Sydney rents going up

Going to be interesting to see what happens to Sydney rents as people realize they cant get funding for their first home under the new APRA lending rules......

- 'It's a different ball game now': Stagnant property prices the new normal

(unless you think people are going to stop....getting married/having babies/immigration halts to 0% etc etc)

 

They can implement rules to make investing less attractive eg Victorian rules around pets etc....but rent controls hmmm I think that's a stretch too far even for our current govts.

Don't get me wrong I think this is a good thing.

Australia needs more #Tier2cities .....and until we do we are always going to be paying over the average for property (both to purchase and to rent).

 

A/t the moment though, rents in Sydney (in general) are dropping.

 

its a cycle isnt it.
too many apartments is for real, but now people cant buy so development slows down.

now supply is more than demand.

but with apra rule means now people cant buy and developers cant built.

so once demand catchs up, it goes back up..

few years later the chain unlocks. the circle goes back ..

who knows how long these cycle will be.. hah

funny isnt it ?

 

I don't think FHB have it that bad, its the investors who are hit the hardest with the credit tightening.

If you remove CG from the equation for next 3/5 yrs, Even at current pricing in Syd/Melb (which is around % down from its peak) Rental yields are too low to make new investment worthwhile.
Something gotta give, either the rents has to rise fast or price has to fall further.

There will be 77k new apartment hitting Sydney and 78k in Melbourne markets in next two year, there is also a continuous supply of new houses hitting market at least for next two years.
With so much new supply hitting Syd/Melb market Rents are not going up in a hurry,

With credit tightening the new game in town and likely to continue for next few years to come, along with IO2PI headwind till 2021, Prices in Syd/melb, over next 3/4 years have only one way to go ... Down

 

It'll take a few years but yeah I think rents will have their day in the sun sooner or later.

But the banks are in the business of lending money - so unsure of how things will transpire on that front.

How long can they afford to be overly conservative before it starts affecting profits...and what will they conjure up from a lending perspective to counteract APRA and the RACs stranglehold? Hopefully its not drastic interest rate rises.

 

For APRA OZ Credit risk is bigger than banks profits,
The household debt (especially IO) has become too big and too risky especially in current global macro environment of rising yields, so much so that its can bring down the entire financial system crashing.
APRA is forced to de-risk the system, For this Leverage has to come down.... this, that or any which way.

 

Working couple making 100k+ total a year in Sydney should still be able to get a 80%lvr loan of 500k so any unit sub 600k they can buy and own instead of renting. Shouldnt be hard as investors start dumping end masse

 

they have them in Germany
Germany’s controversial rent control law works after all (at least in central Berlin)

 

I can answer that one.....it is already started affecting bank profits.

eg. I've put up with variable rates increasing over the last year but with the last 0.14% increase at Westpac I've had enough and sold some USA equities to max out our variable portion in the offset so that we owe effectively $0 in variable (still owe on the 5 year fixed portion at 3.99%).

So basically the bank has lost my business for the foreseeable future/any chance on making profit on that particular mortgage until 2022.

We still have some variable with St George on the portfolio loan but the majority of the debt there is locked up in 5 year fixed loans at various stages of coming off but if we pay this down much more we will go cash flow positive and with 32% ATO tax for non resident expats we aren't interested in doing that and would prefer to put our money elsewhere.

But yep.....if banks want us investors to pay down the debt......we will and they will be making far far less profit in the next few years.

 

The german system is a little different, more like commercial leases in Australia.

Eg kitchen/bathroom not included (yep....you rent an apartment without a kitchen and bring not only your fridge/microwave BUT you also bring cupboards/sinks/backsplash tiles etc etc.

The tenants is also in the property for much longer each 5/10 year leases are the norm AND there are increases being built into the lease each year, also tenants cant walk away from leases PLUS have to give 6 months notice when leaving etc etc.

I had a tenants ask us to pay for a light bulb that needed replacing.....do you really think most Australian tenants would be ok providing a $20,000 kitchen?