House prices to keep rising for years
- Thread starter moses
- Start date
- Status
So what do you reckon the "fair value" net rental yield vs property value should be? Clearly there will always be some ownership premium, both due to the extra "value" most owners perceive, plus the potential for capital gain.
Personally, I think this "fair yield" probably moves with long term "risk free" cash return/inflation yields. Currently, a net rental yield of 4-5% to me represents a pretty fair valuation for most property in my market of primary interest (Sydney), which is not far off where the market is: Ie, if we take 1% off for costs (it's actually less than this IMO for more expensive property as house maintenance is pretty constant and it is the land that provides the increase in relative value, but anyhoo....), that gives 3.5% net yield for Sydney houses on average and 4.5% for units at the moment. A few years ago it was as low as 2% - to me this seemed out of whack, but rents eventually rose while values didn't and that seems to have brought things back in line (for now based on current inflation/rick-free rate conditions etc).
So for me the above (for Sydney) does not paint a picture of a big bubble ready to burst based on that criteria, especially as there is great demand for rental property at those yields and they may continue to rise strongly into the future as well (dependent on many other factors panning out of course).
Cheers,
Beej
Good post Beej. Apply it to inner Melbourne and your lucky to get 3% at the moment.
Add in interest rates heading north, Dr Henry suggesting to cut the CGT discount and the imminent ending of some Govt grants (32k for new homes in Melbourne) and that is why I'm bearish as the above takes us back to the 4-5% range.
You may well be right about Sydney and its a good point that not everyone on this forum is looking at the same markets
Add in interest rates heading north, Dr Henry suggesting to cut the CGT discount and the imminent ending of some Govt grants (32k for new homes in Melbourne) and that is why I'm bearish as the above takes us back to the 4-5% range.
You may well be right about Sydney and its a good point that not everyone on this forum is looking at the same markets
That depends on whether you consider the government's inflation figure to be accurate.
- Joined
- 6 January 2009
- Posts
- 2,300
- Reactions
- 1,130
Taltan, I would agree that inner city returns are about 3%.
Over the last siz months I have looked at many properties that have sold to investors and returned back on the market as rental. In most cases the returning approx 3% gross on their investment.
Example, the apartment I am leasing at the moment. 24th, on the Yarra River with City views. As prime as I think it gets. Returns 4% gross based on sale price 1 year ago. Take out body corporate, rates, agents fees etc net return of 2%.
Beej, you might be right, Syndey prices might start to increase after being relatively stagnate for six years. Have rentals increased over this time period?
Cheers
Over the last siz months I have looked at many properties that have sold to investors and returned back on the market as rental. In most cases the returning approx 3% gross on their investment.
Example, the apartment I am leasing at the moment. 24th, on the Yarra River with City views. As prime as I think it gets. Returns 4% gross based on sale price 1 year ago. Take out body corporate, rates, agents fees etc net return of 2%.
Beej, you might be right, Syndey prices might start to increase after being relatively stagnate for six years. Have rentals increased over this time period?
Cheers
wayneL
VIVA LA LIBERTAD, CARAJO!
- Joined
- 9 July 2004
- Posts
- 25,580
- Reactions
- 12,706
Estate agents are definitely much busier and prices have bounced a little. The bulls are happier, but apparently new mortgages are still way down. Mainly those cashed up who are buying.
But lots more starting to come on the market now and the general economy is still in the crapper, so we'll see. It is raining cash through QE, so interesting to see what happens once that stops.
wayneL
VIVA LA LIBERTAD, CARAJO!
- Joined
- 9 July 2004
- Posts
- 25,580
- Reactions
- 12,706
Before the boom gross yields were 6 - 10% pretty much all around the country, with 7% fairly typical for a normal suburban home. Maybe 5% for premium properties.
If yields are tied to risk free rates it implies that prices should dump if interest rates go up. That is no necessarily the case.
There is a mix of vectors to determine fair value; Mish mentions them also.
Interest rates/net return
Rent/reasonable mortgage payments
Wages/Price
Never fear. This is Australia. We are different...wood ducks
http://www.theage.com.au/business/new-home-owners-spend-big-20090924-g4r6.html
NOT only have first home buyers been swamping banks with mortgage applications, they have been taking out bigger loans over the past year, spurred by the Government's cash incentives and record low interest rates.
In some months, the size of the average loan taken out by new home owners has exceeded new loans to other home owners, prompting renewed fears of a bad-debt time bomb for banks.
The Reserve Bank warned yesterday the super-sized loans were an ''unusual outcome'' given that loans to first home buyers were normally smaller than loans to other home buyers.
http://www.theage.com.au/business/new-home-owners-spend-big-20090924-g4r6.html
NOT only have first home buyers been swamping banks with mortgage applications, they have been taking out bigger loans over the past year, spurred by the Government's cash incentives and record low interest rates.
In some months, the size of the average loan taken out by new home owners has exceeded new loans to other home owners, prompting renewed fears of a bad-debt time bomb for banks.
The Reserve Bank warned yesterday the super-sized loans were an ''unusual outcome'' given that loans to first home buyers were normally smaller than loans to other home buyers.
Re your "pre-boom" gross yield figures, (7% typical so let's say 6% net), that time of course was also a period of higher inflation, higher interest rates, and therefore a higher risk-free rate than what we have seen in the past 10-15 years. So it makes sense that the yields were higher then, and that fact does not IMO necessarily point to any great over-valuation now (as long as you are looking at area's where current net yield is around or just a bit under the risk-free rate).
As for what happens when rates go up? Well this theory might mean that rates up = prices fall, and in fact that is exactly what we normally see, although there is a lag. I believe the falls last year were due mostly to increased interest rates. But also, the yields may rise will prices stay flat in the rising rate situation - and that is what happened in Sydney between 2004 and 2007. So from what I see this whole theory actually fit's quite well with what you can actually observe in the price behaviour of the market.
Yes - but average first loan was still only $266k. $250/week interest at current rates, $375 @ 7.5%. Nothing to panic about IMO and easily serviceable for average wage earners . It will be interesting to see how things play out for the next 6-12 months now in the absence of the FHBG boost.
Cheers,
Beej
The huge loans are a natural response from a generation bought up seeing the too big to fail doctrine. We now live in a world where we expect that govts and reserve banks will forever prop up banks and house prices as much as neccessary to avoid financial collapse or even an election loss
hello,
what a load of rubbish, the government hasnt propped up anything
they are just negating the ridiculous stamp duty the states charge,
oh yeah man, i am so anti government, anti establishment, anti Fed, anti RBA
they all out to get us
thankyou
professor robots
what a load of rubbish, the government hasnt propped up anything
they are just negating the ridiculous stamp duty the states charge,
oh yeah man, i am so anti government, anti establishment, anti Fed, anti RBA
they all out to get us
thankyou
professor robots
- Joined
- 6 July 2007
- Posts
- 202
- Reactions
- 1
There is no way I can read every post here but I'm curious Robots? How many properties do you own? ( if you have mentioned it)Is that rude to ask?
You are so pro property it would be interesting to know?
Best
hello,
sorry, i didnt know there was a qualification requirement to discuss property and that I have to disclose this
just for any new comers, a summary of all the belief's that where put up over the past 12-18mths:
interest rates to go to zero like Japan, didnt occur
property prices to decrease 40%, didnt occur and infact have BOOMed
unemployment to hit 10%, didnt occur
credit tightening, didnt occur
immigration to be SLASHED, hahahaha didnt occur (that was always Numbercruncher's favorite one)
Doom, Doom ,Doom, didnt occur
five of us called it and made mega $ dollars on it, well done to those brothers, top effort
others still have plenty of opportunity
thankyou
professor robots
sorry, i didnt know there was a qualification requirement to discuss property and that I have to disclose this
just for any new comers, a summary of all the belief's that where put up over the past 12-18mths:
interest rates to go to zero like Japan, didnt occur
property prices to decrease 40%, didnt occur and infact have BOOMed
unemployment to hit 10%, didnt occur
credit tightening, didnt occur
immigration to be SLASHED, hahahaha didnt occur (that was always Numbercruncher's favorite one)
Doom, Doom ,Doom, didnt occur
five of us called it and made mega $ dollars on it, well done to those brothers, top effort
others still have plenty of opportunity
thankyou
professor robots
Morning Robots,
just wondering are you a St Kilda supporter....or not....
I dont follow the football....but for today, I am hoping that STK gets up...its been so long apparently since they won a grand final....
I dont usually follow losers, but I thought it would seem appropriate since we discuss STK as a good location for property, that it would be nice if the name came up...in bragging rights for the footy....
no other reason.....
oh and with 4 million residents in Melbourne now...is it 80,000 will turn up for the footy...miniscule in the greater scheme of things.....but they clog up the roads etc...what do the other 3,920,000 other residents do ???
otherwise its great for shopping, car parks have free spaces.....etc as the footy fans are missing....well that was the deal last Saturday....couple with the kids on holidays....
I found a couple of stunning horse statues yesterday, at bargain prices...one is a trotter with gig and driver, the other a jockey on the racehorse....
to add to my collection of horse statues.....found them in a little shop that sells trophies....pity no brand or name...but beautiful just the same....
and so back to property.....this thread has become rather boring of late....
as you correctly stated none of the doomsdayers got it right,,,,nor economists or any other advisors.....hehehehe
noticed another huge apartment block to go up in Cromwell Rd, Sth Yarra...
its off Toorak Rd, near the back of the Jam factory....it looks like a huge area, but very close to the train line which runs over head....hmmm
developers must be getting some finance again.....
cheers
just wondering are you a St Kilda supporter....or not....
I dont follow the football....but for today, I am hoping that STK gets up...its been so long apparently since they won a grand final....
I dont usually follow losers, but I thought it would seem appropriate since we discuss STK as a good location for property, that it would be nice if the name came up...in bragging rights for the footy....
no other reason.....
oh and with 4 million residents in Melbourne now...is it 80,000 will turn up for the footy...miniscule in the greater scheme of things.....but they clog up the roads etc...what do the other 3,920,000 other residents do ???
otherwise its great for shopping, car parks have free spaces.....etc as the footy fans are missing....well that was the deal last Saturday....couple with the kids on holidays....
I found a couple of stunning horse statues yesterday, at bargain prices...one is a trotter with gig and driver, the other a jockey on the racehorse....
to add to my collection of horse statues.....found them in a little shop that sells trophies....pity no brand or name...but beautiful just the same....
and so back to property.....this thread has become rather boring of late....
as you correctly stated none of the doomsdayers got it right,,,,nor economists or any other advisors.....hehehehe
noticed another huge apartment block to go up in Cromwell Rd, Sth Yarra...
its off Toorak Rd, near the back of the Jam factory....it looks like a huge area, but very close to the train line which runs over head....hmmm
developers must be getting some finance again.....
cheers
here are a couple of very interesting blogs, in response to another article about how the market will crash when the extra fhb grant is reduced next month...
I particularly like the first one here.....
I can never understand why more and more people jump on the gloomsday bandwagon. Why can we not see that we,"the ordinary Australian" are immune and wont be told by the best analysts, the so called "breakfast show experts" or our public servants what we can and will put up with in the financial arena or any other for that matter. The amount of times that we are ignored and the "experts" talk about a market that is somehow seperate from us, in some text book somewhere is reaching epidemic proportions We decided as "ordinary Australians" to survive (just in this century alone) the asia meltdown, the dotcom bust, the GFC, the swine flu panic and the terror plots we are told will happen Whoever first stops treating us like a year 10 commerce hypothetical will actually take this nation forward, the Australian spirit, our history and our values of "shell be right" do work. We get it done, we play hard, we work hard and whilst others are telling us what will happen, we carve out our own history, second by second So jump on the biggest banwagon of all, Australia INC, run by us who go into batte each day and feeds, clothe and house this great country Geoff McDonnell Posted by: Geoff McDonnell of Melbourne 5:59pm today
Comment 16 of 34
John Howard introduced the FHOG as compensation for gen X and Y because the cost of new housing increased 10% overnight on June 30 1999. Since then the cost a new home has nearly tripled so it should only be fair that the grant be tripled also.
Posted by: steve of queensland 5:50pm today
Comment 15 of 34
Home ownership is a reward for working hard, not something to be dished out by the warm fuzzy brigade. And if you cant afford a home, work harder, or move to a cheaper area. Or pay rent. I was one of the fools who slavishly worked my butt off in the mining and oil&gas industries in remote west australia, paying massive taxes, not having a life, away from all friends and family, just so I could get ahead. I have no sympathy for those who sit in the luxury of inner city burbs or coastal towns, living the cruisy life, because people like me were stupid enough to subsidise their lifestyle via heavy taxes. All you bludgers need to realise, someone somewhere has to pay for these hand-outs. Go to Western Europe and see how many young people expect to own a home.. very few.. and the economy has stabilised around a healthy and fair rental market. My wife and I did it the hard way in the 1980's, 20% deposit required, 17% interest, no help from anyone. The worst thing we could do now is throw more money at those who cant afford, and should never have been allowed, to own a home. It throws the whole housing market out of whack for what gain? Vote buying, thats all.
Posted by: noel of the Very Wild West 5:38pm
there some other very good blogs that are worth a read....
http://www.news.com.au/comments/0,23600,26123599-5013951,00.html
I particularly like the first one here.....
I can never understand why more and more people jump on the gloomsday bandwagon. Why can we not see that we,"the ordinary Australian" are immune and wont be told by the best analysts, the so called "breakfast show experts" or our public servants what we can and will put up with in the financial arena or any other for that matter. The amount of times that we are ignored and the "experts" talk about a market that is somehow seperate from us, in some text book somewhere is reaching epidemic proportions We decided as "ordinary Australians" to survive (just in this century alone) the asia meltdown, the dotcom bust, the GFC, the swine flu panic and the terror plots we are told will happen Whoever first stops treating us like a year 10 commerce hypothetical will actually take this nation forward, the Australian spirit, our history and our values of "shell be right" do work. We get it done, we play hard, we work hard and whilst others are telling us what will happen, we carve out our own history, second by second So jump on the biggest banwagon of all, Australia INC, run by us who go into batte each day and feeds, clothe and house this great country Geoff McDonnell Posted by: Geoff McDonnell of Melbourne 5:59pm today
Comment 16 of 34
John Howard introduced the FHOG as compensation for gen X and Y because the cost of new housing increased 10% overnight on June 30 1999. Since then the cost a new home has nearly tripled so it should only be fair that the grant be tripled also.
Posted by: steve of queensland 5:50pm today
Comment 15 of 34
Home ownership is a reward for working hard, not something to be dished out by the warm fuzzy brigade. And if you cant afford a home, work harder, or move to a cheaper area. Or pay rent. I was one of the fools who slavishly worked my butt off in the mining and oil&gas industries in remote west australia, paying massive taxes, not having a life, away from all friends and family, just so I could get ahead. I have no sympathy for those who sit in the luxury of inner city burbs or coastal towns, living the cruisy life, because people like me were stupid enough to subsidise their lifestyle via heavy taxes. All you bludgers need to realise, someone somewhere has to pay for these hand-outs. Go to Western Europe and see how many young people expect to own a home.. very few.. and the economy has stabilised around a healthy and fair rental market. My wife and I did it the hard way in the 1980's, 20% deposit required, 17% interest, no help from anyone. The worst thing we could do now is throw more money at those who cant afford, and should never have been allowed, to own a home. It throws the whole housing market out of whack for what gain? Vote buying, thats all.
Posted by: noel of the Very Wild West 5:38pm
there some other very good blogs that are worth a read....
http://www.news.com.au/comments/0,23600,26123599-5013951,00.html
wayneL
VIVA LA LIBERTAD, CARAJO!
- Joined
- 9 July 2004
- Posts
- 25,580
- Reactions
- 12,706
Ludicrous denial... laughable.
and here is another myth, (now blown out of the water as if a stick of gelignite had been thrown in) that some were relying on...that was to contribute to the masses of houses left over by the aged and the boomers....
and all those vacant houses were to become very cheap...(as in the USA in 2008/09)
well the aged care units are not being taken up, in fact they are being shunned.....and the aged and the boomers are staying put....in their homes....and the units are lying vacant.....hehehehe I love myths, and 'pigs might fly' scenarios
btw.....you might actually see some flying pigs at the Melb show.....they are sooo cute....they climb up a ladder, then jump into a pool.....flying through the air....hence flying pigs.....
***now, seems to be there could be a large market, for small complexes, maybe 10 or less in each community....forget the spas and gyms.....keep it simple.....and no retail complexes involved.....purely residential for the oldies
Elderly shun retirement villages as many go bust
Bridget Carter | September 26, 2009
Article from: The Australian
AUSTRALIANS are shunning retirement villages due to limited finances, a deep longing to remain part of their community and the fact that, to many people, they are undesirable.
Industry sources say that about one-third of the land parcels approved for retirement village development and existing complexes that are available for sale are in the hands of insolvency firms.
Many developments have collapsed because people who had provided finance pulled out after struggling to sell their own homes in the downturn, while many developers and operators have grappled with large levels of debt during the global financial crisis.
In recent years, large Australian Securities Exchange-listed corporations have raced to consolidate in the retirement village property sector, acquiring assets from smaller providers and developing large complexes to house more than 100 senior citizens.
But research by Flinders University has revealed that 75 per cent of those who have retired are on government benefits and most people want to be in retirement homes with less than 10 units, which are located close to facilities and in the community where they have spent most of their lives.
The commercial property industry has had trouble meeting this wishlist -- with the exception of developments at the very top end of the market -- because economies of scale have made small projects unviable.
Rod Fehring, the chief executive of ASX-listed retirement village owner and operator Lend Lease Primelife, said: "What people say they like and what they are able to do, are fundamentally different things. Australia is a highly differentiated property market."
Joan Poole, 81, of Sydney's Bondi Junction said she had chosen to remain in her home but would now like to enter a retirement village, if she could find one where she did not have to pay for all the extra facilities that came with it.
She wanted to be in a complex where she could continue using her regular shops, library and doctor's surgery, but without the worries of maintaining her property.
"All (of the retirement villages) that I have seen are charming, but there is a failure on the part of most of them, to regard retired persons in a village as members of the community," she said. "The conventional village gives a spa and a gym and other things, but so what? I can get them outside."
A recent Flinders University study on the aspirations and expectations of older people in South Australia, revealed that, of those living in retirement, only 20 per cent moved into the villages before the age of 65.
The study said the housing currently being developed for older people often fitted poorly with the needs and aspirations of its would-be residents. "While the romance of a seachange or treechange is attractive to some, a far higher proportion look to build upon their community links and stay engaged with friends, neighbours and family members," the report says.
The authors say most people don't like the idea of living in accommodation such as that depicted in the 1970s Eagles song Hotel California -- where there are lots of facilities such as a bowling green, a pool and a barbecue area; where people under the age of 45 are neither seen nor heard, unless they are grandchildren; and where you can check in any time you look but you can never leave.
One of the report's authors, Debbie Faulkner, a research fellow at the Flinders Institute for Housing Urban Regional Environments, said that, despite the industry arguing the sector was booming, "it is not the booming place it's portrayed to be". "Most people want to move into a complex that is modern, but they cannot afford to pay for the large number of services that they may or may not use," Dr Faulkner said.
Previous attempts to develop rental retirement villages, where properties could be leased for 85 per cent of the pension, had been unsuccessful, as many of the businesses behind the facilities collapsed or had been shrouded in controversy. Among them was Village Life, which threatened to evict hundreds of elderly residents from their rented homes and faced a $30 million class action.
http://www.theaustralian.news.com.au/business/story/0,28124,26126680-25658,00.html
and all those vacant houses were to become very cheap...(as in the USA in 2008/09)
well the aged care units are not being taken up, in fact they are being shunned.....and the aged and the boomers are staying put....in their homes....and the units are lying vacant.....hehehehe I love myths, and 'pigs might fly' scenarios
btw.....you might actually see some flying pigs at the Melb show.....they are sooo cute....they climb up a ladder, then jump into a pool.....flying through the air....hence flying pigs.....
***now, seems to be there could be a large market, for small complexes, maybe 10 or less in each community....forget the spas and gyms.....keep it simple.....and no retail complexes involved.....purely residential for the oldies
Elderly shun retirement villages as many go bust
Bridget Carter | September 26, 2009
Article from: The Australian
AUSTRALIANS are shunning retirement villages due to limited finances, a deep longing to remain part of their community and the fact that, to many people, they are undesirable.
Industry sources say that about one-third of the land parcels approved for retirement village development and existing complexes that are available for sale are in the hands of insolvency firms.
Many developments have collapsed because people who had provided finance pulled out after struggling to sell their own homes in the downturn, while many developers and operators have grappled with large levels of debt during the global financial crisis.
In recent years, large Australian Securities Exchange-listed corporations have raced to consolidate in the retirement village property sector, acquiring assets from smaller providers and developing large complexes to house more than 100 senior citizens.
But research by Flinders University has revealed that 75 per cent of those who have retired are on government benefits and most people want to be in retirement homes with less than 10 units, which are located close to facilities and in the community where they have spent most of their lives.
The commercial property industry has had trouble meeting this wishlist -- with the exception of developments at the very top end of the market -- because economies of scale have made small projects unviable.
Rod Fehring, the chief executive of ASX-listed retirement village owner and operator Lend Lease Primelife, said: "What people say they like and what they are able to do, are fundamentally different things. Australia is a highly differentiated property market."
Joan Poole, 81, of Sydney's Bondi Junction said she had chosen to remain in her home but would now like to enter a retirement village, if she could find one where she did not have to pay for all the extra facilities that came with it.
She wanted to be in a complex where she could continue using her regular shops, library and doctor's surgery, but without the worries of maintaining her property.
"All (of the retirement villages) that I have seen are charming, but there is a failure on the part of most of them, to regard retired persons in a village as members of the community," she said. "The conventional village gives a spa and a gym and other things, but so what? I can get them outside."
A recent Flinders University study on the aspirations and expectations of older people in South Australia, revealed that, of those living in retirement, only 20 per cent moved into the villages before the age of 65.
The study said the housing currently being developed for older people often fitted poorly with the needs and aspirations of its would-be residents. "While the romance of a seachange or treechange is attractive to some, a far higher proportion look to build upon their community links and stay engaged with friends, neighbours and family members," the report says.
The authors say most people don't like the idea of living in accommodation such as that depicted in the 1970s Eagles song Hotel California -- where there are lots of facilities such as a bowling green, a pool and a barbecue area; where people under the age of 45 are neither seen nor heard, unless they are grandchildren; and where you can check in any time you look but you can never leave.
One of the report's authors, Debbie Faulkner, a research fellow at the Flinders Institute for Housing Urban Regional Environments, said that, despite the industry arguing the sector was booming, "it is not the booming place it's portrayed to be". "Most people want to move into a complex that is modern, but they cannot afford to pay for the large number of services that they may or may not use," Dr Faulkner said.
Previous attempts to develop rental retirement villages, where properties could be leased for 85 per cent of the pension, had been unsuccessful, as many of the businesses behind the facilities collapsed or had been shrouded in controversy. Among them was Village Life, which threatened to evict hundreds of elderly residents from their rented homes and faced a $30 million class action.
http://www.theaustralian.news.com.au/business/story/0,28124,26126680-25658,00.html
hello,
morning Kincella, no go for the Hawks but i think the community would be really happy if St Kilda won today
looks as though its only you and me offering up the truth with many in denial and many disappeared, laughable
prices are locked in, fantastic EQUITY MATE
thankyou
professor robots
morning Kincella, no go for the Hawks but i think the community would be really happy if St Kilda won today
looks as though its only you and me offering up the truth with many in denial and many disappeared, laughable
prices are locked in, fantastic EQUITY MATE
thankyou
professor robots
hello,
well done Kincella, like MythBusters this morning isnt it
read in the Herald this morning about a boutique development out your way Kincella, top end i think 6 apartments with a shared live-in butler
so people can still be close by to Toorak Village, Lillian Frank, Tok H, Chapel St etc and all the other great attractions
nice and simple
thankyou
professor robots
well done Kincella, like MythBusters this morning isnt it
read in the Herald this morning about a boutique development out your way Kincella, top end i think 6 apartments with a shared live-in butler
so people can still be close by to Toorak Village, Lillian Frank, Tok H, Chapel St etc and all the other great attractions
nice and simple
thankyou
professor robots
- Status
Similar threads
- Locked
