It's called risk management, and it's what investors should be doing...
Long Term Future of Property
- Thread starter nogen2007
- Start date
I certainly haven't found it.
I don't think any Australian cities are anything like NY, London, or Singapore though. In terms of size, population, diversity, and especially public transport and infrastructure. NY, London, and Singapore are in a totally different league.
Also... NY has quite a lot of rent controlled housing, and also a lot of very high density housing. Singapore has an entensive amount of government housing, accessable by pretty much everyone. London - peoples wages are signifigantly higher than anywhere else so they can afford to live there, close to where they work. I doubt very much any of these cities could operate without these measures in place?
All of these places have no more space to expand. Unlike in Australia, where space - is one asset we have lots of. That's the part I can not understand here - why NEW land hasn't been made available? Is it just to keep the prices up? That seems weird to me, and a pretty artificial way of making housing expensive.
It also means - the government already is playing a role in the cost of housing - making it more expensive than it should be that is. So to say that they wouldn't take a role in making it more affordable, to me is a bit naieve?
Give it time. Maybe Sydney will get there.
In London the average pay is 25,000 pounds a year, which is about AUD$60k. And London is about twice as expensive as Sydney. In practice, ordinary people share a small flat with others. No one even dreams of a house. Nogen, have you been to London and seen what an 'average' flat looks like? It's pretty crappy. I rented a pretty average 1 1/2 bedroom flat in Zone 2 and that cost me 260pw.
I agree with you about high -density housing, though London doesn't really allow high rises. Applying that logic to Sydney, for example, it means that as Sydney keeps getting bigger people will have to adjust their 'average expected dwelling' from a house on a quarter acre block to a 2 bedroom unit. NO ONE in NY or London expect to ever live in a house, unless they move hours out into the countryside.
I disagree. London suburbs in fact keep pushing outwards. There is certainly plenty of land out in the countryside. So places like Essex, etc used to be outside London but are now part of greater London. Sure we have plenty of land in Australia, but land by itself isn't enough. You need infrastructure, train lines, shopping, etc. Part of the problem is government aversion to debt: it may make sense for governments to take on debt to improve the train lines, because that really constrains our growth. Tokyo trains, for example, are so great because the govt simply doesn't care what losses they make on it. You'd think Tokyo doesn't have space to expand, but that's crap. Ride a train an hour out of the city and you see farms.
We also have the problem of too few users relative to the infrastructure we need because of distance. The london tube is supported by the sheer number of people who use it.
Alex
Nogen,
I'm not saying our cities are like London and New York - just the principle that some people believe that property can never exceed the average income earners reach.
In our cities (I assume) there will always be more land on the outskirts that can be developed and will be cheap enough for average wage earners to afford. However I do not believe that the current inner suburbs have to remain affordable and within the reach of the average income.
People seem to believe that these inner suburbs can't continue their rise as it will make them unaffordable and impossible for average people to buy. Who says?! These people at some point just have to deal with the fact that they can only afford to buy further out. We are only bordering on this stage now, which is why I believe there is such a 'housing afforidbilitiy issue' in the news at the moment, as people have not yet come to terms with desire vs reality. In 10yrs it may be a given.
There's is no 'affordibility crises' now if people in each city look at the cheaper suburbs.
I'm not saying our cities are like London and New York - just the principle that some people believe that property can never exceed the average income earners reach.
In our cities (I assume) there will always be more land on the outskirts that can be developed and will be cheap enough for average wage earners to afford. However I do not believe that the current inner suburbs have to remain affordable and within the reach of the average income.
People seem to believe that these inner suburbs can't continue their rise as it will make them unaffordable and impossible for average people to buy. Who says?! These people at some point just have to deal with the fact that they can only afford to buy further out. We are only bordering on this stage now, which is why I believe there is such a 'housing afforidbilitiy issue' in the news at the moment, as people have not yet come to terms with desire vs reality. In 10yrs it may be a given.
There's is no 'affordibility crises' now if people in each city look at the cheaper suburbs.
You don't need stats for this one DJ;
just look at you circle of friends/family/aquaintances (outside this forum) and see what percentage of them are active property investors with at least one I.P (not including holiday houses).
I'll bet it is less than 1%.
Then halve that again as soon as you talk about investors with a PPOR and more than the 1 IP.
Or, you could look at the stats and find that it is 1 in 10 households
Long term they have to remain cheap enough for the wage earner in that area to afford them - otherwise who will buy them? But that doesn't mean the wage earner in that area can't change - i.e. higher income people begin to move in and drive up the price. I think that is what you are saying.
This is fine at the micro level but when you add up all areas and all incomes then there is a limit that can't be broken. The money has to come from somewhere. Hence my argument in the property economics section that we have some macro issues moving forward which I won't repeat here.
In that case, I don't know any active property investors ... excluding you lot, of course ... 
I do have another question that I'd like to hear everyone's opinion on ... what do you think will be the effect on property of all the money flowing into superannuation?
It's got to go somewhere to be invested and (hopefully earn returns)? And that's forced savings for a lot of people ...
DJ
I do have another question that I'd like to hear everyone's opinion on ... what do you think will be the effect on property of all the money flowing into superannuation?
It's got to go somewhere to be invested and (hopefully earn returns)? And that's forced savings for a lot of people ...
DJ
OK. So 1% of people are active property investors. Does that mean 99% are out of step?
Logic tells me that it is possible for all Australians to buy some shares and if the market became crowded the more savvy will move to the NYSE (or the DAX or CAC). But it is mathematically impossible for more than 50% of Aussie households to have a PPOR and one (only) IP.
So if you are one of the 1% don't be such a smart ***. There are smarter people than you doing "very nicely, thank you!" in other ventures (leaving the poor RE pickings to be shared by others) and there are your clients, who may well include some of the "smart" group. Be thankful for diversity.
Re-reading this I realise it is a bit rough and not quite following the thread but it is honestly how I feel so I will post it anyway.
Logic tells me that it is possible for all Australians to buy some shares and if the market became crowded the more savvy will move to the NYSE (or the DAX or CAC). But it is mathematically impossible for more than 50% of Aussie households to have a PPOR and one (only) IP.
So if you are one of the 1% don't be such a smart ***. There are smarter people than you doing "very nicely, thank you!" in other ventures (leaving the poor RE pickings to be shared by others) and there are your clients, who may well include some of the "smart" group. Be thankful for diversity.
Re-reading this I realise it is a bit rough and not quite following the thread but it is honestly how I feel so I will post it anyway.
Humility is not a common trait in the young, Sunfish, as I'm sure you know. Nor is respect for other people.
But heck, let us enjoy our achievements while we can. According to HG and YM the days when we feel good are numbered. I'm going to enjoy it while it lasts. If I'm lucky the illusion will persist until I die, after which I couldn't care less.
Yes, it's mathematically impossible for everyone to own their PPOR and buy an IP. Human nature being what it is, though, it IS impossible. No matter how much I promote property investment (and I'm one of the more conservative ones). Property investment works because it is based on the fact that some people rent and some people buy, and those who do it will do better than those who don't. Should I be thankful for the fact that most people are financially inept? Maybe, but in the sense that I have a cynical little laugh about it. What, you want me to send flowers to my tenants thanking them? For all I know HG might be living in one of my IPs (now THAT would be ironic, though I doubt it as I'm seeing strong rental growth in my IPs right now).
As for non-property-investors doing well, great for them. I have no feelings, positive or negative, towards them. I'm really only concerned about my own little world.
Alex
But heck, let us enjoy our achievements while we can. According to HG and YM the days when we feel good are numbered. I'm going to enjoy it while it lasts. If I'm lucky the illusion will persist until I die, after which I couldn't care less.
Yes, it's mathematically impossible for everyone to own their PPOR and buy an IP. Human nature being what it is, though, it IS impossible. No matter how much I promote property investment (and I'm one of the more conservative ones). Property investment works because it is based on the fact that some people rent and some people buy, and those who do it will do better than those who don't. Should I be thankful for the fact that most people are financially inept? Maybe, but in the sense that I have a cynical little laugh about it. What, you want me to send flowers to my tenants thanking them? For all I know HG might be living in one of my IPs (now THAT would be ironic, though I doubt it as I'm seeing strong rental growth in my IPs right now).
As for non-property-investors doing well, great for them. I have no feelings, positive or negative, towards them. I'm really only concerned about my own little world.
Alex
You know, that's the really weird thing about this current boom. Usually at the 'bust' phase the market is oversupplied as investors pile into the market. This happened in Sydney around 03/04. Yet the oversupply has been digested fairly quickly in Sydney, and as a result we're seeing the low vacancy rates. What's weird is that given the huge run-up and anemic yields you would have expected oversupply in Perth, but that's not the case (even though yields are still crap).
Given how strongly Brisbane, I would have expected a lot more supply keeping rents down. Yet vacancies are so low.
So either banks were a lot more cautious about lending to builders (leading to fewer properties built), or there were fewer investors out there than we thought, with the price rises mainly from people buying / changing PPORs.
Alex
I don't recall mentioning "humility" but, as you remind me I did once mention "respect". A mistake, as it turns out.
But I didn't have you in mind when I wrote that. (Trust me!
) I now know that you are a considered investor who needs no guidance (Sheee... I don't try to guide anyone, just raise a little awareness of risks and alternatives) and I don't recall that you expect everyone to live by your standards.I always think of different investment classes as being like farm dams. Cool and refreshing if it's only you 'n ya' mates swimming but when everyone jumps in it gets muddy and they raid your esky, so it's time to move on. Res property is the most crowded waterhole I know. And as I pointed out, it is a strictly limited one. That's all folks!
***********************
Dear YM,
1. Today, I was listening to Anthony Robbin's interview with Dr Paul Zane Pilzer who claims that there is presently no real "working" economic theory in practice today... that the so-called "economic resources" in the Classical Economic Theory are actually "man-made inventions" which exist in abundant supply as a result of new emerging technologies.
2. Dr Paul cited an example of land supply which was no real resource to the indigenious Red Indians in the early days . It was not until the farming technology was introduced into America that the early Americans were able to transform land into productive resource units for their farming activities.
3. Likewise if we were to apply the Classical Economic Theory into today's financial world, it may NOT make real logical sense at all.
4. This is especially so we observe that the total value of financial assets in countries like Australia, can far exceed the size of its real economy... that the housing debt can far exceed its average household debt... perhaps this phenomenon can be properly explained if we were to apply the "LEVERAGING" concept, a man-made creation into our own analysis of the financial world today.
4. For your kind update and further comments/discussion, please.
5. Thank you.
regards,
Kenneth KOH
My brief understanding is that there are a lot of HB's pushing the market as opposed to investors, this is based on anecdotal reports from talking to RE agents only. Also I think the cost of bringing on new supply due to local council charges is expensive and becoming more so, this would appear to be placing some floor under the market so would guess that there is no risk of anything happening due to over-supply anytime soon.
Only 6% of new investors buy new property, so it has mostly been a paper shuffling exercise with borrowed money.
The rental vacancy is apparently low, but when I went to look at 3bdr houses in Adelaide <10km from the CBD for less than $250 there was only 2 people at 2 inspections (and one had 15+ on a saturday, though)
The number of empty houses is huge, and growing. My last rental place is still sitting empty 3 months later. It was advertised before I left with a large rental increase and had inspections. I doubt it is counted in the rental vacancies, though. Maybe the LL thinks why bother renting it out at 12k a year when you get 30k with CG. Houses are for making money, not for sheltering people!
How much of that CG is due to there being a "tight" rental market from keeping houses empty?! Crazy!
if that's what u see in that area then I'd agree with you.. that particular micro-location is purely speculation drive with no fundamental demand. Same can't be said for other areas though
I don't know about the rest of you, but I haven't had ANY vacancy (new tenants start right after the old lease ends) for the last 2-3 years. If someone came to me and said vacancies are high, I wouldn't care, because mine don't have vacancies. If other landlords are keeping their properties empty (for what purpose I don't know) and that's causing my places to be in demand, all the better!
Alex
Alex
