Residential Investment No Longer Safe

Thought I should quote the bit that lined up with my thoughts ....

He said the main reason for this was the sharp increase in the cost of debt.

"These higher debt costs are now playing havoc on the highly geared listed property trust sector, and there's no reason to think that its different for residential property," he said.

While rents are rising in response to the last housing price boom, this does not presage the beginning of another leg up in prices.

"Despite strong rises in gross rental yields, residential property is still delivering an income well below the cash rate. The net yield from property is still too low in our opinion," he said.

Mr Canavan said for property to be an attractive investment once again, gross yields must rise and be on par with other investments such as cash or bonds.

"For this to occur, either rents need to continue rising or prices must fall," he said.

"For rents to continue rising, wages would need to increase. But with both the government and the RBA keen to avoid an inflation breakout, we believe a meaningful increase in wages is unlikely."

He said the alternative was for prices to fall to lead to an increase in gross yields.
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Maybe they could let interest rate fall. Just like few months ago Bernanke said he wouldn't agree to a US rate fall because of inflation, but as the market fell, he had no choice but to slash interest rate again and again. I think australia should do the same as the FED did.
 
willair said:
Banks have written down more than $US125 billion ($A137.15 billion) of assets since November, hammering their shares..willair..
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...not hammering but de-valuing their shares in a click of the thumbs...!

Ouch !:eek:

I keep going back to the old adage.......people need a roof over their heads....and generally will do most anything to keep it there......

We all need shelter......not all need shares.......;)

2c
:)
 
I don't think there has ever been anything safe about investing in something that is garuanteed to lose you money from Day 1, however the point fat prophets seem to have missed is that people need a roof over their heads and if it costs x to produce that then what do you do... live in your car?
 
Ausprop said:
I don't think there has ever been anything safe about investing in something that is garuanteed to lose you money from Day 1, however the point fat prophets seem to have missed is that people need a roof over their heads and if it costs x to produce that then what do you do... live in your car?
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Yeah, I can see AFG fall from $13 to $0.25 but would LOVE for beach front ocean pads drop from $5M to $300k. Heck, I'll even pay $500k for it. But it won't happen.
 
Ex; myRPdata email today


Western Australia continues to lead nation in population growth


Overseas migration to Western Australia has driven the state population growth rate to 2.4% per annum – well above the national average of 1.5%

National population growth
The Australian Bureau of Statistics (ABS) recently released the September 2007 update of ‘Australian Demographic Statistics’. According to the ABS the estimated residential population of Australia increased by 1.53% or 318,400 new residents over the twelve months ending September 2007. The national rate of growth has not been that high since the September quarter of 1989; 18 years ago.

National population growth is derived from two factors: the natural increase (the number of births minus the number of deaths) and the net level of overseas migration. During the year the natural increase boosted Australia’s population by 139,400 residents. Overseas migration accounted for a much larger proportion of Australia’s overall population growth. During the year 217,100 residents departed Australia while 396,100 new residents arrived from overseas. The net result is an additional 179,000 new residents sourced from overseas.



The largest numbers of net migrants to Australia come from China. Over the 2006/07 financial year 23,000 net migrants from China moved to Australia. Migrants from the UK, New Zealand, India and Japan comprised the remainder of the top five.

New South Wales is the most popular state for new migrants to the country, receiving 31% of all net migrants. Victoria and Queensland follow with 27% and 19% respectively.

In percentage terms, Western Australia is leading the national population growth stakes, with the estimated residential population increasing by 2.4% over the year ending September 2007. Population growth into W.A. was trending downwards between 1995 and 2002, however the tides turned for WA during 2002 when population growth started to trend upwards sharply. Jobs growth through the resources sector is the primary driver behind such consistently strong growth figures. Well over half of W.A.’s population growth is derived from overseas migration.



On a raw numbers basis, Queensland has historically led the nation in terms of population growth.
Over the year ending September 2007 Queensland's population increased by 90,636 new residents. This level of growth equates to an additional 1,743 new Queensland residents each week. Based on the average household size of 2.6 persons, this level of population growth equates to demand for an additional 670 new dwellings each week.

Interstate migration is trending downwards into Queensland
A large portion of Queensland’s new population was sourced through interstate migration; primarily residents flowing across the border from New South Wales. The rate of interstate migration into Queensland has been slowing since the last quarter of 2002, largely because more residents from New South Wales are staying put. A primary reason behind the falls in interstate migration to Queensland is the fact that there is no longer a large affordability gap between the states, particularly New South Wales. To illustrate this point, Brisbane house values were 56% lower than Sydney’s back in 2001. Today, Brisbane values are just 16% lower than Sydney values.



Mav
 
yieldmatters said:
http://news.theage.com.au/residential-investment-no-longer-safe/20080323-212d.html

It is amazing for me to see how quickly the mob (the media) change. It was only 12 months ago that I was lamenting that the media just keep fueling it.

This article sums up my thoughts well. I actually think some shares are a good buy right now - could be wrong of course!
Click to expand...
Such an article might just be a raging buy signal if we had been through a large correction or extended flat period, neither of which we have experienced in Brisbane.

Still if you get a lot of such lamestream media propaganda filtering out then you are probably putting a floor under any potential crash as you change the public mindset.

I would be happy to hold as much Aussie resi property as I could get my hands on with serviceable debt, still haven't seen an accurate timing model that thinks it's smart enough to be able to sell and then buy back at a profit!

But if debt is an issue.. and you have a job that is even slightly cession sensitive then you need to be thinking very carefully at the moment I think.

By the way... what ever is always a safe investment?

(Don't say gold anyone)
 
yieldmatters said:
http://news.theage.com.au/residential-investment-no-longer-safe/20080323-212d.html

It is amazing for me to see how quickly the mob (the media) change. It was only 12 months ago that I was lamenting that the media just keep fueling it.
QUOTE]

You're correct about this.

Again, total media BS. 5 days ago they were reporting the beginning of the end. Total disaster.

But cheer up folks, today, its the beginning of a massive boom:
http://www.theage.com.au/news/national/shortages-fuel-housing-crisis/2008/03/27/1206207302370.html

Unbelievable.
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I believe this is typically media hysteria. :rolleyes:

Up until a few months ago the media was saying property was booming and interest rates have not had affect. Now the tune has dramatically changed...I suspect this is also affecting how the average punter is thinking...thus a slow down in spending.

I feel that there will be some good opportunities as some people panick and put their places up for sale. :)
 
asdf said:
Yeah, I can see AFG fall from $13 to $0.25 but would LOVE for beach front ocean pads drop from $5M to $300k. Heck, I'll even pay $500k for it. But it won't happen.
Click to expand...

You wouldn't be able to borrow any money to buy it if it fell to $500k, given that such a fall would imply the disappearence of ANY borrowing.
Alex
 
Blue Card! said:
this on the back of the "Rents increase by 50%" thread.

how can they be a bad investment?
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cant say i am getting too excited about this 50% in 4 years thing - a bit of a sit on the fence prediction really. inflation would account for a fair whack of that, interest rates will see the landlord well behind. Not to mention the kicking and screaming from over potected tenants on water tight leases that can't be changed too quickly anyway. I keep hearing about rental crisis's and rents going thru the roof, but I look around and see $400k villas renting steadily at $250pw, hardly the stuff to get your heart racing. My tenants (2 girls sharing) moved out because I put the rent up $12.50 a week each - when you are up against that......
 
Ausprop said:
hardly the stuff to get your heart racing. My tenants (2 girls sharing) moved out because I put the rent up $12.50 a week each - when you are up against that......
Click to expand...

.....when you're up against that - you need to start playing a different game. :)
 
Mav said:
Ex; myRPdata email today




On a raw numbers basis, Queensland has historically led the nation in terms of population growth.
Over the year ending September 2007 Queensland's population increased by 90,636 new residents. This level of growth equates to an additional 1,743 new Queensland residents each week. Based on the average household size of 2.6 persons, this level of population growth equates to demand for an additional 670 new dwellings each week.

Interstate migration is trending downwards into Queensland
A large portion of Queensland’s new population was sourced through interstate migration; primarily residents flowing across the border from New South Wales. The rate of interstate migration into Queensland has been slowing since the last quarter of 2002, largely because more residents from New South Wales are staying put. A primary reason behind the falls in interstate migration to Queensland is the fact that there is no longer a large affordability gap between the states, particularly New South Wales. To illustrate this point, Brisbane house values were 56% lower than Sydney’s back in 2001. Today, Brisbane values are just 16% lower than Sydney values.



Mav
Click to expand...

IaninvestorThe
whole discussion reminds me of the 'cycles' diagram that Yardney shows at his seminars... Once the media think we're at point 'A', the real investors are already at the next stage.
Click to expand...


As IanInvestor reminds us, we are in a cycle. All the states don't peak and fall at once. Brisbane has seen a profitable year with fantastic growth in most areas. It is now Sydneys turn.
So while we may be seeing higher medium prices in Brisbane, we have just begun the rise in the cycle for Sydney. Give it time. . . . . ;)
 
Agreed. For the record though, my point was not that we are in a cycle, but that the media's perceived cycle lags behind the real cycle underneath.
 
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