I agree @Hands

Some very poor policy choices over many years, and different parties, are a big part of the issue.

Looks fine to me. House prices to the moon

More than happy for them to pick up the tab (as long as I don't have to pay it back to them!).

Nothing. The government will step in if anything goes wrong.

https://rogermontgomery.com/dont-sell-house-prices-must-go-up-unless-youre-in-victoria/#more-45327

Roger says prices are going up? Ok, now I'm really bearish! :)

fwiw i think the supply/demand argument is overly simplistic. Of course, whenever demand remains high, and supply is limited, that will be a very supportive of prices. It's difficult to argue against that -- all else being equal.

BUT that doesn't underpin a given rate of return and there are very real affordability factors at play. At 6.5%pa variable rate, people simply can't afford as much as they could at 3%. At the margins, much fewer people can afford to continue bidding prices up -- regardless of how much demand there is for a house.

Indeed, demand is a function of price. Another core tenet of economics that Roger seems to have forgotten.

Imagine if you tried to sell you house for 5x the current suburb average. I bet there'd be virtually no demand for it at that price. Likewise, if you offered it at half the price, buyers would be lined up down the street!

Australia is a great place to live, and there will always be demand for quality housing in desirable locations. But does that mean that prices must always "double every 7 years"? Does that mean that prices will never drop?

Credit, more than anything, is what has driven prices. And credit is contracting. For now, at least.

Ha Ha, I knew this blog would create @Strawman's response.

Like a rat to cheese @Valueinvestor0909 :)

Also exacerbated by migration and doesn't help when overseas investors possibly can source cash at lower interest rates. But that's just imho.

It's amazing how well prices have held up, and in quite a few areas (at least in Sydney) they are already at or near pandemic highs after a brief slump in 2022. It beggars belief. Where are people coming up with the dough to service mortgages whose rates have moved rapidly at the fatest pace in history? I guess it's still early days, especially with the fixed to variable conversion cliff ahead, and we're yet to see the full/true impact, but I would have expected more cooling off already.

They sell their Bitcoin?

*Trigger warning

Why would you ever do that @Saasquatch? ;)

ugh.. the answer is always "with insane amounts of leverage".

What could possibly go wrong?

Thanks for sharing @Rudyboy

A 1.35% compound annual return, in gross terms (before any costs), over 15 years. A good reminder that there's no such thing as a 'sure thing' in investing, even in property.

Based on a recent sale in our neighbourhood, I thumbsucked a value for the house we currently rent and calculated it's probably on a Price to sales ration of 50. That's not a typo.

ie. assuming our landlord pays no tax and has no costs on the property (agents fees, interest, rates, maintenance etc etc) it would take 50 years for our rent to pay off the value of the property. Madness.

Anyway.. I'm a broken record on this. And there's plenty of mud on my face. So i'll just shut up and go back to shaking my fist at the sky :)

That return was less al the negatives over the years and the three weeks it took me to paint it top to toe and fix up the shower. Hopeless investment.

I bought 500k of EUROA for 3.6c the other day with a little of the money.....was down to 4.1 today....oh bugger, but still up $2500.

I rest my case m'lud.

Ok so I had a unit in the Snowy Mountains that I saved for and bought at 18. ($166k so chill out I don't have millions) Lived in it for a while, had housemates for a while etc.

+$100k in a few years so that was nice but went to paying off debts (including a few ridiculous special levies from a corrupt Strat committee) which means I'm free as a bird. Woo!

Now there's no property in my name but a decent share portfolio as I'm a bigger spender than I should be and I need to have that minor liquidity barrier to prevent ending up at $0 each new year. So shares have been wonderful for me.

I was looking at buying a place up around Lake Macquarie with the intention of renting it out (would be ever so slightly negatively geared) and then would be able to give my mum a bit of security knowing in 10 years or so she has the option of moving up there. What a kind son I am.

Anyway, we would be looking at a purchase of $750k including stamps for maybe $400/week rental income before expenses? Let's ignore extra expenses and just with that loan amount I'd be up for over $1,000 per week on the old mortgage. So I've put that idea on ice.

Fun FACT: The MoneySmart website has recently added a new feature to their mortgage calculator in that it gives you a comparison as to what would happen "if interest rates went up by 2% points" *Hint Hint* Which I swear wasn't there 12 months ago.

New idea, despite my deep seated hatred for units and strata managers after my previous experience, I am again looking at units. Inside knowledge informs me that there are big plans in the near future for the Sydney area of Auburn and unit prices there are well under $300k for a 1 bedder. Not a studio, but something with a living room, kitchen, bathroom and dedicated bedroom. Some even sitting at $230k.

My little treat there is that the weekly rental income is currently $320 and some minor improvements could fetch $350/week included.

Let's assume:

• Mortgage of $200k
• Repayments of $300/w
• Expenses of $90/w ($4,500 per year in council and strata)
• Rental income $320/w

We would still be looking at something ever so slightly negatively geared. Or at least, some of my income from work would be supporting the investment.

I think the only "sensible" strategy would be to double down in the same complex, purchase TWO of the units for a combings outlay of $70k and mortgage of $400k. At least then I would have a little more sway in body corporate meetings and direction of sinking funds for overall improvements to the block. Still, double the units double the problems.

If we double the numbers then yep the mortgage still goes up because we all know how interest works on a larger sum, but the opportunity to claim back the interest or even structure the loan to be Interest Only for a while would see me get close to break even if not turn profitable.

Following that method, within 5-10 years I would be easily cash-flow positive as the loan has come down significantly, interest rates become more predictable and rental yields creep up with inflation and that's assuming minimal capital appreciation which I genuinely believe would be there in the next few years anyway. In this way at least there is a path to profitability instead of a 50 year term where someone else is hardly making a dent in the mammoth mortgage.

Beyond that, given such a "small" price to buy each unit, after a few years there might be enough juice in the tank to purchase another one in the same or different block elsewhere and copy-paste the strategy. Best case scenario is actually redrawing if/when rates come down for a boost to the share portfolio.

Shooting from the hip here btw.