From lawexperts.com.au
Investors could create housing bubble: RBA
- Thread starter hobo-jo
- Start date
thanks dan c
This lease will have been drawn up well after land tax was brought in to WA so it is well and truly taken care of!
I expect if it said all outgoings and this was not on the list then sure especially due to the list itself detailing the other outgoings by its exclusion there would be difficulty getting it out of a tenant.
Anyway thats a bit of a blow. I can see I suppose the justification behind it in that the business is likely to have rent outgoings as only a small portion of turnover so the government bringing in a 2% land tax would have a profound influence on a landlord far less so on a tennant whose rent might only be 3 or 4% of annual turnover.
Still it is a blow.
This lease will have been drawn up well after land tax was brought in to WA so it is well and truly taken care of!
I expect if it said all outgoings and this was not on the list then sure especially due to the list itself detailing the other outgoings by its exclusion there would be difficulty getting it out of a tenant.
Anyway thats a bit of a blow. I can see I suppose the justification behind it in that the business is likely to have rent outgoings as only a small portion of turnover so the government bringing in a 2% land tax would have a profound influence on a landlord far less so on a tennant whose rent might only be 3 or 4% of annual turnover.
Still it is a blow.
Nah...incomes will never increase.
At least; that's what we all believed back in 1980 when I was earning $55 per week.
When I was about 8 years old (1969 approx), we lived in an outer suburb of Melb called Glen Iris. We were renting, and my Mum was offered the house to buy for $18k from memory (could have been $8k?). She couldn't buy it because she couldn't afford it and in those days it was very very difficult for single mothers to get loans.
Now Glen Iris is the geographical centre of Melb I believe. That same house is now worth well over $1 mill.
It's interesting for me as (probably) one of the oldest forumites here to sit and read all the speculation and fear (from the younger ones) about if rents will go up, if house prices will go up or crash and so on.
I can assure all of you; all that ever happens is that house prices keep going up, rents keep going up, and so do incomes.
Now, they never all go up at the same rates and at the same times, and sometimes you will see house prices fall in certain areas and at certain times - but the long term pattern - at least in my 49 years on the Earth is UP.
You can get ahead of the curve by buying at the right time and (if you sell) selling at the right time, but if you did nothing but simply buy a house and rent it and sit on it for a number of years it will go up. No question.
Finally; on the topic of falling house prices; I have never seen anyone lose money on a property until they buy at the higher point of the market, and have to sell at the lowest point. Key word here being "sell".
The problem was the "operator error" - not the market. The operator had to sell. If they didn't have to sell they wouldn't have sold, and wouldn't have seen a loss of money.
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If you're in that position you've lost money. It's just whether you choose to crystalise the loss or not. My mum has this attitude wrt shares: "I can't sell them now or I'd lose money"
T.
That's sort of what I said - but not "choose" - if you have to sell the property.
The only people I see selling a house for a loss are those who have to sell, or maybe occassionally developers who think they can make more money from another project, but need to offload a dud in order to do so. But that is a calculated strategy.
The difference with shares compared to property is that with shares they can disappear to zero, and have done so. I know several people who own shares that died long ago, yet they still have them.
I don't know anyone who has owned a house for a long time that has gone backwards in value. No-one.
With property, if you've bought a fairly average, well positioned, middle of the price range or slightly below that version; it will always be there unless it burns down. Hopefully you have insurance for that.
If you've bought a very high-end property at the peak of the market when higher income earners often buy them then this is when you can see a big loss.
Why?
Because there are not many higher-income earners around to buy very expensive properties - the buyer pool is small. If economic times are poor, often times the high end buyers can disappear, making the pool even smaller, and making it harder to sell your house. Many of these types of houses are custom built, and of a certain style. Not everyone will like that style, which increases the difficulty to sell. Ands so on.
And when the economic climate is poor, this is often when the high-enders get into financial difficulty and have to start offloading assets - in a hurry.
It's a more volatile sector of the market, and one which the media love to drag out for sensational headline articles to get viewers.
It gives the perception that property can swing hugely in value, but from my experience; the vast majority of housing doesn't.
If your assets stay static in price, they are going backwards due to the effects of inflation
If everything stays static, there is no inflation. Some places actually have deflation... Want a formula for working out 'real' growth (as opposed to nominal) I learned in high school?
House prices can appreciate/depreciate independently of the wider economy. What we have seen over the last 15 to 20 years is house prices appreciating faster than prices and wages in the wider economy. Sooner or later that imbalance has to be corrected. BayView thinks that wages will rise to meet property prices, I don't think this is possible for many reasons. Not least because it would make Australia unattractive to migrants, and it would make Australian exports unattractive. I think it's more likely that Australian house prices will depreciate to revert to mean relationship with wages.
are you new to australia?
Australia IS ALREADY uncompetitive - we'd just be putting down a dying dog.
locals are already realising the rip and are buying goods online from overseas.
wages will grow or they won't be able to attract an already malaise local workforce. Section 457 visa's are about to be reviewed and IMO, numbers will be cut thanks to our lovely union NIMBY strangleholds on anything labour related in this country.
big demand for skilled labour + a shortage of skiled labour = higher wage prices.
again, it comes back to supply/demand, which, again, seems to have been missed.
I don't know where you think this increase in wages is going to come from. You can't just create money out of nothing. All this focus on mineral exports ignores the fact that Australia has a net trade deficit. The mineral exports are insignificant to Australia's GDP. Without migrants the demand side arguments for the property market collapse.
have we learned nothing from this little escapade?
I can't create money, YOU can't create money, but BHP go to bank with hand out and say "more!" and bank says "50s or 100's?"
of course we have a net trade deficit, and mineral exports are NOT insignificant.
lets say we have someone selling bananas and someone selling apples.
85 bananas cost $85 to produce and are sold for $120.
15 apples cost $15 to produce and are sold for $30.
which business has more potential? which is more likely to appeal to the wider investing public on scalability? apples or bananas?
apples are "insignificant" the grand scheme of things, but they have a higher profit margin.
Australians invest far more money in housing than they do in mining. Mineral exports represent about 10% of GDP? This is surely negated though by the fact that Australia has a net trade deficit. Incidentally, Australia's net foreign debt is pretty close to 100% of GDP.
SO TRUE.
HBS - debt is a commodity now, like corn, pork bellies, orange juice.
it will grow because it's a tradable, taxable item.
if we have too much corn, prices plunge. same with debt, if we have too much, the security that debt is tied to plunges as well.
it's like the carbon tax. you can't tax "nothing", so carbon needs to become a tradable commodity. if it becomes a commodity, then there's money to be made in producing more, so it will have the reverse effect.
it's not rocket science, just basic supply demand. people seem to want to chuck in all kinds of stats / figures, like M1/2/3, net/gr debt, consumer price indexes - whatever.
but if you treat debt like you treat any other tradable commodity, it's a lot easier to understand.
...or porn and cork bellies....boomchish.
Based on the current market cap for BHP Billiton, Australians could have bought it outright with the amount borrowed for Australian property last year alone. With change left over.
The value of the debt is indeed tied to the value of Australian property. Hence why international investors are worried about an Australian housing bubble. The bank strategy of decreasing business lending and increasing mortgage lending post GFC was nuts.
The value of the debt is indeed tied to the value of Australian property. Hence why international investors are worried about an Australian housing bubble. The bank strategy of decreasing business lending and increasing mortgage lending post GFC was nuts.
On the other hand they can only pay what they can afford. for some that will mean staying single, living with oldies, for others it will mean shared accommodation. A desperate few will live in their cars as they are doing in the US.
"Must live somewhere" does not mean they will continue bidding up prices.
it's the same story all around the world. the only difference is our region is fairing a lot better than most because we have #1 and #2 of the world's largest emerging "people of the middling sort" population bases who want new homes and flash cars and need the raw material from somewhere like here.....or Ghana.
