The future of Australian property prices

[DB008]

Heard the property talkback segment we have on the radio here on a Saturday morning and the property expert (real esate agent) said that you should not expect good returns from property and you should only expect to make capital gain. Is this what most property investors think? To me, if I can make good returns and capital gain elsewhere (shares) why would I bother with property? (other than for diversification maybe).

At the moment, I'd say that most property is returning under 5%.

Cash in bank is higher returns and safer (from a property bubble/losing value), for the moment (no a$$hole tenants, rates, body corp, etc...etc...to deal with). Shares are also, generally speaking, out performing property returns atm.

 

[Mr Z]

Heard the property talkback segment we have on the radio here on a Saturday morning and the property expert (real esate agent) said that you should not expect good returns from property and you should only expect to make capital gain. Is this what most property investors think? To me, if I can make good returns and capital gain elsewhere (shares) why would I bother with property? (other than for diversification maybe).

You invest for income and you speculate for gain! So he is basically saying resi property is speculation more than investment!

NOT THIS LITTLE BLACK DUCK is about all I can say There are better speculative bets and better income on offer.

 

[Mrmagoo]

LOL... yeah that would get me right back into the domestic market! The returns are ****e as it is.... you really don't want more rentals available do you? Maybe mommy government should provide them all?

Yeah right mate. How much more encouragement did you need to invest in property ? It was 10% return per year, plus super low interest rates, tax breaks ect AND THERE WAS A GOD DAMNED SHORTAGE OF RENTAL PROPERTIES !!!! Non of this actually encourage an INCREASE IN DWELLINGS. It actually ENCOURAGED A LIMITED INCREASE TO PROMOTE SCARCITY OF SPECULATIVE INVESTMENTS.

So I don't see how "encouraging investment" does anything to improve stock.

Only thing to improve stock WILL BE TO BUILD MORE NEW HOUSES NOT BUY AND SELL EXISTING ONES.

Plain and simple - NEGATIVE GEARING DOES NOT WORK - GET RID OF IT IT DOES NOT INCREASE RENTAL AVAILABILITY as we saw during the BOOM there was SHORTAGE or RENTALS.

 

[Mr Z]

Yeah right mate. How much more encouragement did you need to invest in property ? It was 10% return per year, plus super low interest rates, tax breaks ect AND THERE WAS A GOD DAMNED SHORTAGE OF RENTAL PROPERTIES !!!! Non of this actually encourage an INCREASE IN DWELLINGS. It actually ENCOURAGED A LIMITED INCREASE TO PROMOTE SCARCITY OF SPECULATIVE INVESTMENTS.

So I don't see how "encouraging investment" does anything to improve stock.

Only thing to improve stock WILL BE TO BUILD MORE NEW HOUSES NOT BUY AND SELL EXISTING ONES.

Plain and simple - NEGATIVE GEARING DOES NOT WORK - GET RID OF IT IT DOES NOT INCREASE RENTAL AVAILABILITY as we saw during the BOOM there was SHORTAGE or RENTALS.

Where did you ever get the idea that ...

a. Negative gearing was specifically about the property market.

b. That it was supposed to deliver any particular outcome in the property market.

????

a. It is not specifically for property investment! It is a general taxation principle applied in many different businesses!

b. It is not supposed to deliver any particular real estate market outcome.

It works fine and does what it is intended to do and has a much wider application that just private property investment.

I think you are barking up the wrong tree... even for property investment it is a pretty short sighted and IMO dumb strategy to negative gear.

However, because it is so ingrained in the property market removing it will...

a. raise rent in the short term.

b. bring more property to market in the short term.

We know this because it has happened before.

Eventually, AS I SAID BEFORE, it will likely lead to lower prices and rents given current market conditions BUT that will take time.

Again, AS I SAID BEFORE, if it is to be removed specifically for private property investors alone then it should be done softly by allowing existing NG finance to stand but disallowing NG on any new finance. That would cause the least disruption.

BTW most places where the rent is high there are constraints in new construction, either man made (gov rules etc) or simply physical. Your assertions are a tad simplistic, it is not always easy to bring new supply to market regardless of added incentive.

10% from resi looking fwd... GET REAL!

 

[Mr Z]

AND THERE WAS A GOD DAMNED SHORTAGE OF RENTAL PROPERTIES !!!! Non of this actually encourage an INCREASE IN DWELLINGS. It actually ENCOURAGED A LIMITED INCREASE TO PROMOTE SCARCITY OF SPECULATIVE INVESTMENTS.

So I don't see how "encouraging investment" does anything to improve stock.

You shouldn't drink and post.... really. You just stop making any sense at all.

 

[Mrmagoo]

Negative gearing is a special exemption in taxation law so you can't just deduct a loss making business against a profitable one..

Otherwise I'd have a food eating business set up at my house and deduct my food and all expenses.

What you dont understand is that over the last 20 years we've had lots of investment in property, negative gearing and all that and the effect has been a REDUCED number of rental properties.

Tell me... if you do something to make a particular outcome occur and then the opposite thing happens, do you keep doing what you were doing or do you stop ?

 

[Ves]

Negative gearing is a special exemption in taxation law so you can't just deduct a loss making business against a profitable one..

You can if you pass the business tests in the Non-Commercial Loss provisions...

 

[Bill M]

At the moment, I'd say that most property is returning under 5%.

Gross, my IP returns me around 6% on capital outlay. Net it's more like 4% so you are right.

Cash in bank is higher returns and safer (from a property bubble/losing value), for the moment (no a$$hole tenants, rates, body corp, etc...etc...to deal with).

At the moment yes but property never stays still and in the long run it will always go up. Cash will never go up, a 100k in cash today returns 5% flat interest income. A 100k in an IP will return the same but in say 20 years time the property will have doubled or trebled but the cash will still be a 100K.

Shares are also, generally speaking, out performing property returns atm.

I have been a long term shares and property investor. Over the last 5 years our sharemarket has gone backward and is nearly 40% off it's highs. On the other hand my IP is still holding it's price well and every year the rent has been increasing. I think, I still prefer that lovely rental deposit each Month in my account over gambling in the share market anyday, cheers.

 

[young-gun]

Gross, my IP returns me around 6% on capital outlay. Net it's more like 4% so you are right.

Don't mean to pick on you bill, but that is a VERY poor return, and unless you paid cash in full, or a large portion of the property, then it would be a poor investment choice.

A 100k in an IP will return the same but in say 20 years time the property will have doubled or trebled but the cash will still be a 100K.

This will soon be realised to be huge myth. Property will not treble, and will unlikely double in 20 years from the current prices. Some areas and properties perhaps, but the market as a whole absolutely not. I would buy property under the assumption that I was going to receive no capital gain in the next 20 years, and base the math on that.

I have been a long term shares and property investor. Over the last 5 years our sharemarket has gone backward and is nearly 40% off it's highs. On the other hand my IP is still holding it's price well and every year the rent has been increasing. I think, I still prefer that lovely rental deposit each Month in my account over gambling in the share market anyday, cheers.

After reading the above its obviously heavily cashflow positive, I think you could find one returning far better than 6% gross if you looked around though

 

[Bill M]

Don't mean to pick on you bill, but that is a VERY poor return, and unless you paid cash in full, or a large portion of the property, then it would be a poor investment choice.

It's blue chip, northern beaches in Sydney. I never have a problem renting it, blue chip = walk to beach, supermarkets, city buses etc. It is an investment that I never need worry about and I have no mortgage on it. Not only that, all the expenses are tax deductible and one day we might end up moving back in there so whilst renting all the bills are covered.

This will soon be realised to be huge myth. Property will not treble, and will unlikely double in 20 years from the current prices. Some areas and properties perhaps, but the market as a whole absolutely not. I would buy property under the assumption that I was going to receive no capital gain in the next 20 years, and base the math on that.

I have been investing in property since 1978, I have no worries of where the price will be in 20 years, it will be up for sure without doubt. I only invest in areas where there is no land left, nothing left in Manly Warringah area.

After reading the above its obviously heavily cashflow positive, I think you could find one returning far better than 6% gross if you looked around though

Yes probably but I am not into gambling, 6% is ok for me. I do have stocks and hybrids too, I'm just saying I've seen several cycles and real estate rarely goes backwards to the same extent like stocks do.

 

[young-gun]

It's blue chip, northern beaches in Sydney. I never have a problem renting it, blue chip = walk to beach, supermarkets, city buses etc. It is an investment that I never need worry about and I have no mortgage on it. Not only that, all the expenses are tax deductible and one day we might end up moving back in there so whilst renting all the bills are covered.

I have been investing in property since 1978, I have no worries of where the price will be in 20 years, it will be up for sure without doubt. I only invest in areas where there is no land left, nothing left in Manly Warringah area.


Yes probably but I am not into gambling, 6% is ok for me. I do have stocks and hybrids too, I'm just saying I've seen several cycles and real estate rarely goes backwards to the same extent like stocks do.

Fair enough, just keep in mind there was no land left to develop in Miami.

 

[Mrmagoo]

Property investing has become a disgusting evil which has pushed both owning and renting above the means of ordinary Australian people.

The facts are pretty clear - when investment environment was strong there was a SHORTAGE of rental properties.

Now that it is weak, there is an INCREASE in availability of rental properties.

Telling us that investor confidence has little to do with increasing rental availability.

They need to get rid of negative gearing and tax exemptions on investment properties immediately.

First home buyers instead should be able to deduct their interest from their income tax like in other sane countries.

 

[young-gun]

Property investing has become a disgusting evil which has pushed both owning and renting above the means of ordinary Australian people.

The facts are pretty clear - when investment environment was strong there was a SHORTAGE of rental properties.

Now that it is weak, there is an INCREASE in availability of rental properties.

If there is an increase in rentals why are rents not falling.

Telling us that investor confidence has little to do with increasing rental availability.

No it doesn't.

They need to get rid of negative gearing and tax exemptions on investment properties immediately.

This would ruin many financially. Although I agree that the tax laws need to be reviewed, it would need to be along the liens of what mr Z was saying, where the new laws apply to people that start investing from a certain point in the future.

First home owners should absolutely not receive tax deductions on their first purchase. People should pull there finger out, and stop expecting hand-outs from the government. The government should only support those who are unable to support themselves, not unwilling to. If they stopped giving all these tax exemptions and deductions, I wouldn't need to pay so much tax.

 

[Mrmagoo]

After decades of handing out billions to greedy investors to push prices out of reach for FHBs I think it is due time that FHBs receive a similar benefits to that provided to investors.

The current situation is socialism for the rich, capitalism for the poor young and struggling. It is a disgrace.

 

[white_goodman]

The facts are pretty clear - when investment environment was strong there was a SHORTAGE of rental properties..

its worth noting that while this is correct, perceived or actual shortages or surpluses can be quite fickle.. while the supply side is quantifiable the demand side is a little more subjective with housing composition (household size) can change rapidly...

for eg. i have read articles coming out of California circa the top of the boom in 2005, where they estimated as much as 1million under-supply in homes and described as the driver behind the boom-boom pricing.. within 2 this picture had reversed and they had a massive oversupply as the household size which was at all time lows in 2005 (slightly above 2) had become around 3 ppl per household

 

[DB008]

After decades of handing out billions to greedy investors to push prices out of reach for FHBs I think it is due time that FHBs receive a similar benefits to that provided to investors.

The current situation is socialism for the rich, capitalism for the poor young and struggling. It is a disgrace.

LOL.

You do realise that this is a stock forum? Where people invest in various asset classes?

I guess I'm an evil capitalist as I worked my a$$ off during my apprenticeship and when I worked in NSW, QLD, VIC, London and WA, and purchased some investment properties, instead of wasting my hard earned money????

 

[howmanyru]

After decades of handing out billions to greedy investors to push prices out of reach for FHBs I think it is due time that FHBs receive a similar benefits to that provided to investors.

The current situation is socialism for the rich, capitalism for the poor young and struggling. It is a disgrace.

What's the FHB grant then?

 

[white_goodman]

What's the FHB grant then?

a boost to vendors..

 

[Mrmagoo]

LOL.

You do realise that this is a stock forum? Where people invest in various asset classes?

I guess I'm an evil capitalist as I worked my a$$ off during my apprenticeship and when I worked in NSW, QLD, VIC, London and WA, and purchased some investment properties, instead of wasting my hard earned money????

Capitalism is brilliant. You deserve a return on that hard work.

However,

The housing market in Australia is NOT capitalism, it is socialism pure and simple. There is no market mechanism it is all subsidies and interventions at every level of government. Infact it is as close to a command economy as this country gets.

A house is not an asset class it is a place to live. By profiting on housing you don't create anything of value. You hurt people. A housing investor is no better than a drug dealer, pimp or stand over man.

 

[Mrmagoo]

There is no return on property because it is not a profit generating investment.

It is just a home someone pays a meager amount of money for the right to reside in the property.

You want to be an investor ? Come up with an idea for a product, develop it, risk it all on your idea and you've done something wonderful.

Invest in said company and you're doing a good thing for the world.

Housing investment is just a parasitic, communist, ponzi scheme resembling a Stalinist system.