It is indeed a great year for rental price growth. Perth is up 14% in the last year.
One of my 3x2 was rented last year for $400 per week, it is now rented for $525. I have a 4x2 which is about to a lease renewal and the real estate agent wants to go from $450 to $550.
I asked the agent what if the tennants wont pay. She said then we do a home open and get new ones, your house will be rented in a week and you have a 50/50 chance of some one offering above the asking price. I was suprised how bullish she was, I knew rents were rising but not by this much, I thought $50 would be a good increase per week.
It wont last forever I can see high rents for the next 18 months or so until more people build houses to keep up with demand. Now rents are as expensive to buy, more people should and will buy, which over time will take preasure of the rental market. But as the saying goes, make hay while the sun shines.
No it makes perfect sense - have a massive war chest at the ready to buy, buy,buy once prices drop by 40% as the wise and intelligent amongst us always thought they would.
Why wouldn't we ? We aren't STUPID, we want to make money on property by buying at the bottom and selling at the top - unlike plenty of others around here who have been apparently buying during one of the worlds largest speculative housing bubbles ever seen over the past 8 years.
Know any more good magazines I can buy - what Im really looking for houses that people like you were paying millions for that I can pick up for around a third of that prices.
LMAO -
Excuse, have to go back and count my savings......
You're absolutely right. Those properties I bought 8 years ago have only doubled in price (and are strongly cashflow positive). I feel like such a fool.
Are those mags reliable Ted - they always look like infomercials to me?
Some things would be accurate while others may not be. For example I would not normally pay much attention to to the last three months especially when it involves January, and was just stirring Mr Castle by mention the 7.9% fall over the last three months . It shows a 7.1% gain for the last twelve months so maybe ask Mr Castle if he thinks it acurate.
Another thing is you will have some areas with 12 sales for the year and some with 300 or more sales for the year. So I tend to discard the figures with sales volumes under 30 sales and prefer to use areas that have had over 50 sales for the year and preferably more. So you can get a reasonable level of accuracy if you know what and how to look for .
As for the clown who asked why I would buy RE magazines, its simply to keep track of the loses, and I have not bought one for a few months , was browsing yesterday and bought it for a look see.
Great insights, advice and anecdotes on this site, but sometimes I wonder why Tiger Woods never posts on the golfing forums, Phil Ivey on poker, Roger Federer on Tennis. I guess they are swimming in bigger ponds
Great insights, advice and anecdotes on this site, but sometimes I wonder why Tiger Woods never posts on the golfing forums, Phil Ivey on poker, Roger Federer on Tennis. I guess they are swimming in bigger ponds
Agreed. Thats why I don't see Donald Trump or Harry Triguboff posting here either.
Great insights, advice and anecdotes on this site, but sometimes I wonder why Tiger Woods never posts on the golfing forums, Phil Ivey on poker, Roger Federer on Tennis. I guess they are swimming in bigger ponds
They probably would post here if we gave sporting advice.
I think that I could help Tiger with his backswing.
Any expressed market opinion is my own and is not to be taken as financial advice
You're absolutely right. Those properties I bought 8 years ago have only doubled in price (and are strongly cashflow positive). I feel like such a fool.
If indeed Audas has a massive war chest, he is probably sensible to hold onto it for the nonce.
While the market is showing some signs of life, I'm not sure I would bet any amount of money on it moving in either direction. It's so finely balanced that any bet right now would be gambling.
Sitting around and waiting for a 40% drop is *probably* unrealistic wishful thinking. But holding onto your cash and waiting for the market to prove its strength is simply prudent at a time when term deposits are earning a higher rate of return than capital return on housing.
According to my back of envelope calculation, based on an assumption of 6.3% mortgage rate, 2.5% rental yield (ex interest, ex capex and purch. expense) and 5.5% 12-month term deposit rate, you are better off holding cash if your view of the next 12 months' value growth in the property is anything less than 3%.
But in a month, I reckon you will be struggling to get 5.1% on your term deposit, so if you put off for a month the decision to lock away that cash, then you would be better-off buying now if your view of prop-price increase is anything over 2.6%.
Fast forward to August, and there has been another 25bp cut in interest rates, banks give 18bp to mortgage holders and take 25 from depositors, so your mortgage rate is now 6.12% and your term deposit rate is 4.85%, and you only need to have a view of price growth of 2.2% in order to make the decision to buy now more attractive.
Negative gearing can lower the decision bar just a little bit, but no amount of negative gearing or interest rate reductions can make buying now a sensible proposition if your view is that property will be cheaper in 12 months. The exception to this is if 12-month deposits get you less than rental yield, in which case it may be a long-term proposition to buy now if you don't have to borrow money, but purchase costs make that very dicey. Note that 12-month CDs in the US get you way less than 0.5% so it is not totally outside the realms of possibility I guess.
Right now, it is hard to make a business case to buy a property for investment. In fact it has been hard since about 2008. Investors are essentially out of the market, and house prices are basically being driven by owner/occupier demand alone which, unemployment being stable, to me gives a mid-term expectation of approximately CPI growth or maybe a smidge more at best until the investors come back or the lack of construction constricts supply even more. At current yields and economic conditions, that would be after another 50bp of interest rate cuts.
On the other hand, if you are in a property now at any sensible gearing ratio, with yields rising and carrying costs dropping, it is hard to make the case to sell the damn thing and get a term deposit because the transaction costs are so high.
If prices stay stagnant or drop, then yields will go up and make the business case easier. At some point the lines will cross. A significant rise in unemployment will push the business case the other way because the owner/occupier demand line will drop.
It's easy to make all kinds of empty predictions if it's not you but some other guy who makes or loses money. Personally, I am cautiously positive about property prices for the rest of the year, but I'd be waiting for another 50bp interest rate cut or a 2-3% rise in the index before I got into the market as an investor.
If you disagree with me on that, then I have this property for sale in Brisbane.... (And I'm gonna realy piss the Real Estate Agent off by actually raising the listing price later this month because the equation for keeping it gets more compelling by the month)
The truth will set you free. But first, it will piss you off. --Gloria Steinem AREPS™
First of all, let me start by congratulating you on learning how to use a computer, make an account on a forum and type messages , that's quite an achievement for someone with neurological impairment as severe as yours.
You may not have noticed this, but in my original post I said, and I quote:
Quote:
...which is $432 per week. And that's what you pay in rent for a 330k house in QLD.
I know this is difficult for you, so let me repeat that with the important bits highlighted in a bigger font.
Quote:
which is $432 per week. And that's what you pay in rent for a 330k house in QLD.
You may notice that at no point did I say '3 bedroom', rather 330k.
I know this is difficult, so I will try and take it slowly. As you can see from the second search, there are no 3 bedroom properties in North Sydney for 330K, unfortunately
This is because rents are a function (in a round about way) of price. Actually, rents are a function of two separate, but related demands. The demand for renting property, and the demand for owning property. But to keep things simple, let's just say that the house price is a function of the demand for owning property, and the rental price is a function of the relative demand of renting property.
Confusingly for you, miw has correctly pointed out that there is another factor in the rental price in some areas, that relate to particular characteristics of that area. For example, in North Sydney, it is close to two of the highest economic activity CBDs in Australia. In certain mining towns as miw mentions it is because of an exodus from surrounding towns whose geography puts them at a disadvantage for access to local jobs.
Lets call that factor X.
So rental price R is a function of demand for owning property Do, the demand for renting property Dr, the property price in the location considered f(L) and X.
R = f(Do,Dr, f(L), X)
It's simplified somewhat, but that's as simple as I could make it for you.
Of course, you don't need to do any of the above calculations, because the market has already done them for you and expressed it as a price.
Using your above example: North Sydney: 750 rent, 900K price gives a gross return of 4.33% Frank Castlalaland: 432 rent, 330k price gives a gross return of 6.8%
Which is awesome! You are like Forest Gump, you have overcome your congenital brain damage and succeeded in finding one of the best rental returns in Australia!!
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