Capital Gain versus Rental Yield

[forumite]

There's an article in The Age today.
http://theage.domain.com.au/real-es...create-housing-bubble-rba-20101006-166z5.html

Quoting from this article:

"If rental yields are very low, investors are buying properties without really thinking about the rental yield. Buying an asset just because you are expecting the price to rise in the future, well that is actually the academic definition of a bubble. So that would be undesirable and be seen as a problem." Dr Ellis said.

Asked if the lower yields meant a limit to the rate of price appreciation, Dr Ellis said: "The short and simple answer is - yes".

forumite

 

[zed_kid]

OK. I’m totally fine with flat growth as long as rents catch up and make the yields appealing, and then investors will do their bit and we’re off and racing again...

 

[truong]

"Buying an asset just because you are expecting the price to rise in the future, well that is actually the academic definition of a bubble. So that would be undesirable and be seen as a problem." Dr Ellis said.

So buying gold, antiques, art, stamps, etc... even buying undervalued shares, trading in currency... is creating bubbles?

 

[long88]

the principle is always buy low sell high or sell high buy low.

which one can you employ to make extra money for you ? doesnt matter what is the vehicle that you use.

So buying gold, antiques, art, stamps, etc... even buying undervalued shares, trading in currency... is creating bubbles?

 

[bene313]

also discussed here:
http://www.somersoft.com/forums/showthread.php?t=65785

 

[Sunfish]

buying undervalued shares cant possibly be creating a bubble because they are undervalued. I concede that "irrational exuberance" can create a bubble in shares the same as any other asset class. If you need to project too far out before an investment will give a 6 - 7% return, maybe you are buying into a bubble.

Buying shares in a growing company is contributing to it's growth and that of the economy as a whole. I am currently buying shares in a 2c company and buying it's new issues every time they are offered so they can proceed to profitable operation. I don't see how that can be creating a bubble. I think of it as "creating a strong company". My 2c company expects to be producing in December with a cash flow margin of US$800/oz with 100,000 ozs/y. This is no bubble, it's inflating a flat tyre: Rebuilding a derelict mine!

 

[Dazz]

Very morose title, Head of Financial Stability....but what is Luci worth ??

 

[Deltaberry]

Whether something is overvalued is a function of flow of credit and cost of credit... SP Ausnet has a high yield - I think 10%. So does Telstra. Maybe some of you should consider buying some. They only fall around 5% everyday. But hey, high yield you know? Surely the markets have got it wrong...

 

[Sunfish]

Whether something is overvalued is a function of flow of credit and cost of credit... SP Ausnet has a high yield - I think 10%. So does Telstra. Maybe some of you should consider buying some. They only fall around 5% everyday. But hey, high yield you know? Surely the markets have got it wrong...

You're just stirring. You know I don't buy that garbage. I buy stuff that I assume will pay me 50 -100% return per year on my entry price if it all comes together. A decade is not too long for those hopes so I see no bubble. (Looked at the price of Au/Ag tonight)

 

[Deltaberry]

I see... well I recently tipped SSM if you track my threads (the only time I stock tipped on this forum, which was around a month ago).

Probably done nearly 75%+ in 3 weeks... should fit your criteria.

Small cap, high risk, high return.

 

[Sunfish]

I see... well I recently tipped SSM if you track my threads (the only time I stock tipped on this forum, which was around a month ago).

Probably done nearly 75%+ in 3 weeks... should fit your criteria.

Small cap, high risk, high return.

They're like fish. You can't catch them all and you don't lament those that you miss. But yes, the sort of stuff I like.