I dont even buy the demand outstripping supply argument, just check out available rentals on realestate.com.au, squillions of places for rent, only shortage is in certain suburbs , but the realestate lobbyists use that as a blanket argument of shortages everywhere which is just false/misleading.
I take it you've been out putting your feet to the pavement and looking around, not cooped up in a basement with windows covered over with black paint?
This is not exactly revealing anything remarkable either. If there is no rental demand in an area then is it any surprise that prices are perhaps, stagnating, and you find fodder for your arguement? As Prof Frink has pointed out, its not impossible to find places where prices have stagnated these last 2-3 years. Areas that have experienced price growth on the other hand are now also experiencing rental shortages. Read into it what you will, but 30-60 people turning up to rental open-for-inspections in Melbourne's outer-east says a handful of things to me.
1. People are cashing in their gains...ie. they feel uncertain about the future, or they're certain prices will go down, or they're just certain they want their money....who knows, who cares, they don't know jack like the rest of us. All that is important is the actual behaviour.
2. Massive number of renters squabbling for 'sub-prime rentals' (I made up that phrase, you like it? It means property you wouldn't see fit to put your dog into but landlords can get away with offering it and potential tenants have to consider (at ever increasing prices) because it's all that is available...either that or go back and live with Mum and Dad <gulp>. OR buy again and find oneself staring down a possible 'new net worth' equation that looks like the following:
"New net worth" = "Before I cashed my gains net worth" - "stupidly ridiculous amount of stamp duty" - "moving costs" - "amount that I fear my house price will fall in price after I buy it" - "incidental costs to fix stuff that I didn't find out about before I bought".
What I see happening, which has already been happening the last couple of years, is rents will continue to go up. And in decent areas (you know the places where people can get a job and actually want to live??) where prices went up these last 2-3 years people would rather hold their properties than sell because who wants to slug it out weekend after weekend with the crowds or face the prospect of the above 'new net worth' equation? Price decreases or stagnation on low volume is not the same as a crash or a panic. Nor do token properties sold for very low prices that the mainstream media discover. Study consolidation or reversal patterns on share charts to see how this might appear visually. It's actually a positive thing for patient investors. The more that TIME overshoots PRICE during such a consolidation the stronger the eventual breakout. The less time price spends at extreme low levels the stronger that indication that those prices levels are not willingly being supported by the market. Keyword: "willingly". When people have no choice then that is something else. I dare say we're know what it looks like when we actually see this en masse, but we haven't seen it yet in this boom cycle.
Many of us have been getting paid more and more these last few years so we can afford the rent increases (did anyone NOT realise that renting in Australia is incredibly cheap!?!?). And watch what happens with unions and Labor now. Rents up, wages up.
Rents up = higher yields = investors re-enter the market eventually, notice I said, eventually. Hell, their PPOR house prices aren't dropping yet, they can use that as collateral and leverage in,
eventually.
IF the US and the rest of the world really cr@ps out badly, which it may well, I think Australia will stand to recover faster than many other countries providing nothing happens to derail China in any terminal way. The 'decoupling' theory ie. China and Europe can make up for a sickly US consumer, may not play out as such but I don't think it needs to. If China just keeps chugging along, or even consolidates a little, then we're only really waiting for a US and European recovery...how long should that be?
Bottom line, now is still not a time to bet against property in Aust in the medium to long term. Short term, I'll pick my time and place to re-enter the Aust market...that could be over 12 months away though. But what's the hurry???