Rentals when economies crash

Everybody is talking about Ireland , where is our insightful Oscar? He will be our expert on this one!

 

The problem with using Ireland as example is that they use the euro currency.

At least with our own currency we can somehow control it to our advantage.

 

are you talking about when there is a depression or just a moderate fall in property prices?

as im sure that when property prices plateau or fall a few % because of the cycle

rents actually start to increase because no one can afford to buy and the banks dont lend as much,

so everyone rents,

as for those people that move back home, that will represent a small portion of the market

obviously a depression is a different kettle of fish

 

Temporarily, rents are lower and prices are lower. Rents will recover and prices will recover as other sectors are developed. Remember we have positive net migration, so the population is increasing. I understand that the net migration rate has dropped drastically and the picture for the econonmy is dire in the short term. However, with the population increasing, those people will need somewhere to live and at some point, which will likely be a while away, rents and house prices will start to recover. Nothing unusual. In my experience, the Perth market always takes a while to recover from a slump. So while the short term picture isn't very rosy, I'm not one of the permabear/trolls sitting on the sidelines wringing my hands and predicting doom and gloom for a decade.

 

I agree. Also, as @Barny pointed out, they overbuilt where no one wanted to live. In WA, if we overbuilt Mandurah and Northam, the hit to high demand areas closer to the CBD would not be as much as in the ghost towns. I also understand that the Irish population is a lot more mobile than Australia.

I think it is important to pay attention when property markets collapse: USA, Ireland, Japan... we don't want that to happen here. But is it also important to understand how we are realistically different and not assume our property market will collapse just because Ireland's property market collapsed.

It's interesting to watch the fall out from the Ireland collapse. They risk entering another unsustainable increase in housing prices if they don't increase supply. For example, it was estimated that in 2013, Dublin needed 8,000 to 10,000 new homes. But only roughly 1,300 were built in Dublin. With restricted supply and pent up demand, prices are going to escalate at an unsustainable rate. Problems for the future for sure.

http://www.irishtimes.com/business/...ny-time-soon-in-the-property-market-1.2284611

 

Yes depression.
Im still researching what happens when depression hits. Watched a video earlier bout Ireland and 96% of people aged under 30 couldn't get a job when depression hit. Holmes 150km out are now being offered in ghost towns for half price. No info on properties closer to major cities. No info on the other people that are still working, no info on what industries still have jobs.
I'm not posting this to say depression will occur in Australia. I'm trying to understand if it did happen (hypothetically) in Australia what areas will become ghost towns, what areas will still be rented, do rents halv, no rentals at all, do property prices drop 50% everywhere or just in areas distant to major cities.
Trying to hypothetically construct a worst case scenario going by past events using other countries as examples. This isn't easy to do as I can't find the info as yet, and for obvious reasons every country will experience a depression differently, but, some things will be the same without doubt.

 

What other sectors are going to be developed?
Judging by the amount of denial posts by permabull trolls, one wonders whether a number are getting concerned about the lack of due diligence put into their gloomy leverage outlook?

 

Not sure if you are accusing me of being a permabull troll but I can assure you I'm not. I welcome the Perth housing market crash. In fact, I'm looking forward to it.

Let's see:
Western Australia’s gross state product (GSP) was $265 billion in 2013-14
GSP is forecast to rise 3.25% in 2014-15, 2.0% in 2015-16 and 3.5% in 2016-17
In 2013-14, industry sectors contributing to GSP growth included agriculture, forestry and fishing (up 59%), non-market service industries (up 5%), construction (up 4%), market services industries (up 1%) and utilities (up 1%).
note - non-market service industries include: Public administration and safety; health care and social assistance; and education and training.

>> What other sectors are going to be developed?
Just agriculture, forestry, fishing, public administration and safety, health care and social assistance, education and training, construction, market services industries and utilities.

Oh, and tourism

 

I read somewhere (please don't ask for an internet linky reference) that during the 1929-1933 depression in Sydney, rent made up 2% of household expenditure and food made up over 80%.

 

Wow 2%. Lucky Australia still has unemployment benefits in the worst case scenario for rentals. I'm using daveron park as the Great Depression that's been happening for years and my property is still rented so all should be ok.

 

Human nature is that people tend to hold onto their family home but when faced with financial pressure, investment properties will be the first things to be liquidated - many of them on the market at the same time will drop prices.

Rents will drop - great time to buy.

 

If investment properties are sold off, and tenant pool remains the same, shouldn't supply : demand suggest that rents rise?

 

no because the same proportion of people in total move back home, share with friends, move interstate / international, become homeless, etc.

it's only when the economy picks back up that we realise there aren't enough rentals anymore because they are all sold to OO's or foreign investors and left vacant.

 

The tenant pool won't stay the same as some of the tenants won't need to rent because they will have bought some of the properties that were sold off.

 

the tenant pool cannot remain the same in a down market - many contributing economic factors come to play, I can write a book on it but dont have the time to discuss here...

 

Please write about. This is why I posted this thread. No one ever talks about it,

 

Diversify. Don't have all your properties in one location or your investments in one basket. Also have adequate cash buffers. Problem solved.