The future of Australian property prices

[Mrmagoo]

And IP owners are subsidised by the taxpayer, the renter pays tax (sometimes??) so it's a funny old loop isn't it?

Let's get back to basics and hope we get some politicians with spine to change the rules in the not too distant future?

Speculating in housing is just faux wealth at the expense of the current generation and hoping (or just being blissfully ignorant will do) not to be the one holding the baby when the music stops......which may be pretty close, as shown by the million dollar garage renos in Sydney recently?

http://www.dailymail.co.uk/news/art...illion-owners-converted-two-bedroom-home.html

If I had $1.2 million I'd just take it and relocate overseas, not buy a house. If I had a 350k in the bank. I would buy a house. Well not anymore. I couldn't. These people are making purchases with money they simply don't have. That is very scary.

 

[Uncle Festivus]

I can assure you there is no subsidy given to the tenants. We pay higher rent because of the high price of purchasing a property + costs, which is caused by subsidies given to investors.

I agree - should you have qouted/replied to qldfrog?

 

[Smurf1976]

I can assure you there is no subsidy given to the tenants.

Subsidies by their nature are a complex subject. I've been in quite a few debates about subsidies and they always end up messy. One side is firmly convinced that a subsidy exists, the other thinks otherwise. Once you add the maths in both end up completely confused.

The basic business model of renting property isn't much different to how many people view shares. How many people here can honestly say that they only consider dividends when evaluating a share purchase, and take no account of capital growth?

Is capital growth of share prices effectively subsidising companies, enabling them to pay lower dividends than would otherwise be the case?

Or could it be argued that if share prices were lower to start with, then many companies would indeed be paying an attractive dividend on a % return basis, such that the real problem is that share prices have become too high?

In a market system where everything is floating against everything else, and nothing is fixed as such, it's pretty much impossible to work out the "correct" price of anything in terms of what it "should" cost to produce.

 

[qldfrog]

mtmagoo had a statement "there is no good landlord" which I take I believe with good reason as a personal attack;
then went over the board when I stated that I am actually subsidising my tenants;

I would just like him to consider what happens if/when a country follows what would be his wishes;
In Paris (a place that I know) people still buy real estate, speculate, etc .
but then owners do not bother leasing anymore.There is accute shortage of accomodation
so no subsidy to tenant indeed there , just no lease at all;
what would happen if such a 'pro tenant aka class warfare' would happen here?
Do you believe I would sell my IP?
No, my son would move in. And later on, I would use it as a bed sitter in the city.
anyway what can i say. If your mind is set who cares about facts...

 

[tech/a]

mtmagoo had a statement "there is no good landlord" which I take I believe with good reason as a personal attack;
then went over the board when I stated that I am actually subsidising my tenants;

I would just like him to consider what happens if/when a country follows what would be his wishes;
In Paris (a place that I know) people still buy real estate, speculate, etc .
but then owners do not bother leasing anymore.There is accute shortage of accomodation
so no subsidy to tenant indeed there , just no lease at all;
what would happen if such a 'pro tenant aka class warfare' would happen here?
Do you believe I would sell my IP?
No, my son would move in. And later on, I would use it as a bed sitter in the city.
anyway what can i say. If your mind is set who cares about facts...

Frog

I'm with you and haven't bothered to become involved.

Gave one tenant 6 mths free rent when her son was diagnosed with leukaemia
and she had to give up work to get treatment underway.

Physically threw one tenant out when he put the head of his partner through a plate glass window---she went home to her parents ---don't know and don't care what he did---copped a $500 fine for tossing him out---small fee for getting rid of un desirables---I wont tolerate it.

Found a grow room in one of 5 bedrooms for a family renting from us $4655 Damage.

But hey we should cop it we are the rich!!

 

[Joe Blow]

There are no good landlords.

Mrmagoo, this is a gross generalisation that is unsupportable, unless of course you have met every single landlord. You may have had negative experiences with your landlords, in which case it's better to qualify your remarks rather than make generalisations that don't really add much to the discussion.

 

[Mrmagoo]

Apologies, based on my experience I expect that 93.37% to 100% of all landlords can be classified as bad (a subjective measure) with with 95% certainty based on a sample of 12 landlords over 12 years across 5 tenants.

 

[tech/a]

Apologies, based on my experience I expect that 93.37% to 100% of all landlords can be classified as bad (a subjective measure) with with 95% certainty based on a sample of 12 landlords over 12 years across 5 tenants.

So based on those figures
Id say with 100% Certainty
your terribly INEXPERIENCED.

 

[medicowallet]

Oh dollar drop, I welcome the inflation you bring
Oh Iron ore drop, I welcome the wages realism you bring
Oh housing price drop, I welcome the fairness and equity you bring to my children.


Happy days, sunshine, rainbows, lollipops and sparkly bunny ears.

MW

 

[Uncle Festivus]

Oh dollar drop, I welcome the inflation you bring
Oh Iron ore drop, I welcome the wages realism you bring
Oh housing price drop, I welcome the fairness and equity you bring to my children.


Happy days, sunshine, rainbows, lollipops and sparkly bunny ears.

MW

Well this will be interesting. How will the RBA 'fight' import price inflation this time?

Raise rates and kill the golden property egg or lower more to help the poor old consumer pay for more expensive imported nick nacks?

They are essentially already 'zero bound' for fear of an even bubblier property bubble?

They (the RBA board) might finally have to work for their pay for once.....

 

[sptrawler]

Well this will be interesting. How will the RBA 'fight' import price inflation this time?

Raise rates and kill the golden property egg or lower more to help the poor old consumer pay for more expensive imported nick nacks?

They are essentially already 'zero bound' for fear of an even bubblier property bubble?

They (the RBA board) might finally have to work for their pay for once.....

Interesting times for sure, especially with the Government saying it won't interfear, looks like a lose/lose situation.

If interest rates go down, first home buyers lose, if inflation kicks off everyone loses.

 

[sydboy007]

http://www.businessspectator.com.au...perty/renters-wont-bail-out-housing-investors

And in the absence of capital gains, investors need to take a second look at yields -- they become, by default, value investors rather than growth investors.

In the run-up to the turn-of-the-century property boom, something quite striking had happened to rental yields. A national average gross rental yield of 7.8 per cent in 1996 slipped to 4.0 per cent by early 2004.

In recent weeks there have been some alarming data released on yields. RP Data figures show Sydney’s price boom has pushed gross yields down to 3.6 per cent for houses and 4.5 per cent for units.

In Melbourne, it is even worse -- 3.2 per cent for houses and 4.2 per cent for units.

And remember these are gross yields. Once finance, maintenance and management costs are factored in the real yield is negative -- and the investment only makes sense by adding together capital gains and the investors’ tax refund from negative gearing.

In the same report quoted above, the RBA noted: “The insensitivity of our results to changing assumptions about growth in rents contrasts with the literature on stock market valuation, which finds substantial sensitivity to assumptions about earnings growth. The main reason is that studies of equity valuation typically assume that higher growth in earnings feeds back into greater appreciation whereas we do not.”

Translated, that means that when sharemarket dividends (or expected dividends) rise, that yield is pretty quickly factored into the share price by analysts and investors.

But when house or apartment rents rise or fall, we have grown accustomed to ignoring them -- house prices have been moved more by animal spirits than by the notion that the asset will prove ‘profitable’ now or in the future. A profitable housing investment? How 1996!

And that could prove to be a huge problem if the pattern of 2000-2004 is followed by a couple of flat years in which rental yields ‘catch up’.

The idea that an interest rate rise next year can simply be passed on to defenceless renters, is a silly one. The rental market follows the laws of supply and demand much more faithfully than do property prices.

A period of flat capital growth, with stubbornly low rental yields in Melbourne, Sydney and perhaps elsewhere, will give many investors pause for thought.

 

[sptrawler]

http://www.businessspectator.com.au...perty/renters-wont-bail-out-housing-investors

It is even worse for SMSF as valuations increase so does the pension drawdown. Yet income is falling.

 

[Uncle Festivus]

Surprised nobody has posted this?

The RBA jawboning again - trying to get a reaction?

In a speech yesterday in Melbourne, the RBA governor, Glenn Stevens said macroprudential tools could prove useful in helping to control the exuberant housing market. That said, he was still skeptical about their effectiveness.

He made the point that whilst monetary policy can’t solve every problem (i.e. interest rates alone) and there may be a need to take other steps if “at the margins they are helpful,”he didn’t consider macroprudential tools a simple solution to the problem, referred to in yesterdays Stability Review of strong investment lending.

http://www.macrobusiness.com.au/2014/09/captain-glenn-finally-embraces-macroprudential/

Go Sydney!

Household credit growth has picked up, almost entirely driven by investor housing credit, which is growing at its fastest pace since late 2007. The willingness of some households to take on more debt, combined with slower growth in incomes, means that the debt-to-income ratio has picked up a little in the past six months.

The increase in household risk appetite is most evident in the continued strength of investor activity in the housing market. The momentum in investor housing activity has been concentrated in Sydney and (to a lesser extent) Melbourne. Investor housing loan approvals are almost 90 per cent higher in New South Wales than they were two years ago and are 50 per cent higher over the same period in Victoria. As a share of approvals, both are back around previous peaks.

http://www.digitalfinanceanalytics.com/blog/rba-on-housing-lending-in-financial-stability-review/

 

[DB008]

I don't think that there will be genuine reforms anytime soon...


The propertied federal politicians: Pollies and their $300 million property portfolio

“With more and more Australians finding it difficult to break into home ownership, adopting the Canadian scheme would make a difference to thousands of Australians each year,” Senator Xenaphon said.

“As HomeStart Finance said this week, there’s something strange about being able to access your super fund if you are about to default on your housing loan, but you can’t access it to put a deposit on a home in the first place,” he said.

The public should ask “Are the property holdings of our federal politicians negatively influencing policy and causing them to ignore evidence?” The parliamentary register of members’ interests may help to answer this question, allowing for a summary report of real estate holdings for each Australian federal politician (which may be jointly owned with their spouse).

It is evident that politicians are heavily invested in the property game, with the 226 members in both houses of parliament with an ownership stake in a total of 563 properties – an average of 2.5 properties per member, conservatively estimated at around $300 million (563 multiplied by the median dwelling price of $530,000 as of July 2014).

Senator Xenophon maintains an impressive portfolio of eight investment properties, along with Senator Barry O’Sullivan from the National Party who owns an incredible fifty properties (see Table 2). The high concentration of landed gentry in the Senate acts as a vested interest to pass policies which inflates housing (land) prices.

http://www.propertyobserver.com.au/forward-planning/investment-strategy/politics-and-policy/34160-the-propertied-federal-political-class-politicians-and-their-300-million-property-portfolio.html

 

[See Change]

Apologies, based on my experience I expect that 93.37% to 100% of all landlords can be classified as bad (a subjective measure) with with 95% certainty based on a sample of 12 landlords over 12 years across 5 tenants.

Maybe it's not the land lords that are the issue ....

Cliff

 

[See Change]

I don't think that there will be genuine reforms anytime soon...


The propertied federal politicians: Pollies and their $300 million property portfolio


http://www.propertyobserver.com.au/forward-planning/investment-strategy/politics-and-policy/34160-the-propertied-federal-political-class-politicians-and-their-300-million-property-portfolio.html

Have to agree with you .

Make hay while the sun shines , and it's shining in Sydney at the moment .

Cliff

 

[syd]

Stumbled across this thread while doing some googling. A little odd it's on a shares website, but it seems well tended to, if a little heated at times.

I'm a Sydney renter who is starting to be pushed towards buying by my significant other. NSW housing website and basic excel tell me that in the last 10 years Sydney prices have risen by a whopping 4.4% p.a.

The benefits of property ownership, at least in Sydney's recent history, seem to be mostly non-financial, which I guess I have to come to terms with

But it does leave me with the question of why the "issue" of property prices gets so much media attention, and why it often seems to bring out the worst in people. Any thoughts?

 

[Smurf1976]

Stumbled across this thread while doing some googling. A little odd it's on a shares website, but it seems well tended to, if a little heated at times.

Welcome to ASF!

Whilst ASF is primarily a share forum, property, commodities etc are still investments so tend to generate some interest.

But it does leave me with the question of why the "issue" of property prices gets so much media attention, and why it often seems to bring out the worst in people. Any thoughts?

The social (as distinct from purely financial) implications. Everyone needs somewhere to live, and a large portion of the community prefer to own rather than rent for many reasons, most of which are not purely related to finance.

In contrast, nobody actually needs to own shares in Woolworths (to pick a random well known stock). Their shops are open to everyone, shareholder or not, so not owning shares has no impact on someone's life as such. The decision to invest / trade the company's shares is purely a financial one.

If housing goes up then some gain whilst others lose and to a large extent there's a generational divide there. Most 50 year olds own a property, most 20 year olds don't. In contrast, if shares go up then, apart from the small minority who engage in short selling (for purely financial reasons), nobody actually loses anything. Even if you haven't got a cent invested in anything, you still don't actually lose anything if the share market rises. Not so if property goes up and you haven't already bought.

 

[CanOz]

why it often seems to bring out the worst in people. Any thoughts?

Because there are those that have too much, by definition of those that have too little. Those that have too much are looking for max yield / min risk through a balanced portfolio of equities/property/bonds etc. This tends to scare up a few emotions from those that believe the property market is for houses....err to live in. Imagine!

Cheers,


CanOz