So when I said 2-3% yield, I should have specified Net Yield and our numbers are in the same ball park based on current sale prices in Sydney. I personally find that unacceptably low. Regional centers as the original poster mentioned can have much higher yields than Sydney, and would then be less reliant on capital gains to be a worthwhile investment.
I agree with you on the gold bugs. I also think they are gambling on capital gains with no yield.
Historical averages on the stock market show firms with the highest P/E ratios under perform shares with the lowest P/E ratios. Same with high M/B compared to low M/B. So you are correct, the highest P/E on average will lose out compared to the lowest P/E firm. I expect the same trends in Real Estate, which is why I would prefer low P/E real estate, which is why I think on average Sydney is over priced.
Falling yields across most markets over the last quater, and not looking pretty over the last 12 months either.
I'd love to know what the median net yield is these days.
Sorry i ment lowest p/e ratios dont always or usually win. I think your claim on historical averages of high p/es underperforming low p/es is faulse. rebuke me if you can!
anywho the point im trying to highlight is the effect of growth and anticipated growth on price and yeild expressed as a percentage of price.
Start stocking up on the tin food and prepare a vege garden in the back yard mate ... it's all doom and gloom in property !
London's Sam Cookney caused a stir recently when he argued property prices in the UK capital were so high it would be cheaper to live in Barcelona and fly to work every day. Here he tells The Local what inspired his thinking.
"It all started as a bit of a fun for a couple of friends," the London-based social media manager told The Local about his viral blog piece.
In his article, Cookney demonstrated he would save €387 a month by choosing to live in Barcelona and commuting with Ryainair to London four days a week for work.
To "compare apples with apples" he chose to line up Barcelona’s upmarket Les Corts district against London’s pricey West Hampstead.
Even after opting for a three-bedroom apartment in the Catalan capital over a two-bedroom option in London, and after adding in the costs of flights and train fares, the Spanish city still came out the winner.
The reaction has been astonishing with media outlets latching on to the story with its "surreal premise".
At the same time, plenty of commentators have taken Cookney to task over his sums, saying he hasn't factored in variables such as changing airline prices, or the toll that all that travel would take.
I'm pretty sure the body of evidence is heavily against you on this, which makes sense.
http://www.mebanefaber.com/2013/10/26/probabilistic-investing/
Or check out any of Robert Shillers work and so on, it all says the same thing.
It all depends on whether all the vested parties continue the game?
Are things so bad to warrant IR's at 'emergency lows' or it's all beer & skittles from here on?
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'emergency lows' is the only driver IMHO of our economy atm, It doesn't seem to be retail, small business or manufacturing. Unless your the BHP's of the world digging holes and selling the contents offshore.
Real-estate from a bubble to a bigger bubble is what I see.
Ummmm banks are posting record profits on "emergency lows" ? Hate to think how much raping they would be doing if rates begin to rise?
I think you have your intuition backwards. Banks earn from a spread between assets and liabilities - Higher rates don't necessarily mean higher spreads. Emergency low rates I'd assume has some effect on peoples willingness to take on more debt, though this is offset by the lower interest payments.
However, if rates rise from here I don't think it would be very healthy for continued property speculation and hence the banks main income source, rather the opposite. Spreads should not change AFAIK but speculative interest may wane.
Banks were quoted as this:- "Higher borrowing costs" to justify as to why they did not trend with the RBA downwards. You can bet your last penny IF rates were to rise they would be using this excuse and some more clever theories/excuses as to why their rates are not in line with reality. Also shareholders want their divvies every year so if rates are rising then more people will deposit cash into said banks who in turn will lend it back to the punters at a HIGHER rate. It's called the velocity of money through the economy.
Too tired to go into spiel mode on this subject but needless to say if rates are increasing then it is a good thing for property "speculators". Have already posted as to WHY I believe this to be a fact and not an opinion. Pie graphs and charts etc along with links have been posted previously.
Banks were quoted as this:- "Higher borrowing costs" to justify as to why they did not trend with the RBA downwards. You can bet your last penny IF rates were to rise they would be using this excuse and some more clever theories/excuses as to why their rates are not in line with reality. Also shareholders want their divvies every year so if rates are rising then more people will deposit cash into said banks who in turn will lend it back to the punters at a HIGHER rate. It's called the velocity of money through the economy.
Too tired to go into spiel mode on this subject but needless to say if rates are increasing then it is a good thing for property "speculators". Have already posted as to WHY I believe this to be a fact and not an opinion. Pie graphs and charts etc along with links have been posted previously.
Right, so I read your rates rising = good for property speculation post earlier. I guess the RBA should be raising the OCR to 10% instead of cutting it to 2.5% if they really want to get a housing boom going? I'm being facetious, but clearly this would be terrible for house prices and would sharply cut discretionary spending and the amount people would be able to spend on rent given the rise in unemployment that would be involved. It would probably be deflationary also. I'm using an extreme example to prove a point here, I know.
Believing it to be a fact that rising rates will be good for property investors does not make it so, it is your opinion that your opinion is a fact - just like everyone else.
Bank record profits are a result of them having a monopoly on lending in Australia.. Since 07 they have enjoyed increased domestic funding (cheaper = higher clip on the way through to borrowers) rather than borrowing from overseas..
If rates are rising people are more likely to keep their money in (risk-free) cash than to put it into an IP which is guaranteed to lose them money every year (assumes high levels of gearing).. Also have to take into account stagnant employment rates, subdued retail and ongoing global worries..
I concur with this statement of FACT. I also said that if rates are rising then people will place "CASH" into the bank to receive a risk free return. No argument here. The bank will then lend it to "property investors" who may or may not be highly geared.
Be as facetious as you like. Please don't limit yourself to reading only a few of my posts over the last few weeks either. Higher interest rates means inflation. Inflation means house prices are going up. Rents will increase blah blah blah = FACT. Cant make it any simpler than this. I am also using a very simplified version to make it clearer.
Try some of these charts that will explain what the factors on monetary policy actually is.
'The bank will then lend it to "property investors" who may or may not be highly geared.' They would like to but if the cost of money is rising why would "property investors" take the 'riskier' path?
It's a perfect storm brewing, although several decades in the making and it's not just limited to Aus. The economic models by which our financial system operates, if you could call them that, have become more and more reliant on the cheapness of money to continually create the same effect in the real economy, and that usually shows up in the hard asset that the general population doesn't need too many brain cells to get into - property.
So the storm is
- interest rates at record lows,
- lot's of money printing going on around the world,
- baby boomers selling the family home and travelling or downsizing,
- migration that is not supported by infrastructure
The cost of promises - anyone under 40 would not have a clue about economic downturns because rates have only been falling since the last recession? Now we are at the bottom there's only limited outcomes from here on in, none of them good? Enjoy it while you can.
Banks job is to lend money ...... not keep it under their pillow
The future of pessimism has never looked so bright ! Simply put ... "they gotta live somewhere" UF
Home values rose to a record high last month led by strong growth in Sydney and Melbourne, according to new housing data.
Figures released today by RP Data Rismark show capital city values peaked during September above the previous high set during the 2010 property boom.
A housing bubble may be on the horizon.
The spike in values is likely to prompt further concern Australia’s housing market may be heading towards a property bubble as historic low interest rates prompt borrowers, particularly investors, to surge back into the market.
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