How long do you think prices can remain static before they fall? It all depends on the stamina of negatively geared landlords to wear losses.
Investors could create housing bubble: RBA
- Thread starter hobo-jo
- Start date
how long do think house prices can remain static before they rise, HBS? remember, neg gearing doesn;t make up a majority of investment property positions. a significant minority - yes, enough to make a difference - yes, but let's not get carried away here.
sorry - i'd have taken your words with some serious consideration about a year ago.
i still think everything is overpriced, myself. i think we're in for the mother of ALL crashes across every index you can imagine - but not yet - not by a long shot. there's enough smoke left in the room to hide the broken mirrors.
i call the bull run to end all bull runs for the next 10 years, minimum - maybe 15 years.
the US will deflate it's dollar to erode it's debt and will take on a new role as they become competitive with India / China for manufacturing again. the late 80's saw America choose incorrectly as to what they would specialise in regionally, and they still got it wrong.
regional currencies will just be implemented by this stage - we may be spending our resource dollars with Doan (dollar/yuan).
but i'm not a bull or a bear, just a realist. i trade the way the wind blows.
there's so much pent up demand and talk of 2011 being "the year" that i can't see prices falling anywhere except outer lying greater Sydney/Melb - even then it'll be a correction and away again.
even the CBA has got ASIC's blind eye while they spruik Aus property CDOs to OS wholesalers.
so at present, i am certainly NOT bearish property in Australia.
sorry - i'd have taken your words with some serious consideration about a year ago.
i still think everything is overpriced, myself. i think we're in for the mother of ALL crashes across every index you can imagine - but not yet - not by a long shot. there's enough smoke left in the room to hide the broken mirrors.
i call the bull run to end all bull runs for the next 10 years, minimum - maybe 15 years.
the US will deflate it's dollar to erode it's debt and will take on a new role as they become competitive with India / China for manufacturing again. the late 80's saw America choose incorrectly as to what they would specialise in regionally, and they still got it wrong.
regional currencies will just be implemented by this stage - we may be spending our resource dollars with Doan (dollar/yuan).
but i'm not a bull or a bear, just a realist. i trade the way the wind blows.
there's so much pent up demand and talk of 2011 being "the year" that i can't see prices falling anywhere except outer lying greater Sydney/Melb - even then it'll be a correction and away again.
even the CBA has got ASIC's blind eye while they spruik Aus property CDOs to OS wholesalers.
so at present, i am certainly NOT bearish property in Australia.
My point was that static prices lead to reduced demand and eventually capitulation. This isn't just a feature of property markets, all markets need a small degree of inflation to keep transactions flowing. Deflation is a self fulfilling cycle. Unless there is growth or prospect of growth things go downtown to chinatown. Perhaps the prospect of growth is the important thing here, there's a big lag in market information and sentiment.
BTW what are th figures for negatively geared investors? Also, I believe there are plenty of flippers and people who see their PPR as a speculative tool.
I think the risk/reward ratio is too high in Aussie property to be honest. I'm concentrating on other things.
I've seen two property crashes already. I've seen this talk before. I'm not saying it won't go on for another ten to 15 years. It very well could. It will be a horrible train wreck if it does though. Right now would a fender bender compared to that.
couldn't agree more with everything you've just said.
FWIW, i don't invest in Aussie property for growth at present. growth is a positive side effect of my strategy at present.
i thought "the talk" about a crash after the Beijing olympics was the same kinda hype - but here we are.
but you seem to be missing a key element - sentiment. you missed it before in the supply/demand side of the equation.
you seem to be adding your thought train up lineally - ie 1+1=2.
when in reality, it should be
2 . 2 = ?
_ x _
3 . 3
FWIW, i don't invest in Aussie property for growth at present. growth is a positive side effect of my strategy at present.
i thought "the talk" about a crash after the Beijing olympics was the same kinda hype - but here we are.
but you seem to be missing a key element - sentiment. you missed it before in the supply/demand side of the equation.
you seem to be adding your thought train up lineally - ie 1+1=2.
when in reality, it should be
2 . 2 = ?
_ x _
3 . 3
I know where you are heading with this and I agree with you around low yielding high capital gains assets but many markets can be sustainable with no capital growth at all.
If they yield a sufficient yield and there is no expectation of capital appreciation or losses then it will be somewhere around a bank account yield.
To say no market is sufficient to stay languishing without growth or loss would be to say deposit markets should have collapsed because they rely only on yield and preservation only of capital.
Are Aussie properties yielding though? I think deposits are a superior bet right now. Zero capital risk either way but superior cash.
Depends where.
Karratha and the like are still even with massive capital gains yielding more than a U bank account.
Nonetheless I agree with you they are not yielding enough.
Why not though in our government make some hay out of the mess; release land, leave low hanging fruit for developers and you get your new supply and GDP growth at the same time as you get a reduction in consumption via an erosion of the wealth effect.
I just don't believe that the demand is based on fundamentals. I think that if the government releases new land they will end up will a huge oversupply. We won't know the truth about 'under supply' until next year or whenever the census results become available. I think the ABS has big questions to answer about the lack of accurate market information.
metro aren't generally yielding a lot.
but if you're in it for yield, why WOULD you look metro resi? why not regional? commercial?
but if you're in it for yield, why WOULD you look metro resi? why not regional? commercial?
Don't start me on commercial.
Brisbane is a mess, plus plenty of dirty tricks going on.Another difference with commercial is it has to yield an extra 2% to cover land tax. Not too many mum and dad investors in commercial. I can see here there are some but it is factored into the decision with commercial on most transactions I imagine.
Residential on the other hand in most states has a threshold allowing you to own an IP or two and avoid it or pay minimal and this is why I believe our housing market is owned by lots of mum and dad investors. While it only yields 4% in Sydney metro imagine as a landholder buying that for yield and paying 2% land tax?
Residential on the other hand in most states has a threshold allowing you to own an IP or two and avoid it or pay minimal and this is why I believe our housing market is owned by lots of mum and dad investors. While it only yields 4% in Sydney metro imagine as a landholder buying that for yield and paying 2% land tax?
The sums for a lot of commercial don't seem to make sense. I can't understand how Ivy (Sydney) for instance can service the level of capital that went into it. Mind boggles. The rents around Pitt St (Sydney) seem crazy too. It seems Brisbane is not the only disfunctional market.
but it may not be they're servicing 100% of it, or even 60%.
vendor finance plays a decent part in commercial investing.
or even something as simple as someone bringing equity to the table from the sale of a few of their houses.
or just the fact that the sale price provides a 17% yield.
doesn't the tenant cover all outgoings - or is land tax payable by the lessor?
Merivale would be an interesting study, they seem to own most of the Sydney CBD bars so I can't see how they're not cannibalising their own business.
As for initial capital you have to consider opportunity cost. Merivale built the premises so it wasn't a case of sale price representing yield.
In Brisbane we have a proliferation of JB Hi-Fi stores that do not seem sustainable. Groove Train has also gone on a very ambitious expansion rollout. I'm sure I can think of other examples but there seems to be a lot of investment in retail and hospitality recently. The new food court on George Street looked a bit sketchy there for a while but it looks like it's getting decent footfall now.
I am a tenant and I pay all electricity, water etc but I do not pay land tax.
I think it would be akin to asking the tenant to pay the owners income tax and interest. It is not an outgoing it is a holding cost.
Edit: I am thinking now it is possible. Maybe I don't pay it because I lease only a portion of a larger lot? They did say when I took this place on outgoings of 30k p.a. and they have not come close over the last 12months maybe there is a surprise in stall for me?
Don't remember paying it on leases in other states though but I was not as involved in the process at that time.
I think it depends on the amount of rent being paid, or at least it does in SA.
ie - once annual rent goes past a certain figure, the owner can pass on the land tax to the tenant. We have a client in 'discussions' with his tenant over this exact issue.
wow especially for industrial premises which comprise mostly hard stand and a shed the land value component is such a large component the 2% land tax could be 20% of your leases value say on a property with a yield of 10%!
Say leasing a property with a land value of $1million with $500k of improvements and be paying 100k rent but the land tax is 20k. It is certainly not insignificant!
i was under the impression that the tenant paid all outgoings - BEING ALL OUTGOINGS...?
however, as a sub-lesse, you may be shielded from that - especially if you're not on the contract.
however, as a sub-lesse, you may be shielded from that - especially if you're not on the contract.
SO I have just got my lease out for here.
I have a lease agreement with the owner that says I will pay all outgoings. Its a REIWA standard lease and has a list of all outgoings with an x in every box for me.
And yes land tax is there along with MRIT whatever that is!!! And it has a cross so I anticipate now I have been here for 12 months the bill is probably in the mail!
We only have a portion of a bigger block and I expect the land value on this portion probably is a million so I can look forward to a 20k bill any day now. This is catered for in th REIWA standard lease. I think much commercial property is broken down into smaller chunks. This one lot is over about 40,000 sq.m so there are a number of tenants in 1000sq.m odd sheds.
This actually makes resi look even more out of sync with commercial!
