House Prices Increases from Debt and Investors....

[connaust]

Average buyers can't compete with rich, tax-subsidised investors.

SYDNEY'S Sunday Telegraph was breathless with joy. ''IT'LL BE WORTH DOUBLE'', its headline screamed.....

 

 

But it won't happen. Melbourne house prices have trebled since 1997, not because our incomes trebled, but because we paid those prices by a massive increase in debt. In the 20 years to January 2010, household debt to the banks grew 10 times over........

 

 

Food for thought....

[Petals]

Interesting, I do think though that investors and first time investors are competing with first home buyers and pushing up the type of property that first home buyers usually get into, especially in established ares.

 

Also I believe that the type of property is not good investment property, often on the fringes of the cities with chance of low capital gain and lower rental return.

 

The balance in the housing market has been tipped and it needs to get on the level again. There is life as well as house, house should not take all a families income and leave them with a poor lifestyle. After all we only live once and we are only young once so we need to have life too.

[Cam]

Hmmm, kind of the reason why we're thinking of going back. We're not sure that we can afford to live in an area we would choose to live in even if it was the size of a shoe, whereas at home, unless you're looking for a new mortgage you can afford to buy something for your money. It's a shame as I love Oz...

[connaust]

Without negative gearing many investment properties in cities would not be worth it if they were rented as the return would not cover inflation (most assume capital gain).

 

Apparently many investors do not even bother trying to rent out their investment properties as it is too much trouble, but "in theory" trying to rent, running investment at loss, and see more as safe investment and use for negative gearing on other income.

 

Interestingly best returns would be in regional centres where there still is affordable housing and units AUD125-250,000.

[halshaw]

House prices in Melbourne are becoming breathtakingly high. One wonders if not for the foreign investors (non European) who can afford these properties? We will not move our money over because of the weak position of sterling and its most probably a blessing in disguise. We do not like a lot of the property that is on the market for size, location, condition and definitely price. We are going to wait even if sterling improves and continue to rent - not anticipating a crash but refuse to get on the panic wagon that is fueling these ridiculous prices. At some point surely sanity has to return.

[Guest barryacott]

Most locations in Australia are experiencing over priced real estate. Melbourne is a case of supply and demand but for many other locations even in the bush is a case of greed and stupidity by real estate agents, developers, local, state and federal governments.

 

Example: Tasmania, lower incomes, less employment and other opportuniies but still over priced real estate. There is no logical answer. There is a surplus of land and houses available in all locations but the local and state government including developers reap their cash.

 

Keep your Sterling and wait for the silly season in Australia to pass. Many expats have already been burnt by the sharks here by purchasing over-priced real estate.

[Guest DaveAke]

I fully agree that property prices here at over inflated. There are a few reasons for this :-

First home buyes incentives - these have kept the property market moving even when other dynamics are against increases. Whilst the Aus government(s) probably have 'best interests' at heart, they are fueling ever increasing prices, and as the UK and the rest of the world has seen, what goes up must come down........

The government(s) all have an incentive to keep prices up. Why ? Stamp duty of course.

Halshaw - I'm in the same position as you. Why sell a UK property, where the market is due to improve over the medium term? Any upward improvement in the economy of UK and Europe will mean UK interest rates will increase and then Sterling strengthens. Double positive and then is the time to sell, if you so wish.

RBA rates due to increase further - no surprise there. It's not Aus manufacturing that is leading this, it's demand from China. This is a tap that can easily be turned off should China source raw material from elsewhere. Aus is playing a very tight game, with maybe too many eggs in one basket at the moment.

Aus rates go up by 100bp or more (sorry that's 1%) and you will see a real tightening for some Aus householders. However only c.33% of the property market is mortgaged. 33% is owned outright (lucky sods) and 33% is investment property, with tenants in place.

The Aus government continues to allow residential mortgages to be part of pension schemes - tax efficient but takes a lot of housing stock out of the market - result is higher and higher demand and less and less available property

Second homes can be 'negatively geared' allowing tax payers to reduce tax commitments.

 

Looking at these examples, stay well clear of buying for time being !

[fleabo]

Halshaw - I'm in the same position as you. Why sell a UK property, where the market is due to improve over the medium term? Any upward improvement in the economy of UK and Europe will mean UK interest rates will increase and then Sterling strengthens. Double positive and then is the time to sell, if you so wish.

 

 

Out of interest, what is your medium term?

[Guest DaveAke]

Fleabo, my medium term on property is between 3-10 years. Yep, it's a wide spread !

[Graemsay]

There seems to be a lot of talk of the housing market recovering. I think that's an overly optimistic view.

 

House prices are still above the peak levels of the previous boom in 1989. The economy isn't in a good way. Borrowing remains difficult, particularly for first time buyers (20% deposit required). Transaction numbers are low. And

 

I think that there is a real risk that house prices will fall further in the UK.

 

As for Oz, the sentiment is that prices there will double every seven to ten years. That's what drives most property investment.

 

(It's rubbish. If GDP grows by its historical average of around 3% and property by 10% - doubling every seven years - then in about two centuries the average house in Melbourne would be worth as much as Australia's GDP. I'll leave the maths to the reader.)

 

There's talk in some in the property investment forums that Chinese buyers are buying up large chunks of Melbourne, and thus driving up prices. I don't know whether this is exaggeration or prejudice, but I don't think that this is the whole cause. The government's stimulus package last year is probably what caused things to kick off.

 

But, as with other posters, I think that it's not going to end well.

[fleabo]

I think many are hoping for both the housing market and the exchange rate to improve substantially (me included), but TBH, I have seen very few indicators to suggest this will happen in the near term. If you can wait to release assets and convert then you may end up better off (it is a gamble though), for others, there is little option other than to take what feels like a hit on property value and the exchange rate. That said, I suspect that for the next few years many would be better having their equity tied up in Australian property than in UK property. Only time will tell.

[halshaw]

I suspect that many would also be better having their equity in Australian savings accounts than UK accounts but nothing doing until exchange rate improves!