Nice analysis Russell. What do you make of the housing shortage and record low vacancy rates.? In Perth where I am invested, and runs on a different cycle to East Coast property, yields are rising supporting prices Wages are also rising due to labour shortages, thus supporting the higher yields.
What I see at the moment is rising wages support rents, but rising interest rates pushing down on capital values, so you end up with property flatlining - and so as an asset underperforming in real terms - which is exactly what government policy of reducing income inequality is aiming for...
I am have been buying older houses on large blocks and putting a "spec house at the back", then doing a strata. Due to lack of capital, I have always sold the houses at the end of the project and made the capital gain, which I am happy with.
As I approach 60 my plan had been to keep a couple of the new properties and let them out (depreciation etc), while selling the older ones.
I may continue with the development and sell strategy.
I would need to hire about 30 people to go micro then macro. There are just so many more things to look at. Macro acts as a better guide. But perhaps one day I will try micro then macro....
I also think Australian house prices arein substantial part dependent also on Chinese purchases, as is also the case in Canada, at least on the west coast (Vancouver).
The US real estate net worth chart picked my interest as The move up in property prices in the late 60‘s - 80’s has me thinking how demographics played a huge role as the baby boomers, were coming into the labor force(women and minorities have a larger role as well). Household formation started to boom and people need to fill these homes/apartments with stuff just as revolving credit was becoming widely available.
Would love to hear your thoughts on that and if a pro labor cycle has strength to run even as global demographics deteriorate. Thx!
Hi Nick - please read my fertility series (fertility tab on my home page). Population growth is a policy choice in my view, and we have a pretty good idea of what policies work in promoting babies these days.
That doesn't matter for investment purposes, as even if birth rates start climbing strongly right now (which is not the case) those babies won't come to the market earlier than in 20-40years time.
Perhaps it is the opportunity for rising rents as nominal wages rise that can support property markets? That seemed to be the driver in the UK in 70s and 80s.
Nice analysis Russell. What do you make of the housing shortage and record low vacancy rates.? In Perth where I am invested, and runs on a different cycle to East Coast property, yields are rising supporting prices Wages are also rising due to labour shortages, thus supporting the higher yields.
What I see at the moment is rising wages support rents, but rising interest rates pushing down on capital values, so you end up with property flatlining - and so as an asset underperforming in real terms - which is exactly what government policy of reducing income inequality is aiming for...
Very interesting, thank you.
I am have been buying older houses on large blocks and putting a "spec house at the back", then doing a strata. Due to lack of capital, I have always sold the houses at the end of the project and made the capital gain, which I am happy with.
As I approach 60 my plan had been to keep a couple of the new properties and let them out (depreciation etc), while selling the older ones.
I may continue with the development and sell strategy.
makes sense to me. I just think leveraged strategies are going to struggle....
Russell it would be interesting to see if your findings would be different if you started with the granular first and THEN the macro?
I would need to hire about 30 people to go micro then macro. There are just so many more things to look at. Macro acts as a better guide. But perhaps one day I will try micro then macro....
russell is there a website email you can be contacted on? Cheers
"Population of Mollymook and nearby Ulladulla is maybe 50,000 people."
Mollymook and Ulladulla? lol 🤣
I also think Australian house prices arein substantial part dependent also on Chinese purchases, as is also the case in Canada, at least on the west coast (Vancouver).
That is not a question of o "if" as prices are already falling around the globe.
"But in an age of rising incomes (ie pro labour policies) property prices are unlikely to fall. "
Great write up, Russell. Thanks!
The US real estate net worth chart picked my interest as The move up in property prices in the late 60‘s - 80’s has me thinking how demographics played a huge role as the baby boomers, were coming into the labor force(women and minorities have a larger role as well). Household formation started to boom and people need to fill these homes/apartments with stuff just as revolving credit was becoming widely available.
Would love to hear your thoughts on that and if a pro labor cycle has strength to run even as global demographics deteriorate. Thx!
-Nick
Hi Nick - please read my fertility series (fertility tab on my home page). Population growth is a policy choice in my view, and we have a pretty good idea of what policies work in promoting babies these days.
That doesn't matter for investment purposes, as even if birth rates start climbing strongly right now (which is not the case) those babies won't come to the market earlier than in 20-40years time.
Once you have a few babies, demand for everything goes way up, and savings go way down in my experience!
Thanks, Russell for the reply. Will do!
Perhaps it is the opportunity for rising rents as nominal wages rise that can support property markets? That seemed to be the driver in the UK in 70s and 80s.
Yes but rising yield should cap asset values as well. So that just like in 1970s, property looks cheap versus incomes.