There are more interesting articles, commentaries and analyst reports on the Web every week than anyone could read in a month. Each Saturday morning I like to share some of the ones I’ve read during the week.
Rent Could Surge 50% Without Negative Gearing
With 96% of public housing provided by ‘mum and dad’ investors, scrapping negative gearing would see the rental stock go into the hands of commercial investors.
They are likely to charge more in order to get the higher rental yields that they typically see on their commercial portfolios which are typically 50% above residential property.
“Like any other public utility, as soon as they enter private and more entrepreneurial hands then prices will go up, and in the case of public housing this could lead to a rental price hike of as much as 50% over time.”
Raiss said this would result in the government having to shoulder the weight of providing a much larger percentage of housing for tenants and social dislocation for those unable to receive government housing.
“Small business owners wouldn’t invest in a new or start up business if they couldn’t claim their losses, so there is no reason why property investment should be any different.”
5 things buyers should never do | Choosing a top investment area | Property advice for your children | Urbanisation
Details of this week’s show:
Patrick Bright says property buyers needed to put their frustrations and emotions to the side and start treating property buying as a business transaction in order to get the best outcome and the 5 things buyers should never do.
Michael Yardney speaks from experience about the advice to give our children about investing in property.
In a brand new segment, guests will be asking our experts to identify a top investment area – be it a street, suburb, town or city and tell us about the area, why they have chosen it and what sort of property would best suit investors. Shannon Davis from Metropole in Brisbane kicks that off for us today.
We hear from Paul Osborne about his report on Urbanisation and its impact on property prices and what developers are having to do to fit the new model.
Rob Balanda answers a question from Christine about buying a unit and the need for insurance and we talk with leading Feng Shui expert Chris Brazel about the importance of energy to your property selection.
Oversupply of Melbourne High Rise Apartments
From the state level data we can source useful indicators for where we might locate dwelling oversupply risk, and here we see that Victoria is off the approvals races, with detached house approvals clearly turning up once again despite several years of elevated levels of construction.
House approvals have also been trending up steadily in Queensland, New South Wales and Western Australia, although in historical terms Sydney has been coming from a terribly low base, hence the inherent detached housing supply shortage in that capital city.
South Australia was the only state or territory to record a decline in total dwelling unit approvals the month of October 2014, which is fairly logical and unsurprising given that Adelaide dwelling prices have under-performed against inflation for fully six years, and as such new development has become neither more attractive nor more profitable.
Moving on to units, as noted on this blog regularly over the past few months, Greater Sydney unit and apartments approvals are trending back down towards a comfortably manageable ~24,000, and at the state level that figure is now around ~30,000.
Victoria, however, is grappling with significant unit oversupply issues.
25% underquoting for auctions is the new norm
The Financial Review warns that underquoting the expected sale price by up to 25% has become the new norm in Melbourne.
But more than the financial cost is the emotional strain and the time and effort spent finding, inspecting and attending auction.
The emotional toll makes it very hard.
Twenty-five per cent is the norm but when it becomes higher than 40 per cent, it is a nonsense.”
Interest rates steady although 2015 outlook uncertain
At its final meeting for the year, the Reserve Bank announced today that official interest rates would remain at the current level until the next meeting scheduled for February 2015.
Interest rates have been at the 60-year low of 2.5 percent now for 16 consecutive months, equaling the previous longest steady sequence set in 1997-98.
This month’s economic data remains both underwhelming with the October national jobless rate stuck at the previous month’s rate of 6.2 percent – the highest recorded since July 2003.
Home building approvals decreased sharply over September as growth in house approvals continues to decline with unit approvals accounting for the overall increase in planned dwelling construction this year.
The Australian dollar has weakened over the month as an improving US economy continues to push the local currency downwards in line with policymaker’s objectives.
Concerns however continue to increase over the outlook for the level and sustainability of US growth and the global economy generally.
The stockmarket remains restrained after experiencing a roller coaster ride over October. Relatively flat retail sales over September add to the overall subdued recent performance of the national economy.
Late spring housing markets have weakened with trend weekend home auction clearance rates for both Melbourne and Sydney falling to the lowest levels in over a year.
The Sydney market clearly leads capital city prices growth however the Melbourne market continues to weaken with house price growth this year unlikely to meet the inflation rate.
The low mortgage rate driver of market activity that drove prices growth over the past year is generally diminishing in the face of modest incomes and profits growth from continuing underperforming local economies.
With house price growth now clearly moderating within an overall weakening economic environment, interest rates are set to remain at current levels over the shorter-term.
A continuing deterioration in the jobless rate however will increase the likelihood of a rate cut mid-year 2015.
The Rich are getting Richer
While this Atlantic report focuses on the US, I would suggest something similar is occurring here in Australia when they say that wealth inequality has spiraled out of control for two reasons—middle-class Americans aren’t making enough money and they’re saving virtually none of it.
Between 1929 and 1986, the bottom 90 percent saw its wealth grow at real annual rate of 3 percent, compared with 0.3 percent for the top percentile, according to new research released last month.
Since the 1980s, the story has flipped. Wealth is growing at an extraordinary pace for the rich—3.9 percent over the last three decades—and not at all for the rest.
The math of wealth is simple.
There is income (the money you make), savings (the money you don’t spend), and returns (the growth in value of the money you save).
The problem facing the bottom 90 percent—not the rich, but the “rest”—isn’t merely that they’re making less money than they used to, but also that they are saving none of it—virtually, none of it.
In the last 30 years, the savings rate of “the rest” has fallen from 6 percent to negative-4 percent. It now hovers a whisker away from zero.
The rich are different. They save.
And the really rich really save, even more than they used to.
Weekend video: The Rubik’s Cube is 40 years Old
Here’s a great new way to solve the Rubik’s Cube puzzle:
Blogs you may have missed this week:
If you didn’t have a chance to read my daily blog, here’s a list of some of the blogs you missed this week:
Subscribe & don’t miss a single episode of michael yardney’s podcast
Hear Michael & a select panel of guest experts discuss property investment, success & money related topics. Subscribe now, whether you're on an Apple or Android handset.
Need help listening to michael yardney’s podcast from your phone or tablet?
We have created easy to follow instructions for you whether you're on iPhone / iPad or an Android device.
Prefer to subscribe via email?
Join Michael Yardney's inner circle of daily subscribers and get into the head of Australia's best property investment advisor and a wide team of leading property researchers and commentators.