Check this out:
http://ping.fm/LSCem
Property has crashed in the US, but it has not crashed at all in Australia. On average rental yields in Australia are 3-4%. This means that it is almost always cheaper to rent than to buy. I think if it's a little bit cheaper to rent than to buy then maybe that's ok, but if it's 50% cheaper to rent, that's a dangerous sign for the property market. I certainly wouldn't be buying any investment property that returns only 3-4% return. That's a really low return investment. Will take 33 years to get your money back at 3% return. And that's not counting inflation. Anybody read about japan in the 1990s? The Market has gone down in Japan for 20 years since then. Australia is not Japan because we have population growth and they don't but it's still a big risk that values will fall when property gets too high.
Obviously it depends on the individual property and there are always good buys. And if you are buying to sell within 6 months it's not so much of a risk. Also if you are buying in a location that is totally prime (for example walking distance to Sydney beaches) the lack of supply may hold up prices permanently and keep them going higher.
Most people say that the reason Australian prices are so high is an imbalance of supply and demand. Maybe but as the prices go higher, supply will adjust. It becomes more profitable to build and so you will get more and more supply until there is an oversupply. That's inevitable if prices get out of whack.
I'm not saying it's definitely going to happen, but I am saying that it's dangerous to buy property when it has really low net yields of 3-4%.
http://ping.fm/LSCem
Property has crashed in the US, but it has not crashed at all in Australia. On average rental yields in Australia are 3-4%. This means that it is almost always cheaper to rent than to buy. I think if it's a little bit cheaper to rent than to buy then maybe that's ok, but if it's 50% cheaper to rent, that's a dangerous sign for the property market. I certainly wouldn't be buying any investment property that returns only 3-4% return. That's a really low return investment. Will take 33 years to get your money back at 3% return. And that's not counting inflation. Anybody read about japan in the 1990s? The Market has gone down in Japan for 20 years since then. Australia is not Japan because we have population growth and they don't but it's still a big risk that values will fall when property gets too high.
Obviously it depends on the individual property and there are always good buys. And if you are buying to sell within 6 months it's not so much of a risk. Also if you are buying in a location that is totally prime (for example walking distance to Sydney beaches) the lack of supply may hold up prices permanently and keep them going higher.
Most people say that the reason Australian prices are so high is an imbalance of supply and demand. Maybe but as the prices go higher, supply will adjust. It becomes more profitable to build and so you will get more and more supply until there is an oversupply. That's inevitable if prices get out of whack.
I'm not saying it's definitely going to happen, but I am saying that it's dangerous to buy property when it has really low net yields of 3-4%.