Property market returns over next 15 years

Lost count on somersoft on how many people kept calling the end of the world

Every qtr there was thread raised on the doom and gloom to come, even some respected members were citing troubled waters ahead- 5 years on funny how none of this has happened

 

Interesting comments by all so far!

I'm not an economist nor do I own a crystal ball. My two cents worth is really not going to add any value here, as I'm just not informed with all of the facts on the state of play of our wider economy, save for those alarming ABS stats.

Instead, I'll pick up on the 'food bowl' comment. I firmly believe that this could be one corner of our economy that offers an incredibly bright spark. Or, perhaps a more appropriate metaphor would be a few green shoots out of empty mine sites...

Asian demand for interbational dairy, vitamin, livestock, and other foodstuffs is bigger now than it has ever been. Particularly Chinese who have trust issues with their own food stocks, and do value imports of food from 'trusted' (read: Western) countries with great food safety, production, and livestock-feeding standards such as Australia.

Even if it is perception only, Asian importers are paying top dollar for Australian ag produce.

Of course... they are also simply 'buying the whole cow' (farm) and not just the milk!

In SS I wrote a bit about this trend. However, foreign-owned farms + rapid roboticisation of the ag sector might not stimulate actual human jobs growth much... meaning that investing in properties in food bowl regional towns and centres mightnt work due to there being minimal demand for housing due to lack of jobs (or, poorly paid jobs that many won't want to move to another town just to work in!)

Outside of ag, I'm hoping we innovate in science, tech, finance, pharma, and other 'brains-based' sectors where we can win!

 

I think you are looking at this from the wrong angle, who do you think provides housing for all of those whom cannot afford it? The investors are in a sense providing the public housing the government cannot.

 

I'm not that bearish (I think next 15 years will do up to 1/2 of previous 15 years in growth nationally) and I still think its worthwhile to listen and assess these more left tail views.

Probably not the right thread to be talking about it but while there may be some collective social benefit from the army of property investors by lowering the price of "shelter" to those who need it, make no mistake, as an "investor", you are buying a property because the sums make sense and you are creating wealth for yourself.

 

I believe in US there are not negative gearing and holding cost is a lot higher than in Australia. The end result is lower property price but much higher rentals. Not sure if it is linked to this high rentals, but there are more street people/beggars on the street than here, I was told( never been there)
It is better to place a roof top over the head of as many people as possible, regardless owning or renting. In this sense, negative gearing is doing greatness in terms of social fairness of providing cheap rentals.

 

Would people get angry if I said in 3 years there's most likely another opportunity to 4x your equity with one buy?

 

Yes, especially if you don't share more info

 

If NG was to removed it would more than likely be grandfathered meaning existing investors would still be able to NG. Future buyers would simply need to set up a company or trust in order to continue deducting costs from profits. Don't see this as a head wind.

Low interest rates were definitely the catalyst for the latest boom but there was also a lot of demand that was just waiting for a reason to be unleashed. IMO

I have also wondered about the Baby boomers selling IPs. I think we will definitely see some selling but as pointed out above, those that have multiple properties are more than likely pretty savvy and will not simply plonk them on the market at any old time and take what they can get. So not sure this will be a catalyst itself.
However certainly there will be less baby boomers buying IPs. Once they stop working unless they have immense income producing assets they will not be buying any more.

 

I would be interested in knowing how.

 

What are you selling Omnidragon?

 

http://www.rba.gov.au/publications/bulletin/2015/sep/pdf/bu-0915-3.pdf

In conclusion, the 1980s, housing price inflation broadly followed general price inflation in the economy, which was relatively high and volatile. Following the financial deregulation of the mid 1980s and disinflation of the early 1990s, cheaper and easier access to finance underpinned a secular increase in households’ debt-to-income ratio that was closely associated with high housing price inflation from the early 1990s until the mid 2000s. The past decade saw a stabilisation of debt-to-income levels, but also a prolonged period of strong population growth – underpinned by high immigration – and smaller household sizes that led to increases in underlying demand exceeding the supply of new dwellings

They're able to write this since it was in the past. We've had property cycles with tag lines ie inflation in 1980s,deregulation and easy credit in 1990s and 2000s. This followed by population/ households growth in the last 10 years.

What do you think will be the trigger for the next boom in Australia (or if we can use/ have same access to information for international markets)

Can it be credit boom? (Unlikely)
Can it be demand? Going towards smaller households
Cycles are just cycles, it'll happen