386,000 home owners owe the bank more than the value of their home

You mean every negatively geared property...

 

I think the negative wealth affect is the biggest issue here. When households limit consumption of goods and services it flows through to the economy which then can create a bigger issue.

 

I think it's related to when you started investing and in what type of property. Residential/commercial.....

I feel 2009 when I started in Sydney it was hard to get positively geared properties .

I also lacked experience I was young.

Knowing what I know today and being more location agnostic I think I would have better chances.

Although 10 years later I'm still learning . @Beano I read alot of your posts thank you for your contribution. If you ever have Time for a beer or a coffee and want to mentor some one I will be their.

 

Not only if you can't afford it but if its going backwards and you're losing money on it the same time it would become hard, the gains you have to get to make up for a loss once you start losing money/ going into negative growth add up fast

This is interesting, it seems that everyone thinks negative cash flow is normal now, however in the past it was not and in many other countries it is not, also I saw that rent is only up 1% in real terms over the last 10 years or something compared to real property prices were over 30% real terms, this can't really continue on this path in the long term, either rents have to go up or property prices have to come down at some point

Every negatively geared property that is also negative equity

 

Haha I agree, this has worked so far for me too.. and Sydney buys too, resi/comm. Just have to look and look and look.

Tho to be fair, my goal is simple and I prefer neutrally geared, i.e. do rental repayments less agent fees with allowance for vacancy cover:

• cost of funds calculated at interest rate p.a. * 105% of buying price
• quarterly costs such as rates
• annual costs such as insurance
• Expected cost of repairs/adjustments per year

Its harder to find a true positively geared property with repayments covering all of those, but when you factor in a 20% deposit, its set and forget.

 

Bit confused by this.. wouldn't that still be positively geared with a 20% deposit?

 

But why is this different to the first point raised?
That was it’s an issue if you need to Sell?

If your in negative equity, negatively geared then it’s only an issue if you need to sell?

 

It's still an issue as it's a bad investment and you may want to sell a bad investment. Not all bad investments turn around, and the money you have tied up and losing cash flow could be making money elsewhere.

 

Core Logic qtrly-economic-property-review--nov2014

Annual sales volumes Sydney - 100,924 over year to August 2014
Annual sales volumes Melbourne - 85,791 over year to August 2014
Total - 186,715
If we assume 2016 & 2017 had same number of sales i.e. 186, 715 X 2 = 373,430

Property is down 10% from peak (made up number) in sydney & melbourne and all buyers put in only 10% deposit - sounds about right.

 

Your forgeting perth and other cities.

 

total 485,526 X 2 = 971,052

Purposely left them out.

 

Yes very good points ..I agree this cannot go on ..sometime in the future properties have to go down relative to rents
Not my crowd ..we still are looking at massive positive margins. The one I posted earlier of my mate 76pc of the net rent is profit .

 

My definition of positive gearing is
Net Rents / purchase cost is greater than funding cost.
eg $100/$1000 = 10% is greater than funding cost of say 4%
Deposit amount has no effect on the positive gearing.

 

Yeah I get how it

Your definition of positively geared is based on total price? I can't even find anything positive geared with 20% down..

 

But it might not be a bad investment?
Just because someone purchased before the credit crunch and they are now in negative equity is only a bad investment if they sell it at a loss.

The purchase could or has likely been effected from the flow on from the general market. However when the dust settles it could actually be a great investment in 5-10 years time.

 

If the long term prospects are looking pretty dire, sometimes it's better to cut your losses. But I feel that if this is a small bump along the road, it's pretty much that. I don't know why some people are so fixated in listening to all the bells and whistles from people who have no investment experiences.

Really wonder how many people went all out with bitcoins when they were the favour of the month?

 

As of 2015 there was about 8.42 million households in Australia (Source: ABS). The population has increased since then, so let's round it up to 9 million households, this is probably a low figure and therefore generous for what comes next.

If we accept the reports statement that the number of households in negative equity is 386,000, simple math says that's around 4.3% of the population with negative equity.

This figure would also include people owing one or more investment properties, therefore some people will have both negative equity and positive equity at the same time. Overall most of these people will have a net positive position.

This suggests that the real percentage of people in a net negative equity position is likely to be closer to the RBA estimate 2.75%. It's definitely not 9%+.

 

And throw in those with offset accounts that may have negative equity on paper but are actually well in the green.

 

Doesn't mean it will turn out to be a good investment either.