The future of Australian property prices

[Junior]

Rents are determined by the market supply and demand,

Supply of dwellings available to be rented vs Amount of people wanting to rent them determines the rental price.

Wouldn't the above be the determinant of vacancy rates, rather than rental price?

Surely the major determinant of rental prices is 'ability to pay a certain price' rather than simply the demand for rental properties. i.e. higher unemployment and slow wage growth may not have a major impact on demand for rentals, but would have a significant impact on prices.

 

[young-gun]

2. renters leaving a certain market. will reduce prices.

therefore if renters are leaving the market to buy their own house due to rapidly dropping or bottomed out prices would in fact reduce rent prices...?

 

[Tysonboss1]

No, people will sell or be foreclosed on and live in their cars, move in with family or rent a caravan in some ones back yard like they did in the 80's and this will put more property's on the rental market at a lower price and if the land lord buys he will most like reduce rents to cover costs only.

That always has and will contiune to happen, But will be offset by others moving out of parents homes and caravans.

 

[Tysonboss1]

Wouldn't the above be the determinant of vacancy rates, rather than rental price?

Surely the major determinant of rental prices is 'ability to pay a certain price' rather than simply the demand for rental properties. i.e. higher unemployment and slow wage growth may not have a major impact on demand for rentals, but would have a significant impact on prices.

Land lords will lower the rental price to get a tenant if their property is sitting vacant,

If their are no vacancies and the land lord puts the rent up $10 a week you will just cough up the extra $10, so in a tight rental market the rents will creep higher.

If their is plenty of other similar properties coming onto the rental market and sitting empty for a month at a time, the landlord will probably not ask for an extra $10, especially if other land lords with vacant houses have been dropping rents by $20 to get tenants.

If tenants are hard to find rents stagnate or even creep down a bit, if properties are having multiple rental applications submitted the rents will creep up.

 

[Tysonboss1]

therefore if renters are leaving the market to buy their own house due to rapidly dropping or bottomed out prices would in fact reduce rent prices...?

But if they are buying houses in the same market the net affect is the same.

eg, A sydney renter stops renting and buys a property from a sydney land lord, He has vacated a rental property but taken another off the market,

Only if people are moving out of the market to another city does it have any affect, if the city is maintaining the same number of house holds and it is only the ownership being shuffled there will be little affect on rents being charged.

 

[explod]

There is still a bit of dreamland stuff on here I notice.

Young ones in their droves are losing jobs and moving back with old Mum and Dad. A number I have delivered beds two down here held city jobs and have moved out as they lost it and cannot afford their rental pads anymore.

Speaking to my Newsagent mate again the other day and things in Frankston are getting worse. If the retail sector there had to catch up on their rents owed, half would have to shut up and leave. My Brother in business in Brunswick told me this morning it is the same there.

And debt, so many around here were encouraged by the banks to mortgage their homes and buy an investment property in the last two years are now up to their necks in it. When the next quarter figures come out there is going to be a rush at the gate on property as has not been seen before in my view.

Forget about listening to the industry, go out and talk to people on the ground in the real world. We are going into tough times and there does not seem to be any green shoots to me.

Of course time will tell.

 

[Glen48]

This post will be good reading and should be compulsory for home buyers of the future and will be a accurate record of how house prices rose and feel due to greed and cheap money, government bribes and taxpayers propping up the banks as they fail nothing else.

House prices are still falling in USA and will do so for many more years.
If you got the choice of eating a poison pen letter or buying a house eat the letter first.

Tysonboss1
The ones who move out of their parents home/caravans where do they go?

 

[young-gun]

But if they are buying houses in the same market the net affect is the same.

eg, A sydney renter stops renting and buys a property from a sydney land lord, He has vacated a rental property but taken another off the market,

Only if people are moving out of the market to another city does it have any affect, if the city is maintaining the same number of house holds and it is only the ownership being shuffled there will be little affect on rents being charged.

you would like to think the sydney landlord(obviously a property investor) wont be selling at the bottom

i think you are over-simplifying(and dont get me wrong i love to simplify) for example foreign investors who have numerous houses sitting totally vacant in sydney, might be forced to sell up, as previously discussed boomers who are downsizing to units or small townhouses, or even retirement homes(which would possibly come under your 'those who move cities' category. the assumption that people who move out of a rented property will then only buy from a landlord/property investor is absurd. there is no guarantee landlords will be able to offload their property, not to mention potential lag time of months or even years between the renter leaving and being able to sell the property if tenants cannot be found.

granted its all swings and round abouts, its impossible to comprehend every possible scenario, and i am somewhat coming around to what you're saying, but still remain skeptical.

if you are right and rental price is dictated by supply and demand then you would expect investors to see the same prices well into the future as they are now if not increasing steadily, as in a declining property market people arent rushing out to buy houses that are plummeting, but are far more likely to rent until they think it's bottomed. im struggling to see prices going up if things go south

 

[Mrmagoo]

So....

Crashing economy.

Job losses.

Mortgage defaults.

Low rental vacanies.

High rents.

High homelessness.

If events come to pass. Will be an interesting ride.

How does homeless people squatting in repo'd IPs no one wants to buy sound ?

exaggeration I know, but still it is lol.

 

[Mr Z]

The pool of property is a little more elastic than the bulls tend to argue. We had three generations under one roof in the last depression now we have one generation under two roofs and an empty holiday house. Recession and depression tend to change the rules and the resource becomes used more frugally.

 

[Tysonboss1]

1, foreign investors who have numerous houses sitting totally vacant in sydney, might be forced to sell up

2, as previously discussed boomers who are downsizing to units or small townhouses, or even retirement homes(which would possibly come under your 'those who move cities' category.

3, the assumption that people who move out of a rented property will then only buy from a landlord/property investor is absurd.

4, there is no guarantee landlords will be able to offload their property, not to mention potential lag time of months or even years between the renter leaving and being able to sell the property if tenants cannot be found.

5, if you are right and rental price is dictated by supply and demand then you would expect investors to see the same prices well into the future as they are now if not increasing steadily, as in a declining property market people arent rushing out to buy houses that are plummeting, but are far more likely to rent until they think it's bottomed. im struggling to see prices going up if things go south

1, I don't think is a number of any material value

2, yep, But then you have younger people moving out of home and international migrants coming in every day to replace them, the population is growing.

3, No they will also be buying from home owners, But then the home owner has to live some where, they will either rent or buy another house either way it's a zero sum.

4, it takes very little time to find a tenant, I couldn't see a situation where it would take longer than a few weeks if it is priced correctly, As I said big vacancy increases can only happen if extra supply comes on board, lots of it.

5, All commodities are priced based on supply and demand in a free market. landlords will raise prices when they can when the market is tight and drop them when competion forces them to

 

[young-gun]

3, No they will also be buying from home owners, But then the home owner has to live some where, they will either rent or buy another house either way it's a zero sum.

in a falling market something has to give. if everything went as per your rosey examples prices would never rise nor fall in house prices or rentals. can you please give some examples as to what would cause a fall in rental demand and in-turn rental prices, if not house prices themselves?

 

[Junior]

What about this information? Irrelevant?

HOUSING UTILISATION

While Australian households are becoming smaller on average, dwelling size (as indicated by the number of bedrooms) is increasing. The average number of persons per household has declined from 3.1 in 1976 to 2.6 in 2007-08. In the same period, the proportion of dwellings with four or more bedrooms has risen from 17% to 29% and the average number of bedrooms per dwelling has increased from 2.8 to 3.1.

In 2007-08, most households enjoyed relatively spacious accommodation. For example, 86% of lone-person households were living in dwellings with two or more bedrooms; 75% of two-person households had three or more bedrooms; and 35% of three-person households had four or more bedrooms. Over a fifth (21%) of three-bedroom dwellings, and 8% of four-bedroom dwellings, had only one person living in them (table 10.3).

Source: ABS

 

[robots]

So....

Crashing economy.

Job losses.

Mortgage defaults.

Low rental vacanies.

High rents.

High homelessness.

If events come to pass. Will be an interesting ride.

How does homeless people squatting in repo'd IPs no one wants to buy sound ?

exaggeration I know, but still it is lol.

hello,

sounds well out of order, freeloaders to get it even easier

bulldoze them and plant trees for the other organisms we share the globe with

thankyou

professor robots

 

[MACCA350]

3, No they will also be buying from home owners, But then the home owner has to live some where, they will either rent or buy another house either way it's a zero sum.

Not necessarily zero sum, they may have just inherited a property, they may be moving back in with the parents, they may be moving into a retirement home, they may be moving in with the kids.....there's a whole bunch of scenarios.

Cheers

 

[Wysiwyg]

4, it takes very little time to find a tenant,

That is because some employment sectors (mining, construction/engineering) have had considerable wage increases while most sectors have not. Plenty that can't afford a home on their wages.

 

[Tysonboss1]

Not necessarily zero sum, they may have just inherited a property, they may be moving back in with the parents, they may be moving into a retirement home, they may be moving in with the kids.....there's a whole bunch of scenarios.

Cheers

More house holds are created each year than are disbanded, eg. people living longer, population growth, immigration, smaller numbers in each house hold etc etc. more than offsets those factors

 

[Tysonboss1]

in a falling market something has to give.

1, if everything went as per your rosey examples prices would never rise nor fall in house prices or rentals.

2,can you please give some examples as to what would cause a fall in rental demand and in-turn rental prices, if not house prices themselves?

1, you have to understand that asset prices ( house prices) are based on expectations of the future wheres as earnings of the asset are based on current market fundamentals. A business's revenue (rent) will be based on the current supply and demand for it's products, But the price the asset sells at will be based on the future expectations.

if people start in mass start thinking property prices will go through the roof and start buying the price of houses will rise, But this does not mean rents will rise, In the same fashion if people become bearish and refuse to buy the prices may fall, But this will not mean rents fall.

2, As I said, rental Prices will fall if supply increases. If you owned a 2 bed apartment and in a tight market were charging $300 per week, then a brand new project was completed next door and 100 new 2 bed apartments came on the market and soaked up all the demand, when it came time to renew the lease your tenant may decide to move next door into a newer apartment where landlords are trying to under cut you to gain a tenant.

This is happening in the suburb of brisbane I own a duplex in. I own both units in a duplex that have always rented well with steady rent increases, this year is the first year I have not raised rents and the reason is an influx of town houses on the rental market that are keeping a lid on rents at the moment.

 

[Tysonboss1]

Also remember within any area there are many markets,..

For example if houses are being bulldozed to built units, the extra units being produced can dilute the market and force rents of units down, While as the houses get bulldozed the diminshing number of houses left may mean rents of house start increasing,

Also if a recession occurs, rental yields of high end properties may fall and vacancy increases as people move into cheaper housing, this may cause a floor under lower end property.

 

[Tysonboss1]

What about this information? Irrelevant?



Source: ABS

Yes it is irrelevant , most people do want more bedrooms than people in the house, most people I know have, guest rooms, studies, storage etc etc in what would be called a bedroom on the plans.

Having lived in a one bedroom apartment, I know how much easier it makes life to have a few extra rooms