Smart Property Investors

[bbruham]

G'day,
What are we up to in relation to purchasing more property?
Is Sydney and Melbourne in property bubbles, if so what happens when they burst? Will the burst bubble affect Brisbane as well?
Then you have those reginal towns. Drought affected, unemployment rising. Meaning less tenants to rent your investment property.
But what if Sydney and Melbourne are not in bubbles!
They could be future Londons or New Yorks, standard millionaires only as owners. The rest of us only renters.
In New York the only owners of property are large property trusts
so individuals own next to nothing. What a shame.They should
be reading this forum, then do what they read, wolla! Then they'll
own N.Y.
I don't want to get caught up with the herd mentality.
Bruce G.(Sydney)

 

[Kevmeister]

On the one hand, if the property bubble does burst, the question is what affects will it have:

1. Stagnating prices, or.
2. Lowering prices (and how much).

What effect will that have on rentals? Perhaps less tenants if property becomes more affordable, leaving those who are investors with a potentially smaller rental.

Only an interest rate increase will force people to sell if they now have negative equity.

I guess it's all about Risk Management.

On the other hand, if it doesn't burst, tenants will indeed start to increase as affordability drops lower and lower, a'la New York. Less people can afford to buy, more rent. More and more young people will rent, and for longer and longer (or stay at home longer).

But the downside of that is that the question will then become one of affordable rent anyway. So investors who have bought mega-$ places may still have trouble getting a good return in my opinion.

From what I have seen, expensive residential property is vacant longer and earns a lower yield, so this could simply be the start of a trend.