The future of Australian property prices

[tech/a]

The Greens have released Parliamentary Budget Office (PBO) modelling that shows the Government could save $3 billion in four years by abolishing negative gearing.

The tax break allows investors to claim expenses for rental properties and reduce tax paid on any other income.

Investors will build to sell not to rent.
Good luck with that.

 

[Uncle Festivus]

Investors will build to sell not to rent.
Good luck with that.

Politicians don't have the backbones to do what is right so no need to worry about NG being abolished any time soon.

If they wanted to tip-toe around the problem then they could start with only have NG apply to new dwellings.

As we know NG on existing properties serves no purpose at all other than to drive up prices and make the economy poorer.

 

[satanoperca]

Investors will build to sell not to rent.
Good luck with that.

Excuse my ignorance, but don't the vast majority of "investors" by established properties in the first place.

NG should be on new builds only, this would at least funnel some of the investors money into adding supply.

Cheers

 

[tech/a]

Excuse my ignorance, but don't the vast majority of "investors" by established properties in the first place.

NG should be on new builds only, this would at least funnel some of the investors money into adding supply.

Cheers

I agree but would widen it to encompass refurbishments and additions to older home investment properties.
Limited to those works.

I wouldn't say most investors go for established.
Many meet the demand in new housing and apartment development

 

[banco]

I really don't understand what investors are thinking buying when interest rates are this low? Surely the time to buy property is when interest rates are relatively high?

 

[CanOz]

I really don't understand what investors are thinking buying when interest rates are this low? Surely the time to buy property is when interest rates are relatively high?

Sydney and Melbourne are both sellers markets, the savy investors are not buying.....

 

[Klogg]

I really don't understand what investors are thinking buying when interest rates are this low? Surely the time to buy property is when interest rates are relatively high?

Well interest rates alone aren't a good indication - I'd use them more as the 'risk free' rate for my cash, and would expect net rental yields to be greater than these; i.e. if IR are 7%, but net rental yield is 11%, then it may be worthwhile.

It's more the idea of picking up an asset that generates less cash than a term deposit and hoping for it to go up in value that doesn't really make much sense to me.

 

[tech/a]

I really don't understand what investors are thinking buying when interest rates are this low? Surely the time to buy property is when interest rates are relatively high?

For me my holding costs are lowest ever.
More buyers off plan locking in rates.

 

[banco]

Well interest rates alone aren't a good indication - I'd use them more as the 'risk free' rate for my cash, and would expect net rental yields to be greater than these; i.e. if IR are 7%, but net rental yield is 11%, then it may be worthwhile.

It's more the idea of picking up an asset that generates less cash than a term deposit and hoping for it to go up in value that doesn't really make much sense to me.

My understanding is that net rental yields are pretty terrible in melbourne and sydney if you were buying today.

 

[satanoperca]

For me my holding costs are lowest ever.
More buyers off plan locking in rates.

Tech/A for someone in your business, it should be a dream come true, or close to it

• The lowest interest rates in a very very long time
• Easy access to huge piles of debt
• A consumer/customer who is unaware or just ignorant to what is happening at a macro level with Australia and world wide.

Apart from the normal difficulties of running a successful business, your greatest task I would guess, is when to exit the game in this cycle, not get holding to many non performing assets. I believe that is still some time away unless the rainbow swan appears and like all good rainbows one cannot predict when and where they will be until after the fact.

Oh, while I cannot reference exact stats at the moment, I believe the vast amount of passive property investors by established properties as this is where the capital growth is. Active investors are developers under my definition. If NG was only on new builds, it would see far more passive investors turn into active investors and provide much need stimulus and housing for greater society.

To be a passive investors takes no where near the due diligence and smarts as a passive and we have become a lazy nation.

Cheers

 

[tech/a]

I believe the vast amount of passive property investors by established properties as this is where the capital growth is.

I have held many Established properties over the last 20 yrs.
I now only hold 2---One I have on the market and the other is
my business premises which collects rent from my company into my super.

Holding Established property here in SA is not a sound investment and hasn't been for over 5 yrs.
Your just chewing up capital with very low return on rent.
I'm in it for capital gain and the only place I can get decent capital gain on my money (Or I should say a lot of the banks) is building---developing. Here a 15% return on capital at work is a minimum and 30% is possible in 12 mths.

The return on my own money is massive even at 15%

I buy the land and borrow the development building costs.
On a 1.5-2 mill development there is around 20% so $300K
Land on a 3 apartment build on average $350K

So after holding costs of say $45k and Sub division and legal's of
$30K there is a drink.

 

[kushi212]

As others have said, if you can set aside $500 a week for a few years, you'll be in the market soon enough.

Why are you paying high fees? Are you purchasing units in both stocks every week? Might be better off accumulating cash and making a purchase once every month or two, to reduce brokerage costs.

Agree to what junior said.

 

[DB008]

Scorching Vancouver house prices put pressure on politicians​

The average price for detached homes within the city of Vancouver has rocketed to a record $2.23-million as the provincial government faces pressure to cool off the scorching housing market.

Prices for those coveted properties in Vancouver proper have surged amid low interest rates, limited listings and an influx of international buyers in a seller’s market. Industry observers say buyers with ties to China have been especially keen on high-end houses, though the broader impact of offshore buyers is unclear because of a lack of data.The record monthly average price of $2.23-million in Vancouver for existing single-family detached homes sold in May is a 19.2-per-cent jump from $1.87-million in the same month last year, according to new statistics obtained by The Globe and Mail from the Real Estate Board of Greater Vancouver.

In its monthly release of statistics, the board provides the average detached price for Greater Vancouver, which includes most suburbs, but doesn’t disclose the average for the city itself.

Last week, B.C. Premier Christy Clark dismissed a proposal by Vancouver Mayor Gregor Robertson, who called for the province to introduce a speculation tax on house-flippers. She also rejected his suggestion to selectively hike British Columbia’s property transfer tax to target high-end transactions.

In his May 22 letter to Ms. Clark that was publicly released last week, even Mr. Robertson vastly underestimates how expensive detached homes have become within city limits.

A recent Vancouver City Savings Credit Union study predicts that in 2030, the average price for all housing types within Vancouver could exceed $2.1-million, with detached properties forecast to soar to an average of $4.4-million.

Ms. Clark said it doesn’t make sense to clamp down on foreign investors. “Experts estimate that local investors are 3 to 4 times more active in the region’s housing market than foreign investors,” she wrote in a letter dated June 4 to Mr. Robertson. “Using any method of new taxation with the goal of driving down the price of housing could have the unintended effect of hurting current homeowners across the region.”

More on link below...

http://www.theglobeandmail.com/report-on-business/economy/housing/blistering-bc-housing-prices-put-pressure-on-politicians/article24836765/​

 

[satanoperca]

I have held many Established properties over the last 20 yrs.
I now only hold 2---One I have on the market and the other is
my business premises which collects rent from my company into my super.

Holding Established property here in SA is not a sound investment and hasn't been for over 5 yrs.
Your just chewing up capital with very low return on rent.
I'm in it for capital gain and the only place I can get decent capital gain on my money (Or I should say a lot of the banks) is building---developing. Here a 15% return on capital at work is a minimum and 30% is possible in 12 mths.

The return on my own money is massive even at 15%

I buy the land and borrow the development building costs.
On a 1.5-2 mill development there is around 20% so $300K
Land on a 3 apartment build on average $350K

So after holding costs of say $45k and Sub division and legal's of
$30K there is a drink.

I don't think you are the majority, you fit the active investor model. It is what the masses are doing that is of interest, they move markets.

Smart, calculated, well researched and hardworking individuals will benefit in all markets.

The majority are not the above.

 

[tech/a]

Never wanted to be in a majority in ANY field.

So thanks!

 

[Wysiwyg]

Canada .....

Ms. Clark said it doesn’t make sense to clamp down on foreign investors. “Experts estimate that local investors are 3 to 4 times more active in the region’s housing market than foreign investors,” she wrote in a letter dated June 4 to Mr. Robertson. “Using any method of new taxation with the goal of driving down the price of housing could have the unintended effect of hurting current homeowners across the region.”

Australia .....

Foreign nationals who want to buy a house in Victoria must pay a three per cent surcharge on stamp duty from July 1, which is expected to raise about $279 million over four years.
A land tax surcharge - an extra 0.5 per cent from 2016 - will also scoop a collective $52.5 million for the government.
Mr Pallas said the new taxes would ensure foreign property investors paid their "fair share" towards infrastructure, and the added cost was a small component of the overall price and would not affect investor demand.
A $600,000 home would attract a surcharge of about $18,000 for a foreign buyer under the new taxes.

 

[Tooth Faerie]

Well interest rates alone aren't a good indication - I'd use them more as the 'risk free' rate for my cash, and would expect net rental yields to be greater than these; i.e. if IR are 7%, but net rental yield is 11%, then it may be worthwhile.

It's more the idea of picking up an asset that generates less cash than a term deposit and hoping for it to go up in value that doesn't really make much sense to me.

Thank you.

You've just expanded my ming regarding property.

 

[satanoperca]

Hi Tech/A,

As I mentioned earlier, I didn't believe most investors borrow money for new builds (construction) but rather for established dwellings.

It was a lot higher than I thought. 90% of housing financial commitments are for existing.

NG gearing on existing is a rort.

 

[Junior]

Hi Tech/A,

As I mentioned earlier, I didn't believe most investors borrow money for new builds (construction) but rather for established dwellings.

It was a lot higher than I thought. 90% of housing financial commitments are for existing.

NG gearing on existing is a rort.

It really is.

All of the arguments FOR negative gearing are only relevant to new properties, not for existing. Tax deductible expenses relating to the property purchase should be quarantined and carried forward, only to be offset against future rental income or capital gain relating to that specific property.

Rules to remain as they are for newly constructed dwellings.

 

[tech/a]

Hi Tech/A,

As I mentioned earlier, I didn't believe most investors borrow money for new builds (construction) but rather for established dwellings.

It was a lot higher than I thought. 90% of housing financial commitments are for existing.

NG gearing on existing is a rort.

Yes I know.
They in general terms will be lucky to profit in the long run.
unless you get a good run on capital gain it really is non productive for producing an income even if you buy it freehold. Being negatively geared is pretty easy to do---even when you think you'll be positively geared.
You need any tax benefit you can get.

You end up as is the case now with many holding property in hope of a capital gain but finding its costly to hold on.
eventually many will get sick of the drain and sell out.
When interest rates increase---watch the exodus!
Bubbles Popping Everywhere.