IFocus
You are arguing with a Galah
- Joined
- 8 September 2006
- Posts
- 7,646
- Reactions
- 4,718
The future of Australian property prices
- Thread starter Joe Blow
- Start date
- Joined
- 3 July 2009
- Posts
- 27,629
- Reactions
- 24,514
Well I was being charged 8% + p&p + gst + inspections + letting fee, in Mandurah. That's why I manage it myself now.
IFocus
You are arguing with a Galah
- Joined
- 8 September 2006
- Posts
- 7,646
- Reactions
- 4,718
We had a number of properties in the area so got management for 7-8% after doing the rounds for a while negotiating.
Expected lower but just couldn't move the local agencies, now only hold a small block of units still paying 7-8% having said that my wife managers the manger pretty closely (and me
) so we likely do a bit more than most.
- Joined
- 3 July 2009
- Posts
- 27,629
- Reactions
- 24,514
We had a number of properties in the area so got management for 7-8% after doing the rounds for a while negotiating.
Expected lower but just couldn't move the local agencies, now only hold a small block of units still paying 7-8% having said that my wife managers the manger pretty closely (and me
That's a good return, great little earner. Wouldn't I like to be getting that.
- Joined
- 10 December 2012
- Posts
- 3,632
- Reactions
- 9
I think Sydney City Council has some of the cheapest rates. I pay about 270 / qtr
I have my building insurance for a value of 300K with coles insurance. they were significantly cheaper than anyone else last year.
As for the management fees, i as erring on the low side. If anything, my calculations are showing an IP in a very favourable light. I have no idea why anyone would buy an IP in my area to make such a pathetic yield. I have a 40K personal share portfolio which is paying me a tad under 3k a year with fully franked dividends. capital gain of ~8% too (annualised to around 12%)
white_goodman
BOC
- Joined
- 13 December 2007
- Posts
- 1,635
- Reactions
- 0
still below the benchmark
- Joined
- 9 July 2006
- Posts
- 5,991
- Reactions
- 1,651
Which/who's benchmark?
white_goodman
BOC
- Joined
- 13 December 2007
- Posts
- 1,635
- Reactions
- 0
- Joined
- 9 July 2006
- Posts
- 5,991
- Reactions
- 1,651
I don't get too involved in benchmarks or let them dictate me.
If l'm getting ~10% in todays environment, l'm happy with that.
white_goodman
BOC
- Joined
- 13 December 2007
- Posts
- 1,635
- Reactions
- 0
would you be happy with 10% if the investment vehicle/market you're in is averaging +50%?
no because the return you are getting isnt adequate for the amount of risk... there is a reason why fund managers are judged against he benchmark
would you be happy backing a horse at $1.50 and having it win if it was only a 50% chance of winning?
- Joined
- 9 July 2006
- Posts
- 5,991
- Reactions
- 1,651
My bolding...
Oh, and some common sense. Would you be happy getting 10% when everyone else is getting 50%?
- Joined
- 10 December 2012
- Posts
- 3,632
- Reactions
- 9
I'm happy with the return. I've target income over capital growth.
Any-who, the main point was to say that it's quite easy to have a small parcel of shares generate an above IP rate of return.
The amount of gearing required with an IP these days is just SCARY - at least for me.
Unless you can convince Australians to gear up even more, how can property prices increase much above wages growth??
Hopefully we wont see the woeful household savings rates that were around during the early noughties.
It's rarely talked about, but why did Australians save so little during the Howard Govt??? I blame the halving of capital gains tax and the headlong rush into negatively geared property.
Attachments
- Joined
- 9 July 2006
- Posts
- 5,991
- Reactions
- 1,651
Come on. You know the answer to that. Even I know, and l'm a muppet.
+1. Thanks for the graphs. The scary thing is how many people, after showing them data like you did will still jump head first and with a smile into a 500K mortgage, either for their on home or for an IP.
- Joined
- 27 December 2012
- Posts
- 33
- Reactions
- 0
Great graph!!!
IP"s have become a burden for most investors at the moment. I think people who have bought properties pre
Boom and holding will do well , the people who will struggle are the ones who have just recent bought Ip
Properties. When I was in real estate only 4 years ago my average open had 30 people, basically the way it worked was who ever wanted the house the most paid the most
4 years later some of these houses are back on the market for allot lower then what they bought it
IP"s have become a burden for most investors at the moment. I think people who have bought properties pre
Boom and holding will do well , the people who will struggle are the ones who have just recent bought Ip
Properties. When I was in real estate only 4 years ago my average open had 30 people, basically the way it worked was who ever wanted the house the most paid the most
4 years later some of these houses are back on the market for allot lower then what they bought it
- Joined
- 10 December 2012
- Posts
- 3,632
- Reactions
- 9
The Economist Magazine has just released its latest round-up of Global House Price indicators. According to the analysis, Australia’s house prices are 45 per cent overvalued on a price to rent ratio and 23 per cent overvalued on a price to income ratio.
This is down from the November 2011 assessment of a 53 per cent overvaluation on a price to rent ratio and 38 per cent overvaluation on a price to income ratio.
Seems like the Canadians are in worse shape than us. If conversations I had a with some Vancouver cabbies last October are anything to go by, it sounds like a near impossibility for a first home buyer to aspire to buy less than an hour from downtown. I am surprised the rent to property ratio is so bad there, as rents seemed to be a lot higher than Sydney.
This is down from the November 2011 assessment of a 53 per cent overvaluation on a price to rent ratio and 38 per cent overvaluation on a price to income ratio.
Seems like the Canadians are in worse shape than us. If conversations I had a with some Vancouver cabbies last October are anything to go by, it sounds like a near impossibility for a first home buyer to aspire to buy less than an hour from downtown. I am surprised the rent to property ratio is so bad there, as rents seemed to be a lot higher than Sydney.
Attachments
CanOz
Home runs feel good, but base hits pay bills!
- Joined
- 11 July 2006
- Posts
- 11,543
- Reactions
- 519
Yeah, couver just nudged out Sydney from the top spot of most unaffordable city one ear ago this month actually....
Thanks for that post, very informative
CanOz
Thanks for that post, very informative
CanOz
- Joined
- 10 December 2012
- Posts
- 3,632
- Reactions
- 9
I remember a guy from my old job. late 20s or early 30s. Newly married - wife's family seemed to be pretty well off. I think the Indian heritage wasn't helping as there was a lot of pressure on him to buy a property since their peer group had all got at least 1 IP.
The purchase price was in the high 500K range, but the rent was ridiculously low. I had a bit of a chat with him 1 night shift and was gobsmacked that he had done nothing similar before signing on the dotted line. I would say he'd be easily 6 figures under water now, and what really got me was we all knew our jobs were going over the next 6-12 months, so how you could set yaself up with that much debt when job security is not there, I have no idea.
A lot of the literature doesn't inflation adjust their figures, nor do they truthfully factor in holding costs for an IP, and they never ever talk about bad tenants.
We live in a land where mum and dad property investors purchase a property to be able to claim back more tax than their neighbours and workmates from the government (this is a definition of success in Australia), and hope to achieve capital growth that exceeds inflation, maintenance, depreciation and interest repayments. Rental Yields? Why are they relevant to property prices???
I've yet to be convinced that "capital" gains deserve to be treated differently to income earned stacking shelves at the local coles or driving a truck between states.
- Joined
- 7 April 2010
- Posts
- 972
- Reactions
- 106
Your anecdote reminds me of one of the reasons why I am quite bearish regarding property. Back in the late '80s all my friends were buying property. I had saved the equivalent of a house deposit but not to buy a house but to take a year off work and backpack around the world. All my friends told me I should use it to buy property instead but I kept to my original plan and had a great time, I thought house prices were too high at the time. Most of the ones who bought sold a few years later at a loss.
Hahaha I have many friends, relatives like the ones you've described, lucky for most of them, they got into the market a while back. Being from an Indian background, I have lost count of the number of times I have been told to "buy your own house or IP or you're will be left behind."
I remember having a chat with a family friend who wanted to get an IP. He is a part of the family business and "their accountants" had suggested getting an Ip or doing a development to reduce tax and get easy capital gains. After about 10 mins of trying to convince him with back of the env figures that this is bad idea, he wouldn't budge (and his wife is an accountant).
They bought an IP apartment and an old house on a large block (to develop into town houses) without calculating cost etc (I think this was ~2009-2010). The apartment is loosing them money even at today's interest rates and I have no idea how much they will lose on the old house assuming they just sell it, probably ~$200K.
