RP Data September Housing Market Update

Please find above the RP Data September Housing Market Update, which discusses the state of Australia’s capital city housing markets as at the end of August.

As usual, the report contains lot’s of useful data and information, and therefore is well worth a look.

Leith van Onselen

Comments

  1. Not much mention of sales volumes and if they are reducing record stock on market. Prices could go up on very low volumes but not sure if this qualifies as a recovery.

  2. Is 4.2% before rates, water, tax, and other expenses?

    That’s what I don’t get. How can anyone look at this as an investment with such a poor yield, it leads me to the conclusion that my fellow country persons like watching A Current Affair and are bad at maths.

  3. One of my best investments was a stock I bought on a PE of 25. It earned 4% (of purchase price) per year and paid out 2.5% per year as a dividend.
    I was not impressed by the 4% yield, however the newsletter (The Intelligent Investor) believed it was a good value stock because the earnings were likely to rise in years ahead. This is why I bought – for the potentially rising earnings.
    Indeed the earnings did rise and now it pays me a dividend of 10% per year of what I paid. Of course the capital value has also risen, but I don’t bother checking that since I don’t intend to sell.
    Now if only I could have bought far more stock back then on a 90% margin with no danger of a margin call. Then I would have made a fortune.
    Come to think of it, isn’t this what property investors in Australia have done the last few decades?- Bought a low but strongly rising dividend/rental income stream, with large borrowings and no danger of a margin call.

    All this greater fool talk is BS if the income rises. Are current rents sustainable? Will rents continue to rise? Will interest rates stay low? Can you keep up the payments? If YES YES YES YES then property investment still makes good longterm sense at today’s prices.

    • Are current rents sustainable?
      Will rents continue to rise?
      Will interest rates stay low?
      Can you keep up the payments?

      If YES YES YES YES

      That’s a lot of ifs

    • Are current rents sustainable? In a property crash the entire economy is wrecked and rents drop. They dropped by around 20% in Ireland, for example.

      Will rents continue to rise? Who knows – see above.

      Will interest rates stay low? Assuming the bear case, it’s a good bet.

      Can you keep up the payments? Who wants to be a hostage to fortune? Things change.

    • I think you will find that economics will conspire against these prices.

      Earnings growth on residential property depends on wide spread increases in income, and a continued low inflation/interest rate environment. It has worked in the past and may continue to do so until we get to 0% interest rate. If that is the future you believe we face, then I agree with you.

      However being some of the most highly paid population in the world, I think this is a big call. Eventually the economic tide will recede back, and our uncompetitive, import based economy will be laid bare for the world to see. A fall in the AUD will blow our low inflation environment out of the water…….

      So it is really a bet on “more of the same” or the “times are a changing”. One thing is very obvious, governments seem to want to hang on to the “more of the same” type policies.

      • Around my parts an ordinary home unit rents for $600 per week. I can remember when $600 per week was a good wage to be on.
        Where is the bubble? Is it in wages and rents, or is it just a pure credit bubble affecting house prices?

        • “Where is the bubble? Is it in wages and rents, or is it just a pure credit bubble affecting house prices?”

          Well I can remember when you could actually POSITIVE GEAR a house….. As long as people continue to borrow the model works, but falls apart once it stops. However the model seems inherently unsustainable, so its a bet on when, rather than if.

          Australian’s want cheap housing that they can continually make a capital gain on, forget about actually doing something productive.