I do agree with your views. I would want to live in the Northern Beaches too if I could afford it. However as an investor, are you happy with the yields you are getting say if prices remain flat?
The future of Australian property prices
- Thread starter Joe Blow
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I do agree with your views. I would want to live in the Northern Beaches too if I could afford it. However as an investor, are you happy with the yields you are getting say if prices remain flat?
Bill M
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Yes I am as I do not have a mortgage on it. They are not spectacular yields, around 6% gross or 4% after expenses and tax. With very low interest rates now being offered for bank deposits I think I prefer leaving my cash in the IP at this stage and collect the rent. Remember though, everything I say here is very area specific. If my property was out in woop woop and I couldn't rent it then that would be a different story, cheers.
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Since the cricket finished early I went to an OFI on Saturday. I only went because it was the front unit of a pair, the back one of which was auctioned about six months ago and I am curious to see if it goes for more, less or the same as the other one. Engaging in the usual chit chat with the agent she said now was a good time to buy, I muttered something about not being so sure and she fairly pounced on me and was most insistent that prices were going to rise and I had to get into the market NOW!!! She was almost hysterical 
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Since the cricket finished early I went to an OFI on Saturday. I only went because it was the front unit of a pair, the back one of which was auctioned about six months ago and I am curious to see if it goes for more, less or the same as the other one. Engaging in the usual chit chat with the agent she said now was a good time to buy, I muttered something about not being so sure and she fairly pounced on me and was most insistent that prices were going to rise and I had to get into the market NOW!!! She was almost hysterical
Being an ex real estate agent when other agents said to me when i was buying "now was the right time to buy" I used to tell other agents why don't they buy that property themselves?
I think every state, suburb, type of home will offer a different return and this will apply to shares as well, some shares will do well and some wont. But from my view Melbourne market has been very flat!!!
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Since the cricket finished early I went to an OFI on Saturday. I only went because it was the front unit of a pair, the back one of which was auctioned about six months ago and I am curious to see if it goes for more, less or the same as the other one. Engaging in the usual chit chat with the agent she said now was a good time to buy, I muttered something about not being so sure and she fairly pounced on me and was most insistent that prices were going to rise and I had to get into the market NOW!!! She was almost hysterical
She probably is hysterical, commissions have probably been down as well as sales. I don't think RE agents are the best people to speak to about prices. They may be good for local area advice such as schools transport shops etc, but would never listen to a word they say re investment.
When we first moved in to our rental the property manager(not RE agent) congratulated us on our move to sell our house and rent, reason being she saw prices coming down a lot further over the coming years. Everyone has a different opinion I guess.
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Latest figures from RP data, houses prices fall again. Melbourne worst hit it would seem (may account for the hysterics from the agent I spoke to ).
The article also says rents are rising. Being a tennant I keep a close eye on rentals in my area and can't see any evidence of them going up so I don't agree with that assertion (although other places may be different of course).
http://finance.ninemsn.com.au/newsbusiness/aap/8587769/home-prices-fall-again
). The article also says rents are rising. Being a tennant I keep a close eye on rentals in my area and can't see any evidence of them going up so I don't agree with that assertion (although other places may be different of course).
http://finance.ninemsn.com.au/newsbusiness/aap/8587769/home-prices-fall-again
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Latest figures from RP data, houses prices fall again. Melbourne worst hit it would seem (may account for the hysterics from the agent I spoke to
The article also says rents are rising. Being a tennant I keep a close eye on rentals in my area and can't see any evidence of them going up so I don't agree with that assertion (although other places may be different of course).
http://finance.ninemsn.com.au/newsbusiness/aap/8587769/home-prices-fall-again
Hi Miss Hale,
I have to agree with you on a couple of points and here is my view:
1) RP data shows Melbourne prices worst hit, 100% agree with you but I also think the figures are far worse than actually shown, WHY is that the case? I used to use RP data when I was in real estate and allot of information was in correct at the time, Plus not all owners want to disclose what the house was sold for “Etc”.
2) Are rents rising or Not: It all depends on the acutaly suburb, For example in Melbourne, Keilor Village rentals are rising in price because the demand for rentals is very strong and the supply of homes available for rent is weak.
Then you look at a suburb like Keilor downs, Only 1KM away from Keilor village, there are allot of homes vacant, rents are on the decrease, Docklands a prime example, high vacancy rates and apartments are decreasing in value and so are rents.
So every suburb has its own economy to deal with.
By the way I live in Deer park, My home was valued by the Bank in 2010 for 420K got it revalued last year at 360K
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Investment in Australia really has only three options: real estate, the stock market or cash. Cash has been king, but with falling interest rates, money is going to start flowing out of bank deposits to real estate, or stocks and funds. Which would you invest in? Falling interest rates are also good for the property market, so property might kick on again, but how high can prices go? Property is a great-long term investment, so 10 years-plus and you should do OK, but I think the share market will do more over the next few years. The stock market is still historically low, with plenty of potential for growth, much more than the property market. A lot of investors are still wary of stocks, but the bandwagon is building up steam again and your money isn't locked up for a decade. I'm certainly moving my money out of cash and back into stocks.
There will always be people wanting to buy a house, and I don't see any big collapse, but prices might stagnate in real terms for a decade, like the 1990s. If real estate prices tumble, along with mortgage rates, real estate is the place to be, but I don't see either happening.
There will always be people wanting to buy a house, and I don't see any big collapse, but prices might stagnate in real terms for a decade, like the 1990s. If real estate prices tumble, along with mortgage rates, real estate is the place to be, but I don't see either happening.
CanOz
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Interesting, some comments on the Bloomy this morning also reflected a move into stocks in the US because of the lack of yield anywhere else...
CanOz
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This.
The difference between stocks and property at the moment is the yield on offer. TLS is up 40% and still has a grossed up yield of 9%. The dividend yield goes part of the way to explaining how the ASX is sustaining PEs of 14-15x in a fairly subdued economy. The other part of the equation being the low debt on the balance sheet and that while things aren't great, the sky isn't falling in, IMO.
While I generally agree with your sentiments, as a potential investor I find it very difficult to make sense of the number when it comes to property investing in Oz. Real returns are still below term deposit rates and with house prices falling not increasing, there are no capital gains to be had in the near future. Of course if you look hard enough there are and will be decent returns but nothing great.
While this might change in the future. Will you be able to recover all your loses (yes if you hold it long enough but take opportunity cost into account as well)?. Also if it looks like prices will tumble then investors and home owners will hold off longer before pulling the trigger.
Personally I believe the "real" (not all the people who bought the tale of "but its saving you tax") investors will start chasing yields and for this to happen either rents go up or prices come down. I believe it will (have to?) be a mixture of the two as it is becoming to expensive to rent or own property for the younger generations. Collapse or not might depend on other factors. I see people weaning off the "but you have to get into market" sentiment slowly because its either too expensive to own property or comes at too great of cost to lifestyle etc.
Personally I don't think Australian companies will really begin to grow (apart from niche markets plus mining and gas depending on chinese demands) until the dollar comes down and with it the cost of doing business here. We might see some structural changes as well which might flow onto the housing markets.
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I think it is inevitable that more money moves into the stock market when interest rates go down and the housing market is depressed.
In fact through the doom and gloom of the market pessimists I have been quite confident that money will move back into the market and that good performing companies that were undervalued would rise significantly.
Bill M
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You keep going around in cirlces. I thought we addressed this further back. How do you explain that now I must pay more on the Northern Beaches for a decent 2 br unit than what I did 3 years ago? What makes you think there are no further gains? Again, I emphasise, research and pick your area carefully.
To answer your question regarding "real returns being below term deposits". try getting a term deposit over 4.8% now, you will be hard pushed to find one. It you did get one then good luck to you but where will you get capital growth? There will NEVER be any, is that a good investment? I will take 4.8% income from rents with a possibility of capital growth anytime over just leaving it in the bank.
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Julia
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This has clearly been happening here since cash deposit rates began to fall significantly.
Even I am looking seriously at stocks again at present as what I'm getting on the cash at call is now only 4.75%.
Hesitating because (a) there has already been a good run up, and (b) there is still plenty of potential for the global patching up process to fall apart.
Bill M
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What wasn't hard? Your link is only for online cash accounts which are higher. I was generous with the term deposits, it seems the best 5 year term deposits in fact are only 4.75%.
Link here: http://www.infochoice.com.au/banking/savings-account/term-deposit-interest-rates.aspx
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No capital growth with term deposits but no loss either. While there is a possibility of capital growth on your real estate there is also the possibility of capital loss.
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Don't be ridiculous Miss Hale, hasn't anyone told you property always goes up(over a 10 year period)*?
white_goodman
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its important to look at things in real terms not nominal..
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I don't think Sydney or Brisbane has gone anywhere in the last few years - 'Sideways' ?
