, you want to get someone whose interests are aligned with yours. Basically, there are (at least) two simple things to look out for:
Does your advisor invest in the same things that he or she would have you invested in?
If not, he or she will not share in your joy or pain. This will not keep him or her truly atuned to your needs in that case. There will be no accountability if he or she makes bad decisions for you.
Are your advisor’s fees based on performance and high water marks?
The guy who manages my money gets a very small management fee, but the vast majority of the money I pay him is based upon meeting two criteria:
2a. A cumulative hurdle rate
2b. A highwater mark
The cumulative hurdle rate means that my returns need to be above a hurdle that is constantly increasing. So, if he’s had a string of years with lousy returns, he needs to make those returns up (in addition to the expectations for this year) before he gets paid.
The highwater mark means that if my assets drop in value by 50% this year, and then increase again 80% next year, he doesn’t simply clean up on fees in the second year because I’d still only be at 90% of where I started.
He needs to meet both of these requirements or he doesn’t get any performance fees. Again, these things mean our interests are in alignment since he only makes money if I make money. I had to pay him a substantial amount of money recently. I hope I have to pay him even more money in a year’s time.
Once you have these kind of incentive structures worked out (and run a mile from anyone who doesn’t do similar things), then it really is simply a matter of finding someone who shares a similar investment philosophy to you, which simply requires you to learn a bit about different types of investments and the process of valuing/selecting them. I would recommend looking at the letters of Warren Buffett to the shareholders of Berkshire Hathaway. You can find them all over the internet and they’re very easy to read. Start with them way back in the 70s and read right up until now. It will take a while, but it’s worth it. Buffett manages to distill the ideas of his teacher, Benjamin Graham, in a very simple way. I would recommend against trying to head straight for Graham because he’s considerably harder going. I tackled Security Analysis, which is like the War and Peace of investment books in two weeks and felt like I’d survived two weeks in a plane crash site in the Andes by eating my best friend. Even The Intelligent Investor is kind of hard going. Buffett is much easier to read. From there, look at some of the work by other guys in that vein, such as Seth Klarman’s Margin of Safety, or just read up on big value investors such as Walter Schloss, or Buffett wannabes such as Prem Watsa or Sardar Biglari.
It’s not just about the nuts and bolts of investing, it’s about the philosophical underpinnings of any system. In the end, like me, you’ll probably figure out that you want a hands off approach. In that case, look at guys like Tweedy, Browne or Chou Associates, or similar type funds. Some may require considerable minimum amounts of money to be invested, but maybe not, depending upon the fund. I’m not here to spruik for my guy (nor am I here to send him those who don’t know what’s what either), but if you were to read up about all of this kind of stuff and get back to me in six months and have a relatively serious discussion about value investing, then I could put you in contact with him. What I will say about him though is that he didn’t just jump at the chance to manage more money in my case. We came to each other recommended by a third party who knew what he was talking about, and my guy was reluctant at first until he realised we were on the same page philosophically in terms of investing and money. He wanted to make sure there would be no misunderstandings.
You could even just look at trying to get shares in companies like Berkshire Hathaway (Warren Buffett’s company) or Fairfax Financial (Prem Watsa’s company), though obviously, you’d have to be able to value them in an informed way and be comfortable about your decisions. If you read Buffett’s letters, you’ll get an understanding of what Berkshire Hathaway does (actually nothing in a sense since it’s a holding company and allocates capital) and how and why he does it. Buffett has made a lot of very ordinary people extraordinarily rich, but going along for the ride does require a particular mindset.
In terms of just getting a really basic understanding about what different assets are, you could have a look at Investopedia (which is a good, simple site generally, so follow the links) and go from there:
There are about as many sites declaring houses as bad investments as there are sites telling you to buy property. I don’t really see it as a good or bad investment, we need somewhere to live and bought a modest house. Our mortgage and general maintenance doesn’t cost much more per month to service than renting a comparable house. In the inner city or Taipei I would definitely consider renting because of the larger disparity between rent and purchase price.
There are about as many sites declaring houses as bad investments as there are sites telling you to buy property. [color=#FF0000]I don’t really see it as a good or bad investment[/color], we need somewhere to live and bought a modest house. Our mortgage and general maintenance doesn’t cost much more per month to service than renting a comparable house. In the inner city or Taipei I would definitely consider renting because of the larger disparity between rent and purchase price.[/quote]
Buying a house can be a good investment; it can be a bad investment. Depends on the facts. I bought a house in California in 1994 that was a terrible investment. I invested considerable time, money and labor into that house for several years, couldn’t find a buyer, finally sold to some deadbeat losers who defaulted and trashed the place and sued me when I foreclosed on them after they failed to make their payments for many months. On the other hand, I’m certain the place we bought in Taipei in the past couple of years is already a terrific investment and will be one in the end. We’re extremely happy living in it, are paying ourselves instead of a landlord, realtors have repeatedly told us how much it has already appreciated, and it’s in a prime area of Taipei that will always be in high demand.
So, some win, some lose – the key, as with all investments, is to do lots of homework beforehand, be absolutely certain that you know exactly what you’re doing, and then pray a little.
[quote=“Mother Theresa”]Lots of interesting points in this thread. I just want to comment on two of them.
I agree with whomever said not to count on the guaranteed magic of compound interest. I agree that seems to be something of the past. Stocks, bonds and mutual funds are most definitely NOT guaranteed to go up, not even a modest 5 or 6% per annum. Prepare for the definite possibility of negative returns, which screw up the whole magical theory.[/quote]
With a long term view and a diverse portfolio it seems hard to do any worse than time deposits and it definitely won’t do any worse than not saving at all.
That’s really the point I was getting at in my original post. It’s not about how much we make but how early we start saving. After looking through my finances I realised that although I make a good income I’m in quite a precarious position with regards to job security and liquid assets.
I think you’re right, even with an aggressive savings plan my wife is a lot happier at home. That’s something I would be unlikely to cut just to save more.
Perhaps I should clarify: I don’t see it as an investment at all. There was nowhere for rent that we were happy with but some reasonably priced and suitable houses for sale. The place we live in will be very unlikely to increase in value within the next 10-20 years but that wasn’t very important. So I don’t see our mortgage payments as anything more than housing cost. If we have equity in the house after 10 years then that’s a bonus.
There are about as many sites declaring houses as bad investments as there are sites telling you to buy property. I don’t really see it as a good or bad investment, we need somewhere to live and bought a modest house. Our mortgage and general maintenance doesn’t cost much more per month to service than renting a comparable house. In the inner city or Taipei I would definitely consider renting because of the larger disparity between rent and purchase price.[/quote]
I can tell you did not visit the site for more than 10 seconds because the author of the site would agree with everything you just wrote.
EDIT: Your first sentence implies that this site is declaring houses as bad investments, but the purpose of the site is to give guidelines to not lose money when buying a house. He also lives in the Bay area, much of which is bubbled. Taipei is also bubbled and if you run the numbers for rent vs. buy, in a lot of cases, it doesn’t make sense to buy.
You’ve said that twice, but I’m not sure one can be certain of that. Sure, when the price of anything rises extremely rapidly it’s tempting to conclude it’s a bubble, especially after all the popped bubbles we’ve suffered in recent years. But isn’t it possible prices might rise extremely rapidly due to other factors such as increased wealth in society (and increased capacity to buy desired assets), increased population leading to increased demand, and other factors increasing the desirability of and demand for such assets? Can one really conclude it’s a bubble before it bursts? Isn’t it possible, the exorbitant property values in Taipei’s most desirable neighborhoods could continue to rise modestly for another decade or longer – continue to be outrageously priced until those most desirable neighborhoods of today and the foreseeable future finally get run down and succeeded by other more desirable neighborhoods of the future? In other words, you call it a bubble, but isn’t it possible that bubble may not pop for a decade or longer with respect to well-selected properties/locations? Call me crazy, but I believe that. Why would properties at Minsen/DunHua, for example, drop in value? I can’t see that happening.
You’ve said that twice, but I’m not sure one can be certain of that. Sure, when the price of anything rises extremely rapidly it’s tempting to conclude it’s a bubble, especially after all the popped bubbles we’ve suffered in recent years. But isn’t it possible prices might rise extremely rapidly due to other factors such as increased wealth in society (and increased capacity to buy desired assets), increased population leading to increased demand, and other factors increasing the desirability of and demand for such assets? Can one really conclude it’s a bubble before it bursts? Isn’t it possible, the exorbitant property values in Taipei’s most desirable neighborhoods could continue to rise modestly for another decade or longer – continue to be outrageously priced until those most desirable neighborhoods of today and the foreseeable future finally get run down and succeeded by other more desirable neighborhoods of the future? In other words, you call it a bubble, but isn’t it possible that bubble may not pop for a decade or longer with respect to well-selected properties/locations? Call me crazy, but I believe that. Why would properties at Minsen/Dunhua, for example, drop in value? I can’t see that happening.[/quote]
Well, there’s a lot of factors at play, so it’s really better if you read some of the discussions at the mentioned site because it can explain things much better than I can.
I do agree there’s a lot of wealth coming into Taiwan and it’s possible that it will continue to rise, but you’re talking about speculation. I have no idea what’s going to happen in the future, it could go either way. If you think prices will continue to go up then that of course would factor into your decision, but then you are speculating and that’s another matter entirely.
But what I am talking about is this (fictional, but reasonable), scenario:
Assume housing prices will continue to rise at, say, 3% a year
market rate, for a 20 ping condo in a neighborhood “somewhere” for 30000nt/mo
then, how much should you pay for a 20 ping condo in the same neighborhood?
according to the guideline on the site:
annual rent / purchase price = 3% means do not buy, prices are too high
annual rent / purchase price = 6% means borderline
annual rent / purchase price = 9% means ok to buy, prices are reasonable
so (30000*12) / (6 million) = 6%
which means you shouldn’t pay much more than around 6 million for an equivilant condo.
Now to answer your question: When I say “bubbled”, I mean that, in most of Taipei you would probably have to pay much more than 6 million for that condo, and therefore, purchase prices are too high compared to rent prices.
