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Market supply higher than demand

Discussion in 'Real Estate' started by Jacque, 9th May, 2008.

  1. Jacque

    Jacque Team InvestEd

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    From the latest RP Data Pulse report....

    There are currently 97,100 residential properties listed for sale throughout mainland Australia – 73% higher than the same week last year. Supply levels have been trending upwards since mid January due to low buyer numbers and properties taking longer to sell. In essence, despite a national undersupply of dwellings, the market supply is outweighing market demand.

    The reasons for this imbalance are varied but can mainly be tied back to a fundamental lack of buyer confidence. The recent announcement by the Reserve Bank of Australia that the official cash rate will remain on hold for May should provide a much needed boost to market sentiment.

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    Buyer confidence is low, according to RP Data, and not surprising, given the recent rates hikes. Keeping them stable during this month (recent news) hasn't done much to increase faith amongst purchasers though, especially given banks are opting to raise independently of RBA increases.
    Interesting times ahead
     
  2. Simon Hampel

    Simon Hampel Co-founder Staff Member

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    Of course, while confidence stays low, there is likely to be little growth (or even negative growth) in new rental properties being made available to tenants - hence further driving up rents until we reach a point where yields are high enough to entice investors back into the market.
     
  3. Jacque

    Jacque Team InvestEd

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    Spot on
    It's a land of opportunity out there with more listings than buyers- I'm seeing evidence of it in the field every day, and increasingly so with vendors who are dropping their prices to meet the market, and then some.
    Investors will be enticed further when interest rates start to fall (my prediction another 6-9mths away) and limited stock begins to attract further rental increases.
     
  4. dostortugas

    dostortugas Active Member

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    I wonder if people's mindset towards renting will change if the uncertain market conditions means demand remains stifled for months/years to come?

    Perhaps it will help crush that great Australian quarter acre block dream (a positive change in my opinion).
     
  5. Jacque

    Jacque Team InvestEd

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    I think that the younger generation's mindset has already changed (talking about late teens to early twenties) in terms of accepting the fact that they may rent for a longer period than their parents did, before opting into home ownership, or perhaps not at all. The nice thing about home ownership, however, is the security factor. Knowing that no one can move you on, or kick you out at the most inconvenient times of your life, counts for a lot. Especially when elderly, who wants the hassle of having to potentially move house on a frequent basis? Then there's the reality of paying rent for the rest of your life as opposed to the "norm", when most retirees are able to retire and live in a debt-free asset.

    As for the 1/4 acre block, I think that dream isn't for all and was definitely compromised on some time ago- dependent largely on where you wish to live!
     
  6. Chris C

    Chris C Well-Known Member

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    Speaking on behalf of the "early 20s" generation - I think most of us these days aspire to a townhouse that has a few metres of yard, as we are face with the reality that most of our first independent purchases (within 5km of the CBD) will most likely be a unit or townhouse. Up here in Bris Vegas purchasing land within 5km of the CBD is going to set you back more than 500,000 which isn't realistic for most sub 25 year olds in a single income household.
     
  7. Jacque

    Jacque Team InvestEd

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    If you want to live close to the CBD then naturally your choices are going to be limited. Nothing wrong at all with a townhouse or unit, however, as your first purchase either.
    It's amazing how much growth Brissy has sustained just in the last 4 yrs alone and I can't really see it going backwards either.
     
  8. Young Gun

    Young Gun Guest

    Maybe people are slowly realising that the Australian Residential property market is vastly over valued and is about to collapse......

    Why would any rational person want to buy in today's market? its at the top, the only way is down.

    It wont take much either to send it over the edge, just a few more rate rises and another subprime. The warning signs are out there but Property Investors are blind to the facts. Just look at what happened to Japan in the 80s/90s and whats happened to the US market recently. The ozzie market is way more overvalued when you compare it to the pre subprime US market.

    As a renter I feel lot more secure than first home buyer or mortgage slave. I have the freedom to move where ever I like, upgrade to a better place without any other costs other than an increase in rent. And if worse comes to worst and I can't pay the rent, the only person worse off is my landlord.

    I don't know about you but I'd feel more secure with $500K in the bank/shares/MFs than with a property "worth" $500K.

    P.S. if you can't tell I really, really, really don't like Resident Property as an investment class. There are some many things wrong with it I could spend hours filling this forum with facts, figures and real life examples of why property is not worth looking into. in fact I might start a new thread........
     
  9. Simon Hampel

    Simon Hampel Co-founder Staff Member

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    ... and you might just find another thread started by someone else about how bad financial planners are - especially those who ignore the benefits of residential property :rolleyes:

    Be careful - we generally don't approve of "shares are better (or worse) than property" types threads since they typically don't achieve much and are usually based on personal biases and the arguments are full of assumptions.

    I've been running discussion forums for 7+ years, and we've heard all the arguments before.

    Our philosophy here at InvestEd is that there is room in your portfolio for BOTH property AND shares - it doesn't have to be either-or. If you prefer shares over property, so be it - I know plenty of people who have been very successful with that approach too. I also know plenty of people who prefer property over shares and have been just as successful.
     
  10. dostortugas

    dostortugas Active Member

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    I'll add to that and say one thing... the median house price in Sydney increased by 0.3% the last quarter. Think about what that means.. the most expensive city in Australia, where people are paying $1.50+ for petrol and 10% interest rates still managed to squeeze a little out of the housing market. You'd be surprised at how resilient people will be when it comes to security of tenure... I am the same as you (happy long term renter with plenty of cash in the bank) but not everyone is the same.

    That said, I would say that the negative gearers and the "investors" sold on 3% rental returns in the hope that their property will double in seven years are playing a hopelessly outdated game.
     
  11. Jacque

    Jacque Team InvestEd

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    Ah the old Shares vs Property Debate rears it's futile head!! ;):D

    Like Sim, I've been around long enough (well OK maybe a tad longer :D) to know that this debate has no winner because both markets are not only largely unpredictable but carry differing levels of risk, dependent on what you buy and when. It's up to the individual investor to decide for themselves in the end, based on their circumstances.

    Diversification is a good thing when it comes to investment- ignoring one asset class because you don't like it (or understand it) is your choice alone to make. However, let's not deride or criticise something on the basis of that alone.

    Every investor also has differing goals and timelines.... I'm sure, given your position as an FP, Young Gun, that you've encountered the entire spectrum!

    Anyway, I'm not complaining about the returns property has given me over the years- I'm pretty comfortable :D