House prices to keep rising for years

hello,

what ten rises so far over a couple of years, and reports from the office of housing showing rent up 15%, haven't done too much NC

whats going on with mr imber, jumped ship from afah? i wonder if he is down and dirty on the street front or just got the handout for the executive salary

thankyou

robots

numbercruncher said:

Oh lol @!

So Robi thinks 20pc year on year rental Increases is acheivable ? Thats some sort of twisted fantasy that interest rate rises would stop in its tracks.

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It's achieveable over a short period of a couple of years,... but not longterm,..

However any property that has increasing scarcity such as houses on decent blocks close to the capital cities, will have there rents increase at rates above inflaion in the longterm,... simply because as they become less and less in number and the population grows the supply and demand factor pushes the prices of these houses up,..... Rentals will still be available to average incomes but you will find that the density will increase for the median renters.

however saying that the rent doesn't always grow year by year,... it tends to come in surges and then flat periods,... what we are in now and have been for a few years is an example of a surge.

robots said:

yoy 20% chromo? very achievable

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I have no doubt it is achievable. However is it sustainable - off course not. If rent's continue to go up faster than wages, then at some stage peoples wages will no longer afford the rent.

But its the fall out from the bubble that has me worried the most. I read a couple of days ago about the huge number of people using their super as a last ditch effort to keep their homes. It's all crazy. When the bubble pops, they will have an asset that halfs in its value and have no super. It would be laughable, if it wasn't so serious.

YChromozome said:

. If rent's continue to go up faster than wages, then at some stage peoples wages will no longer afford the rent.

.

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Thats not true,... the median rent growth will stay within wages growth limits,.. however people will have to move into higher density to get a median rent,... The existing low density homes will increase at a rate faster than inflation,..

Ask yourself this,.... In 15years will there be Less of more people wanting to live in Sydney,.... If he the aswer is more,... then they will have to demolish houses to build apartments,.... If they are demolishing houses to built town houses and apartments then the houses become fewer and fewer but the number of people wanting them continues to increase increases,... So the suburbs that remain low density within 10ks of the city will have there rents growing faster than inflation,... while the median rent still remains within inflation because there is a gradual move to high density which will keep the average rent in check.

In 15 years I would say less as swaths of Boomers leave the city to retire in Greener pastures.

numbercruncher said:

In 15 years I would say less as swaths of Boomers leave the city to retire in Greener pastures.

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Well if that is your opinion then I would not suggest you investing in property,..

How ever I don't believe that to be the case, so I will continue to invest... some of the biggest developments around sydney are retirement villiges and communitues. offcorse there will be % hat leave the capitals but I would suggest that it is not the majority, and will be offset by immigration and population growth,... as well as continued growth in sungle person house holds....

One other factor to consider is the large amount of gen Y still living at home, these people will move out over the next 15 years, which wll further offset the baby boomers.

Tysonboss1 said:

Thats not true,... the median rent growth will stay within wages growth limits,.. however people will have to move into higher density to get a median rent,... The existing low density homes will increase at a rate faster than inflation,

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Cool, so I'm posting from the 20th floor in a 565 Apartment complex spanning two towers. I assume that is high density. If I follow you, Will my rent only increase 4.5% this year? If I give you the details of my landlord, can you write to them please?

nioka said:

There are statistics and statistics. Be careful of averages. The average trader will not make money. A lot will lose and bring down the average. That does not mean that a proportion of traders won't do very well. I would say that average property investors do a lot better than average traders.

Property investors who select the right property will do very well. It all boils down to position, position, position with getting the right price a secondry factor. The best position; close to the coast or city. The worst house in the best street rather than the best one in a bad street. Forget averages.

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This an interesting article for everyone to read, both related to property and investors as a whole.

http://www.frontlinethoughts.com/pdf/mwo050908.pdf

I personally see some of "bad" emotions that cause investor to behave badly in some of the posters here. Overconfidence, anchoring and Cognitive dissonance are more dominant.

I'm not saying property investment is bad. In fact, those who can make money consistently through all market cycles are considered to be both SKILL AND VERY LUCKY.

Tysonboss1 said:

What I was comparing was someone putting say,.. $200,000 in property vs cash.

With cash they will only get 8% interest which they have to pay tax on,.... and their capital in eroded by inflation,...

If they put the same $200,000 in property they would get maybe 4.5% cash flow after costs,..... however he capital is most likely then protected from inflation and the cashflow will also rise with inflation.

This is further bettered by the fact that only 50% of the capital component of the gain is taxed when the property is sold,... so it has compounded for years before being taxed at a 50% discount.

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Ok, a little bit misunderstanding here. I was talking about "home mortgage" investment verse "cash" investment, but you are talking about INVESTMENT PROPERTIES. So that's ok.

You need to be careful with the assumptions you have just made. No one can assume everything would be that consistent (cash rate %, rental yield %, debt cost %, etc) over the long time. But if your timing was not right, where cash rate increased to 15% overnight to halt inflation (yes, happened before) and property value actually stagnates or worse, drop in value for a few years, then you would have been less off over that period of time than simply saving cash alone.

No one will argue that property investment had one of the best reward/risk ratio as an investment class over the last few years, especially when there are so much tax advantages. Just rental income alone with tax deducation through depreciations were enough to justify the investments alone (if it only appreciate along with inflation). Capital appreciations were just a big bonus that were extraordinary over the past few years.

But past performance is NO indicators of future performances, and this has always been true no matter how much one argue about it. The credit boom cannot last forever, and this goes along with the local and international economy. Here is a famous quote from Jim Rogers, "How can you trade US steel if you don't know what's happening with rubber in Malaysia". Likewise, "How can you invest in Australian properties if you don't know what's happening with monetary policy in China?".

This discussion will never ends anyway, we have our own biases I guess.

Macquack said:

Good post gfresh, I like your perspective.
Some of the other posters in this forum think they will live forever and enjoy the fruits of their "property" in perpetuity.
If they only thought, we are all renters in effect, you cant take it with you.

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Agree with this. The majority of people who buy property are renting the money from a lender, so it's a different renting arrangement, not a ceasation of renting altogether.

I like older houses, the sort I wouldn't bother buying myself (lots of character often = lots of maintenance) so I rent. Tax wise, I'm better off buying a cheaper property which earns me the same rent as I pay, being modern there is veryt little maintenance, and the money I rented to purchase it costs me interst which is tax deductable. I'm still happy with my decision and it shouldbe neutrally geared in the short future.

Not sure why the fact that some people being happy with one portion of their investment profile seems to upset others so much.

I've only read the last couple of pages of this thread but notice that the discussion - perfectly reasonably, of course - is focused on the financial outcomes of renting versus buying to live in/investment/ etc.

What about the emotional aspect of owning the home you live in? The knowledge that no landlord can throw you out, the fact that you can do as you wish with the place and just the sense of security it provides?

I've lived in the same property for 15 years and can look around it, especially the garden, and see the results of my efforts over that time. I just really like that.

YChromozome said:

Cool, so I'm posting from the 20th floor in a 565 Apartment complex spanning two towers. I assume that is high density. If I follow you, Will my rent only increase 4.5% this year? If I give you the details of my landlord, can you write to them please?

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Your rent will be affected by supply and demand,.... so it will rise in times of peak demand,.... but as more and more apartsments are built to take advantage of the peak rents normally over construction will cause rents to stagnate or reduce slightly for a couple of years,.... this was seen in sydney in 2003,...

But generally as long as there is enough construction I would expect high density tower apartments to stay within the realms of inflation growth as it is realatively easy to increase supply of apartments, unless there is other factors such as harbour veiws or above average parking spots per unit.

but saying that as I said early rental growth comes is spurts,.. it won't increase at a steady rate with inflation,... but over the years shouldn't outpace inflation.

Mofra said:

I like older houses, the sort I wouldn't bother buying myself (lots of character often = lots of maintenance) so I rent. Tax wise, I'm better off buying a cheaper property which earns me the same rent as I pay, being modern there is veryt little maintenance, and the money I rented to purchase it costs me interst which is tax deductable. I'm still happy with my decision and it shouldbe neutrally geared in the short future.

:

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I am in a similiar situation,.... I am renting in sydney,.... but invest in brisbane.

I have always found the renting while also investing in property works because you can invest in areas that you think are better investments while living where you have to work.

robots said:

rents will continue to rise and rise as I believe renters have plenty of spare $ and can easily handle at least 50% increase over the next 1-2yrs,

thankyou

robots

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:

Third-world Australia, here we come, eh? Looks like soon we'll be putting 60% of our wages into the rent, just like Indians.

Every Australian family will receive a room, a bicycle, and three bowls of rice per day.

hello,

look at the case of a couple on average wage, so therefore, total gross is roughly 100k/pa

they can rent a good 2-bed apartment with parking in st kilda, prahran etc for around 350-400/wk, thats chicken feed

massive scope for rent increases

thankyou

robots

xoa said:

:

Third-world Australia, here we come, eh? Looks like soon we'll be putting 60% of our wages into the rent, just like Indians.

Every Australian family will receive a room, a bicycle, and three bowls of rice per day.

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Indians probably put a smaller % of their wages towards rent than Aussies put towards home/social entertainment.

In 20 years, the jobs that the locals won't take now, will be the jobs that the current immigrants won't be taking.

In the UK, 95% of the Indians that I know (over 100) are either professionals, own a business, or own an investment property. The number claiming unemployment benefit is zero.

It will also happen here. In a way, this is also supporting property prices, in that many immigrants know of only one way to make money, which is to take a investment loan and see it out by any means.

Pommiegranite said:

Indians probably put a smaller % of their wages towards rent than Aussies put towards home/social entertainment.

In 20 years, the jobs that the locals won't take now, will be the jobs that the current immigrants won't be taking.

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I mean Indians living in India.

In supposedly developed nations like Australia, essentials like housing are supposed to consume a modest share of disposable income. The real estate disciples seem to be praying for a future where an oppressive and ever growing share of our income goes to pay for a roof over our heads.

xoa said:

:

Third-world Australia, here we come, eh? Looks like soon we'll be putting 60% of our wages into the rent, just like Indians.

Every Australian family will receive a room, a bicycle, and three bowls of rice per day.

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So sorry! Rice is off menu due to severe worldwide shortage!! (How about some home grown tucker, then - Witchetty Grubs are yummmmmmmm! ).


AJ

Tysonboss1 said:

I am in a similiar situation,.... I am renting in sydney,.... but invest in brisbane.

I have always found the renting while also investing in property works because you can invest in areas that you think are better investments while living where you have to work.

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Absolutely agree - although my natural aversion to non-deductable debt makes be very much a bias commentator

xoa said:

I mean Indians living in India.

In supposedly developed nations like Australia, essentials like housing are supposed to consume a modest share of disposable income. The real estate disciples seem to be praying for a future where an oppressive and ever growing share of our income goes to pay for a roof over our heads.

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Do you anything to back up your statement?

I know many Indians who live in India. To pay rent is laughable for the majority of the Indian population. Even to have a mortgage is unheard of. In fact, it's pretty embarrasing to for an Indian resident to take a loan.

They tend to stay in the family home (if male) or move in with the husband + in-laws (if female).

In Oz and the other English speaking countries, to have a home loan is seen a normal milestone in life. More like a millstone around the neck, is what I say.

Oh well, that's western culture for you. Well done you've achieved getting into debt. How independent of you. Now you pay the price for the way you were raised i.e 25-30 years of servitude to the big 4.

robots said:

hello,

look at the case of a couple on average wage, so therefore, total gross is roughly 100k/pa

they can rent a good 2-bed apartment with parking in st kilda, prahran etc for around 350-400/wk, thats chicken feed
robots

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...

The median household income is $54k, not $100k.

Assuming your apartment rented for $375 per week, that means 47% of their net income would be consumed by rent. If you got your 50% rent increase within the year, rent would be consuming 70% of their net income. That's your vision for Australia.

robots said:

massive scope for rent increases

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Just yesterday, you said that renters are 5x poorer than home owners. Now all of a sudden, they can absorb massive rent increases? What changed in the last 24 hours?