Brisbane - to soar again?

[alexlee]

http://www.news.com.au/couriermail/story/0,23739,22402229-952,00.html

In a bleak message for future home buyers, BIS Shrapnel chief economist Frank Gelber said present prices were as affordable as housing was going to get.

"There's a housing boom coming, is what I'm really saying," Dr Gelber told yesterday's BIS Shrapnel Economic Outlook conference in Brisbane.

"It's going to take something like a 30 to 40 per cent rise in housing prices across the board in order to encourage enough of that land to be brought on to satisfy the 'greedy' developers and landowners.

Dr Gelber said the housing market was "collateral damage" in the Reserve Bank of Australia's war on inflation through interest rate rises.

The dilemma for the RBA would be to recognise the "tipping point" at which further rate rises would shatter household confidence, Dr Gelber told investors.

Basically he's saying that structural issues are going to push up prices, but at the same time buyer confidence is going to be crap? How does one reconcile that? I can't. Prices rise when people are willing and able to borrow. They fall when people are not willing or unable to borrow. I would have thought the structural-driven undersupply would increase rents instead as prices come off the boil.

Either way, those who own property aren't complaining. Higher rents but flat or lower prices in the short term, then a medium term boom.
Alex

 

[equitymate]

Ive always found BIS to be full of BS.
These are they same guys who afew years ago were calling for interest rates to go to 10% plus and the market to crash.

I think with some of these property think tanks the more ott claims, the more press, the more press, the more report sales.

Saying that the market is now clearly moving in some parts.

 

[Mr. Fabulous]

Ive always found BIS to be full of BS.

Backed. I don't believe in fortune tellers, why would I pay attention to any of them?

Mark

 

[alexlee]

I'm just hoping the rubes will believe it and bid prices up. Then I can refinance my Brisbane IPs at the top and buy into Western Sydney.

I made a trip to Blacktown the other week and am more confident than ever that it's going to be a great investment area for me.
Alex

 

[Mr. Fabulous]

Hi Alex,

If BIS is tipping a boom in Brisbane, they're about six - eight months too late mate. Blind Willy could see that there has been a boom of sorts happening up here. No one currently in the market in Brisbane would be surprised to be told that.

It's really bizarre - six months ago it was possible to find good properties yielding 5.2% or more. But now? Forget it. Even if you find something that comes close it's either a piece of crap or gets above asking price offers anyway.

If John McFarlane is right, it's not going to continue for much longer, I reckon.

Mark

 

[eternit]

Hi Alex,

If BIS is tipping a boom in Brisbane, they're about six - eight months too late mate. Blind Willy could see that there has been a boom of sorts happening up here. No one currently in the market in Brisbane would be surprised to be told that.

It's really bizarre - six months ago it was possible to find good properties yielding 5.2% or more. But now? Forget it. Even if you find something that comes close it's either a piece of crap or gets above asking price offers anyway.

If John McFarlane is right, it's not going to continue for much longer, I reckon.

Mark

Hi,

So you dont think the prices will go up much anymore in Brisbane?

 

[tubs]

They need to take the 'I' out of BIS.

 

[alexlee]

Hi,

So you dont think the prices will go up much anymore in Brisbane?

On a yield basis, in general it's pretty poor. Continued credit issues will make loans harder to get. My own prediction is still the same as for Sydney: flat or lower prices together with higher rents.
Alex

 

[eternit]

On a yield basis, in general it's pretty poor. Continued credit issues will make loans harder to get. My own prediction is still the same as for Sydney: flat or lower prices together with higher rents.
Alex

I just bought a property in Browns Plains not too long ago for about $270,000.

It will most likely be rented for $300-$310 which is not bad.

Hopefully there will be CG on it soon.......

 

[Mr. Fabulous]

Hi,

So you dont think the prices will go up much anymore in Brisbane?

Woah! I didn't say that. Check my interest rates thread.

Mark

 

[eternit]

Woah! I didn't say that. Check my interest rates thread.

Mark

I have read the article with Mr McFarlane.

But if the interest rates do keep rising then surely the house prices will have to come down at some stage. I mean there is a limit to how much repayments a person can make.....

 

[dwv]

I made a trip to Blacktown the other week and am more confident than ever that it's going to be a great investment area for me.
Alex

Hi Alex,

I won't you won't mind me asking these questions here in this thread. I've also been thinking of investing around Blacktown and Hills area. I'm new to the market (I've just bought my house 5 months ago) and have practically no idea if it's a good buy or not . But the areas I've been wanting to invest in (based only on what I see and feel) is Kellyville Ridge, Rouse Hill and The Ponds areas. There are also talks of a new apartment to be built beside the Westpoint area where the current tennis courts are located. I also believe they would be good investment. What are your thoughts on these?

Thanks.
Dennis

 

[Mr. Fabulous]

I have read the article with Mr McFarlane.

But if the interest rates do keep rising then surely the house prices will have to come down at some stage. I mean there is a limit to how much repayments a person can make.....

Hi eternit,

Yes I agree to a certain point. Depending on how high rates go will determine if prices come down. They may just go flat, no one can really say either way. It's just something to keep in mind that it may happen. I don't believe prices in Brisbane are sustainable - they will at least stagnate until such time as rents come up. But when that happens is anyone's guess.

Personally, I want rates to go up, which will hopefully encourage people who paid too much to sell and I can pick something up at a price which makes sense. Like the illustrious Warren Buffett says 'wealth is the transfer of money from the impatient to the patient'. I've been learning a lot about patience, lately haahaha.

Mark

 

[eternit]

Hi eternit,

Yes I agree to a certain point. Depending on how high rates go will determine if prices come down. They may just go flat, no one can really say either way. It's just something to keep in mind that it may happen. I don't believe prices in Brisbane are sustainable - they will at least stagnate until such time as rents come up. But when that happens is anyone's guess.

Personally, I want rates to go up, which will hopefully encourage people who paid too much to sell and I can pick something up at a price which makes sense. Like the illustrious Warren Buffett says 'wealth is the transfer of money from the impatient to the patient'. I've been learning a lot about patience, lately haahaha.

Mark

I guess it makes sense about prices wont keep going up until rent goes up more.

I would like to get some good deals aswell if and when the interest rates go up too much. However that all depends on the affordability of the repayments by people.

Surely there are people in such situations right now. I wish I could find people before the bank repossess their homes, that way I can deal directly with the vendor....

 

[alexlee]

Hi Alex,

I won't you won't mind me asking these questions here in this thread. I've also been thinking of investing around Blacktown and Hills area. I'm new to the market (I've just bought my house 5 months ago) and have practically no idea if it's a good buy or not . But the areas I've been wanting to invest in (based only on what I see and feel) is Kellyville Ridge, Rouse Hill and The Ponds areas. There are also talks of a new apartment to be built beside the Westpoint area where the current tennis courts are located. I also believe they would be good investment. What are your thoughts on these?

Thanks.
Dennis

Personally I'm looking for old houses, mainly because I'm interested in the land, not the houses themselves. So I'm not looking for a new mcmansion, for example.

My concern is that the yields still aren't very good in Blacktown. Houses in the $230 - $250k range would only rent for $200pw.
Alex

 

[sue78]

it's happening right now....has been soaring since around april. my friends bought a 2br 2 bath unit in kangaroo point with a bit of city views and river views (first floor) for $380k in may...now worth $450k. there aren't any units with views under $450k really.

I said from early in the year that land that are 600sqm+ at around $190k will reach $closer to $300k by the end of the year and it's happening.

All our properties have witnessesd about a $50k growth each since June.

ofcourse, rent has increased a lot in the last few mths too follow on from the growth. Our Kuraby house is being rented at $385 per week but now that it is valued at $450k , rent of $450 p/w should be achievable. Houses in this area rent out very quick anyway.

The house we have just finished building....when we started I was hoping that it would be worth around $420 to $430k on completion...back in april...now it's worth $520k....In jan i got a a rental appraisal for $450p/w, just got another one last week for $500 to $520 p/w. Land alone is about $260k...easily worth nearer top $300k by dec.

Okay, now I want to share this tip here.....just found out today yet to enquire...hmmm maybe I should wait until I can secure one fo myself!! but the capital growth is about $150k!!!

 

[dan_zs]

There is obviously no indication of prices going anywhere but up in Brisbane, especially if we all keep in mind that Queensland's GSP has grown approximately 5.0% each year from 2002 until present, while growth in Australia's GDP rose on average 3.9% each year suggesting that a property shortage will allow profits to keep climbing …

If we look at South Australia, the increase in property value is due to investor interest and not determined by a rising population or lack of property per capita, they are actually experiencing a decreasing population; prices will still increase due to relatively cheep property in comparison to other states, I’m just not sure if renters will be able to maintain the same upward price trend especially when they are experiencing a city of renting choice, this could effect all IP that are purchased with little deposit or equity transfer. Does anyone agree or disagree??

 

[sue78]

you have a very good point! what's the median house price now in brisbane? I think it should be $500k and if not...it will be in the future.

dan, why not? considering renting is still much cheaper than buying for a tenant. One of my mil's IPs is rented at $350p/w and worth $450k. It's way cheaper than buying.

 

[Spectre]

Good post timing Alex

I see renting changing (or is evolving a better suited word?) with tenants not just getting a flat rate for a property per week any more. I've even seen a trend of clients who own rentals skipping year leases and do 6 monthly with the preset notion of increasing every six months (in bris)

A few comments... what are the signs to be watching for...

Incomes (according to our PM) have never been higher, unemployment never lower, the economy never stronger
(while also noting seniors cant afford to pay rates or higher costs of living, issues are around with Workplace Agreements, and its a question if JH is going to get back in or is it all media hype re Rudd and JH will cream him in the end)

As our ex leader mr beattie states employment is down to 3.5% in qld compared to the national average.

With the increasing costs of property ownership can/should tenants expect to pay low rents and not face increases.

A battle between the first home buyer and investors is continuing...

Noting as well that rates are trending up steadily with fixeds in some of the lenders just now starting to hit into the very high 7's with a variable getting closely matched... so variables including your .7% disc come to around 7.62% with a future hike (maybe)

Stock market jumping around like a kid with ants in his pants.

And your 'nonconforming lenders' who get a bit of bad press every once in a while... I wonder if they're getting ready for a boom in business

Its going to be a fun ride

 

[alexlee]

What I don't get is why people expect the buyer (property prices) and rental (rents) markets to move in the same direction. In this particular article, it's saying chronic undersupply will force prices up. That doesn't necessarily make sense, especially when yields are already relatively low.

Undersupply of new properties means demand for existing properties goes up. Fine, but demand for what? Demand doesn't necessarily translate to higher prices, because the population can either buy or rent. i.e. demand can be in the form of buyer demand (pushes prices up) or rental demand (pushes rents up).

With the current credit issues (non-conforming and even banks simply won't be able to lend as much as they used to). Banks don't make extra money if house prices go up, though their default rate drops.

So we have undersupply and tightening credit, in a situation when prices are already fairly high based on rental yield. What's the most logical result? Given that rents are relatively cheap, wouldn't you expect the excess demand to go into rental demand instead of buyer demand?

The article states that property prices have to go up because otherwise investors won't go in. I disagree. I think investors will go in if property prices don't go up but rents increase. With prices already high (relative to rents) and credit tightening, even if business is good (though watch the US and China on this one: remember the economy ALWAYS looks good just before a bust), I think more people will rent instead of buy. That means rents will go up (the 6 month thing is likely, just as during the boom in Sydney we had rent free offers).

As landlords, we win either way. Either our rents go up, giving us more serviceability to buy more properties, or our properties go up, giving us more equity to buy more properties.

My own bet would be that rents to up, prices stay flat or trend down.
Alex