Will restricted lending limit capital growth in next few years
- Thread starter House_Keeper
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A bit like gold then?
fair call - I have broadened my definition. PS do you have any gold? because I have some very pretty tulips
Think from memory I said there will "probably be some new fad or gimmic to start it off". Don't recall mentioning Tulips ever recovered, however the general economy did. It brings us back to the basic situation of supply & demand. Tulips are fairly common and no longer a fad. If you can get them to grow in the Sahara, you could be onto something and create a demand in desert areas.
Project 1080.
The project: 10 IPs in 80 mths.
As a real estate agent for many years I would have to disagree with you on all points.
Immigration is going to be SLIGHTLY less but still very,very high historically.Just check the numbers to confirm this.The new immigrants are also good earners and not mostly family immigration.
I absolutely see the sellers of units to first home buyers desperately looking for upgrades to houses.There is a massive shortage of properties available at present compared to buyers looking.This is due to winter but very much due to upgraders.
Investors are definately waiting in the wings looking to pounce when first home buyer grant reduces,including myself.
The banks reluctance is due to stricter lending policies arising from OS costs and is cyclical but this is great for investors as it adds to pent up demand,whether it be this year or next,doesn't really matter as most property investors invests don't just invest for a year or two.The less properties built the better for investors if you already have a good portfolio.
Immigration is going to be SLIGHTLY less but still very,very high historically.Just check the numbers to confirm this.The new immigrants are also good earners and not mostly family immigration.
I absolutely see the sellers of units to first home buyers desperately looking for upgrades to houses.There is a massive shortage of properties available at present compared to buyers looking.This is due to winter but very much due to upgraders.
Investors are definately waiting in the wings looking to pounce when first home buyer grant reduces,including myself.
The banks reluctance is due to stricter lending policies arising from OS costs and is cyclical but this is great for investors as it adds to pent up demand,whether it be this year or next,doesn't really matter as most property investors invests don't just invest for a year or two.The less properties built the better for investors if you already have a good portfolio.
You're starting to sound like a property seminar presenter Michael!
I think evand is quite right, and not the only one who has observed that only the bottom end of the market showed any significant price growth after the government grants were announced. Its effects are slowing down, so there is a good chance this boost to the market can only be temporary.
The so-called massive undersupply has been mentioned for years, it doesn't explain what happened in the last 6 months.
Immigration is on the way down, not on the way up.
Banks are very reluctant to finance developers, most likely because they see it as a high-risk activity in a weak economy. I wouldn't bet that the banks are stupid in this assessment.
Cheers,
there is debate about whether the FHB will ever be abloshed
I cant stress enough to my fellow Somersofters the dangers of this way of thinking. Over the very long term your view is DEFINATELY correct so long as two things happen
1) money is slowly debased over time; AND
2) population growth continues over the long term.
However the long term is just that..... long (more than 10 years).
I am confident that i am going to be proved wrong in the short to medium term as markets take time to realise their falicies.
But some points made by Yld Matters (even though i disagree alot with what he says), essentially wages to property prices, have to stack up over the long term. You can have a very decent period of time when the market opperates in a state of disequilibrium due to a number of factors, but over the long term, factors which cause the disequilibrium are eliminated and the market moves back to its intrinsic value.
For those of you that are thinking that if we move into a high inflationary environment, it will be 'all cool' with property as it will inflate to match the higher inflation rate, again i caution you. This way of thinking is correct over longer periods of time, but first the market must adjust to that higher inflation rate (and this adjustment phase can cause significant pain in short term prices).
(again i use reference to the late 90's, many 'professional' views at this time was that if australia enters a time of prolonged low inflation, property will UNDERPERFORM. What these professionals failed to realise is that once the market realises that inflation will be low, interest rates adjust accordingly and hence purchasing power increases).
dont rely on the FHB as justification to be in the market or to buy. Its a nice add on for those that have existing property but dont rely on it.
Its a bit like the dot.com boom, when people said stop looking at valuations, look at sales growth (for some share investors, growth in sales is an important indicator of future value, it just got taken out of context).
The point im trying to emphasise is to always ensure your investment stacks up solely on its investment merits, not because of market impediments (or the converse).
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I haven't had time to read the thread but thought that I would just say that I have recently just had finance approved and was shocked at how willing they were to lend me the money. I have taken my loans up to 77% LVR, have had a drop in income and they basically just chucked it at me? it really shocked me as I thought I would be struggling to meet their Debt to service ratio.
Thanks for that feedback shanematt. Sometimes it's easy to miss part of the picture.
This has been a very interesting thread for me. I hadn't considered the effect of restricted lending on property development. Most likely, banks are more reluctant to finance property developers than property purchasers at the moment, so the restriction on property development is probably more severe.
There are forces pulling the market in opposite directions at the moment:
Factors that tend to push prices up include:
- Low interest rates
- Short-term government incentives
- Supply shortage
- Strong immigration levels
Factors that tend to limit price growth include
- Market sentiment / recession fears
- Tighter lending
In the short term, this explain why the market is holding up despite the weak economic environment.
What I find interesting is that, if you take a slightly longer perspective (beyond one year):
On the plus side, two fundamental factors will remain: Supply shortage and high immigration.
On the minus side, market sentiment is likely to have improved. It's hard to guess how long tight lending will last but it might start to loosen up in the medium term. Interest rates are likely to rise over the medium term though.
So, looking at it from a medium term perspective, the forces pushing prices up are likely to remain reasonably strong, while the opposites forces are likely to be weaker, except for interest rates.
I think the term 'pent-up demand' best describes what is likely to happen in the next few years. There's no boom coming tomorrow, but solid growth likely over the medium to long term.
It looks like it might be a good time to purchase another property soon.
Thanks for helping me clarify my thinking.
Cheers,
I take your point Chillia and have no dispute with your comments however you omitted to quote a key line from my post, "It won't happen overnight, but it will happen." Now, one might argue that I have not elaborated this with a time frame, which may have given rise to your response.
Firstly, like everyone else I cannot predict the future, hence I do not know know when it will happen. All I know is that it will happen based on historical trends and human behaviours. I am young enough (and perhaps also silly enough) to wait it out.
Secondly, the phrase "long term" is subjective. It may mean different things to you and I and it may also have different meanings within our own minds depending on the product in question and our intent at the time we decide a time frame. Example: waiting 6 months for the correct floor tiles to arrive from Italy is long term
, whereas the expectation of property values doubling may be in the order of 10 years, again long term but in a different application.One thing I do know is, to a young child "long term" means 5 minutes in every sense.
Project 1080.
The project: 10 IPs in 80 mths.
although westpac doesn't agree. no idea why.
What cycle? There is no cycle. What evidence is there of a sustainable cycle? House prices rise, debt levels rise ... that's about it. Occasionally incomes rise as well - but that is just levered up with debt and again house prices rise.
I think we are at the extreme of what is possible - from this high point higher real incomes are unlikely, unless the kids go to work we have maxed out at 2 income households, credit is getting tighter. Best case for a property investor is flat prices with rising rental yields. Worst case is a collapse.
Exactly why looking at median price as a market indicator for cap growth is a waste of time, mostly.
If you are able to analyse WHY the median has dropped and act accordingly - in other words, the drop in median might mean a flood of lower end sales so maybe time to buy in the lower end, then it is a useful stat.
But that's about the only time it is useful IMO.
Too true. So much more can be ascertained about a property market by spending 5mins checking out recent sales and current listings than the median figure.
Good point. Rising unemployment is likely to constrain capital in the short term (next 12 months).
Cheers,
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