Canberra Property market

From: Simon and Julie M


Hi all
We have been progressively buying property in Canberra for the last 10 years. We have experienced rises and falls in the market.
From our experience and studying history an interesting thought came to mind in regard to market indicators.
We have noticed when the R/Estate market is weak rents are strong, until the crossover transition from tenanting to owning takes place. Because of this the market strengthens, the rents level out then because of over supply etc. they then decline and the process repeats itself.

My question is :

Is this a true market indicator? and if so does it hold true for all real estate markets (in particular, Gold Coast)?

Would appreciate your thoughts
regards
Simon
 
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Reply: 1
From: Paul H


Interesting,

In the AFR this week-end, there is an article making the same
observations...AFR is showing average state of rental for each state.

An interesting read and definately worth hearing different opinions.

Cheers,

Paul H.

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Subject: Canberra Property market


From: "Simon and Julie M" <[email protected]>

Hi all
We have been progressively buying property in Canberra for the last 10
years. We have experienced rises and falls in the market.
From our experience and studying history an interesting thought came to mind
in regard to market indicators.
We have noticed when the R/Estate market is weak rents are strong, until the
crossover transition from tenanting to owning takes place. Because of this
the market strengthens, the rents level out then because of over supply etc.
they then decline and the process repeats itself.

My question is :

Is this a true market indicator? and if so does it hold true for all real
estate markets (in particular, Gold Coast)?

Would appreciate your thoughts
regards
Simon





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Reply: 2
From: Terry Avery


Hi Simon,

You might like to read Peter Waxman's book Investing in Residential Property
4th Edition. On page 128 he says:

The price and availability of alternative rental accommodation exerts a
direct positive impact on house prices, since an increase in rents leads to
an improved yield on housing investment as well as stimulating demand by
tenants who find that the cost of rental accommodation is similar to that of
servicing an average mortgage....

In other words, as rents go up tenants start to think it will cost the same
to buy as to rent so why not buy? This fuels demand for housing so prices
increase, vacancies increase, rents go down, it becomes cheaper to rent than
buy and the cycle goes on. Peter says the equilibrium point for vacancies is
around 3%. When vacancies drop below 3% rents increase due to higher demand.
When vacancies are higher than 3% then rents decrease to attract tenants.
These swings are not like the commodities market, they take years to happen
so one doesn't need to rush.

Hope that helps.

Cheers

Terry
 
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