Join Australia's most dynamic and respected property investment community

Rentals when economies crash

Discussion in 'Property Market Economics' started by Barny, 22nd Oct, 2015.

  1. Barny

    Barny Well-Known Member

    Joined:
    16th Oct, 2015
    Posts:
    1,180
    Location:
    Melbourne
    morning everyone. I'm trying to understand and learn what happens to rental properties when economies crash. For example Ireland, and any other country that has previously crashed. I know the cost of assets drop in a massive way, do rentals sit vacant, reduced rent? Or pretty much vacant as hardly anyone will have a job? Major cities have a better chance over others? Places closer to the CBD compared to outer edge living and regional areas?
    If anyone has lived through and experienced or is educated on the matter, would be great to hear some info. Cheers.
     
  2. Waterboy

    Waterboy Well-Known Member

    Joined:
    29th Aug, 2015
    Posts:
    326
    Location:
    Sydney
    Young ones move back to their parents or they share houses.

    The other thing is many immigrants may go back home to get a job if they are unemployed for a long time.

    In other words there will be competition among landlords.

    Just have a look at what's happening in Perth, watch and learn.
     
  3. D.T.

    D.T. Adelaide Property Manager Business Member

    Joined:
    13th Jun, 2015
    Posts:
    5,584
    Location:
    Adelaide, SA
    I remember a few years ago back in Perth, you'd see opens for rentals with a queue down the whole street. Some people would camp in tents on parks and ovals. In these conditions, obviously you have the luxury of demanding high rents. It's the polar opposite there now.

    All cities are on a different schedule. All cycles are circular.
     
  4. wylie

    wylie Moderator Staff Member

    Joined:
    18th Jun, 2015
    Posts:
    2,931
    Location:
    Brisbane
    What is happening in Perth? Are rents falling? What sort of falls?
     
  5. D.T.

    D.T. Adelaide Property Manager Business Member

    Joined:
    13th Jun, 2015
    Posts:
    5,584
    Location:
    Adelaide, SA
    From what other Perth investors have said on here, similar to my own Perth property - 10-20% or more falls in rent, 6 week vacancies, people offering a week free to secure a tenant. Have even heard of tenants paying breaking lease fees to go to a cheaper place.

    I think this will lead to some investors selling off their stock which in turn will reduce property prices and tighten stock. Eventually rents will rise again.
     
  6. Barny

    Barny Well-Known Member

    Joined:
    16th Oct, 2015
    Posts:
    1,180
    Location:
    Melbourne
    Do you think Australia would loose much of its population?
    I understand immigrants have passports that allow them to pick up and leave, what about most Australians? I'm not sure what the percentage is that have this option.

    Anyone know?
     
  7. Barny

    Barny Well-Known Member

    Joined:
    16th Oct, 2015
    Posts:
    1,180
    Location:
    Melbourne
    Do you see rents dropping more than 20%?
     
  8. WattleIdo

    WattleIdo renovating Premium Member

    Joined:
    18th Jun, 2015
    Posts:
    1,817
    Location:
    Central West NSW
    Are you serious???
    Also, while knowledge and caution are admirable, this fear-based posting you're indulging in is irrational in my view.
     
    The Falcon and Perthguy like this.
  9. twistedstats

    twistedstats Well-Known Member

    Joined:
    5th Jul, 2015
    Posts:
    80
    Location:
    Sydney
    I was in London during the GFC and I remember a friend who rented a 2 bedder for 350 pounds per week when it was previously rented for 600. This was after Lehman's went bankrupt.

    I'm going to treat this question seriously. There are population/net migration statistics on the ABS so you could consider the previous housing cycle as a guide. Australia's population growth is slowing but is still positive. Australia is going through a tough transition away from mining and my personal view is Perth property investors will experience more pain. What is currently happening (and will likely continue) is more people will move interstate to where there are jobs (east cost).
     
    Perthguy and Barny like this.
  10. HUGH72

    HUGH72 Well-Known Member

    Joined:
    18th Jun, 2015
    Posts:
    2,123
    Location:
    FNQ
    Australia's population is growing both by natural increase and by immigration and will continue to do so.
     
  11. Barny

    Barny Well-Known Member

    Joined:
    16th Oct, 2015
    Posts:
    1,180
    Location:
    Melbourne
    Appreciate the feedback, thanks.
     
  12. Perthguy

    Perthguy Well-Known Member

    Joined:
    23rd Jun, 2015
    Posts:
    4,707
    Location:
    Perth
    To me, this is one of the key drivers of the property cycle. I have seen this happen twice now. When Perth booms, people move in from over east. Prices go up, rents go up. When there is a downturn, people move back to Sydney and Melbourne. Then they boom, Sydney first, then Melbourne. Perth has been declining for over a year, Sydney has been booming in that time and Melbourne is reaching a peak. I would say that in a downturn, people move more within Australia than away from Australia.
     
    Barny likes this.
  13. Barny

    Barny Well-Known Member

    Joined:
    16th Oct, 2015
    Posts:
    1,180
    Location:
    Melbourne
    Yes I'm serious, it's irrational to you because you must already know what I'm asking.
    I'm trying to get a better understanding of all the negativity of late relating to booms and busts, and what actually happens in a bust.
    There are people that say there are many similarities with Ireland and Australia. Since I don't know Ireland, I've researched what I can myself online. They show ghost towns but some of these areas are a fare distance out, and no one mentions what happens to rentals, or the people that are still living there. The information always shows the worst of it.
    I thought fellow investors would have a better understanding of it as some may have gone through it or have studied the worst case.
    Who wouldn't want to know the worst case, before investing thousands?
     
  14. Barny

    Barny Well-Known Member

    Joined:
    16th Oct, 2015
    Posts:
    1,180
    Location:
    Melbourne
    Thanks mate.

    Wonder if these people will move back to Perth. If mining doesn't pick up again in Perth, or jobs, Then is it fare to say no growth for Perth and further declines
     
  15. Perthguy

    Perthguy Well-Known Member

    Joined:
    23rd Jun, 2015
    Posts:
    4,707
    Location:
    Perth
    Perth has more to offer than mining. The property market will recover.
     
    radson and Barny like this.
  16. Waterboy

    Waterboy Well-Known Member

    Joined:
    29th Aug, 2015
    Posts:
    326
    Location:
    Sydney
    Just look at the number of Kiwis leaving. They come and go as they like. Visa on arrival. NZ finance minister noted it's a positive for NZ and negative for Aus.
    http://www.afr.com/news/economy/the...as-economy-are-new-zealanders-20151022-gkfxg9

    As the RBA has said, the lower than expected population growth will affect us significantly to the point of cutting our potential growth. There's no hiding this fact. It's in their monetary policy statement.
     
    Last edited: 23rd Oct, 2015
  17. Waterboy

    Waterboy Well-Known Member

    Joined:
    29th Aug, 2015
    Posts:
    326
    Location:
    Sydney
    Yes, but it's no longer the same high-paying mining jobs in the past. What does that mean to rents and prices?
     
  18. Greyghost

    Greyghost Well-Known Member

    Joined:
    23rd Jun, 2015
    Posts:
    1,262
    Location:
    Melbourne
    The exorbadent rental prices in WA are effected by mining. Hence there may be a correction. As for those in mining towns, it's not like the endless tim-tam packet.... It comes to an end.
    One of the reasons most of us are investors - not speculators... Because research and understanding of economics go into our buying decisions..

    In relation to general rental decreases over the country. Just like interest rate rises, investors should have some sensitivity analysis done to see how "x" drop in rent will affect them, same with vacancy periods. Hence why I allow for 1-2 weeks vacancy depending on the demographics in the area of the property.
     
  19. WattleIdo

    WattleIdo renovating Premium Member

    Joined:
    18th Jun, 2015
    Posts:
    1,817
    Location:
    Central West NSW
    In that case, go back to 1945 and track Australia's population growth and decline. When did it decline and why? When did it increase and why? Is that the same as Ireland? Is Australia's history of prosperity and poverty similar to Ireland's? Why? Why not?
    Do some research, put your thinking cap on and learn to be careful of the over-exuberant and the fear-mongers who landed in the lucky country with their pots of gold and love to tell us all what we're doing wrong because we're from a different hemisphere.
    Is it analysis or analysis paralysis?
     
    Perthguy likes this.
  20. Greyghost

    Greyghost Well-Known Member

    Joined:
    23rd Jun, 2015
    Posts:
    1,262
    Location:
    Melbourne
    Adding to this:

    1. 20 years ago a report was done projecting Australia's population by 2020. All the states had to submit their projections. With 4 years to go we are 2 mil ahead of where we should be at this point..
    2. Isn't there meant to be a stupidly large population in Melbourne by 2050.

    Forget the mix of immigration and natural growth, does OP really think all of these immigrates from less fortunate countries are going to back bags and return to their country of birth.
    I think OP needs to understand our economy is affected by other global economies, china, America, so if there is soon and gloom over here im our neck of the woods, there will definitely be doom and gloom across the seas!

    Finally, the logic doesn't stand up, this country is made of migrants, irish, Chinese, Vietnamese, Italians, Greeks, Maltese, Germans etc etc. Of there was going to be any form of exodus - wouldn't it have happened at some point already? Dunno, the Great Depression, ww2, 19% interest rates of the 80's...