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rents falling in geraldton wa .lock them tenants in 
House prices to keep falling for years
- Thread starter Pommiegranite
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Asset prices will deflate when unemployment suddenly explodes and all rental properties hit the market at the same time and no credit is available to take up the slack.
If you still see inflation taking your 7 X incomes away to 10X then keep investing and I will wait with 'I told you so' in 12 months time.
Yes, I will never sell my PPOR as it is purely a lifestyle choice of where I have decided to live and nothing more due to family reasons.
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I wonder what will happen when inflation takes off, ok I'll tell you, the RBA will have no choice but to up interest rates, watch KRudd and Swan dive for cover then.
Julia
In Memoriam
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It's pretty sad that such a picture makes me smile in anticipation.
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It's a certainty and all the FHB that jumped on the KRudd bribe wagon will be caught.
Even those who didnt lock in the low rates will find their houses are worth 30 or 40% less so if they go to sell ????
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http://www.theaustralian.news.com.au/story/0,25197,25092065-2702,00.html
I don't really expect this situation to change in the short/medium term until either :
a) we start seeing signs that the economy is improving or
b) middle and upper price brackets lower their expectations
explod
explod
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I hope that comment is in jest Julia. The situation facing new home buyers with a large mortgage will, unless they have secure incomes, be very dire within the next 12 months or so.
Cheers explod
Everyone here in this forum advocating that you should sell the house you live in because of deflation - that would be good advice under certainity however very bad investment advice. It exposes you to a lot more risk and not just financial - stability in where you live is important to a lot of people.
The magic of portfolio allocation is that you don't have to have all your eggs in one basket. If you want to prepare for deflation by all means sell the investment property however for most people the house you live in provides much more than just financial benefit. In bad times I think the idea would be to hedge the risk, not profit from it. You can take a punt, or you can simply prepare for the case if the market goes either way.
The magic of portfolio allocation is that you don't have to have all your eggs in one basket. If you want to prepare for deflation by all means sell the investment property however for most people the house you live in provides much more than just financial benefit. In bad times I think the idea would be to hedge the risk, not profit from it. You can take a punt, or you can simply prepare for the case if the market goes either way.
Glen48
Money can't buy Poverty
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Most people try to pick the top of the market in any thing and sell..except houses they like to ride them all the way down and then sit there for years waiting for them to go back to were, they not knowing houses appreciate about 1-3% PA over 50 years.
That's 1-3%pa ABOVE INFLATION I think you will find Glen48 - ie that's the "real" capital return. And for PPORs, both the inflationary and the real growth are TAX FREE. Any other investment class around that you can say that about?? On top of that, you don't have to pay rent! That's another 4%+ return pa AFTER TAX. Of course if you buy well (like in good area's of Sydney etc that will only gain in exclusivity as the population grows), your capital return will be even greater again.
The numbers stack up incredibly well if you take your blinkers off and think about it a little more than you seem to have.....
Cheers,
Beej
Glen48
Money can't buy Poverty
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That's the trouble with R E it's all hearsay 1-3% but take out rates, insurance repairs etc. etc and what is the real cost, now with prices crashing to 90's level if you can get 1% for 15 years on reduced rents you are doing well.
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wheres real estate crashing to 90,s levels ??
i paid 54k for a triplex block with ok 3 brm house on it in the early 90,s in perth ....... cant see any real estate guides showing me the same deals yet bud
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Beej,
You are quite correct with your figures based on past history, but we are entering a different time where CG may not be there and in this case renting can be an advantage over owning a PPOR.
Example:
Current interest rates are starting to come in line with rents of a similar property. Why would you not own. Still have other costs associated with owning, rates, insurances, maintenance etc
We enter a deflationery period of several years, asset prices drop at 2% p.a. On a $400,000 property that $8000 p.a. If the rent was say $400 pw and interest rates we 5% then we are neutral. Add in an addition $50 p.w for rates, insurances etc plus the -CG of $153 per week that is an additional $203pw over renting or a %50 increase over renting. I think my figure of 2% over several years is quite conservation, but never the less illustrates the situation.
It does not take much to change the situation, 0 growth and your down $50 a week, small price to pay for security of your own home but you are still in debt, 3% growth and you are almost equal with inflation, fantastic, -%5 growth for two years and you have to catch up $40K, renting sounds good.
I hope that eventually property will become less speculative (growth based on doing nothing just going into debt), more consistent in growth (inflation +1-2% on average) allowing everyone to have the opportunity to own at least their own home and get on with building a clever country not one dependant on the stuff that is in the ground and the hope that assets will keep on rising without being productive.
Benjamin
You are quite correct with your figures based on past history, but we are entering a different time where CG may not be there and in this case renting can be an advantage over owning a PPOR.
Example:
Current interest rates are starting to come in line with rents of a similar property. Why would you not own. Still have other costs associated with owning, rates, insurances, maintenance etc
We enter a deflationery period of several years, asset prices drop at 2% p.a. On a $400,000 property that $8000 p.a. If the rent was say $400 pw and interest rates we 5% then we are neutral. Add in an addition $50 p.w for rates, insurances etc plus the -CG of $153 per week that is an additional $203pw over renting or a %50 increase over renting. I think my figure of 2% over several years is quite conservation, but never the less illustrates the situation.
It does not take much to change the situation, 0 growth and your down $50 a week, small price to pay for security of your own home but you are still in debt, 3% growth and you are almost equal with inflation, fantastic, -%5 growth for two years and you have to catch up $40K, renting sounds good.
I hope that eventually property will become less speculative (growth based on doing nothing just going into debt), more consistent in growth (inflation +1-2% on average) allowing everyone to have the opportunity to own at least their own home and get on with building a clever country not one dependant on the stuff that is in the ground and the hope that assets will keep on rising without being productive.
Benjamin
Glen48
Money can't buy Poverty
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From Patrick.net
Downtown apartment rent falls by most in 7 years
By: Alby Gallun Feb. 23, 2009
(Crain) ”” Rents at top-tier downtown apartment buildings last year fell the most since 2001 as a development boom and deepening recession gave tenants the upper hand over landlords.
Effective rents at Class A downtown buildings fell to $2.11 a square foot in the fourth quarter, down 6.2% from $2.25 in the year-earlier period, according to Appraisal Research Counselors, a Chicago-based real estate consulting firm. It was the first annual drop since 2003 and the biggest decline since 2001, when effective rents slid 7.7%.
In a case of bad timing, rising unemployment is depressing demand for apartments amid a surge in supply of both apartments and unsold condominiums that are being rented out. Many landlords are still holding the line on face rental rates, but a growing number are offering one or two months free, driving down so-called effective rents.
“I think this next year is going to be really tough,” says Appraisal Research Vice-president Ron DeVries. “We’ve just been having lots of ugly conversations lately.”
Effective rents fell 6.6% between the third and fourth quarters, the biggest quarterly drop since Appraisal Research began surveying the downtown market in 1997. The fourth quarter is typically slow for most landlords, with rent declines even in strong markets.
The downtown Class A occupancy rate, meanwhile, fell to 90.6%, from 92.8% in the third quarter and its lowest level in six years, according to Appraisal Research. While Mr. DeVries expects the occupancy rate to slip further, he doesn’t see effective rents dropping as low as they did in the last downturn, when they bottomed out at $1.83 in 2003.
The depressed for-sale residential market initially benefited apartment landlords, as many would-be buyers rented instead, either because they couldn’t qualify for a mortgage or didn’t want to buy a house or condo that could fall in value.
But the worsening economy now is depressing demand, forcing some renters to save money by doubling up or moving back home with their parents. The job market, which drives demand for apartments, continues to shrink: Moody’s Economy.com forecasts that the Chicago area will lose 133,000 jobs in 2009 ”” about the same number lost during the last recession ”” and won’t start adding them until after 2010.
Still, an oversupply of apartments is the larger problem for landlords right now, especially in the South Loop. Developers completed three buildings comprising 1,016 apartments in the South Loop last year, according to Appraisal Research.
And condo rentals are becoming a bigger competitive threat, with developers adding nearly 3,200 condos to the South Loop in 2008 and 2009. Unwilling or unable to sell their units in a lousy market, many condo owners are renting them out for the time being.
Some are offering good deals on rent, one reason new apartment high-rises in the South Loop have been slow to fill up. A 278-unit building at 1401 S. State St. developed by Chicago-based Equity Residential and Dallas-based Lincoln Property Co. is only 60% leased 10 months after opening, according to Appraisal Research. Under normal market conditions, a similar building would be at least 90% full at this point.
The new South Loop projects “have hit the market at the worst time,” Mr. DeVries says. “If you want to live in the South Loop, you have lots of options. That has really slowed down the leasing.”
Lincoln and Equity Residential representatives did not return calls for comment.
Some landlords are trying to address the competitive threat posed by condo rentals by playing up the advantages of living in an apartment building, which usually have on-site customer service staff.
“We talk about the benefits of being in a professionally managed building,” says Mark Segal, president and CEO of Chicago-based Habitat Co., whose downtown properties include Kingsbury Plaza, a 420-unit apartment tower at 520 N. Kingsbury St. When tenants have a problem, they “can go directly to our management staff as opposed to going to a unit owner.”
With houses being repo'ed every 13 second in USA and getting worse things are still going down
Dr. Kenn is quoting 40% drop but claims there could be a over shoot.
And to answer your questions, we were suppose to de- couple from USA but we didn't, we were suppose to be saved by China and Japan but were not, we owe more per person then USa but less than UK so prices have a long way to go and 90 prices are on the cards.
Downtown apartment rent falls by most in 7 years
By: Alby Gallun Feb. 23, 2009
(Crain) ”” Rents at top-tier downtown apartment buildings last year fell the most since 2001 as a development boom and deepening recession gave tenants the upper hand over landlords.
Effective rents at Class A downtown buildings fell to $2.11 a square foot in the fourth quarter, down 6.2% from $2.25 in the year-earlier period, according to Appraisal Research Counselors, a Chicago-based real estate consulting firm. It was the first annual drop since 2003 and the biggest decline since 2001, when effective rents slid 7.7%.
In a case of bad timing, rising unemployment is depressing demand for apartments amid a surge in supply of both apartments and unsold condominiums that are being rented out. Many landlords are still holding the line on face rental rates, but a growing number are offering one or two months free, driving down so-called effective rents.
“I think this next year is going to be really tough,” says Appraisal Research Vice-president Ron DeVries. “We’ve just been having lots of ugly conversations lately.”
Effective rents fell 6.6% between the third and fourth quarters, the biggest quarterly drop since Appraisal Research began surveying the downtown market in 1997. The fourth quarter is typically slow for most landlords, with rent declines even in strong markets.
The downtown Class A occupancy rate, meanwhile, fell to 90.6%, from 92.8% in the third quarter and its lowest level in six years, according to Appraisal Research. While Mr. DeVries expects the occupancy rate to slip further, he doesn’t see effective rents dropping as low as they did in the last downturn, when they bottomed out at $1.83 in 2003.
The depressed for-sale residential market initially benefited apartment landlords, as many would-be buyers rented instead, either because they couldn’t qualify for a mortgage or didn’t want to buy a house or condo that could fall in value.
But the worsening economy now is depressing demand, forcing some renters to save money by doubling up or moving back home with their parents. The job market, which drives demand for apartments, continues to shrink: Moody’s Economy.com forecasts that the Chicago area will lose 133,000 jobs in 2009 ”” about the same number lost during the last recession ”” and won’t start adding them until after 2010.
Still, an oversupply of apartments is the larger problem for landlords right now, especially in the South Loop. Developers completed three buildings comprising 1,016 apartments in the South Loop last year, according to Appraisal Research.
And condo rentals are becoming a bigger competitive threat, with developers adding nearly 3,200 condos to the South Loop in 2008 and 2009. Unwilling or unable to sell their units in a lousy market, many condo owners are renting them out for the time being.
Some are offering good deals on rent, one reason new apartment high-rises in the South Loop have been slow to fill up. A 278-unit building at 1401 S. State St. developed by Chicago-based Equity Residential and Dallas-based Lincoln Property Co. is only 60% leased 10 months after opening, according to Appraisal Research. Under normal market conditions, a similar building would be at least 90% full at this point.
The new South Loop projects “have hit the market at the worst time,” Mr. DeVries says. “If you want to live in the South Loop, you have lots of options. That has really slowed down the leasing.”
Lincoln and Equity Residential representatives did not return calls for comment.
Some landlords are trying to address the competitive threat posed by condo rentals by playing up the advantages of living in an apartment building, which usually have on-site customer service staff.
“We talk about the benefits of being in a professionally managed building,” says Mark Segal, president and CEO of Chicago-based Habitat Co., whose downtown properties include Kingsbury Plaza, a 420-unit apartment tower at 520 N. Kingsbury St. When tenants have a problem, they “can go directly to our management staff as opposed to going to a unit owner.”
With houses being repo'ed every 13 second in USA and getting worse things are still going down
Dr. Kenn is quoting 40% drop but claims there could be a over shoot.
And to answer your questions, we were suppose to de- couple from USA but we didn't, we were suppose to be saved by China and Japan but were not, we owe more per person then USa but less than UK so prices have a long way to go and 90 prices are on the cards.
spot on...
and after rising 300% or more..who cares if it drops 10%...you are still 290% in front
numbercruncher
Beware of Dropbears
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For someone who claims to own a multimillion dollar property portfolio your maths is pathetic.
huh ??? 300 - 10 = 290 you think differently
about the multimillion dollar props.....no skills required there...just buy low and they go high...simple...no maths required...plain old arithmetic
being sarcastic ....why bother.....you lose the points
about the multimillion dollar props.....no skills required there...just buy low and they go high...simple...no maths required...plain old arithmetic
being sarcastic ....why bother.....you lose the points
Glen48
Money can't buy Poverty
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Maybe he means $10 not 10%?
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