Alex, do you believe that real property returns (yield + CG) will always exceed real mortgage rates? Will there come a time when they're consistently lower? I know we've only seen it briefly in the past but do you reckon a permanent high rate environment is settling in (i.e. 5% cash rates are a thing of the past)?
I don't look at 'real' mortgage rates (I'm taking it to mean nominal interest less inflation). There will be times when they are lower, but I don't believe it'll last forever.
I don't think any high rate (or low rate) environment is permanent. Sure we might not see 5% cash rates for many years, but do you consider 5 years permanent? 10 years? The property LVR doesn't hold constant. As time goes on the LVR decreases (even if the price increases are from pure inflation), and rents also increase (assuming the same yield but on an inflated asset price). That's why after holding a property for more than a few years, owners generally no longer care how their property now has a low yield, since they've already made a lot of money from it.
Alex