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rmoor


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A conversation piece - rising real estate
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Was pondering this morning.

Rising real estate, particularly Sydney and Melbourne.

Prices continue to rise markedly and it is having the obvious impacts to some levels of society in our once fair country.

For once I am not going to bash the pollies, although they do have an iron in this fire.

Food for thought, lets assume in the not too distant future real estate prices in say, an outer Sydney suburb hit 2 million dollars not too far down the track for your average 3 bedroom abode.

Who then, in their right mind would wish to become a landlord under these circumstances.

Let's assume the rates, insurance, R&M and (looming land tax as land prices are fast overtaking state land tax thresholds) all were say, 10 grand. The letting agents commission would be an unknown negotiable one would imagine.

If the investor borrowed say 1.5 million to obtain the rental property, their interest bill could be upwards of 70 Grand a year?

So fixed and variable costs in the vicinity of $1,700 per week.

The aspiring new landlord would be wanting to obtain to least a 5% to 10% return on investment, which has been the norm.

This would equate to a weekly rent for the tenants of around $1,920 @ 5% and $3,840 @ 10%.

My observation or question is, of the Bunnings person, check out chick or Dr's surgery nurse, who would be able to afford 2 grand plus a week in rent for the average 3 bedroom home?

Where does this stop, does it stop, how deep are the overseas investors pockets?

Thirteen interest rate rises have not cooled Australian house prices as yet, so that tells me they won't?

My old Economics teacher who wrote an excellent book on Economics in Australia in the early 80's had a well compiled chapter on the "Price and Elasticity of Demand". Of course, the higher the price, the lower the demand and vice versa.

With the Australian dream of owning your own home probably now out of the range of anyone 18 to 25, it must be awful depressing and then the spectre of impossible rental levels in the future.

It also tells me the entry of new landlords into the market looks bleak.

I can see a dark cloud looming.......

 

 



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Ron
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The bubble will burst soon in Australia, and half of the population will be broke. Our council here in whoop, whoop, want to double the rates for our $150k homes to $5k plus year in the next 3 years, we wont be here after that, will be in a tent on the river.



-- Edited by Bicyclecamper on Thursday 16th of November 2023 01:40:18 PM

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rmoor


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Yes, we are looking at 10% per year over 4 years. Goulburn council is worse, I think they are looking at 50% immediate rate hike.
One does wonder if the bubble will burst.
When it comes, we get little warning.
Even at half of the home prices I mentioned above in the example, rents of $600 to $800 per week are probably out there now.
Have also wondered if these price hikes will shift to van parks and holiday locations, effectively pricing many grey nomads out of various markets.
Also wondering if we will see an upsurge in private campgrounds and semi permanent residents in commune like facilities??
Anything is possible one would think?
Will be interesting to see what the future brings.
So far it seems to have widened the gap between the "haves" and "have nots".

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Ron
msg


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The price of my home is of no concern to me I'm not selling. Unless someone gives me sufficient to buy/build somewhere else that is the same or better. A small place backing onto the beach would be nice perhaps.

But what worries me is rate hikes. Rates in ACT are tied to Unimproved values (land) So if inflation causes values to increase then rates increase. The valuations are done by a government agency, and you really have to jump through hoops to enter an objection to the valuation.

There is also the option of increasing the rate of the increase calculation. (its averaged over 3 yrs) I don't think I would last very long with double rates having to be paid. Into the bargain, with the averaging it will take 3yrs for the full effect of any downward trend to take the full effect. So, even with a fully owned house they could very easily evict me. That is how they will get rid of people who own their residences.

Looking through Wikicamps the changes in fees, the availability of free camps and the increase in Hipcamps (with their fees draining the property owner) is only too evident

Thats what is intended. Widen the gap between the "haves and not haves" Makes for easy land grabs.

Its the only way I can see it going.

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dogbox


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the story sounds like the one we heard when interest rates were in the mid-high teens as far as affordability and rising prices went.



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yobarr


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dogbox wrote:

the story sounds like the one we heard when interest rates were in the mid-high teens as far as affordability and rising prices went.

 I remember 17%, but have heard stories of 20%.

If someone were to have a $500,000 mortgage now, at 20% they'd be paying OVER $1900/week, INTEREST ONLY! Cheers



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v
Whenarewethere


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People say houses were cheaper then. My salary was also far less in 1989.



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rmoor


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Yes, I remember 17%, some farmers were copping 22 and 23%.
Of course houses were significantly cheaper then but from my calculations the younger ones are worse off now than we were in relative terms.
At least many could afford a starter house hovel.
It wasn't easy then, but I think the market is far more complicated now and extremely volatile.
Also in the 70's to 90's we didn't have the massive numbers of foreign raiders in our market either.
Said to a mate last night, the Govt and ATO in this computer day and age should withhold property sale funds and impose a tax on these overseas hit and run raiders stuffing up our grandchildren's future and calculate capital gains tax on them at the same rate and laws as we have to cop?
it would not be rocket science and may discourage them from wrecking our house prices and claw back lost capital gains tax revenue when they sell and do a runner.
Surely it would not be difficult to identify those properties in question.

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Ron
dogbox


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when I bought first house could not afford to buy in the area we would have liked, had to settle for a less desirable address by buying a 3 bedroom, 1 bathroom, no garage, in the sticks. then commute over an hour each way, in an old car with no a/c, to work a 12/14 hour day to keep bills paid.
we managed.
in those days it was the Japanese that we were worried about buying up our country.



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Whenarewethere


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We were renting a 1 bedroom Unit in Mosman Sydney. Wanted to buy a 2 bedroom Unit in same suburb. It was too expensive.

 

We bought on the northern side of the Spit Bridge which was cheaper, & we didn't get a balcony or garage which we wanted... price again!

 

Fortunately the Unit was never touched since the day it was built in the 1950s. We did put in a new kitchen later when we had some cash.

 

The bathroom looked ok even though it was original, so we kept that.



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Dick0


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As a rental property investor of many years I would love to comment, however, doing so would see this conversation thread closed.

Remember, no politics. Rising real estate is about politics!

disbeliefdisbeliefdisbelief



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dogbox


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Dick0 wrote:

As a rental property investor of many years I would love to comment, however, doing so would see this conversation thread closed.

Remember, no politics. Rising real estate is about politics!

disbeliefdisbeliefdisbelief





it would appear that political comment (or joke) is not the issue, the issue arises when someone takes offence to comment/joke made, that they do not agree with an lodges a protest.

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rmoor


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dogbox wrote:
Dick0 wrote:

 

As a rental property investor of many years I would love to comment, however, doing so would see this conversation thread closed.

Remember, no politics. Rising real estate is about politics!

disbeliefdisbeliefdisbelief


 




it would appear that political comment (or joke) is not the issue, the issue arises when someone takes offence to comment/joke made, that they do not agree with an lodges a protest.

I think you are right.

The new Buzz word "Misinformation" has been adapted to mean "my view is correct on all accounts, your view is totally inaccurate and inappropriate".

In "their" view and therefore should be removed.

It seems to be a new method of controlling dialogue?

There is even draft legislation on it !!!!!

There were two threads on here disappeared completely last week, the second of which I responded to as a form of online bullying.

I think the threads disappeared so quickly, I think no-one but myself an the poster got to read it.

I seriously got the impression a certain someone got them erased completely.

To me it had the effect of controlling the dialogue.

I speak, truthfully, frankly and with no fear or favour. Having said that I am open to being corrected or accept another point of view.

The only disclaimer here is, it better be damn good, we have all been around too long to have the wool pulled over our eyes.

I also think if Dick0 wants to make a comment and it relates to a sensitive topic, then why not be allowed to make such an observation.

If it is factual, proven and considered to be unfair, then why should those views be moderated?



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Ron
Whenarewethere


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Dick0 wrote:

As a rental property investor of many years I would love to comment, however, doing so would see this conversation thread closed.

Remember, no politics. Rising real estate is about politics!

disbeliefdisbeliefdisbelief

 I let a Unit, I own it outright, actually my tenants have better air conditioning 5.0 & 2.5kW Daikin, than me! Better carpet, commercial grade solution died nylon, R3.5 insulation under floor (access from basement), I have painted it numerous times with Dulux, get it steam cleaned every time tenants move. Stainless HWS, new Bosch dishwasher (I haven't bothered fixing our own broken one for years), filtered water. I even scrub the tiles & clean every louvre blade before each new tenants. By the time I pay the annual costs & repair running short & long term costs, it takes a good chunk out of the rent. So the current value in this area, after annual & special levy long term expenses, about 2.8% return.



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Blues Man


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Whenarewethere wrote:
Dick0 wrote:

As a rental property investor of many years I would love to comment, however, doing so would see this conversation thread closed.

Remember, no politics. Rising real estate is about politics!

disbeliefdisbeliefdisbelief

 I let a Unit, I own it outright, actually my tenants have better air conditioning 5.0 & 2.5kW Daikin, than me! Better carpet, commercial grade solution died nylon, R3.5 insulation under floor (access from basement), I have painted it numerous times with Dulux, get it steam cleaned every time tenants move. Stainless HWS, new Bosch dishwasher (I haven't bothered fixing our own broken one for years), filtered water. I even scrub the tiles & clean every louvre blade before each new tenants. By the time I pay the annual costs & repair running short & long term costs, it takes a good chunk out of the rent. So the current value in this area, after annual & special levy long term expenses, about 2.8% return.

 

 

You a a good landlord , but not all landlords are like that.



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dogbox


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Blues Man wrote:

Whenarewethere wrote:
Dick0 wrote:

As a rental property investor of many years I would love to comment, however, doing so would see this conversation thread closed.

Remember, no politics. Rising real estate is about politics!

disbeliefdisbeliefdisbelief

 I let a Unit, I own it outright, actually my tenants have better air conditioning 5.0 & 2.5kW Daikin, than me! Better carpet, commercial grade solution died nylon, R3.5 insulation under floor (access from basement), I have painted it numerous times with Dulux, get it steam cleaned every time tenants move. Stainless HWS, new Bosch dishwasher (I haven't bothered fixing our own broken one for years), filtered water. I even scrub the tiles & clean every louvre blade before each new tenants. By the time I pay the annual costs & repair running short & long term costs, it takes a good chunk out of the rent. So the current value in this area, after annual & special levy long term expenses, about 2.8% return.

 

 

You a a good landlord , but not all landlords are like that.





good landlords are as hard to find as good tenants.

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Whenarewethere


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Have had about 10 lots of tenants, they have moved on mostly due to job changes. But all of them have been very good. I have given some tenants references for a mortgage & advise to look at Fair Trading. A few have given me thank you cards. 

 

The absolute best tenants was a real estate worker herself. It is interesting how half the people applying are really well organised with all their history & about half are not.

 

Currently have two young guys which is their first rental. Had two inspections via the real estate agent. I have no complaints.

 

My accountant once said to me he had a client that complained that the tenants very always an issue & he couldn't get much rent. The accountant said in 25 years you have not spent a cent on maintenance. He probably told that client about my well maintained property. Which currently pays $730pw for 2 bedrooms. They range from $560 to $980pw in our block, all 2 bedrooms.

 

A bit over half the Units in our block are let. Over the decades I can only think of one tenant that was an issue, maybe a second one. 

 

Ironically the one who was an issue was also trying to be elected for politics. There would be no chance so you are all safe from that one!



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rmoor


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"Ironically the one who was an issue was also trying to be elected for politics. There would be no chance so you are all safe from that one!


What does that tell you!!!!
Think that would ring true for most of us with a distaste for the many that are ego driven only.
I can think of one particular fly buy specialist in that category

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Ron
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When one has lived in the same building, & even then in direct line of sight, I only moved 700 metres, could spy on my parents with binoculars, & vice versa!

 

Moved a bit within in the block, & by a long shot the longest owners at 34 years in our building. One is aware of micro history... good & bad!

 

We have a well run building due to very long term planning & a bucket load in the sinking fund for the next repairs (a bit more asbestos to get rid of). Luckily at present we have another really good owner who can see the longer picture & helps out a lot. Unlike the investor externalizers who reckon their farts have more value!



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Eaglemax


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This is a hot topic on social media commenced usually by young adults up to 40yo. Their argument is based on how expensive it is to enter the market and they do have some justification for that argument.

 

However, I point out to them that they make their own luck in life. 1/ Never give up 2/ Consider a block of land or cheap house a couple of hours from the city 3/ Consider commuting (we did from Kilmore and Yea (90 minutes one way!) for example 4/ Join the military for 6 years and sign on for another 3 and you get a home loan. 5/ Get a second job.

In 1973 I joined the RAAF at 17yo, by the time I was 20yo I had a home loan (3 years them days).  By the time I had built a house in 1986 the measily $25,000 for the defence loan meant I needed $45,000 second mortgage and yep- 21%... thankyou Mr Keating. That meant after a while if we wanted to start a family we had to sell the house which we did.

 

So, why isnt young adults taking some of my advice?  Moving regional means "what about my friends". Joining the military means "I dont like killing people" and  "can I take my mobile phone"?. Getting a second job means "You shouldnt have to give up your leisure time in the evenings just to get a roof over your head.

 

You make your own luck.

Tony



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dogbox


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from my own experience with grandchildren, they do not seem to have get up an go, to forgo the luxuries of life that have been provided by indulgent parents/grandparents to commit the effort to purchase a house that requires sacrifices to be made by themselves. always seem to be some excuse

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Dick0


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dogbox wrote:
Dick0 wrote:

 

As a rental property investor of many years I would love to comment, however, doing so would see this conversation thread closed.

Remember, no politics. Rising real estate is about politics!

disbeliefdisbeliefdisbelief


 




it would appear that political comment (or joke) is not the issue, the issue arises when someone takes offence to comment/joke made, that they do not agree with an lodges a protest.

 It is an issue on this Forum.

What I can say is...

"Back in the day", residential subdivisions popped up all over the place and land prices were cheap in comparison to annual salaries and wages.

Now it can take up to 10 years to get residential subdivision approvals due to Green and Red tape obstacles that increase yearly. Similar with infrastructure approvals.

Until recently building costs were within reach of first home buyers but land costs just kept ballooning beyond reason. Due to political policies.

Enough said.



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Cheers, Richard (Dick0)

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"4x250W solar panels, Epever 80A charger and 3x135Ah Voltax Prismatic LiFePO4 Batteries".
dogbox


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most of those housing estates/subdivisions where considered out in the boonies, with the ability to work from home for a lot of people in this day and age, they could move farther out, the farther out in most cases the cheaper it gets.

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peter67


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The biggest elephant in the room re lack of housing stock is the high yearly immigration intake of over 600,000 per year to boost the economy and avoid having to declare a recession, technically. So the gummint hoist interest rates because they only have a hammer in the tool box, so every problem looks like a nail. We also have 775,000 foreign students in country this year, they all have to live somewhere and for decades the gummint has not been addressing infrastructure needs.

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msg


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The immigrant and student housing issue is a really big elephant in the room. We can all see it. It's just the powers that make all the decisions have all gone deaf to what their electors want and intend to do as they are told by big business, who have no cares about Australia and the Australian way of life and only want more profit no matter the cost.

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Craig1


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www.abc.net.au/news/2023-11-21/the-uncomfortable-truth-about-immigration-rents-inflation/103128424

Even " our " ABC seems to recognize the biggest Effelent .

www.abc.net.au/news/2023-11-21/the-uncomfortable-truth-about-immigration-rents-inflation/103128424

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