The future of Australian property prices

drunkestdriver · 19 April 2010

Australia is not keeping up with housing demand now, if there was no negative gearing investors wouldnt be building.
That would mean less rentals on the market, so higher rents.

satanoperca · 19 April 2010

drunkestdriver said:
Australia is not keeping up with housing demand now, if there was no negative gearing investors wouldnt be building.
That would mean less rentals on the market, so higher rents.

Can you please provide some evidence that this would be the case.

It would seem the only thing NG does is allow property prices to stay artificially high at the cost of taxpayers.

As I previously mentioned, USA has no NG but has a housing oversupply and falling prices.

Cheers

drsmith · 19 April 2010

CamKawa said:
Some intersting reading.

Rentals showing poor yield

''You can put money in the bank and get 5.5 per cent without any maintenance costs, insurance and repairs.''

Rental yield is perhaps not straight forward.

Residential/commercial land has a value but does not attract an income (it does in Monopoly but not very much). Land is perhaps like a commodity. It's real value increases as demand (relative to supply) increases but earns no income.

The infrrastructure (buildings) on the land earn the rent. The apprioriate income (rent after expenses) would therefore be represented by the capital cost of the building (plus maintainance) over it's economic lifetime plus a return on that capital investment. This should be greater than a risk free rate but once the value of the land is added it may not.

drsmith · 19 April 2010

Argument around negative gearing often revolves around have/have not when the answer most likely lies somewhere in between.

joeyr46 · 20 April 2010

MR. said:
In addition to Drsmith's reply

Yes and interest rates may not return to where they were just 20 months ago. IMO the low interest rates now appear to be a major driving factor in the current housing speculation. IMO something else needs to be done like a slight change to Negative Gearing.
Who knows what will be the cause of any actual crash of 50%......

Low interest rates are not the cause of rising house prices they were low for years before the 70's and house prices were relatively stable.
Interest rates in Japan have been low for a couple of decades and house prices have been falling
It is true that low interest rates allow us to borrow more on a particular income and from that perspective they allow prices to rise further.
But why would you pay more because interest rates are lower.
We dont pay more for say a commodore because the repayments are lower, but we may buy a more expensive car.

Trembling Hand · 20 April 2010

Joey you cannot be serious? Interest rate adjustments then do what? Provide something for the punters to read about in the papers but have no effect on the economy?

lol.

robots · 20 April 2010

hello,

who cares what happens/or has happened in Japan or US or Germany or UK

its all irrelevant, walk out the door look around, no guns no crack

just pure whitelight

thankyou
robots

MR. · 20 April 2010

joeyr46 said:
Low interest rates are not the cause of rising house prices they were low for years before the 70's and house prices were relatively stable.
Interest rates in Japan have been low for a couple of decades and house prices have been falling
It is true that low interest rates allow us to borrow more on a particular income and from that perspective they allow prices to rise further.
But why would you pay more because interest rates are lower.
We dont pay more for say a commodore because the repayments are lower, but we may buy a more expensive car.

Joey, perhaps people before the 70's didn't feel that they were going to miss out on securing property! If you were Japanese why would you put your money into an asset which keeps falling? The majority of the Japanese public keep their savings in deposits returning just 0.25% We can't imagine the circumstances in "OZ" which would lead to such decisions.

"Why would you pay more because interest rates are low?" Perhaps because the wife really really wants that house! Or because the property spruikers have convinced further investors to sign up with low interest rates while the figures are looking great. Perhaps it's the promise that prices will double again and they have missed out until now. It's a good question Joey, perhaps "it's just the fear of missing out!...." If we happened to acquired the mindset of the Japanese, the opposite would be happening. As robots states "who cares" this is "Oz".

Joey would you do me a favour and have a look at this past post. Although this chart is only "volumes of sales" we can see the volume change with interest rate changes. Volume has to have an impact on prices at some stage. It's my graph and it's how I concluded to my opinion.
https://www.aussiestockforums.com/forums/showpost.php?p=539679&postcount=688

Although I have read figures of only 2% from international investors I have wondered if this figure is greater because of the way the Chinese government has increased the deposit for a second home in China to 40% then 50% all within 6 weeks.

Carry trade and buying "OZ" property? Sure thing.......?

MR. · 20 April 2010

Those recent clearance rates of some 85% or so may have increased the total volumes of late so the red arrow could even be pointing the wrong way just now. You have to wonder what is driving this sudden demand? Foreigners/low interest rates/property spruikers with last years sales increases.....

satanoperca · 20 April 2010

MR. said:
Those recent clearance rates of some 85% or so may have increased the total volumes of late so the red arrow could even be pointing the wrong way just now. You have to wonder what is driving this sudden demand? Foreigners/low interest rates/property spruikers with last years sales increases.....

Greed and the allure of easy money, herd mentality.

Cheers

Dowdy · 20 April 2010

Interesting story on Bloomberg.

China to Damp Property Prices With `Draconian' Moves: Video

http://www.youtube.com/watch?v=AwDtZshzzTQ&playnext_from=TL&videos=LcaTeC5qlqw&feature=sub

UBIQUITOUS · 20 April 2010

Dowdy said:
Interesting story on Bloomberg.

China to Damp Property Prices With `Draconian' Moves: Video

http://www.youtube.com/watch?v=AwDtZshzzTQ&playnext_from=TL&videos=LcaTeC5qlqw&feature=sub

With the Ken Henry tax reforms due next week (which are touted as being the biggest in 50 years, I would be very surprised if the money renters aren't left high and dry. If China are cooling their own market, you can bet the Chairman Rudd will most definitely follow!

joeyr46 · 20 April 2010

Trembling Hand said:
Joey you cannot be serious? Interest rate adjustments then do what? Provide something for the punters to read about in the papers but have no effect on the economy?

lol.

I never said they have no effect on the economy. House prices are not the economy just a small part of it. IMO House prices are no different to any other auction type market where buyers and sellers enter into agreements with (lets call them fundamentals) data that is not necessarily accurate but is the only data available at the time, people buy and sell on emotion and a perception of what is happening. In the house market at the moment fear of missing out is probably one of the emotions driving the market. If interest are lower it may allow more people to participate but it doesn't matter if interest rates go up or Krudd puts cigarettes up $6 a packetit still means less money to bid house prices up

joeyr46 · 20 April 2010

robots said:
hello,

who cares what happens/or has happened in Japan or US or Germany or UK

its all irrelevant, walk out the door look around, no guns no crack

just pure whitelight

thankyou
robots

OK so you moved out of St Kilda

Dowdy · 20 April 2010

robots said:
hello,

who cares what happens/or has happened in Japan or US or Germany or UK

its all irrelevant, walk out the door look around, no guns no crack

just pure whitelight

thankyou
robots

You know what they say - The one thing that we have learnt from history is that we have learnt nothing from history

And what is happening in Japan or US or Germany or UK is less then 5 years old, so it's still current so if you choose to ignore that then you're only doomed to repeat it.

kincella · 21 April 2010

Dowdy....can we assume you are not a property owner....
so another inexperienced property investor is telling a very experienced property investor what to do...
I take very little notice of lame street media regarding property.....they are out to sell news....truth is irrelevant, facts are distorted to suit their story
we certainly never take any notice of the 'pigs might fly' sprouters
on average our debt in Aus represents 20% of our total assets.....

Pivotonian · 21 April 2010

joeyr46 said:
But why would you pay more because interest rates are lower.
We dont pay more for say a commodore because the repayments are lower, but we may buy a more expensive car.

Um, OK. You're clearly lacking in some of the fundamentals here.

Here are a couple of questions for you. How does buying a Commodore differ from buying a house? And how does supply of Commodores differ from supply of real estate?

Beej · 21 April 2010

Dowdy said:
You know what they say - The one thing that we have learnt from history is that we have learnt nothing from history

And what is happening in Japan or US or Germany or UK is less then 5 years old, so it's still current so if you choose to ignore that then you're only doomed to repeat it.

So what do you think should be learned form history, re the relationships between the property markets in say Australia, the US, the UK, Japan and Canada?? Tell us about the historic correlation of all those markets please, using say the post WWII period? (1950 -> now).

joeyr46 · 21 April 2010

Joey would you do me a favour and have a look at this past post. Although this chart is only "volumes of sales" we can see the volume change with interest rate changes. Volume has to have an impact on prices at some stage. It's my graph and it's how I concluded to my opinion.
https://www.aussiestockforums.com/forums/showpost.php?p=539679&postcount=688

Carry trade and buying "OZ" property? Sure thing.......?[/QUOTE]

Did you a favour
My reading of that chart is that house sales (I take it it is sales as opposed to prices) slowed 6 mths or so (new homes earlier) before interest rates dived and that the demand on money created by this slowing of demand was the raeson interest rates came down and when demand picked up so did interest rates rather than the other way round

Dowdy · 21 April 2010

Beej said:
So what do you think should be learned form history, re the relationships between the property markets in say Australia, the US, the UK, Japan and Canada?? Tell us about the historic correlation of all those markets please, using say the post WWII period? (1950 -> now).

What you should learn from those countries is why their property market collapsed and since they all collapsed recently it shouldn't be ignored... but hey, this time it's different, right?

The future of Australian property prices

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Trembling Hand

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robots

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MR.

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