The smart ones already are. Via the AFR:
Property investor Taku Ekanayake has sold two of his six residential investment properties, is revaluing the remaining and considering a switch into commercial property, possibly warehouses.
…According to City Residential Real Estate, there are nearly 27,000 apartments for rent in Mebourne’s Docklands, Southbank and inner Melbourne, an increase of about 500 in the past week.
…Chetcuti says she is negotiating with landlords every week to reduce the rent of tenants no longer able to afford the original costs, which has the unintended consequence of encouraging other tenants to demand their landlords match the cut.
…Rents for Sydney apartments are down about 7 per cent compared to the 5 per cent in Melbourne and about 2 per cent in Brisbane.
I am now expecting a bust every bit as bad as 2018/19, with the rapidly rising risk of deeper, and a recovery period that is measured in real prices not nominal that takes many years. I am not optimistic about vaccines and think we’ll only gradually get on top of the virus via improving treatments. Therefore:
- immigration is stuffed for years;
- banks are stuffed for years with tight lending standards the result;
- rents will fall for years, and
- unemployment will be high for years.
This looks to me like it will end in structural change to the living habits of Australians with the number per dwelling lifting materially to create chronic oversupply of rental and owner-occupier stock.
In short, the whole country now looks like a gigantic Perth:
There are two million landlords in Australia with 1.2m of those operating a negative yield carry in the hopes of capital gains. In effect, they are all now paying rent to their property for the privilege of losing capital interminably.
If I were sitting under that kind of titanic investment overhang I would observe to myself that it is better to panic sooner rather than later.
