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SQM Research Louis Christopher: House prices will be flat but bet on rent rises
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Topic Started: 13 Dec 2010, 05:22 PM (4,931 Views)
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Frank Castle
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13 Dec 2010, 05:22 PM
Post #1
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Business As Usual
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I just love rent rises :beer:
How about you?
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House prices will be flat but you can bet on rent rises Louis Christopher December 13, 2010 - 9:50AM Comments 27 It's that time of year again where the old crystal ball comes out and we do some gazing for 2011. The great thing about being an analyst is that the media rarely holds you to account regarding past predictions. So in the spirit of accountability, these predictions were made here last year for 2010: Sydney's house prices would record about 8 per cent growth with the market slowing due to withdrawal of the First Home Owner Grant and higher interest rates. Building approvals to surge, with a good year for developers. Upper end of the market likely to outperform the lower end. Affluent end of the market likely to record a rapid decline in vacancy rates, while lower end would remain very tight. Interest rates must not go over 8 per cent otherwise it's curtains for the Sydney market. The market has indeed slowed to a trickle. It is now safe to state real estate prices in Sydney have slightly fallen in the second half of the year. However, due to the surge in the first half, the annual rate of growth for this year has been close to the 8 per cent mark. Advertisement: Story continues below Property developers have had a good year and there was a surge in building approvals in the first half of the year. The jury is out on whether the upper end of the market has outperformed this year. True, it has had a better year than 2009; however we are still recording patchy performance for properties over $2 million. New predictions: Vacancy rates to remain tight for most of the market and that means at least 7-9 per cent plus rises in rents for 2011. Building approvals to soften as investors largely stay on the sidelines following very high interest rates. Outer ring in Sydney, particularly the south-west and west, will outperform in rents and capital growth. The affluent end of the market is going to underperform once again. And watch out for properties around the $1 million mark - they are likely to be discounted most. We remain with the firm conviction that the average home loan lending rate must not go over 8 per cent. If it does, that would hit the Sydney market hard, depending on how long it would stay at those levels. Our overall forecast is that the Sydney market is likely to record flat to moderately falling house prices for 2011. We believe it is going to be somewhere between a 0-4 per cent decline. It is clear now that the Reserve Bank is happy for the housing market to have a correction. Early this year, I did not believe the RBA would risk a housing bust so early in the economic recovery. However that was one prediction I did get wrong. After all, there was already a housing bust taking place outside Sydney which presumably the RBA was aware of, and yet it lifted rates http://news.domain.com.au/domain/home-investor-centre/house-prices-will-be-flat-but-you-can-bet-on-rent-rises-20101213-18ufd.html
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The T.A.M.P.O.N effect - A NEW whinging bear acronym emerges
Timo And Moops Protest Over Nothing
Proof that moops is a simple minded hypocritical turnip
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SausageDog
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13 Dec 2010, 05:35 PM
Post #2
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- Frank Castle
- 13 Dec 2010, 05:22 PM
I just love rent rises :beer:
How about you?
I've got no issue with rent rises. The first few years of a mortgage are the years when it's actually cheaper to rent so the longer I can put off buying and the bigger a deposit I can build the better. Flat prices make that decision a no brainer. If the landlord gets too greedy buying becomes more attractive and I switch. You scratch my back I'll scratch yours.
On a side note, is this what bulls have finally come down to? Bragging about rental yields? I thought housing was all about capital gains and ending negative gearing would be a disaster because nobody would want to invest in property then. You're seriously happy about flat price growth? Weird.
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kennyjaiz
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13 Dec 2010, 09:18 PM
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- SausageDog
- 13 Dec 2010, 05:35 PM
I thought housing was all about capital gains and ending negative gearing would be a disaster because nobody would want to invest in property then. You're seriously happy about flat price growth? Weird.
What gave you that impression?
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mythbuster
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13 Dec 2010, 09:27 PM
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Frank Castle - why dont you drink to actual rent increases, not forecast ones. Similarly I dont think Australian's will alter their religious belief that property always rises until it consistently falls. 2011 should be a lot of fun.
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Frank Castle
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13 Dec 2010, 09:37 PM
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- mythbuster
- 13 Dec 2010, 09:27 PM
Frank Castle - why dont you drink to actual rent increases, not forecast ones. Similarly I dont think Australian's will alter their religious belief that property always rises until it consistently falls. 2011 should be a lot of fun.
Sure, why not :beer:
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That one signed
Others to follow :beer:
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The T.A.M.P.O.N effect - A NEW whinging bear acronym emerges
Timo And Moops Protest Over Nothing
Proof that moops is a simple minded hypocritical turnip
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raveswei
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13 Dec 2010, 10:00 PM
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House prices will be flat but you can bet on rent rises
Can you?
Look what happened in Ireland:
fall in rents in Ireland, mid-2007 to mid-2010, by county Dublin: -29%
Or USA:
Rents fall almost everwhere - even Manhattan more than 10% down
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http://popping-bubble.blogspot.com/
Thinking of an Australian property speculator (PI):
Inaction = missing opportunities.
Missing opportunities = losing.
Too much thinking = inaction.
Thinking = missing opportunities.
Therefore thinking = losing.
disgraceful little man Frank Castle owes a house to Salvation Army
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SausageDog
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13 Dec 2010, 10:21 PM
Post #7
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- kennyjaiz
- 13 Dec 2010, 09:18 PM
What gave you that impression?
Endless rhtetoric to that effect whenever the subject of the government changing negative gearing laws is brought up.
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plugmeister
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13 Dec 2010, 10:27 PM
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Locally North of Brisbane, there is a glut of rentals and they have dropped rents at least 10%. One house on the market for $1.4M, with sea views, two years ago is available for $400pw. Rent or buy?
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kennyjaiz
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13 Dec 2010, 10:43 PM
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- SausageDog
- 13 Dec 2010, 10:21 PM
Endless rhtetoric to that effect whenever the subject of the government changing negative gearing laws is brought up.
I can't say I understand where you are coming from. I am not sure who and what rhetoric you are referring to. The arguments I have heard to date with regard to negative gearing is that it would have implications on rent as well as property price. Mind sharing some of the "endless rhetoric" that would lead to the conclusion that "housing was all about capital gains"?
If property investment is all about capital gain as you claimed, people would be buying land instead. Your perception of the motivation to buy properties in Australia may be incorrect.
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SausageDog
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13 Dec 2010, 10:55 PM
Post #10
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- kennyjaiz
- 13 Dec 2010, 10:43 PM
I can't say I understand where you are coming from. I am not sure who and what rhetoric you are referring to. The arguments I have heard to date with regard to negative gearing is that it would have implications on rent as well as property price. Mind sharing some of the "endless rhetoric" that would lead to the conclusion that "housing was all about capital gains"?
If property investment is all about capital gain as you claimed, people would be buying land instead. Your perception of the motivation to buy properties in Australia may be incorrect.
Read a Sydney Morning Herald property blog some time. Pretty sure I've seen similar comments on this site from people who can't seem to handle the idea that rents don't have to go up for yields to adequately justify prices without negative gearing -- prices could fall to the same effect -- but I'm not about to trawl through topics looking for them. Sorry.
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kennyjaiz
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13 Dec 2010, 11:34 PM
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- SausageDog
- 13 Dec 2010, 10:55 PM
Read a Sydney Morning Herald property blog some time. Pretty sure I've seen similar comments on this site from people who can't seem to handle the idea that rents don't have to go up for yields to adequately justify prices without negative gearing -- prices could fall to the same effect -- but I'm not about to trawl through topics looking for them. Sorry.
I generally don't keep myself informed by newspaper blogs as I have my doubts re the accuracy.
From a logical perspective, if negative gearing is removed, the demand for investment property will be reduced and therefore exert a downward force on price. However, the supply of rental property will also be reduced, which will result in an increase in rent. Rents don't HAVE to go up. But the historical fact is, as a result of the removal of negative gearing by Keating in the 1980s, the capital cities with low vacancy did increase in rent. I am not justify the need for negative gearing, just its implications.
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catnap
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14 Dec 2010, 06:42 AM
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- kennyjaiz
- 13 Dec 2010, 10:43 PM
Your perception of the motivation to buy properties in Australia may be incorrect.
So what is your perception of the motivation to buy property in Australia?
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Olmule
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14 Dec 2010, 07:07 AM
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From http://s4.zetaboards.com/Australian_Property/topic/8237944/1/#new
- Strindberg
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The article is about home owners but far more renters live with housing stress (defined by Shelter as 30% or more spent on housing) than home owners. 
How are these super stressed renters going to pay for higher rents? Seems to be some confusion here...
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kennyjaiz
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14 Dec 2010, 07:12 AM
Post #14
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- catnap
- 14 Dec 2010, 06:42 AM
So what is your perception of the motivation to buy property in Australia?
Certainly not just about capital gains. However, I would tentatively agree that the property market is becoming more motivated by its ability to appreciate in capital.
Holiday house/ owner occupiers can be motivated by its utility value (that is the subjective satisfaction / enjoyment derived from utilising the dwellings, based on individual preference, which is difficult to measure/quantify).
Investors can be motivated by both capital gains and rental yield (i.e. intrinsic value).
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Frank Castle
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14 Dec 2010, 07:59 AM
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Business As Usual
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- Olmule
- 14 Dec 2010, 07:07 AM
Gee, if they cant pay perhaps they move into a cheaper house
or give up fags
or drink XXXX instead of James Squire Amber Ale
or drive a 10 year old commodore instead of the Lexus 4x4
etc etc etc
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The T.A.M.P.O.N effect - A NEW whinging bear acronym emerges
Timo And Moops Protest Over Nothing
Proof that moops is a simple minded hypocritical turnip
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7:24 AM May 24
