The future of Australian property prices

[luutzu]

There are plenty of people doing that, all they are doing is spending any equity they have gained, to support their lifestyle.
Then in 10 years time they will be wondering why they haven't got ahead, and blaming the banks for letting them do it.
I know someone who bought a property 20 years ago, and still hasn't paid anything off it, because of the tax advantage.
I asked him what he had done with the savings, he hadn't invested any of it, so he hasn't paid anything off the investment property or his principal residence.
But they have had a great time.

Yea, some people can be a bit too complacent. Somehow they think that debt is not other people's money but are really theirs to spend.

 

[luutzu]

If you haven't already, check out CoreLogic's YT videos.

Pretty good summary of Australia's property market by months and quarters.



Check this out:

Assuming that by "under construction" they mean new ones starting construction each period. i.e. not double counting.

So from 2009 to 2017... I did a rough cumulative sum and it's about 1.3M units having been built.

Assuming again that each unit house 2 people. That's 2.6M people.

Not counting houses and the people living in them...

What's the population of Sydney again?

We're so stuffed.

 

[greggles]

NSW dad made $90,000 in just nine months after investment property skyrocketed in value

http://www.news.com.au/finance/real...e/news-story/0a0c7824176c22df5c88aada5247d03c

Surely news articles like this represent the last, dying gasp of Australia's residential real estate boom.

 

[Wysiwyg]

3 kids and the ppor already paid off. He has done well before property investing. I think finding value in real estate for investment purposes would be very possible and an exciting challenge. All towns are in a state of rise, peak, fall and trough.

 

[luutzu]

3 kids and the ppor already paid off. He has done well before property investing. I think finding value in real estate for investment purposes would be very possible and an exciting challenge. All towns are in a state of rise, peak, fall and trough.

It's not possible for property in Australia, or anywhere in the world really, to grow anymore. The best that could be hoped for is that they flatline... for a very long time.

Costs of financing for the banks are going up. There's that added capital requirement APRA slugs on them. There's the new requirement to have no NINJAs and other high net worth people in the outer suburbs buying a few investment properties.

Then there's the oversupply glutting the market.

Apartments and granny flats are everywhere. Those who couldn't afford to buy will find the rent going for very cheap.

With higher costs of credit, sluggish wage growth and job uncertainty; with the Chinese being told to keep their Yuan at home, harder for investor to get more credit, oversupply; fuel and cost of living rising... If any country in the world sneezes, game's over.

 

[luutzu]

NSW dad made $90,000 in just nine months after investment property skyrocketed in value

http://www.news.com.au/finance/real...e/news-story/0a0c7824176c22df5c88aada5247d03c

Surely news articles like this represent the last, dying gasp of Australia's residential real estate boom.

For sure.

Almost impossible to find honest opinions in the media about property. Shane Oliver of AMP is always quoted in Fairfax... and his assessment of property is that it'll probably drop by 5%. But it wouldn't crash or take any dramatic correction.

Don't think so Shane.

 

[Smurf1976]

Almost impossible to find honest opinions in the media about property.

A difficulty there is that most adults have, or perceive that they have, a vested interest in the subject.

Commercial media also has a vested interest.

Put the two together and it would be unwise to expext unbiased commentary.

 

[luutzu]

A difficulty there is that most adults have, or perceive that they have, a vested interest in the subject.

Commercial media also has a vested interest.

Put the two together and it would be unwise to expext unbiased commentary.

yea, true.

I also find that those I am close to and so would talk honestly with... that when I said from what I read and could figure out, property is going to go down and they really should think about reducing their debt, maybe realise profit on one or two of their properties, just in case.

They tend to not like hearing it at all. They tend to put it down to me being harmless and don't know what I'm talking about, or just being a prick.

But yea, no one wishes or hope property doing a major correction i.e. crash. Just that the way things are, there doesn't appear to be any other way but down, real hard. And we're all going to be affected.

For every sleezy broker "owning" six or more investment properties, and keep telling everyone to load up... there are young families, I know quite a few of those, who saved and borrowed from their parents, worked hard to just get one they could one day call their own. They work two jobs, fix the place after work and on weekends to rent out... maybe those with one property should do alright no matter what happened.

 

[Junior]

For sure.

Almost impossible to find honest opinions in the media about property. Shane Oliver of AMP is always quoted in Fairfax... and his assessment of property is that it'll probably drop by 5%. But it wouldn't crash or take any dramatic correction.

Don't think so Shane.

Strong population growth, low unemployment, low interest rates.

At least one of the above would need to move significantly in order for a real crash to occur, IMO.

Another risk is a Labour victory at the next election. End neg gearing and tax hikes on the table.

 

[luutzu]

Strong population growth, low unemployment, low interest rates.

At least one of the above would need to move significantly in order for a real crash to occur, IMO.

Another risk is a Labour victory at the next election. End neg gearing and tax hikes on the table.

Bank of England and the Feds just kept their rate as is. They raised it a couple months ago from memory... so maybe seeing things that scare them a bit and want to pause the hike.

Those increase have yet to be passed on by our banks, as far as my scanning of the headline tells me anyway. But it will increase the costs of of funding for our banks and they will pass it on... maybe just waiting for the commission and heat to be over first... maybe they don't want to bring the house down if they do it too suddenly. But I heard that the Canadians have already passed on the increased cost to home borrowers.

We'll need a massive infrastructure boom to help save our skins. So far there's some in Australia so hopefully it's about to pick up and construction work can be transferred to infrastructure work.

That or maybe our people's representative want to sweat the plebs a bit more, get them to work harder for less, maybe get a few thousand to lose their savings and investment so friends can come in to scoop it all up... all that before they try to "save" the plebs in case there'll be riots.

They've done it in the US post GFC. Some 10 million households lost everything. Hedge funds and rich people scooped up for next to nothing, made themselves billions renting and kicking out people.

 

[satanoperca]

Little by little is all it takes

 

[Wysiwyg]

That's it. I am soooo depressed about Australian property after reading these last posts that all bets are off.

 

[luutzu]

$US 200K+ for a car parking spot in HK.


------

https://www.reuters.com/article/us-...park-money-down-in-the-lot-idUSKBN1IB367?il=0

"
Her parking spots, marked out in mustard-colored paint, have more than doubled in value in the past 18 months, with one surging to HK$1.6 million ($203,850.22) from HK$720,000.

Those gains have greatly outpaced the price growth of the flats in the building above them in Tai Wai district, some 30 minutes’ drive from the central business district on Hong Kong island.

It took about seven years for the flats, measuring only around 300 square feet (28 square meters), to record the same growth of 120 percent, according to data from Centaline Property Agency. The flats currently go for about HK$4.7 million per unit.

City-wide, while Hong Kong’s private homes roughly doubled in value between 2010 and 2017, the price of a parking spot in residential complexes around the city tripled to an average of HK$1.4 million, according to data from an independent website dedicated to the asset, CarparkHK.com.


“Flats are expensive, but their value won’t jump 100 percent in roughly a year,” said Fan, who does not drive and rents both spaces out for HK$2,300 a month each. “But that’s what’s happening with parking spots. It’s incredible.”

The boom is being fueled by a surge of cars on Hong Kong’s roads and a red-hot housing market that pushes investors to park their money in assets with lower entrance fees.
"

 

[Value Collector]

Those gains have greatly outpaced the price growth of the flats in the building above them in Tai Wai district, some 30 minutes’ drive from the central business district on Hong Kong island.


"

I have no idea how much a car spot in HK should be worth or whether existing prices represent a bubble.

How ever, it makes sense to me that in certain situations the value of a car spot may rise faster than the value of residential apartments.

For example, if more and more apartments are being produced with no parking or less parking than older apartment buildings, then that can mean the ratio of apartments to car parking spaces is growing, and would increase demand for existing parking facilities.

eg, if from 1990 - 2010 every apartment built came with at least 1 car space, but from 2010 - present only 50% of apartments came with a car space, then the growth in apartment numbers might be subduing apartment prices, while population growth is increasing demand for car spaces.

 

[luutzu]

I have no idea how much a car spot in HK should be worth or whether existing prices represent a bubble.

How ever, it makes sense to me that in certain situations the value of a car spot may rise faster than the value of residential apartments.

For example, if more and more apartments are being produced with no parking or less parking than older apartment buildings, then that can mean the ratio of apartments to car parking spaces is growing, and would increase demand for existing parking facilities.

eg, if from 1990 - 2010 every apartment built came with at least 1 car space, but from 2010 - present only 50% of apartments came with a car space, then the growth in apartment numbers might be subduing apartment prices, while population growth is increasing demand for car spaces.

Yea, true. But we'd have to assume other factors being equal. For example, every new apartment's tenant actually need a parking spot; that every apartment not having a spot ought to have one; every spot available are where it's needed and the supply/demand spreads out evenly.

I did the maths before on the rental income each spot managed to rent out for... yield is about 1.7%p.a.
Not a great investment in that income-producing sense. But then if someone else offer higher soon enough... but then that'd be speculation.

Not to mention a parking lot tend to not have much of a moat. Nearer the fire exit and elevator maybe, but not much of an advantage. Then there's the future of auto pilot.

 

[Value Collector]

Yea, true. But we'd have to assume other factors being equal. For example, every new apartment's tenant actually need a parking spot; that every apartment not having a spot ought to have one; every spot available are where it's needed and the supply/demand spreads out evenly.

I did the maths before on the rental income each spot managed to rent out for... yield is about 1.7%p.a.
Not a great investment in that income-producing sense. But then if someone else offer higher soon enough... but then that'd be speculation.

Not to mention a parking lot tend to not have much of a moat. Nearer the fire exit and elevator maybe, but not much of an advantage. Then there's the future of auto pilot.

Not every apartments tenant needs to demand a car space for prices to rise, all that needs to happen is that the demand per capita stay about the same, while the number supplied per capita fall.

Eg there has always been people that don’t need spaces,

Yes the car spaces need to be located well, but also those that are located well may increase faster in value than others.

1.7% return might be good compared to a residential property, once you deduct all the maintenance, insurance, water rates etc.

If you believed that you would get a 1.7% cash flow return with zero maintenance, and the capital value and cash flow is protected from inflation, some people would see that as meeting their investment goals.

Car space is still space, space is valuable, whether its a parking garage or an apartment.

 

[luutzu]

Not every apartments tenant needs to demand a car space for prices to rise, all that needs to happen is that the demand per capita stay about the same, while the number supplied per capita fall.

Eg there has always been people that don’t need spaces,

Yes the car spaces need to be located well, but also those that are located well may increase faster in value than others.

1.7% return might be good compared to a residential property, once you deduct all the maintenance, insurance, water rates etc.

If you believed that you would get a 1.7% cash flow return with zero maintenance, and the capital value and cash flow is protected from inflation, some people would see that as meeting their investment goals.

Car space is still space, space is valuable, whether its a parking garage or an apartment.

Yea, I supposed one could always set up a meter in front of the space. Charge the main parker the day rates and special half-price night owl rate

I wasn't making fun of you btw, just thinking how people could take out a mortgage on a single parking spot.

1.7%... my simple maths put that at 58.8 years for the cash flow to repay the initial investment. Assuming it's inflation adjusted everything.

So if no other buyer were to take it off me, and assuming I don't need to sell unless one were to offer a better price... the kids will have a good inheritance.

 

[orr]

Well fella's it looks like from the mood above I'm soon to be gaurding my potato patch with the trusty Kalishnikoff(who's view of the future was that?)... That being the case I'll need good soil good rain fall, this stuff quiet often come with good air and good neighbours and time to talk to them.
My judgement, for what it's worth, wont see the Domain section of 'The Land' tanking like Albert Park Meriton unit. Make that switch soon if you haven't already...If you've got the skills of course.

As an aside; Check what the Snowy 2.0 done for the communitee's PV's closely assosiated. God Damb that Central Planning...
Karl Marx 200.....

 

[Value Collector]

1.7%... my simple maths put that at 58.8 years for the cash flow to repay the initial investment. Assuming it's inflation adjusted everything.

So if no other buyer were to take it off me, and assuming I don't need to sell unless one were to offer a better price... the kids will have a good inheritance.

Thats just a flaw in the capital model, not all all assets are suitable to high leverage.

Just because an asset would produce terrible results if it were financed 100%, doesn't mean it is not a sound investment in itself.

by the way I dont own any car parks (well except those attached to other assets, such as the Disney car parks etc which by the way make go money for Disney).

Look at Westfields, they learned years ago they could increase their rental yield of their centres by letting kiosks set up in the middle of the walkway, whether they are cutting keys, selling mobile phone cases, ice creams, coffee or juice people will rent those kiosk spaces that are not much bigger than a car spot.

As I said above space is space, and as long as there are people willing to pay to use that space, owning space can be a sound investment, whether that space is an apartment people want to live in, or a storage locker they want to put their crap in, or a spot where they can erect their Saturday market stall tent or park a food truck, or shop to rent, and office to use, a place to farm, host an event, film a movie, host a concert etc etc.

 

[luutzu]

Thats just a flaw in the capital model, not all all assets are suitable to high leverage.

Just because an asset would produce terrible results if it were financed 100%, doesn't mean it is not a sound investment in itself.

by the way I dont own any car parks (well except those attached to other assets, such as the Disney car parks etc which by the way make go money for Disney).

Look at Westfields, they learned years ago they could increase their rental yield of their centres by letting kiosks set up in the middle of the walkway, whether they are cutting keys, selling mobile phone cases, ice creams, coffee or juice people will rent those kiosk spaces that are not much bigger than a car spot.

As I said above space is space, and as long as there are people willing to pay to use that space, owning space can be a sound investment, whether that space is an apartment people want to live in, or a storage locker they want to put their crap in, or a spot where they can erect their Saturday market stall tent or park a food truck, or shop to rent, and office to use, a place to farm, host an event, film a movie, host a concert etc etc.

wait. what's "financed 100%"? You mean 100% equity financing?

Debt financing, leverage, can do wonders. Just I reckon it's better, and safer, to see all financing as my own equity with a cost on it. That mean that if the debt can be had for cheaper, that's just icing on top.

As to leverage... it's better to not leverage with debt but to leverage through that moat, market position, political influence. Debt could bankrupt a company when the tide turn; the other leverages tend to get bigger and better no matter what happen.