@boy

http://www.news.com.au/business/mone...013951,00.html

* Rental market set to be squeezed even more
* Listings now at a five-year low
* Renters advised to lock in to properties

"Most major cities had seen double-digit percentage rises in house rents over the past year as advertised listings dropped to a five-year low, Australian Property Monitors said in its March quarter rental series."


The article from the Financial Standard really points the finger as poor old Gen Y being a considerable factor in driving up rents.
http://www.financialstandard.com.au/index.php?id=12210
“Generation-Y are leaving home much later than they used to – at an average age of 27 years. They don’t seem to have the same pre-occupation with home ownership as previous generations,” Michael McNamara, APM’s operations manager, told ABC radio this morning.

How realistic does that sound ?

geordie downunder

Never read them,they are all a load of crap.Nobody can predict the future,crystal balls do not exist.As a very long term investor I've found that which way the goldfish swims around the bowl can be a good sign,it has a 50/50 chance of being right.Far better than the experts.

I attend the AGM of Berkshire Hathaway (Warren Buffett).Although primarily stock market orientated he sums up the whole financial industry very well.

If they knew what was going to happen,they'd be buying shares (gold,property,bonds,you name it),not selling advice.

Vash the Stampede

Thanks for the good news! Looks like we might be able to put up the rent on our investment property in Adelaide.

Wol

All pretty obvious. Australian renters have been getting it easy for years - "investment" owners have been content to rent for little more than the mortgage cost since they "know" their property will bring in a huge capital gain in a year or two. Now that scenario is out the window: interest rates and restricted credit means house prices are going down. So they have to make their properties pay their way - and there's a shortage of rentals too for the same reason. You ain't seen nothing yet!

DrWho

Hmm... would have to disagree... if owners rented for more than the mortgage cost then negative gearing wouldn't really be around... The ones I know doing it rent for less than their costs and offset this against their tax... The only reason anyone says the rents have to go up is because the landlords are doing it with borrowed money and increased interest rates means their cost are going up which they'll try and push to the tennants...

Personally I think a much more likely scenario is that the price of houses will significantly drop so the return obtained by the rent is a realistic return on the investment... I think the notion of 50% rent increases across the board in the next 4 years is simply fantasy... Where on earth do they think they money will come from...? All something like that would do is push wages up considerably which would fuel inflation and more interest rate rises...!

Ozzidoc

As I've been saying since I was 15!!! Why negatively gear when you can positively gear? ie why make a loss if you can make a profit??

stariston

[QUOTE=@boy;6158689]http://www.news.com.au/business/mone...013951,00.html





Simple cant afford to buy shortage of housing to buy need roof over head
rents rise supply and demand senario
intrest rates at all time high
bye bye

Wol

[quote=stariston;6166274]
Try re-booting?

geordie downunder

Forget it ,I've been telling people that for 25 yrs.You don't get rich by losing a dollar to get 30 cts back off the taxman.

There is a very large financial industry spending a fortune on advertising to tell people that 30 cts from the taxman is a wonderful thing,as long as everybody agrees on something and repeats it, bullshit will be great wisdom.


Earn a $ and pay tax on it you have 70 cts in your pocket.

Spend a $ on a deduction and have 30 cts in your pocket.

Amazing how many people cannot figure out that 70 cts is more than 30 cts if the sentence has the word tax in it.

JAJ

In a stable market, a property's rental should be x% of the purchase price. What "x" is depends on a number of factors, but broadly speaking there should not be a wide gap between rental cost and the sum of loan interest + costs of ownership (maintenance + insurance + property taxes).

Over shorter time periods, which can run into years, this becomes distorted. In a period of time where house prices are climbing and everyone is desperate to buy, rentals become "cheap" in relation to purchasing. During this period, it is not a problem for owners as they see their capital value increasing.

On the other hand, in a property downturn, demand for rental increases substantially (because people don't want to buy in a falling market) and so rents will increase.

When house prices reach a low point, renting will actually be quite expensive in relation to buying property, and so the cycle repeats itself.

WelshSarah

So as a newbie...

Should I buy or rent?

JAJ

With respect - are you seriously going to base a decision like that on advice you receive on an online forum?

@boy

I'm pretty sure it's a windup :-)

Ref their "Most stupid questions on expats" thread
http://britishexpats.com/forum/showthread.php?t=527208

geordie downunder

Why would the return be X% of the purchase price,you want ROI (return on investment.)If the house is worth 400K and the return is 18K per year would you not compare it with other assets.

Buy shares,say CBA,400K gets you 10,000 shares in CBA (roughly),dividend would be around 26K net,this year,the imputation credits take the gross income up to 37K .Both of them have a chance of capital gain,or loss.There are high holding costs in property,no holding costs in shares.

Put 400K in the bank @ 8% and you get 32K per year,no chance of capital gain and an extremely small chance of capital loss.However a 100% certainty of inflation loss.

After the event you can calculate the return on the cost price,eventually you would be aiming for a 100% or more return of capital every year, plus the capital gain.No matter where it is you want a return on 400K,not how much the asset cost.If the house cost 50K years ago then the yield is 36% of cost.When the rent reaches 50K per year (god knows how long into the future)then the yield is 100%

The best way is probably put them all on a P/E ratio (price/ earnings),the house is on a gross P/E of 4.5% (then the heavy holding costs).

The stock is on a gross P/E of 9.25%,no holding costs.

Cash ,obviously P/E of 8%.

The house looks really bad on yield but in all fairness the depreciation scedule does increase the yield.

Amazulu

Great news. This country just gets better and better.