Landlords shouldn't bet house on capital gains
- Thread starter L Bernham
- Start date
G'day LB,
I was going to post this last night, but the ISP "switched me off" (and it WAS getting a bit late) so I saved it to my hard drive.
Anyway, today's posts have been interesting - and I, for one, am glad to see you continuing to post. The role of being "anti" an accepted norm is often a lonely path. And, on this forum, I see you being "lonely" a number of times
Anyway, here are my thoughts re your comment that went something like "if investors sell, you have just as many homes suddenly available, as renters wanting to fill them" or some such:-
G'day LB,
With respect to the original discussion, if ALL investors except 100 were to "sell out", (they might need to drop their prices WAY DOWN, but they ALL SOLD!!) Then some VERY HAPPY home buyers got some bargains - but, suddenly, those renters that CAN'T afford their own home (even at bargain prices) have only 100 possibilities of places to go.
I find that taking an argument to its extreme can often make the point... So, here we are with only 100 rental properties available - what happens next??? Well, there are a number of scenarios:-
1. If the total number of renters was LESS than 100, I'd say nothing has changed much, and investors would still be selling
2. If the total number of renters was 200, then there could be a lot of "dutch auctions" going on regarding what rents they would be prepared to pay just to get a roof!!!
3. If the demand was SO HIGH, then a number of renters would consider shifting to another city where the situation was more favourable to them (i.e. higher vacancy rate of rental properties).
4. Some builders, real estate agents, etc. may well see that people are "screaming" for properties to rent, and are prepared to pay above "normal rents" just to be able to rent a property. As such, they would do what THEY could to ease the situation, AND put money in their own pockets.
LB, we DON'T live in a vacuum - every change has an effect, and the market accommodates !! As such, I don't believe that your "static" environment exists in the real world. Change is here to stay !!!
As to "where are the home buyers coming from?" From immigration, from other states, from kids who are just "itching" to leave home (they might not even have reached the age where they fit the "Home Buyer" mould - maybe they just want to share with a bunch of mates). While investors are around in droves, there are lots of places available to rent (perhaps too many?) so yields drop, the investors sell out, until the situation reaches (or goes past) equilibrium. Then the pendulum swings back the other way.
The major point is, the pendulum never stops at the bottom of its travel. It goes way past where the "neutral point" is, then swings back toward it, and again overshoots. I think life is a lot like that (and property too).
Perhaps property values are "over-shooting" now? Perhaps not. But I really don't think any decisions are ever as simplistic as the example you gave. Things are changing daily. I guess I have to subscribe to the Shares maxim that "the trend is your friend" (it's that pendulum again....) - so if the trend seems against you, change your situation to suit.
The vacancy rate is changing daily - usually in one direction for weeks, months, years on end. Over time, it changes, and heads in the other direction !!!!
Regards,
I was going to post this last night, but the ISP "switched me off" (and it WAS getting a bit late) so I saved it to my hard drive.
Anyway, today's posts have been interesting - and I, for one, am glad to see you continuing to post. The role of being "anti" an accepted norm is often a lonely path. And, on this forum, I see you being "lonely" a number of times
Anyway, here are my thoughts re your comment that went something like "if investors sell, you have just as many homes suddenly available, as renters wanting to fill them" or some such:-G'day LB,
I disagree that the figure is irrelevant. Imbalances are what create changes in supply/demand. What if the "certain number" of home buyers exceeds what is being built? What if the "certain number" of home buyers is LESS than the number of homes being built? It is THEN that the supply/demand curve changes, leading to an oversupply, or undersupply.
With respect to the original discussion, if ALL investors except 100 were to "sell out", (they might need to drop their prices WAY DOWN, but they ALL SOLD!!) Then some VERY HAPPY home buyers got some bargains - but, suddenly, those renters that CAN'T afford their own home (even at bargain prices) have only 100 possibilities of places to go.
I find that taking an argument to its extreme can often make the point... So, here we are with only 100 rental properties available - what happens next??? Well, there are a number of scenarios:-1. If the total number of renters was LESS than 100, I'd say nothing has changed much, and investors would still be selling
2. If the total number of renters was 200, then there could be a lot of "dutch auctions" going on regarding what rents they would be prepared to pay just to get a roof!!!
3. If the demand was SO HIGH, then a number of renters would consider shifting to another city where the situation was more favourable to them (i.e. higher vacancy rate of rental properties).
4. Some builders, real estate agents, etc. may well see that people are "screaming" for properties to rent, and are prepared to pay above "normal rents" just to be able to rent a property. As such, they would do what THEY could to ease the situation, AND put money in their own pockets.
LB, we DON'T live in a vacuum - every change has an effect, and the market accommodates !! As such, I don't believe that your "static" environment exists in the real world. Change is here to stay !!!
As to "where are the home buyers coming from?" From immigration, from other states, from kids who are just "itching" to leave home (they might not even have reached the age where they fit the "Home Buyer" mould - maybe they just want to share with a bunch of mates). While investors are around in droves, there are lots of places available to rent (perhaps too many?) so yields drop, the investors sell out, until the situation reaches (or goes past) equilibrium. Then the pendulum swings back the other way.
The major point is, the pendulum never stops at the bottom of its travel. It goes way past where the "neutral point" is, then swings back toward it, and again overshoots. I think life is a lot like that (and property too).
Perhaps property values are "over-shooting" now? Perhaps not. But I really don't think any decisions are ever as simplistic as the example you gave. Things are changing daily. I guess I have to subscribe to the Shares maxim that "the trend is your friend" (it's that pendulum again....) - so if the trend seems against you, change your situation to suit.
The vacancy rate is changing daily - usually in one direction for weeks, months, years on end. Over time, it changes, and heads in the other direction !!!!
Regards,
Hi Les
I feel you may have missed the point I was trying to make re "Every year there are a certain number of new home buyers coming in anyway so the figure is irrelevant for our discussion of what would happen if some owners sell as there would no doubt be new houses being built as well etc"
I should have highlighted" for our discussion of what would happen if some owners sell"
I have absolutely no doubt that a change in supply or demand in all those things you mentioned have an effect on values. this is constantly occuring and always will. I'm not too sure where you got the idea that I expect a static environment as the norm.
AS you said about taking things to the extreme being a good way to prove a point - I agree. This is what I was doing but taking it to the underextreme by ignoring changes in demand etc and focussing on what would happen if an investor sold to another investor or a FHB and that it wouldnt increase or decrease the total amount of housing stock available.
At this point in time there may be 5 million houses in Australia (number is irrelevant). If investor Max sells to Minnie there are still 5 million houses regardless of whether Minnie is an investor or a FHB.
If she is a FHB there will be one less rental property available. This is the point I think you were making. However if Max decided not to sell and Minnie bought elsewhere there would still be one less rental property available and this doesnt mean they will inevitably run out.
Cheers
LB
I feel you may have missed the point I was trying to make re "Every year there are a certain number of new home buyers coming in anyway so the figure is irrelevant for our discussion of what would happen if some owners sell as there would no doubt be new houses being built as well etc"
I should have highlighted" for our discussion of what would happen if some owners sell"
I have absolutely no doubt that a change in supply or demand in all those things you mentioned have an effect on values. this is constantly occuring and always will. I'm not too sure where you got the idea that I expect a static environment as the norm.
AS you said about taking things to the extreme being a good way to prove a point - I agree. This is what I was doing but taking it to the underextreme by ignoring changes in demand etc and focussing on what would happen if an investor sold to another investor or a FHB and that it wouldnt increase or decrease the total amount of housing stock available.
At this point in time there may be 5 million houses in Australia (number is irrelevant). If investor Max sells to Minnie there are still 5 million houses regardless of whether Minnie is an investor or a FHB.
If she is a FHB there will be one less rental property available. This is the point I think you were making. However if Max decided not to sell and Minnie bought elsewhere there would still be one less rental property available and this doesnt mean they will inevitably run out.
Cheers
LB
There is truth to this statement, there are so many newly generated investors due to this boom who have no idea about why they made a decision to invest in property. I can vouch for this because many of the people I know (friends, relatives) just buy because they tell me "Everyone is doing it and making a fortune, if we don't buy we're missing out. You should do it to, getting a home loan is so easy these days. When I ask them about yield, loan service costs, etc. Their reply to me is.. I plan to sell this home in 6mo/1yr/2yr and make good CG return.."
B
brains
Guest
If housing prices had gone up at the same time as affordability remained constant and yields were about average, then there would be no bubble.
But the opposite has happened - affordability is the worse for a long time and thats with record low interest rates (See XBenX post).
Yields are ridiculously low - some small regional towns are offering 4% gross and major cities down to 2% in some areas.
Interest rates have only one way to go and when they do go up affordability will ge even worse and then there will be some major pain in the market and a bursting of the bubble.
It all sounds like a bubble to me.
And my responses are nowhere near as histrionic as Aceys, we're not in the same ball park - at least i can let it go.
But the opposite has happened - affordability is the worse for a long time and thats with record low interest rates (See XBenX post).
Yields are ridiculously low - some small regional towns are offering 4% gross and major cities down to 2% in some areas.
Interest rates have only one way to go and when they do go up affordability will ge even worse and then there will be some major pain in the market and a bursting of the bubble.
It all sounds like a bubble to me.
And my responses are nowhere near as histrionic as Aceys, we're not in the same ball park - at least i can let it go.
Originally posted by suggo
Well Brains
I'm not that sure we are in a property bubble. Isn't it possible that the housing sector had a lot of catching up to do and now are really at prices they should have been?? A correction up as it were!?? And I think Bill goes on about the one house BECAUSE it is in a non-discript suburb and thats exactly what proves the point he has been trying to get across.
As for what you said to Acey, you are kidding yourself! You spit the dummy more than anyone when someone won't follow your line of thinking.
I think when the chief Executive of Westpac says its a bubble its as good as confirmed.
Quote:Westpac chief executive David Morgan warned this week that the property market was overvalued by 20 per cent (source nearly every australian newspaper and the NY FT)
Some 75% of the banks business is from home loans. Why would he jeapordize their earnings by saying something like this if they werent seriously concerned. Its not like the bank has any other growth opportunities available.
I'm not even sure why they would care as the risk of their customers paying overinflated prices is of no consequence to them because even if they default they a) get the house b) claim on the mortgage insurance.
Maybe they're just fulfilling their fiduciary duties as they are obliged to do.
I would think 20 percent would be a very conservative estimate because if they'd said any more it could kill the market a lot quicker.
Anyway, I've shorted Westpac because I expect their earnings growth will suffer.
Quote:Westpac chief executive David Morgan warned this week that the property market was overvalued by 20 per cent (source nearly every australian newspaper and the NY FT)
Some 75% of the banks business is from home loans. Why would he jeapordize their earnings by saying something like this if they werent seriously concerned. Its not like the bank has any other growth opportunities available.
I'm not even sure why they would care as the risk of their customers paying overinflated prices is of no consequence to them because even if they default they a) get the house b) claim on the mortgage insurance.
Maybe they're just fulfilling their fiduciary duties as they are obliged to do.
I would think 20 percent would be a very conservative estimate because if they'd said any more it could kill the market a lot quicker.
Anyway, I've shorted Westpac because I expect their earnings growth will suffer.
Hi all,
re the affordability debate.
Lets compare apples with apples.
The "official" sources for affordability compare wages, interest rates and median house prices. They say that affordability is record low.
By accepting these figures we ignore the fact that the "median house" is not the same animal that it was 15, 30, or 40 years ago. The houses have been improved(older ones with renovation/extension, newer with 2/3 living areas,ensuite DLUG etc.)
How do we account for these changes?? You know what I like to look at. The numbers from the average house in the average suburb that is effectively unchanged over the last 20 years.
So when the average house approaches how unaffordable as it was 13 years ago, then I may start to worry. But it would have to DOUBLE in price to get to that level.
bye
re the affordability debate.
Lets compare apples with apples.
The "official" sources for affordability compare wages, interest rates and median house prices. They say that affordability is record low.
By accepting these figures we ignore the fact that the "median house" is not the same animal that it was 15, 30, or 40 years ago. The houses have been improved(older ones with renovation/extension, newer with 2/3 living areas,ensuite DLUG etc.)
How do we account for these changes?? You know what I like to look at. The numbers from the average house in the average suburb that is effectively unchanged over the last 20 years.
So when the average house approaches how unaffordable as it was 13 years ago, then I may start to worry. But it would have to DOUBLE in price to get to that level.
bye
Heres the website as requested
http://www.theage.com.au/articles/2003/10/31/1067566088028.html
He was also on Business Sunday this morning saying that within the bank they are already seeing a slowdown in the overall market but currently most noticeable in the CBD unit market where people have been getting 20% less than what they paid for. He is concerned about historically low rental yields.
http://www.theage.com.au/articles/2003/10/31/1067566088028.html
He was also on Business Sunday this morning saying that within the bank they are already seeing a slowdown in the overall market but currently most noticeable in the CBD unit market where people have been getting 20% less than what they paid for. He is concerned about historically low rental yields.
Make hay while the sun shines.
Personally I doubt it will crash, but it may level off for a few years so anyone looking for spectacular capital gains in less than 7 years may be disappointed. Anyone looking to invest 10+ years has little to fear.
There have been several articles in the Sydney Morning Herald explaining why, as well as interesting statistics going back to 1906 or thereabouts for Sydney.
Personally I doubt it will crash, but it may level off for a few years so anyone looking for spectacular capital gains in less than 7 years may be disappointed. Anyone looking to invest 10+ years has little to fear.
There have been several articles in the Sydney Morning Herald explaining why, as well as interesting statistics going back to 1906 or thereabouts for Sydney.
For me there has been only one comment worth looking at in the post
To quote the quote
"Some are seeking alternatives in apartments, while others are moving farther afield to achieve a foothold - helping a price surge in areas such as Geelong and Ballarat."
I don't know any one who doesn't think that sydney and Melbourne havn't reached the top ( or close to ) of their cycles.
Brisbane may have some way to go , but other areas have only moved a portion of the way one expects them to move.
They may look and smell different , but they're still cheese.
See change
To quote the quote
"Some are seeking alternatives in apartments, while others are moving farther afield to achieve a foothold - helping a price surge in areas such as Geelong and Ballarat."
I don't know any one who doesn't think that sydney and Melbourne havn't reached the top ( or close to ) of their cycles.
Brisbane may have some way to go , but other areas have only moved a portion of the way one expects them to move.
They may look and smell different , but they're still cheese.
See change
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Personally I doubt it will crash, but it may level off for a few years so anyone looking for spectacular capital gains in less than 7 years may be disappointed. Anyone looking to invest 10+ years has little to fear.
I think this is actually the key to the fact that it will be likely to "crash".
This is how it will happen in my opinion.
1 As the above consensus starts proving true, many of the short terms investors will get fed up with the paltry or negative rental returns on offer, and not content with waiting 7 - 10 years for the next boom, will sell.
2 This will be compounded by the reduced number of new investors entering the market as a result of the hype disappearing and low potential returns.
3 The cheap rents on offer will encourage FHB's to hang out a bit to take advantage of low rent while they save for a deposit.
4. As a result of 1-3, demand will drop while supply continues on because the cost of building new house is still comparable to buying a "secondhand" house. Builders need to keep building to feed their families.
5. While this "flatness" is going on, investors are reviewing their positions and making their exit (smartest ones first)
6. MArginally more sellers than there are buyers mean even more deflated prices
7. Deflated prices means more sellers keen to get as returns are now well in the red and hearing negative media reports of "unfortuante people ripped off by greedy RE agents etc" doesnt help.
8. More sellers as banks foreclose and forced sales push prices lower and lower.
9. Very small number of new investors as general population now considers property to be a "dud" investment as nearly everyone knows of someone who had to sell or is sitting on big capital loss.
10. prices fall so rental returns 8-10% (or more) but investors nowview this as fair compensation for risks involved (as most places always have)
11. LB quits renting and pays cash for a house to live in with his family with all the money he has saved and invested after living virtually rent free in a very nice house for the last X years. A few months later (against the advice of family, media, Fin planners and joe bloes) he buys himself an IP.
12. 1-2 years later A Current Affair runs a story of how buying property is the key to unlimited wealth and if anyone can do it, so can you.
13. Property becomes king. Its the talk of coffee shops conversation and the majority of the country has become wealthy on paper. This time, they say it will never end because after all"people have to live somewhere and there is hardly any space left in Australia.
14. LB sells his property, a few years after buying, for an average annual return of 30%. People tell him he is crazy to sell while everyone is madly buying as he will miss out on "the property boom". He doesnt care, as he hasnt run with the herd for years and always seems to do alright.
****
Please note this scenario doesnt include
Interest rates rising
Unemployment rising
Banks tightening credit lending
Any of these events occuring will just speed up the process but none will actually be needed for steps 1-14 to commence.
cheers
LB
I think this is actually the key to the fact that it will be likely to "crash".
This is how it will happen in my opinion.
1 As the above consensus starts proving true, many of the short terms investors will get fed up with the paltry or negative rental returns on offer, and not content with waiting 7 - 10 years for the next boom, will sell.
2 This will be compounded by the reduced number of new investors entering the market as a result of the hype disappearing and low potential returns.
3 The cheap rents on offer will encourage FHB's to hang out a bit to take advantage of low rent while they save for a deposit.
4. As a result of 1-3, demand will drop while supply continues on because the cost of building new house is still comparable to buying a "secondhand" house. Builders need to keep building to feed their families.
5. While this "flatness" is going on, investors are reviewing their positions and making their exit (smartest ones first)
6. MArginally more sellers than there are buyers mean even more deflated prices
7. Deflated prices means more sellers keen to get as returns are now well in the red and hearing negative media reports of "unfortuante people ripped off by greedy RE agents etc" doesnt help.
8. More sellers as banks foreclose and forced sales push prices lower and lower.
9. Very small number of new investors as general population now considers property to be a "dud" investment as nearly everyone knows of someone who had to sell or is sitting on big capital loss.
10. prices fall so rental returns 8-10% (or more) but investors nowview this as fair compensation for risks involved (as most places always have)
11. LB quits renting and pays cash for a house to live in with his family with all the money he has saved and invested after living virtually rent free in a very nice house for the last X years. A few months later (against the advice of family, media, Fin planners and joe bloes) he buys himself an IP.
12. 1-2 years later A Current Affair runs a story of how buying property is the key to unlimited wealth and if anyone can do it, so can you.
13. Property becomes king. Its the talk of coffee shops conversation and the majority of the country has become wealthy on paper. This time, they say it will never end because after all"people have to live somewhere and there is hardly any space left in Australia.
14. LB sells his property, a few years after buying, for an average annual return of 30%. People tell him he is crazy to sell while everyone is madly buying as he will miss out on "the property boom". He doesnt care, as he hasnt run with the herd for years and always seems to do alright.
****
Please note this scenario doesnt include
Interest rates rising
Unemployment rising
Banks tightening credit lending
Any of these events occuring will just speed up the process but none will actually be needed for steps 1-14 to commence.
cheers
LB
G'day LB,
Write a play, it's sure to be a HIT on Broadway !!!!
Mate, it sure sounds just like the usual cycle to me. You've got out when you deemed correct (good for you) - and will be looking to get in again when right (on your terms - good for you, again).
Meantime, as always, there are markets within markets. There are always people making money, even in a Bear market !! Who?? Those who UNDERSTAND the way the game is played. Is that me?? Well, I now know a helluva lot more than I did 4 years ago.... Will it prevent me from making mistakes? Sheesh, I hope so, but there are no guarantees...
But, LB, if you are playing according to your rules, then you will sleep well at night, and will (I'm sure) do "all of the above" when the time is right for you (i.e. buying your own PPOR, followed by IP's, etc.) Meantime, those who know "their areas" will continue to do well, even in a "bear" market in property.
The market is changing - no doubt - and will continue to do so. I've appreciated (put THAT in capitals!!) the last rush on property, and, even though I know it won't/can't continue, it has been welcome (I thought Brisbane would NEVER MOVE!!!).
The only thing, LB, that I think was missing from your dissertation, was the impact from immigration !! And that could have a marked effect on individual property markets (even to the point that they DON'T collapse, but just continue to grow...)
As always, even though I don't always agree, your posts DO get me thinking - so, thank you !!
Regards,
PS Had to smile at your point 2 - wasn't "nil nett effect" going to prevent this from happenng ...... ???
Write a play, it's sure to be a HIT on Broadway !!!!
Mate, it sure sounds just like the usual cycle to me. You've got out when you deemed correct (good for you) - and will be looking to get in again when right (on your terms - good for you, again).
Meantime, as always, there are markets within markets. There are always people making money, even in a Bear market !! Who?? Those who UNDERSTAND the way the game is played. Is that me?? Well, I now know a helluva lot more than I did 4 years ago.... Will it prevent me from making mistakes? Sheesh, I hope so, but there are no guarantees...
But, LB, if you are playing according to your rules, then you will sleep well at night, and will (I'm sure) do "all of the above" when the time is right for you (i.e. buying your own PPOR, followed by IP's, etc.) Meantime, those who know "their areas" will continue to do well, even in a "bear" market in property.
The market is changing - no doubt - and will continue to do so. I've appreciated (put THAT in capitals!!) the last rush on property, and, even though I know it won't/can't continue, it has been welcome (I thought Brisbane would NEVER MOVE!!!).
The only thing, LB, that I think was missing from your dissertation, was the impact from immigration !! And that could have a marked effect on individual property markets (even to the point that they DON'T collapse, but just continue to grow...)
As always, even though I don't always agree, your posts DO get me thinking - so, thank you !!
Regards,
PS Had to smile at your point 2 - wasn't "nil nett effect" going to prevent this from happenng ...... ???
5a. Us dumb investors that are in it for the long term hold on and ride through the rough patch having selected well placed houses at reasonable prices charging reasonable rents. For some reason our tennents have signed long term leases and are very happy with us!!??
6a7a8a9a Buying buying buying
10a We rent those houses out to the poor smucks who try and pick the tops of markets but don't and don't have any money saved or invested. We hear them say damn stockmarket!! We rejoice for those like LB who have picked the top and have heaps of money, well done! We sell him our houses......wait, no we don't, we are still making money out of them so we continue to hold on!
11a People like LB start jumping on the housing market, we start to rejoice once more...seeing $'s coming our way!
12a You forgot that Jamie Durie and his mates make a comeback with Backyard Blitz and The Block. Long term investors cheer!!
13a We enjoy! My god how did my equity get that high but paying all this tax on all this money coming in from rent is annoying! lol
14a LB having sold and gone back to doctoring until he can get back in the whateveristhebestatthetime market, us old dumb investors who rode the waves retire very comfortably and try to convince the LB's of the world that long term investments actually do work!! OMG can it be true.
ps, I think you actually have to run in front of the herd rather than always in the opposite direction. My theory is if I just keep running in the one direction then the herd will be behind me at some stage, but hey what do I know! We should seal these statements in a crete and open them in 10 years time and see how we all went. Hopefully, we'll all be rich no matter what path we took!
PPS Oh yes thanks for the link to the article too LB!
Yep there are markets within markets. And those who know the main market will do well finding these.
This takes time, experience and a little luck. Most of the experienced ones on this forum will most likely always do well regardless of the way the market is going. Many getting in for the first time now wont.
True, when it gets like this (looking toppy) I prefer to find a new market that hasnt boomed yet so that even if I make a bad investment decision my investment should still go up with the momentum of the herd. Even if I dont get the capital gain I need I still try to make a good after expense income.
PS Had to smile at your point 2 - wasn't "nil nett effect" going to prevent this from happenng ......
not quite. that was the assumption I used to explain that IF the same number of new investors were entering the market as in the past it would have a nil net effect on total supply.
When the hype disappears there will actually be less new investors (demand) as well as more sellers (supply) creating a double whammy of forces affecting prices.
LB
This takes time, experience and a little luck. Most of the experienced ones on this forum will most likely always do well regardless of the way the market is going. Many getting in for the first time now wont.
True, when it gets like this (looking toppy) I prefer to find a new market that hasnt boomed yet so that even if I make a bad investment decision my investment should still go up with the momentum of the herd. Even if I dont get the capital gain I need I still try to make a good after expense income.
PS Had to smile at your point 2 - wasn't "nil nett effect" going to prevent this from happenng ......
not quite. that was the assumption I used to explain that IF the same number of new investors were entering the market as in the past it would have a nil net effect on total supply.
When the hype disappears there will actually be less new investors (demand) as well as more sellers (supply) creating a double whammy of forces affecting prices.
LB
G'day
Well I have been following this thread with great interest (no pun intended).
After the initial bluff and blustering was out of the way, some thoughtful comments have emerged.
Not the least is, we all learn something from each other, and sometimes trying to explain our viewpoint means we learn what our viewpoint actually is!
I've already made my own comments regarding this 'bubble' and thought I'd post this link in case anyone is interested in historic data and all that census information. I find it quite fascinating trying to determine the story behind the figures, eg the impact of GST or other known events and the effect it has on the figures.
This is the Department of Sustainability and Environment. It is the Victorian page but you can access any town or area in Australia by using the drop down menus.
http://www.doi.vic.gov.au/doi/knowyour.nsf?OpenDatabase&Seq=6#_RefreshKW_selectArea
Now I'd like to make a comment based not on figures but on general observation, arguing from the personal to the policital:
I have noticed increasing garden neglect in and around my general area.
No, this is not because of the drought. This is the overgrown, bare patches, weeds everywhere type of neglect. It is the rubbish bins at the front of the house (sure sign on a rented property), cobwebbed windows, general unhappy house syndrome type of look.
Considering that the Census figures put my neighbourhood at family homes of four bedroom plus, owner occupied, good incomes, couples with children etc, why is this neglect showing?
Are mortgages too high, particularly as people move into this area for the private schools. Are families really stretched (plus paying for the four wheel drive, mobile phones and other essentials). This is second and third home territory. What is happening? Are people putting too much into their superannuation, leaving not enough to maintain their properties?
Have people bought investment properties / holiday homes and now find the shortfall consuming all disposable income?
Is the middle class (I consider my family to be upper working class) over stretched and starting to hurt? Is the pain of keeping up with the Joneses making itself felt?
Have I posed enough hypothetical questions?
Do you get my drift?
Is there going to be a massive 'lifestyle correction' in the short term future, bringing people down to earth with a real bump?
Now, leaving aside any emotional feelings here (I can't save the world), I am sure that in recent years the number of people who own property bought deliberately for investment purposes (leaving aside inherited and recreational property) has risen and is probably now a point above the traditional 6% of population.
Statistics show us that the traditional 6% includes the inherited / recreational purchases, that of the 4.5% of the population with one other property, 3% (of the pop) will keep the second property but 1.5% (of the pop) will sell AND WILL NEVER BUY ANOTHER.
The balance of the 6% (of pop) is made up of 1% (of pop) who own two 'other' properties and .5% (of pop) who own three or more 'other' properties.
So getting back to the neglected gardens:
Is the vulnerable 1.5% group - or more importantly, the opportunist extra x% - about to start shedding the rental properties which aren't returning enough to meet the mortgage payments, shedding the holiday homes which have provided a little windfall but may not improve much further until the next little peak comes around again, shedding the inherited property which looked after itself for a while but is now needing maintenance and quite frankly, no one in the family has the time or the money to get involved in maintaining the place!
So:
Should we 4.5% deliberate investors start reorganising our finances to take advantage of the gradual offloading of these properties?
Will the rationale be 'Well, the property is really more a nuisance than it's worth, so while we can get a good price, let's sell it then we can afford a new car and that holiday we've been promising ourselves and besides the third child starts college next year and anyway we can always buy another one later'.
My point? You want me to have a point?
My point is another question:
Ignoring the figures, what condition and presentation are properties currently demonstrating in your area? We are all a fairly alert lot - what do you 'see' going on in your own immediate area. Not the renovations, just the common or garden maintenance of house and garden.
My instinct is telling me that the undertow is starting to pull the sand out from under people's feet. This will be very subtle, banks do not go around advertising 'Mortgagee Auctions' as they used to - I saw lots around here 1990 - 1991.
I would be interested in hearing your observations
Cheers
Kristine
Well I have been following this thread with great interest (no pun intended).
After the initial bluff and blustering was out of the way, some thoughtful comments have emerged.
Not the least is, we all learn something from each other, and sometimes trying to explain our viewpoint means we learn what our viewpoint actually is!
I've already made my own comments regarding this 'bubble' and thought I'd post this link in case anyone is interested in historic data and all that census information. I find it quite fascinating trying to determine the story behind the figures, eg the impact of GST or other known events and the effect it has on the figures.
This is the Department of Sustainability and Environment. It is the Victorian page but you can access any town or area in Australia by using the drop down menus.
http://www.doi.vic.gov.au/doi/knowyour.nsf?OpenDatabase&Seq=6#_RefreshKW_selectArea
Now I'd like to make a comment based not on figures but on general observation, arguing from the personal to the policital:
I have noticed increasing garden neglect in and around my general area.
No, this is not because of the drought. This is the overgrown, bare patches, weeds everywhere type of neglect. It is the rubbish bins at the front of the house (sure sign on a rented property), cobwebbed windows, general unhappy house syndrome type of look.
Considering that the Census figures put my neighbourhood at family homes of four bedroom plus, owner occupied, good incomes, couples with children etc, why is this neglect showing?
Are mortgages too high, particularly as people move into this area for the private schools. Are families really stretched (plus paying for the four wheel drive, mobile phones and other essentials). This is second and third home territory. What is happening? Are people putting too much into their superannuation, leaving not enough to maintain their properties?
Have people bought investment properties / holiday homes and now find the shortfall consuming all disposable income?
Is the middle class (I consider my family to be upper working class) over stretched and starting to hurt? Is the pain of keeping up with the Joneses making itself felt?
Have I posed enough hypothetical questions?
Do you get my drift?
Is there going to be a massive 'lifestyle correction' in the short term future, bringing people down to earth with a real bump?
Now, leaving aside any emotional feelings here (I can't save the world), I am sure that in recent years the number of people who own property bought deliberately for investment purposes (leaving aside inherited and recreational property) has risen and is probably now a point above the traditional 6% of population.
Statistics show us that the traditional 6% includes the inherited / recreational purchases, that of the 4.5% of the population with one other property, 3% (of the pop) will keep the second property but 1.5% (of the pop) will sell AND WILL NEVER BUY ANOTHER.
The balance of the 6% (of pop) is made up of 1% (of pop) who own two 'other' properties and .5% (of pop) who own three or more 'other' properties.
So getting back to the neglected gardens:
Is the vulnerable 1.5% group - or more importantly, the opportunist extra x% - about to start shedding the rental properties which aren't returning enough to meet the mortgage payments, shedding the holiday homes which have provided a little windfall but may not improve much further until the next little peak comes around again, shedding the inherited property which looked after itself for a while but is now needing maintenance and quite frankly, no one in the family has the time or the money to get involved in maintaining the place!
So:
Should we 4.5% deliberate investors start reorganising our finances to take advantage of the gradual offloading of these properties?
Will the rationale be 'Well, the property is really more a nuisance than it's worth, so while we can get a good price, let's sell it then we can afford a new car and that holiday we've been promising ourselves and besides the third child starts college next year and anyway we can always buy another one later'.
My point? You want me to have a point?
My point is another question:
Ignoring the figures, what condition and presentation are properties currently demonstrating in your area? We are all a fairly alert lot - what do you 'see' going on in your own immediate area. Not the renovations, just the common or garden maintenance of house and garden.
My instinct is telling me that the undertow is starting to pull the sand out from under people's feet. This will be very subtle, banks do not go around advertising 'Mortgagee Auctions' as they used to - I saw lots around here 1990 - 1991.
I would be interested in hearing your observations
Cheers
Kristine
Kristine wrote:
My point is another question:
Ignoring the figures, what condition and presentation are properties currently demonstrating in your area? We are all a fairly alert lot - what do you 'see' going on in your own immediate area. Not the renovations, just the common or garden maintenance of house and garden.
**************************
You are right Kristine.
I made exactly the same comment to my wife on Saturday after we visited our IP near where we live - an area that is (according to realestate.com) an area with 23% renters....
The streets near our IP had a fair few properties that had overgrown lawns and many weeds (all they need is "weed n feed" sprayed on !!!! - but that is another story)....and it is a recycled water area!!!!
We came to the same conclusion as you. Too many rental properties in area ( I had to drop 70pw to get mine rented out again).
My point is another question:
Ignoring the figures, what condition and presentation are properties currently demonstrating in your area? We are all a fairly alert lot - what do you 'see' going on in your own immediate area. Not the renovations, just the common or garden maintenance of house and garden.
**************************
You are right Kristine.
I made exactly the same comment to my wife on Saturday after we visited our IP near where we live - an area that is (according to realestate.com) an area with 23% renters....
The streets near our IP had a fair few properties that had overgrown lawns and many weeds (all they need is "weed n feed" sprayed on !!!! - but that is another story)....and it is a recycled water area!!!!
We came to the same conclusion as you. Too many rental properties in area ( I had to drop 70pw to get mine rented out again).
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