The future of Australian property prices

Tysonboss1 · 19 November 2011

jank said:
Maybe you should sell those investment properties! Dont you hear a crash is coming?

Yeah I hear I crash is coming, I hear lots of things, Not every thing you hear is true though.

I agree there may be a correction, But I don't believe it will be as large as some people here beileve, and it would not be worth the hassle of sellign up, paying the transaction fees and capital gains just to sit in cash.

I would rather just keep the properties and keep have the weekly rental income flowing in,

My property portfolio offers a good counter weight to all the market girations in the stock market.

The same people that say the property market is going to crash say big inflation is coming, I see hold a chunk of my wealth in property as being a long term inflation hedge that produces cashflow.

Mrmagoo · 19 November 2011

Tyson property will crash. Either in 1 year or 10 years or 20, by price correction or lack of growth or growing wages the price will come down. It is a mathematical certainty. Why ? Well I've tried to explain that to you, but your argument has been "well then just earn more money" so it seems that you think the inflation argument will be what brings house prices down.

Mrmagoo · 19 November 2011

Tysonboss1 said:
Sorry, Last off topic reply I promise.

Hey Craft,

1, The % I saved varied depending on my income, during highschool it was 100% of my income, after school it was probably around 30%, Since I have been running my business I save around 80% of the companies earnings

2, I have never calculated the return, But I have certainly had some lucky days and had some big wins, Some looking back in the early days some we pure dumb luck, eg. getting into property right before the 2001 boom, and some of my early investments. Some were big gambles that fortunately paid off eg. Beppa convertable securities and others have been great buys during the GFC.

I have a much more conservative investment operation going at the moment though, So my future returns although they will be lower, should be based on sound investment principles and less on outright speculation and luck.

Any one interested can have a look back to this post from 2009 in another thread if they want to see that my responces have not just been made up to answer mcgoos questions.

https://www.aussiestockforums.com/forums/showthread.php?t=4426&page=11&highlight=people+poor

So the truth comes out. Investing at the right time and investing in high risk high return investments combined with earning a relatively high income will make you rich.

That, I agree with.

Unfortunately property is a joke at the moment as it is just too expensive to even consider

Smurf1976 · 19 November 2011

cutz said:
This thread is turning into one big yawn.

Now back to property,

Has anyone got any observations at street level with what’s happening. In my area sales boards are on the increase, no bidders at auctions (apart from the vendor bid) and deserted open for inspections.

Is this a bottoming process or the start of a seismic shift ?

House next door to where I lived for many years has been for sale for probably half a year now and the owners have moved to Queensland. According to neighbours on the other side who I know quite well, there have been open inspections (nobody turns up) and the price has been reduced but still no luck. There's nothing wrong with the house but it's not selling.

Or I could look around my own area. Plenty of houses for sale with an asking price that is lower than the independent valuation done on this house when I bought it 4 years ago. And that's asking prices - actual selling prices would no doubt be lower again.

In cash terms I'd say that prices are much the same as they were 5 years ago. Relative to practically anything else of value (gold, oil, wages, food etc) they have certainly come down and are continuing to fall.

craft · 19 November 2011

Mrmagoo said:
So the truth comes out. Investing at the right time and investing in high risk high return investments combined with earning a relatively high income will make you rich.

Not to mention a high level of retention.

Yep, I think Tyson just made pretty powerful argument against real estate if your ambition is wealth creation as you need to seek high return potential and that is just not present in Australian real-estate at the moment.

It’s all just opinion but I doubt residential real-estate is even going to be much of a store for wealth over the next decade, but there is more reason then just financial for owning your home. As for property investment – Happy to leave that to others at current prices, buying a low yielding asset for diversification sake doesn’t make much sense to me nor does leveraging it up to try and get a decent return.

Ves · 19 November 2011

craft said:
Sorry to continue this off topic stuff but I was just wondering Tyson, what % of disposable income did you have to put aside and what % return did you have earn to achieve this?

I apologize if I am intruding, but would appreciate if you could give a rough indication of the answer to this question for yourself too.

Welcome to PM me if you feel more comfortable.

Thanks in advance!

Wysiwyg · 19 November 2011

Smurf1976 said:
House next door to where I lived for many years has been for sale for probably half a year now and the owners have moved to Queensland.

Qld., N.T. and W.A. is where the money is and apparently the whole of Tassie is going to be World Heritage listed. Well that would keep the chuffed grin on Bob's face anyway.

Julia · 19 November 2011

Tysonboss1 said:
Inflation reduces the purchasing power of cash, I don't hold 100% of my principle in cash, so no it wouldn't.

I hold assets that produce Cashflow, that I could live off. The principle value of these assets as well as the Cashflow generated will increase with inflation.

This may be an intrusive question, but if you can live off your current cashflow, why don't you do that? Too young to retire? Absolutely love working???

Tysonboss1 said:
1, And an operating business,

2, Why, would you find it hard to believe you can live off rental income and dividends.

Probably because in most cases the ROE for property is miserably low, and with regard to dividends, you're currently going to be accepting this yield whilst watching your capital investment diminishing. You might be the exception, Tyson, but imo this is not a time to regard dividend yield as all that matters.

medicowallet said:
now AFTER the 15 years of training (of which 12 of those are at least 60 hours per week ) the earning is good, but you would be surprised how low some of the jobs pay for such intense and prolonged training.

Not to mention the immense responsibility involved.

craft said:
Not to mention a high level of retention.

Yep, I think Tyson just made pretty powerful argument against real estate if your ambition is wealth creation as you need to seek high return potential and that is just not present in Australian real-estate at the moment.

Totally agree.

Smurf1976 · 19 November 2011

Wysiwyg said:
Qld., N.T. and W.A. is where the money is and apparently the whole of Tassie is going to be World Heritage listed. Well that would keep the chuffed grin on Bob's face anyway.

Literally about half the entire state already is locked up... (off topic but it really annoys me everytime I see someting in Vic / NSW media implying that there's about 10 trees left in Tas and they'll be cut down by the end of next week. Fact is about half the state is protected - far more than any other state).

Back on topic, there are more reasons to own real estate than simply investment that's for sure and that's something I think of everytime I hear of yet another person with landlord hassles. My landlord (me) gives me no silly hassles...

Only the other week a colleague had a truly ridiculous saga. They wanted to keep his bond because apparently the flat needed cleaning. It came down to the fact that he hadn't thoroughly cleaned (1) the underside of the kitchen sink and (2) the exterior of the hot water service. WTF! Who regularly cleans the underside of a kitchen sink? And when's the last time you gave your hot water cylinder a good scrub? No doubt there's some good landlords out there, but there's an awful lot of outright scammers. Owning your own home has its advantages...

kincella · 19 November 2011

on another forum today....a labourer who had taken up the incentive to go seek the big money in the mines...was whinging about paying roughly $70,0000 in tax on an income of $180,0000.....
same whinger is a property bear.....he is like most of you on this forum....
they cannot see the woods for the trees....

I know people in the eastern states, earning similar incomes.... who have taken the smarter tax routes....and invested in the negative gearing incentives, from the property market....
and they are not whingeing......
they reduce their tax bills, by huge amounts...which more than compensates for the low return on income from property....but at the same time....they are looking at good increases in capital growth.........
in Melb for instance... there has been growth of over 30% in the past 3 years....but a decrease in the past year of is it 1.3%.....?

if you are on a medium income for a family of around $120.000 pa.....with a joint income....paying only 21% tax is fine....
but on a single income in excess of that....
there are better ways to reduce your tax bill....
and increase your wealth.......

sptrawler · 20 November 2011

Well for what it's worth, I THINK.
The government has to decide whether to let inflation slide up and make the average wage $120,000 p.a. a loaf of bread goes to $5. The price of fuel goes to $2/L, the
Aussie dollar goes back to $0.75 U.S and the average house price stays at $450,000.
The upside is you can get rid of all the change in your pocket, no need for 5, 10. 20, 50cent coins. Not long and we could be 1 for 1 with the rupiah. LOL
I guess what I am saying unless you have crashes like U.S/ U.K/ Europe. The money system just keeps compounding up.
We just haven't had our crash YET!!!!!

noirua · 20 November 2011

Commodity prices are falling and that should help reduce inflation and Import prices will eventually follow. Government will need to increase taxation as the future mining tax may not now bring in as much as expected -- together property prices will fall as guaranteed profits become the way of the past; probably very soon.

craft · 20 November 2011

kincella said:
on another forum today....a labourer who had taken up the incentive to go seek the big money in the mines...was whinging about paying roughly $70,0000 in tax on an income of $180,0000.....
same whinger is a property bear.....he is like most of you on this forum....
they cannot see the woods for the trees....

I know people in the eastern states, earning similar incomes.... who have taken the smarter tax routes....and invested in the negative gearing incentives, from the property market....
and they are not whingeing......
they reduce their tax bills, by huge amounts...which more than compensates for the low return on income from property....but at the same time....they are looking at good increases in capital growth.........
in Melb for instance... there has been growth of over 30% in the past 3 years....but a decrease in the past year of is it 1.3%.....?

if you are on a medium income for a family of around $120.000 pa.....with a joint income....paying only 21% tax is fine....
but on a single income in excess of that....
there are better ways to reduce your tax bill....
and increase your wealth.......

If you are negatively gearing then by definition the asset is not capable of self liquidating the debt against it.

You are dependent on a few things that are not a given. The economy growing to facilitate capital growth, the economy providing employment so you can fund the shortfall. The government continuing to support your investment. Negative gearing has been a path to wealth creation in the past but it may just be a path to wealth destruction if any of the above changes.

Even if all the supporting factors remain in place your return may not be that great if you have paid too much in the first place and there is unwinding in the multiples paid for housing by the time you want to sell, a real possibility given the current multiples on a historical basis.

trainspotter · 20 November 2011

Head tenant just signed 3 year lease for $90 psqm in a 325m commercial shed plus outgoings and a 5% ratchet per annum.

Just signed contracts to build 2 x "spec" homes. 18% return on input when they sell.

Have just finished 8 x unit development for tidy sum.

Whatever you do don't invest in property !!! It is going to crash ................

MACCA350 · 20 November 2011

MACCA350 said:
REIV amended clearance rates for the previous two weekends have been 50%.

This weekends pre-amended clearance rate is 54%, most likely will be amended to around 50% later in the week.

Last weekends amended clearance rate is 51%

This weekends pre-amended clearance rate is 52%

Cheers

young-gun · 20 November 2011

sptrawler said:
Well for what it's worth, I THINK.
The government has to decide whether to let inflation slide up and make the average wage $120,000 p.a. a loaf of bread goes to $5. The price of fuel goes to $2/L, the
Aussie dollar goes back to $0.75 U.S and the average house price stays at $450,000.
The upside is you can get rid of all the change in your pocket, no need for 5, 10. 20, 50cent coins. Not long and we could be 1 for 1 with the rupiah. LOL
I guess what I am saying unless you have crashes like U.S/ U.K/ Europe. The money system just keeps compounding up.
We just haven't had our crash YET!!!!!

problem is as we start devaluing our currency with stimulus spending(as ive said so many times before this doesnt do anything except prolong the bubble bursting)other nations such as the states will by that time be writing down their debt and destroying their dollars(increasing their value) which will cause ours to be even more worthless

once the resource boom slows - so too will the amount of high income earners coming back to capital cities to push up house prices, and buying numerous investment properties.

MO the perfect storm is brewing.

japan, the US, Europe, everywhere in the world investors and home owners have had reasons excuses and facts as to why housing there was different, and that it CANT crash here............

the system is imperfect, we dont do anything much differently to anywhere else, its only logical that we will follow suit.

young-gun · 20 November 2011

trainspotter said:
Head tenant just signed 3 year lease for $90 psqm in a 325m commercial shed plus outgoings and a 5% ratchet per annum.

Just signed contracts to build 2 x "spec" homes. 18% return on input when they sell.

Have just finished 8 x unit development for tidy sum.

Whatever you do don't invest in property !!! It is going to crash ................

welcome back train spotter

are you a builder or a developer? and have u been paid for those contracts? 3 houses built at the end of my st(not spec homes) were put on the market for 520-530. they sold for around 480-490, and took months to move.

ive been watching for houses in the area i wish to live - same houses have been on there for the past 5 months - each dropping prices by 10-20k since august and still not budging - 2 houses ive been watching sit there have now be repossessed by banks, and are listed under new agents. ive watched the amount of houses in the same price range go from 18 to about 28 in the area.

commercial real estate is a joke, we require about 150m2 storage to allow us to grow our businesss in the near future, most were priced at over 20k p/a for basic tilt slab lock up. 400$ a week?! no thanks. we can rent a 3 bedroom house with a shed and have almost the same amount of space for equal to or less than that price. storage space and a place to live - win win.

its obviously in high demand as the cost of buying the commercial buildings doesnt justify whats able to be charged. not many 300k houses out there u could rent for 400$ a week.

i think u have luck on ur side atm. and am guessing margins are lower?

trainspotter · 21 November 2011

young-gun said:
welcome back train spotter

are you a builder or a developer? and have u been paid for those contracts? 3 houses built at the end of my st(not spec homes) were put on the market for 520-530. they sold for around 480-490, and took months to move.

ive been watching for houses in the area i wish to live - same houses have been on there for the past 5 months - each dropping prices by 10-20k since august and still not budging - 2 houses ive been watching sit there have now be repossessed by banks, and are listed under new agents. ive watched the amount of houses in the same price range go from 18 to about 28 in the area.

commercial real estate is a joke, we require about 150m2 storage to allow us to grow our businesss in the near future, most were priced at over 20k p/a for basic tilt slab lock up. 400$ a week?! no thanks. we can rent a 3 bedroom house with a shed and have almost the same amount of space for equal to or less than that price. storage space and a place to live - win win.

its obviously in high demand as the cost of buying the commercial buildings doesnt justify whats able to be charged. not many 300k houses out there u could rent for 400$ a week.

i think u have luck on ur side atm. and am guessing margins are lower?

You are welcome young-gun.

I am a developer. I have signed the contracts to build the homes to speculate on. The advantage I have is that I sell my own product so it is not hard for me to offload. I have gone into the formula on this thread many times and can't be bothered posting it again.

Commercial property is the best. Not much to destroy inside a big tin shed !! Anything above 300sqm attracts between $90 - $110 psqm depending on location and fitout. Good to be the owner ..... tenant pays for the lot. Once again I have explained how to create 30k per annum income out of 2 x industrial sheds in previous posts. All this for a 150k input

Margins I operate on have not changed for me. I am doing it less than previous years as the market has gone off the boil somewhat. LOLOLOL

McLovin · 21 November 2011

trainspotter said:
You are welcome young-gun.

I am a developer. I have signed the contracts to build the homes to speculate on. The advantage I have is that I sell my own product so it is not hard for me to offload. I have gone into the formula on this thread many times and can't be bothered posting it again.

Commercial property is the best. Not much to destroy inside a big tin shed !! Anything above 300sqm attracts between $90 - $110 psqm depending on location and fitout. Good to be the owner ..... tenant pays for the lot. Once again I have explained how to create 30k per annum income out of 2 x industrial sheds in previous posts. All this for a 150k input

Margins I operate on have not changed for me. I am doing it less than previous years as the market has gone off the boil somewhat. LOLOLOL

Are they in this thread? I'd like to read them. I'm amazed at the cost of warehousing in Sydney. Last week I was looking at 400sqm warehouse with a very small office area and the agent wanted $240/sqm. I laughed at him and told him I'm paying $190/sqm just down the road for showroom/warehouse. It did get me thinking though, how hard can it be to put up four walls and tin roof.

satanoperca · 21 November 2011

kincella said:
in Melb for instance... there has been growth of over 30% in the past 3 years....but a decrease in the past year of is it 1.3%.....?

30% hey, so back 3 years to 2008 the median price was approx $360K, currently $455K?
-1.3% - actually -4.4% from rpdata, just a little out.

Is that decline in prices the start of a new trend or just a correction?

Time will tell.

Cheers

The future of Australian property prices

Tysonboss1

Mrmagoo

Mrmagoo

Smurf1976

craft

Ves

Beyond Good and Evil

Wysiwyg

Everyone wants money

Julia

In Memoriam

Smurf1976

kincella

sptrawler

noirua

craft

trainspotter

MACCA350

young-gun

young-gun

trainspotter

McLovin

satanoperca

Similar threads

The future of Australian property prices

Beyond Good and Evil

Everyone wants money

In Memoriam

Similar threads

Privacy & Transparency

Privacy & Transparency