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While property prices remained fairly subdued in 2011, weekly rents continued on an upwards path in most capital cities. Last year, Sydney was among the standout performers with rents increasing by an impressive 4.2 per cent for houses and 4.5 per cent for apartments. Great news for investors but spare a thought for all the tenants out there competing for their next home!
The latest rental report from Australian Property Monitors (APM) says the median rent for a house in Sydney has reached a record of $500 per week, with apartments a little more affordable at $460 per week.
Rents for apartments are increasing at a more rapid rate because more people are competing for the cheaper option. There’s also the ongoing desire, especially among Gen Y, to live in trendy inner city locations close to cafes, beaches, transport and the CBD and there are more apartments than houses available in those areas.
After a flat patch in the middle of last year, Sydney rents have resumed their upward trajectory. The latest Australian Property Monitors Rental Report, released this week, reveals median weekly asking rentals for houses rose by 1 per cent in the December quarter.
There was an even stronger rise in apartment rents, which surged 2.2 per cent.
Rents for houses rose by 4.2 per cent in 2011 with apartment rents up by 4.5 per cent.
Nationally, the story was similar with house rents rising by 1.1 per cent and apartment rents up 1.4 per cent, with most capitals recording rises in rents in the December quarter.
Melbourne remains the most tenant-friendly capital, with no rise in rents in the December quarter. House rents in Melbourne actually fell during 2011, by 1.4 per cent.
I don't think that is true. Tax deductions on investment properties make them cheaper then they appear. There are property investors only after an income stream, once purchased, they could not care less about the dollar value of the house just as long as someone will send them some pocket money every week.
Rent is still going up...
How can that be true? Companies invest earnings in R&D, equipment, factories, stores, etc - whatever it may be. Company add value by growing, they can legitimately increase they produce.
A house cannot.
If people want to hedge against inflation then just buy gold - it's really not hard. Why bother with property or stocks if that is all you want to do.
Leverage is speculation. I bet nobody would ever use leverage if property rose in step with broader CPI. Only in some markets, and only some people and only under very favourable demographic and credit conditions, will they be successful for some unknown amount of time in their speculation. And in the end, it destroys the economy of whichever nation allowed it.
Now there's something which hasn't changed in hundreds of years.
If one was not a scumbag speculator intent to destroy his nation's economy, clearly there are better ways than property to hedge against inflation (gold) and invest with the aim to increase wealth (companies).
But earnings can be reinvested into the property to increase value, increase rent, or subdivide, or other ways to augment capital value and returns, same as a company.
Gold is speculative plain and simple, it hedges fear, not inflation. Gold has decreased in nominal and real terms during periods of inflation in the past, hence not a reliable hedge.
Dear Lord! Please do some maths FFS. If property reliably tracked inflation and no more, leveraged, cash flow neutral RE investment is a no brainer.
I agree rampant speculation on RE is a negative, but this bears no relation to sensible investment.
Surely you can't say it's the same.
With a company, you can build another factory and permanently increase your output. Doing renovations merely maintains the quality of the house or apartment.
Subdividing is like cutting a factory in half. Nothing is really created.
Like when?
There should be no debate that gold has returned to it's historic status as money and a real store of value. In the last decade it easily beat inflation and any rental returns, putting an equal amount of capital in it and housing. Except unlike housing worldwide gold is not in a speculative bubble and has not crashed.
There are other dynamics at play other than interest rates/inflation.That's only true if interest rates are lower than inflation. Historically, that has never really happened - except now, specifically in countries where RE bubbles burst.
I would prefer to invest in things which were not speculated upon, would you not?
I don't think that is true. Tax deductions on investment properties make them cheaper then they appear. There are property investors only after an income stream, once purchased, they could not care less about the dollar value of the house just as long as someone will send them some pocket money every week.
Well if you had bought either gold or real estate in 2000 you would have made a killing.Like when? There should be no debate that gold has returned to it's historic status as money and a real store of value. In the last decade it easily beat inflation and any rental returns, putting an equal amount of capital in it and housing. Except unlike housing worldwide gold is not in a speculative bubble and has not crashed.
If this is true then Buffet style value investing in stocks is also a non investment.
There was some analysis done that the real value of stocks only increases via the retention of earnings, so same thing.
In addition, this is one of the hopes of long term investment, as a hedge against inflation. Ergo, if it keeps keeps pace with inflation, especially with regards to yield, then the investment is worthwhile as it outperforms cash.
Returns in excess of inflation are cream.
Both stock and RE 'investment', if well selected will outpace inflation. Gearing enhances this.
The great advantage of RE is that even when leveraged is that it is not marked to market. As long as repayments are covered (by whatever means), one can hold for the long term and allow inflation to diminish real debt.
I agree that RE investment has been rather more speculative of late, but this does not detract from the intrinsic good sense of RE as an investment class as at least part of one's total portfolio.
-- never sell RE
it's safe and easy as long as you can afford to service any loans.
are you one of these property investors sk? i only ask as I think you would find very very few if any investors that would be happy watching the value of their proeprty either sit there or slide. the only ones who would be happy to are thoes that bought 30, 20 and even 10 years ago. why? because they have seen stupid percentage increases already and prob all have over 50% equity(if not more), so even if prices did crash by 50 they still break even if they sell, and keep making money off rent if they hold.
if i bought an investment property tomorrow, and it went no where for 10-20 years, and all i did was reduce my taxable income while helping the bank make hefty profits, i would be pissed off.
hum not really, you lower the risk of the bank calling for its mortgage, yet by paying cash, you loose the 6% on ubank that you could getMy situation is a bit different thought as I paid cash.
Not quite. Facilities can be added... and extra bedroom, another bathroom, a garage where none existed, additional curb appeal etc etc.
Say what??? Two, three, fifteen, a hundred and fifty (OR WHATEVER) additional dwellings are created, each creating another yield. Sometimes each new dwelling has a greater yield than the one original.
For your education, pull up a cart of gold prices over the last 30 years and a chart of inflation over the same period. The correlation 'at times' is weak at best. At other times the correlation is reverse.
I'd like you to contemplate on the qualifier you have included (bolded) and consider how you have torpedoed your own argument. If gold has 'returned' to some purported status as detailed, logically there was a time in the near past when such status did not apply.
As to whether gold is is in a bubble, it is very difficult to quantify as there is no yield or other economic markers to compare to. I am not denying gold as a store of value, but would point out that that value is fleeting and marked to market and not to some intrinsic value.
If 'investing', the speculative component is irrelevant. All that matters is if the numbers stack up as an investment. The speculators will do what they will and if speculators have distorted the market to the point where investment is inappropriate, then 'investors' will look elsewhere.
Who`s to say we aren`t at another 1980 PM peak?
Actually, a simple kitchen or bathroom renovation, on an older style unit, even if it is only cosmetic can substantially increase the rent received per week.Firstly that can't be done with units. Secondly, you would do such major transformations with a house you are renting out? Sounds totally bizarre.
Actually, a simple kitchen or bathroom renovation, on an older style unit, even if it is only cosmetic can substantially increase the rent received per week.
That's one way of looking at it. Another (and one I favour due to very low rental yields in Australia) is that it's rental value has depreciated overtime along with the building structure / interior itself - and quite so, this is what people refer to when they say real-estate is a depreciating asset. The point however is that through renovation you are merely investing to maintain the relative quality of the dwelling, allowing yourself to take advantage of the full rental value it once had before it depreciated too much.
I don't know why i bother but,
Do you know how Tax depreciation works in relation to fixtures and equipment?
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