House prices to keep rising for years

[Pommiegranite]

History is well and truly against you though.

The reasons;

1. There is no more coastal land available. Most of the coastal land not developed is locked up forever by the conservationists and the Nimbys, this accellerates the law of supply and demand for city and coastal living.
2. Urban spread and the cost of fuel will cause steep rises in city land values.
3. While ever the Aussie balance of payments continues in the negative way it has done for many years now we will have interests rates higher than most of the rest of the world as we struggle to attract overseas money to fund our extravance.
4 Rents will only fall if there is a surplus of rental properties. There will only be a surplus if a. The population falls or
b. A surplus of new homes are built faster than the demand.
Neither of those look like happening.

I'm not a property bull myself but a long term property investor. I bought my first block of land 60 years ago and the situation hasn't changed in that time. There are flat periods but they don't last long so make the most of those that do.

Your above points can be applied to the UK. Yet house prices are continuing to fall there.

It works the same as in the stock market. A stock could be undervalued and look very appealing, but why not sit on the sidelines and buy even cheaper. This is what is leading to a dip in home sales.

I agree that the long term trend is up. However, I'm much happier with cash parked at over 8% while watching next to negative gains in the Sydney property market, ready to pounce. In the meantime I am happy to rent a property which suffices.

I have calculated that the house I desire to buy would have to appreciate close to 3% for me be at a financial loss by renting. Looking at the suburb which I wish to buy in, history is with me.

 

[Tysonboss1]

Your above points can be applied to the UK. Yet house prices are continuing to fall there.

It works the same as in the stock market. A stock could be undervalued and look very appealing, but why not sit on the sidelines and buy even cheaper. This is what is leading to a dip in home sales.

I agree that the long term trend is up. However, I'm much happier with cash parked at over 8% while watching next to negative gains in the Sydney property market, ready to pounce. In the meantime I am happy to rent a property which suffices.

I have calculated that the house I desire to buy would have to appreciate close to 3% for me be at a financial loss by renting. Looking at the suburb which I wish to buy in, history is with me.

Well that depends on where you want to invest,... some parts of sydney will drop a bit, other parts may be flat inner city suburbs will proberly increase over the next year,... the inner suburbs of sydney are a bit of a pressure cooker at the moment.

alot of people are talking about property dropping 30%,.... this simply won't happen, at worst you might see price drops of 5-10% or most likly a bit of stagnation,....

And really if you do your homework there is always deals you can pick up where you can make 5-10% staight away anyway,

 

[pepperoni]

Without giving away my actual address , the house is 300m to the beach 300m to mosman villiage, has been offered $4.5m, and is costing me $750 exactly including a gardener.

Its a substantial home with substantial land.

If it is sold the agent has confirmed that he will buy me out of my lease if need be (Its happened once before and IMO is a good little earner).

It is rented through an agent and is indeed the deal of the century but there are many rental bargains ... try to find an amazing deal buying in such an area.

But with rents for such houses topping out at about 2% it makes sense to rent.

Although I doubt I could afford such a property in my 60s, but am living my dream now in my 30s.

Living in my dream house vs owning a PPOR is simply within my means ... which to choose which to choose ha ha.

As for the investment decision, now its cash but it will ALWAYS be separate to the "where and how I live" decision.

For comparison, $750 a week I could get into a $300,000 30 yr mortgage and break my back to own a 2.1m house in my 60s.

Renting with equity invested I can rent + live off the interest (ie retire ... as if) and eventually downgrade to renting a 2008 2.1m house when Im old ;-).

Home ownership as a holy grail is BS which youger generations see through ... this wont be good for property prices as has been the case forever in most of europe.

 

[numbercruncher]

Home ownership as a holy grail is BS which youger generations see through

Precisely, young people simply arnt buying it, Hence the very very low ownership rates with Gen-y, Houses will be tons cheaper in real terms in the future as the younger ones dictate the price they will pay.

 

[gfresh]

From a gen-Y perspective..

I think it's maybe a good thing? Encourages people to instead live life, travel overseas, invest and try other things (businesses, share investment, fixed investments).. Property is in Australia made out to be some golden challice to becoming rich. Maybe too much emphasis, too much tax advantages, that should be reduced.

If you tell some people they'll never be able to afford to buy property, they almost seem disappointed and frustrated. It should almost be a "oh well, I guess I'll just spend my money on more interesting things" and that's that. But the mindset is very hard to break on some people.

To me, property is very boring. I've never seen the excitement of property at all. Several years ago I was in the situation of property or other things, and it was "nah, stuff it, I'm buying a fast car". And that was hell fun at the time. Now I'm in the position again a few years on to be able to buy (and probably will in 12 months or so), I am simply not that excited at the prospect whatsoever. Again, going through the same thoughts.

Even some of my friends that have bought in recent years don't seem to happy with what they have, it's almost "I wish we could afford a larger place", or "you're so lucky not to have to worry about mortgage payments", or "f'ing interest rates, when's it going to stop?!". Makes me wonder whether I'm really missing out on too much when I keep hearing these sorts of comments from them.

If I slaved my guts off for a property, I'll be nearly 60 and wow, I'll have a house I "own". My mother died at 63 and one of my grandmothers not much older. You never know how long life will give you, and 25-30 years is a long time for a mortgage.

There will surely be others out there seeing the pain of some with interest rates and thinking "this is not for me". Maybe they'll even be more convinced to rent forever.

 

[Tysonboss1]

Houses will be tons cheaper in real terms in the future as the younger ones dictate the price they will pay.

Doubt it,...

they can't dictate the price, they can only choose to rent or buy,.. more renters and less people building homes means incresed yeilds.

I would love to see the % of renters to home owners increase, it would make it better for investors.

remember even if prices did not appreatiated much in the future then it would simply make the yeild better,.... either way I win.

 

[numbercruncher]

You guys discount demographics, 70pc+ of societys assets are owned by the over 50s, Our population wont rise forever and we are top heavy in older people, this Housing will all be recycled.

So I do see the price being dictated by what people can/will pay .....

R/E has always returned to its long term mean in relation to Price to Incomes.

Wont happen here is what you guys always say, But US, UK , NZ amoungst many others were saying the same.

Your Yields wont be dictated by what you pay for an asset they will be dictated by peoples ability to pay, hence why average rents to Prices are on about 4pc.

Either way your fine Tysson, you have over 60pc equity, but we are talking about the market broadly, not you

 

[pepperoni]

Doubt it,...

they can't dictate the price, they can only choose to rent or buy,.. more renters and less people building homes means incresed yeilds.

I would love to see the % of renters to home owners increase, it would make it better for investors.

remember even if prices did not appreatiated much in the future then it would simply make the yeild better,.... either way I win.

If everyone sold (... not possible but for arguements sake ...) and suddenly rented rents wouldnt change - its the people to home ratio not the owner to renter ratio that effect rents. (supply of homes vs demand for them).

Developers will continue to build if there is demand for property at a profitable price. (Last i heard they were building 600 homes in one development out west very soon)

 

[pepperoni]

You guys discount demographics, 70pc+ of societys assets are owned by the over 50s, Our population wont rise forever and we are top heavy in older people, this Housing will all be recycled.

So I do see the price being dictated by what people can/will pay .....

Agree.

And when the older people die they will split the money in their wills leaving a gen of 50 somethings that are lucky to have enough money to buy a fraction of a property.

 

[Temjin]

If you take a 10year period,.... I don't think many people would argue that property prices and rents would not increase by atleast inflation,... so if you believe that property prices and rents will atleast be maintained will inflation then property is better than cash.

If property is only appreciating in NOMINAL value with inflation over a 10 years period, how is it better than cash? There are costs associated with holding a property, and debt is one major cost. The only way to justify an investment property is the cash flow it generates through rent income and the ability to depreciate the house/land as a deduction against your income tax. Capital appreciation is secondary, but has been a BIG PLUS over the last 10 years due to the credit boom. Otherwise, one will ALWAYS LOSS over the long term just by holding a mortgage and not treating it as an investment property.

Historically, there have been very few periods where inflation is higher than the offical short term interest rates. (i.e. cash rates) US is in one right now.

In fact, looking back 10 years is way too short. Try something like 50 years and you will get a better picture. There was a pretty graph posted eariler in this whole thread on the REAL PRICE INDEX for houses in the US and Australia for the last 50 years. The chart does look pretty in the last 10 years, but not when you go further back, it's been averaging around inflation rate (i.e. steady in real price) more or less.

 

[tigerboi]

Re: House prices to keep falling for years

Supply & demand has sent rent prices through the roof,no secret in that but you also have the dopey owners who overstretched themselves trying to pass on the complete cost of their mortgage repayments.

Look at the couple at fairfield,had to sell up...THEY paid $750,000!! for a house in fairfield...fools..hope they learn a very big lesson.

Now is the time to look around for the fire sales/bargains,its not unlike the market...supply & demand

 

[nioka]

If property is only appreciating in NOMINAL value with inflation over a 10 years period, how is it better than cash?
Historically, there have been very few periods where inflation is higher than the offical short term interest rates. (i.e. cash rates) US is in one right now.

In fact, looking back 10 years is way too short. Try something like 50 years and you will get a better picture. There was a pretty graph posted eariler in this whole thread on the REAL PRICE INDEX for houses in the US and Australia for the last 50 years. The chart does look pretty in the last 10 years, but not when you go further back, it's been averaging around inflation rate (i.e. steady in real price) more or less.

There are statistics and statistics. Be careful of averages. The average trader will not make money. A lot will lose and bring down the average. That does not mean that a proportion of traders won't do very well. I would say that average property investors do a lot better than average traders.

Property investors who select the right property will do very well. It all boils down to position, position, position with getting the right price a secondry factor. The best position; close to the coast or city. The worst house in the best street rather than the best one in a bad street. Forget averages.

 

[Tysonboss1]

If everyone sold (... not possible but for arguements sake ...) and suddenly rented rents wouldnt change - its the people to home ratio not the owner to renter ratio that effect rents. (supply of homes vs demand for them).

Using your example if everyone sold then yes rents would stay the same but prices would go down,... so %yield would naturly go through the roof, either condition is good for investors.

 

[Tysonboss1]

If property is only appreciating in NOMINAL value with inflation over a 10 years period, how is it better than cash? There are costs associated with holding a property, and debt is one major cost.
.

What I was comparing was someone putting say,.. $200,000 in property vs cash.

With cash they will only get 8% interest which they have to pay tax on,.... and their capital in eroded by inflation,...

If they put the same $200,000 in property they would get maybe 4.5% cash flow after costs,..... however he capital is most likely then protected from inflation and the cashflow will also rise with inflation.

This is further bettered by the fact that only 50% of the capital component of the gain is taxed when the property is sold,... so it has compounded for years before being taxed at a 50% discount.

 

[numbercruncher]

Using your example if everyone sold then yes rents would stay the same but prices would go down,... so %yield would naturly go through the roof, either condition is good for investors.

But not so good for Investors who bought at the peak in 2007.

 

[nioka]

(Last i heard they were building 600 homes in one development out west very soon)

I also heard that there are 600 Iraquie families that australia is going to allow to settle here as our troops are withdrawn. The story was that they have been working with the aussie troops and they will be at risk when the aussies leave. so they are gone. Then there are the thousands of homeless that Rudd has promised to house and the housing required for disadvantaged aboriginals to be accomodated.

(If you have done one thing I guess you have kept this thread alive.)

Question; Are you trying to convince us or convince yourself that you are on the right track. For me you have filled in the time waiting to see which way CNP went.

 

[Tysonboss1]

:There are costs associated with holding a property, and debt is one major cost. .

debt is secondary factor to property investing,... If you are taking on a large amount of debt to invest in a property then offcourse as with borrowing for shares you have to time it right, and you are adding another layer of risk to the investment.

but not all property investors take on large amounts of debt to invest,.... alot just use property as an inflation hedged income stream in which they can park large sums of money,

The way I look at it, when it comes to money you have to play good offence and defence,...

Offence is actually winning the cash by,.... Working, Trading, Building
business cashflow, doing a property development, etc. etc. alot of this requires personal excertion..

Defence is then saving these funds which you have won playing offence in a stable platform where they are protected from inflation and producing a passive cashflow that will oneday allow you to stop relying on offence activities... therefore freeing up time for leisure activites...

When it comes to defencive assets I think property is at the top of the list,...

I myself focus my offence on making money though working in and on my business I then play defence by saving 50% of my earnings into property investments and longterm share holdings,....

 

[robots]

hello,

and you have to love that stat from ABS (many people's holy book) that home owners are 5x wealthier than renters,

2.5ys still going strong, congratulations well done to those involved

thankyou

robots

 

[numbercruncher]

Last edited by wayneL : Today at 06:55 PM. Reason: Remove trollish comment

Thanks Wayne, I nearly went down to his level and replied to his comment ...


You may get your wish Robi, but its an Inflation spiral, youll forever play catchup till something breaks.

 

[wayneL]

Latest news from the UK

Repossessions hit near 1990s peak
Dearbail Jordan and Frances Gibb, Legal Editor

Home repossession orders are nearing the level last seen in the recession of the early 1990s after rising by 16 per cent in the first quarter of this year....

...The last time mortgage repossession claims reached this level was in the third quarter of 1990, when actions hit 37, 498, and the housing market was slipping into one of the worse downturns in its history.

Full Story at The Times

The remarkable thing about this figure is that we are not "officially" in recession yet. We haven't even begun to see redundancies yet, though the word on the street is that it's getting freakin' hard to get a job atm.