The Mother of All Booms is Coming??

OMG!! Is your sole purpose in being here to spruik negativity

Actually no it isn't but the point I was making is that and we have to be careful with our purchases because the big influx of investors might not happen and there is job insecurity.

As investors we should consider all possibilities and not only listen to what developers are telling us.
 
Actually no it isn't but the point I was making is that and we have to be careful with our purchases because the big influx of investors might not happen and there is job insecurity.

As investors we should consider all possibilities and not only listen to what developers are telling us.

Well, that's a given. We should always do our due diligence.

As for developers, sheesh, that's like believing in what you see on TV. I would never advocate listening to ANYONE on face value, especially those with a vested interest, but I do believe in looking at what history tells us.

Of course, in saying that, the caveat that past performance is no guarantee of future performance should be used, but past performance at least has a track record.
 
It's not the increase I want. I don't drive the market. The renters will, themselves, push the rents up via supply & demand.

Have you not rented? Did you not get rental increases? The cost of living goes up, wages go up and rents go up. Nothing stays the same. It's the same argument as saying that housing prices can't go up because people can't afford it.

Where will homeowners find the extra income to pay for ever increasing house prices? See, same argument! The only thing that has changed is that it is homeowners instead of renters.

A classic example of how supply & demand works is with houses selling by "Offers Over". You put in your best offer, but someone else is willing to pay much more, so they get the house. I've got first hand experience with my recent sales on this. When asking the Agent what they thought the final selling price would be the reply was "Well....I think the property is worth around X, but to be honest, we have absolutely no idea of what someone will be willing to pay for it."

Skater, you have made some fair points but I don't think it is fair to compare buying to renting. I think we can both agree that whether or not someone can afford something is dependent on whether or not they have the money to pay for it.

Most people purchase a property with some combination of their own money (in the form of a deposit) and a loan from a bank. IMO the size of the loan is the biggest factor as to how much that person can afford to spend. Over the past few years, loans have become increasingly cheaper (with the falling interest rate) to service which has allowed people to purchase more expensive homes. Furthermore, whether you believe it or not, we have had new market participants in the form of overseas investors contributing to the rising house prices.

People do not take out a loan to rent a property - they pay for it directly from their incomes. Unless we see a substantial increase in income, I don't think we'll see rents increasing to the point where yields could return to 5-7%.
The exception to this is if the property where amenable to shared accommodation, which seems to be a popular option for reducing housing costs.

I say this without having had as much experience as you have had in the property game.
 
Skater, you have made some fair points but I don't think it is fair to compare buying to renting. I think we can both agree that whether or not someone can afford something is dependent on whether or not they have the money to pay for it.

Most people purchase a property with some combination of their own money (in the form of a deposit) and a loan from a bank. IMO the size of the loan is the biggest factor as to how much that person can afford to spend. Over the past few years, loans have become increasingly cheaper (with the falling interest rate) to service which has allowed people to purchase more expensive homes. Furthermore, whether you believe it or not, we have had new market participants in the form of overseas investors contributing to the rising house prices.

People do not take out a loan to rent a property - they pay for it directly from their incomes. Unless we see a substantial increase in income, I don't think we'll see rents increasing to the point where yields could return to 5-7%.
The exception to this is if the property where amenable to shared accommodation, which seems to be a popular option for reducing housing costs.

I say this without having had as much experience as you have had in the property game.

Rents have always increased over time with periods of stagnation and some falls in between. Yields are already much higher than 5% in many suburbs of many cities.
A low rate environment and plenty of new supply definitely suppresses rental growth but rents will always increase over time, they are the outcome of market forces and are also related to owners expenses
 
Actually no it isn't but the point I was making is that and we have to be careful with our purchases because the big influx of investors might not happen and there is job insecurity.

As investors we should consider all possibilities and not only listen to what developers are telling us.

Personally I thought your post about potential drop in skilled migration was a relevant one, we're already seeing perth affected by that. With the current slowdown in engineering, accounting etc jobs many areas heavily populated by that demographic like say east perth have seen rents drop significantly
 
Just wait, you just wait soon you'll buy houses on beaconsfield pde for 400k ast that is the "fair price" that a house should be available to people to buy ;)
 
Generalisation coming here.....

CG goes gangbusters and then it flattens....

While its flat rents then "generally" steadily increase to a point while yields play catch up.

2 separate properties in different suburbs I bought last year in Brisbane where very close to what the buyers had paid purchasing them back in 2008/2009, yields back then would have been close to 4%, they weree both 5.5% yeild at my purchase price in 2014.

Point is, yields can recover and do recover
 
I think we can both agree that whether or not someone can afford something is dependent on whether or not they have the money to pay for it.
OK, lets take the most vulnerable of people into this equation. Welfare recipients! And let's take a look at the rents they pay. No matter where you live in Australia, with the exception of some remote areas, welfare rates are the same. I won't make assumptions as to what they pay, so I will give two examples, based on what I know to be true.

In and around Elizabeth, SA, rents for a 3 bedroom dwelling are around $200-$250pw.

In and around Mt Druitt, NSW, rents for a similar property are around $300-$340pw.

If you were to talk to someone in Elizabeth and tell them their rent was going to go up to the level of the Mt Druitt rents, they would tell you they can't afford it. Yet, when you look at the number of people in Mt Druitt paying those rents, it is clear that they can.

If you have a home to rent & you are asking, say, $500pw for rent, and you do an open home and you get 20 parties through, and half of them fill in an application, and a couple of them have been looking for a while & can't get anywhere to rent, and they turn around and offer an extra $20pw. Presuming that they are of the quality you are looking for in a tenant, the Landlord would take the ones offering the most money.

This is again, supply and demand. When you've got a small amount of rental places available, and a heap of people wanting to rent them, costs go up. It does work the other way as well, in that if there's a glut of rentals on the market, and not a lot of tenants, the price goes down, or you get Landlords doing things like offering a week or two free, etc.

A personal example from when I was young, & renting.

My first unit cost me $40pw. It was a cosy 2bedroom unit, and the rent stayed at this price for a while. Then, out of nowhere, the rent rises came. I remember at the time, they went from $40 to $80pw in the space of a couple of years, and it was very hard on me, for a time, but slowly the increases at work and a few adjustments, and it was all good again.

The thing is....I couldn't have moved elsewhere, as all the rents in the area did the same thing. I was forced to suck it up, just like everyone else. I could have got a flatmate, as it was a two bedder, but chose to keep my spare room. This was around 1986.

That same unit would rent now, for around $340pw.

I say this without having had as much experience as you have had in the property game.
That's fine. We are all here to learn.

Rents have always increased over time with periods of stagnation and some falls in between. Yields are already much higher than 5% in many suburbs of many cities.

Exactly right!
 
Hi

I am seeing that Sydney is looking cheap compared to other states in terms of property prices. Even a global scale you can buy houses within 40 klms of the Sydney CBD for less than 400k. Even Melbourne, Adelaide, and Brisbane look cheap when you go out 30-40 klms.

I know that Gen Y don't like living in their suburbs but as they age they will change their expeactations just like my generation (Gen X) did. This along with high immigration, high birth rates (need for a backyard for kids), and an endemic structural planning issue which both the state and federal governments are failing to address is going to cause the lack of supply and thus the Mother of All Booms.

The article below also support some of what I am saying...

http://www.news.com.au/money/proper...ery-reserve-bank/story-e6frfmd0-1225838977173

So...what happens once this booms happens....just make sure you are not holding the can in 2014-2015..

Would love to hear other views.


The mother of all booms is coming alright. So far in my opinion we have not seen the boom yet. Cards are still lining up nicely. Come on Sydney - give me a 1.3 to 1.4 million median.
 
The mother of all booms is coming alright. So far in my opinion we have not seen the boom yet. Cards are still lining up nicely. Come on Sydney - give me a 1.3 to 1.4 million median.

ha, let's just round it off to $2m whilst we are at it

seriously tho, I think there is a flee of skilled labour taking place now. the guys that chase the hot money are moving on
 
ha, let's just round it off to $2m whilst we are at it

seriously tho, I think there is a flee of skilled labour taking place now. the guys that chase the hot money are moving on

CBA home loan calculator is offering $1.2 million for a couple earning $200 000 gross income with $3000 worth of monthly expenses. This is at current rates.
If rates keep dropping then I don't think $1.3 million would be impossible.
 
CBA home loan calculator is offering $1.2 million for a couple earning $200 000 gross income with $3000 worth of monthly expenses. This is at current rates.
If rates keep dropping then I don't think $1.3 million would be impossible.

so long as $200k is the median income for a Sydney household.

it would also be a mistake to think that what is available to borrow materialises into a median house price.
 
And when rates rise?

When exactly, will rates rise? The RBA kept rates on hold for the 18 months prior to their most recent rate cut. The RBA is expected to keep cutting, especially with the overvalued dollar.

In fact, which Western Economy has actually raised their rates in the past 12 months? I don't know of anyone that has. The EU has cut and is printing to stimulate. The U.S has now delayed its rate rise until the end of the year - my bet is that that may not even go ahead if the price of oil keeps dropping. NZ has admittedly increased, but they are now thinking of cutting again - admittedly, they have implemented macroprudential policies to target their housing bubble.

so long as $200k is the median income for a Sydney household.

it would also be a mistake to think that what is available to borrow materialises into a median house price.

According to ABS data from Nov 2014, the full-time adult average weekly total earnings is $1539.40 or $80 048.80 per year. That is for a single person.
I don't think it'd be uncommon to find couples living in Inner West (or parts of Western) Sydney on >$160 000 combined.

the banks shake the rattle, the public bails them out, joe average gets slaughtered

Just move countries (seriously). If you are young and have skills then why the heck would you stay in Australia?
 
Just move countries (seriously). If you are young and have skills then why the heck would you stay in Australia?

professional salaries for the last 10 years or so have exceeded most other parts of the world. Am not sure how your reply relates to my post however until the recent exchange rate collapse there was little financial sense in moving countries
 
When exactly, will rates rise? The RBA kept rates on hold for the 18 months prior to their most recent rate cut. The RBA is expected to keep cutting, especially with the overvalued dollar.

In fact, which Western Economy has actually raised their rates in the past 12 months? I don't know of anyone that has. The EU has cut and is printing to stimulate. The U.S has now delayed its rate rise until the end of the year - my bet is that that may not even go ahead if the price of oil keeps dropping. NZ has admittedly increased, but they are now thinking of cutting again - admittedly, they have implemented macroprudential policies to target their housing bubble.



According to ABS data from Nov 2014, the full-time adult average weekly total earnings is $1539.40 or $80 048.80 per year. That is for a single person.
I don't think it'd be uncommon to find couples living in Inner West (or parts of Western) Sydney on >$160 000 combined.



Just move countries (seriously). If you are young and have skills then why the heck would you stay in Australia?

I would hope any couple would be on considerably more than 160k combined if they were FHB with a 95% lend on a 1m property, yes they could afford it initially but if one wants to invest aggressively then being a slave to a massive ppor loan is not the way to proceed. Problems will arise in the their early to late thirties when children enevitably come along.
I don't think rates will rise significantly any time soon but eventually they will and this will catch many unaware unless large inroads are made into non deductible debt IMO
 
I would hope any couple would be on considerably more than 160k combined if they were FHB with a 95% lend on a 1m property, yes they could afford it initially but if one wants to invest aggressively then being a slave to a massive ppor loan is not the way to proceed. Problems will arise in the their early to late thirties when children enevitably come along.
I don't think rates will rise significantly any time soon but eventually they will and this will catch many unaware unless large inroads are made into non deductible debt IMO

I really think most FHB will not be looking at buying in around 1 million mark with very little deposit. I know a mates who is FHB looking at buying their homes around inner west for around 1.1-1.2mill. They have 20%+ saved, and their household income is way more than 200k

Young professionals couple FHB with 10% deposit or less along average income (120-150k household income) will most likely looking at an apartment value around 650-850k)
 
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