Exactly. The place I live in has always had abysmal yields. It's probably moved another half a mil or so in the past few months, but even without it the yields would've been like 1.5 or 2.0%. Now it's probably around 1.4%
Melbourne Property Cycle Update
- Thread starter JIT
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Exactly. The place I live in has always had abysmal yields. It's probably moved another half a mil or so in the past few months, but even without it the yields would've been like 1.5 or 2.0%. Now it's probably around 1.4%
Housing drove rate rise
Of course, the RBA's focus on house prices will help move values and rents up due to supply side constraint.
I can imagine a time when lenders will be mandated by govt to provide a discounted rate for new construction, funded by a premium on the rate offered for existing stock.
Of course, it'd help if local govt got with the program and matched town planning to population growth.
Of course, the RBA's focus on house prices will help move values and rents up due to supply side constraint.
I can imagine a time when lenders will be mandated by govt to provide a discounted rate for new construction, funded by a premium on the rate offered for existing stock.
Of course, it'd help if local govt got with the program and matched town planning to population growth.
Foreign buyers - if you're talking chinese (i doubt it - they're probably just going to hold it. It's hard enough to try to get money out of china and to hide their wealth.
2nd - Some of these foreign buyers mostly have kids (in foundation year or year 12) and it would be a good couple of years 3-4 years after university before they decide to offload that is if they decide to offload. And if they intend to apply for residency - they will need a place to stay.
Most of them buy cash and not under much pressure as they don't want to reveal too much
4% would be great, it's around 3 - 3.2% at the moment. Didn't have Toorak in mind, it's more like Reservoir, Coburg and Preston. I've always been a believer that rents won't make you rich, capital growth and or developing will, so while yield isn't my main priority, it does help pay the interest. My latest purchase was 6 months ago, only paid $345k on a dual occ site and a yield of 3.9%, now that same prop is valued at $450k and would give me 3% yield.
Not sure if you're Chinese, but I deal with plenty of the sort you're referring to. They will go as quick as they come once they fundamentals of this economy is disturbed and they believe house prices are going to crash. They dumped Shanghai and Hong Kong as quick as they bought back in, and speaking/dealing with many on a commercial level or as friends, I'd say they'd do the same here.
Having an unsafe city where violence is widespread esp against the Indian students (plenty of China parents call up my friends to ask if they're ok, as papers over there are saying Melbourne is extremely dangerous) doesn't help.
From experience I know you need cashflow and CG to move forward and also deals that you turn over (cash deals) so you can continue purchasing.
Developing within 12 months of purchase would be great, but could you actually do this if not it is an expensive hold and you need deep pockets, how many of these can you afford?
It will become difficult to accumulate property using this strategy.
Cheers, MTR
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I'm new to the game but aren't people getting a little hysterical? With the projected population growth for Melbourne wouldn't it mean house prices would continue to soar (perhaps not at the same levels) as there is more competition for housing?
Am I looking at this the wrong way? I am more than happy for someone to give me a crash course in market trends.
Am I looking at this the wrong way? I am more than happy for someone to give me a crash course in market trends.
I guess we both are - i deal a lot with them too. And the last 2 who bought - 1 had a daughter in foundation year entering 1st year uni (that's another 3 years to hold the property) and the other was the in 1st year uni at RMIT - so unless they decide not to continue their tertiary education - can't see why they would dump the properties. Indian students (i believe choose different suburbs as opposed to chinese - where there is a higher rate of crime and they do take up different kind of jobs (taxi drivers, graveyard shifts at mcdonalds, hungry jacks).
Auctions - they're still around in my area - buying and bidding. Again you have the dad, mom and kid types going around looking for places to buy. Anyway, glad i offloaded the last 2 - and looking to offload another one.
That's fair but the influx of people will be skilled workers due to Australia's lack thereof, I believe. It is my belief that inner city may bust but "suburbia" will continue to flourish as the population continues to move further out as housing becomes scarcer and scarcer closer to the city. Sounds like commonsense to me but by no means do I claim to be an expert, I'm just an accountant.
I don't think you'll find inner city falling harder than outer-suburbs. People's no. 1 choice is always inner-city. Land in inner-city is scarce, land in outer-suburbs is not. it's a simple equation. Of course I am talking about good inner-city like Hawthorn, Carlton etc and not slums like Collingwood
Everything is inter-connected in the various property markets. The connections aren't always strong or fast, but price and rent is usually based on relativities. e.g. Paying $50/wk more to rent in Hawthorn than BoxHill. If Box Hill rents climb $20/wk people say for another $30/wk I may as well be in Hawthorn.
More people with even low paying jobs means more trying to rent at the bottom of the rental market. This nudges up prices. Then the mid-level rental market gets a small price nudge up. Then it starts to make sense to mid-income people to buy rather than rent (since rents keep going up).
Due to the demand pressures everyone is forced to pay slightly more than they used to. So 30% of income to rent becomes 32%.
This connectedness between low price units -> low price houses -> mid price units -> mid price houses probably stops somewhere around $1M. This is because the large number smooth statistics of the mass market start to become much more granular.
More people with even low paying jobs means more trying to rent at the bottom of the rental market. This nudges up prices. Then the mid-level rental market gets a small price nudge up. Then it starts to make sense to mid-income people to buy rather than rent (since rents keep going up).
Due to the demand pressures everyone is forced to pay slightly more than they used to. So 30% of income to rent becomes 32%.
This connectedness between low price units -> low price houses -> mid price units -> mid price houses probably stops somewhere around $1M. This is because the large number smooth statistics of the mass market start to become much more granular.
Well similar arguments were given about resources a couple of years ago. China was and still is in the middle of developing and over 50 cities will urbanise and rival at least Melbourne if not Sydney. Base metals, bulk commodities and oil and gas consumption should continue to hold commodity prices up, not to mention the urbanisation that's happening in India and eventually Indonesia, Vietnam etc. Chip Goodyear told us "stronger for longer" in 2007, right before the peaks in 2008. Thank god I sold out late 2007 for personal reasons.
Many factors need to be considered. Just one really obvious one that comes to mind, drawing on what happens to and what happened with and what has been happening to luxury villas in Hong Kong for the past six decades, are the people buying and driving prices up genuine homeowners or investors? If it's all investors, then perhaps prices aren't at the level where homeowners can afford so why bother looking at population growth and the need to find a house... since that is no longer the driving force any way? If it's homeowners that are making up the majority of buyers, then are these mortages sustainable? Is 90% gearing in Werribee by blue collar workers whose jobs are probably most at risk (due to globalisation, outsourcing and the dispensable nature of some blue collar sectors) who love to go on holidays before they pay down their house volatile?
That's fair but the influx of people will be skilled workers due to Australia's lack thereof, I believe. It is my belief that inner city may bust but "suburbia" will continue to flourish as the population continues to move further out as housing becomes scarcer and scarcer closer to the city. Sounds like commonsense to me but by no means do I claim to be an expert, I'm just an accountant.
Refer to previous post. I would've thought outer suburbs are at higher risk of busting. Who's really on the fringe here? New suburbs and new mortages and jobs most at risk? Or old lady with a fully paid off house she bought in 1975 in Balwyn North. Corporate lawyers living in Fitzroy whose skills are easily transferable overseas if Melbourne falls on its knees, or the mechanical car engineer or telecommunications specialist (ie electrician) maintaining the copper cable?
Really......the outer suburbs have a higher portion of tradies...particularly Werribee and surrounds. Last I looked....their prospects were much better than most white collar workers. Particularly plumbers, electricians, brick layers...
As for Corporate Lawyer and Telco Specialists....some of these areas can take months to land a job.
As for Corporate Lawyer and Telco Specialists....some of these areas can take months to land a job.
