Discussion in 'Finance & Banking' started by Nigel Ward, 7th Nov, 2007.
RBA: Media Release-Statement by Glenn Stevens, Governor: Monetary Policy
This is bad news for property investors... will most certainly slow down capital gains in IP.
With another 2 rate rises on the cards, I would not like to be holding large debt against property!
Why ? My margin loan costs me a lot more than my property loans do!
You would if you fixed it at around 6.5%! I think market theory would suggest that it will have a worse effect on the share market than on the property market. Investors require higher returns for their risk (thus lowering equity prices), and businesses find it less attractive to take on debt to fund infrastructure and acquisitions.
Having said that, the share market is up about 1% today so who knows!
I'm in the same boat, no house loan, but large margin loan.. however I doubt higher margin loans is going to affect the stock market..
house prices are fueled by debt... stocks are mostly owned outright in Australia.
anyway, higher interest rates means higher call premiums for me, I use these to cover most of my margin loan interest.. so I'm covered..
Fixing rates will only help existing property owners.. new people entering the market will have to pay the higher rate.. hence they will have less to spend on their new house.... resulting in a lower sale price..
About to get into a managed loan...so this rate rise is unwelcomed....but i'm thinking if i don't get in there now, and with possible more interest rate increases....there may well be not a "good time" at all to start.
However, unlike holding shares everyone has to live somewhere. In my opinion this single fact is the greatest advantage of property over shares, and I think acts as the biggest cushion to falling house prices.
Agree with that!
Its peanuts and will have no effect at all on property prices. In fact another few rate rises will do very little to property prices if anything at all.
If anything it might stall the imminent east coast boom for a year or so, but that will just make it that much bigger quicker when the brakes do come off. I still reckon Brisbane and Melbourne will keep doing 10%+ for the next few years and growing from that. Sydney has now turned the corner and is back into positive growth territory. It might slow Sydney's take-off until 2009, but even that's a stretch of the imagination. I see Sydney doing 10%+ in 2008 now too.
Home financing down, but Sydney prices recover - Business - Business
Last time I checked, everyone has to eat, buy petrol, build houses, buy electricity etc as well..
People have to live somewhere thats true, but people can easily downsize, take in a border etc.. put simple, a house is only worth what someone else is willing to pay for it.. its also linked to how much people can borrow from the bank.. so once rates go up, people can borrow less slowing down CG in property.
a stock is worth based on its company earnings.. so when people continue to buy fuel, shop at coles, burn coal to make electricity, then stocks will always go up.. plus lots of money is invested in the market via super.. people can't just withdraw that money..
Just out of interest, what did property prices do during the 80's when interest rates were 18%+? Were prices still increasing during that time? That would be a good place to look at potential insite on what could happy.
Ahh now that is not the same thing. People dont eat share certificates, they eat food. The share market is not a direct commodities market, it is a market on top of a market. An imaginary overlay if you like. If Coles share price drops 40%, does it mean people are eating 40% less food? When BHPs share price dropped in August, did that have anything at all to do with BHP's production? Did they product less because the share price dropped?
The property market is direct - you buy a house you live in the house.
Companies earnings must fluctuate a hell of a lot. Every second of the day between 10 am and 4 pm (EST) Monday to Friday in fact. Somebody should tell the share market this is how stocks are priced.
Lucky they cant just withdraw their money, I was under the impression that Australia's aging population meant more people are going to be withdrawing more money from their super than ever before.
Could you ever stop property bashing for just one day?
I find this place as a positive place about investing (regardless of anything). Im finding your post to be detracting from this negative feel and turning it into something negative overall.
Investing is Investing. As long as your doing it, your already ahead of the majority of the population. Maybe you should have a bit more of an open mind about it...
Hey I'm curious! What did happen when interest rates were 18%?
Both investments have different factors affecting their values. In a depressed market, both houses and shares will suffer in value. Shares certainly aren't immune to price drops. The only point I made was with raising interest rates, they are more likely to affect house prices then share prices. That is the topic of this thread.. House prices simply reflect what people are/can/will pay for them. Share prices also reflect those things, but to a less extent as they don't rely on interest rates to determine what someone can afford to pay.
So do house prices, if you keep a watch on suburb medium prices, they also fluctuates month to month..
same could be said for the aging population selling their large 4 bedroom houses and buying retirement villa's!
Both investments are good and have their variables. Just illustrates the fact that both a long term investments, and must be viewed that way! I for one would be fixing my rates at the moment! (actually would have done so a year ago)
I'm also curious, but somehow got accused of property bashing..
I would guess rents(yield) went up, and capital growth would have stalled..
I thought crc_error's post was an excellent rebuttal and I think both statements are correct - neither share market nor property market is guaranteed to behave rationally
"...a stock is worth based on its company earnings"
Stock is only worth what market players are willing to pay for it.
Comp. Earnings have nothing to do with it.
"so when people continue to buy fuel, shop at coles, burn coal to make electricity, then stocks will always go up.."
Keep on dreaming.
Can't speak for all markets, but I was in my first PPOR in Brisbane purchased at $69,000 when rates were 12%, and I sold approx 8 months later when rates were 18% for $93,000
Then I spent the CG on beer and partying (I was young after all)
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