Aj,
Thanks for the compliment "expert specialist in real estate" far from it as the real estate market changes from deal to deal, location to location, funding, ROI etc... and on many occasions the stars just don't align especially if it involves development a builder and those unexpected variations and time delays.
Watching Q & A is an experience in itself, and in my opinion is often very biased to the left of politics.
In WA, my guess is that the Perth residential market would not be affected just yet, but the mining town, where a three bedder was achieving $1,500 plus a week in rent will be a blood bath. Commercial & Office property in Perth I would be more than certain must be in free fall, with vacancies all around.
I have clients that have contracts at Karatha and they needed to rent premises for their staff, the asking rent at the height of the boom for a modest house was close to $2,000k, which was ridiculous, similar to apprentices being paid $150,000k a year way over the top.
I am currently advising potential Chinese investors who want to acquire both residential and commercial property, you can basically drive a truck through the rules and regulations as they are easy to steer clear from.
Negative gearing, considered by some to be evil, serves its purpose, especially the residential market as it creates a supply of housing for those unable to acquire a property and need to rent. A lot of the new homes being built are being purchased for rental investment (negatively geared) or their is a big increase in SMSF buying as they get better returns and the potential for capital gains as opposed to fixed interest.
Negative gearing does not only apply to property investments, share portfolios can also be negatively geared. With shares you are actually receiving a tax benefit that is peculiar to shares, being franking credits of 30.00%.
The overseas investors are generally attracted ti the high end market and target locations, they in my opinion are not causing prices to rise in the traditional blue collar and middle class areas.
The current spiral in housing prices is as a result of limited land releases in years gone by and lack of infrastructure spending, which is now causing demand to be greater than supply, add to that the historically low interest rates, with more to come, the first home buyer once again is being tempted by the Banks to buy , borrowing 90.00% and paying interest only.
This works a treat until the missus stops working, the interest only period ends and principal payments are also required and, which they will in the future interest rates head north once again.
My guess is that at the moment, the average home loan rate is 4.50%, if rates increase to 6.00% and above, watch out. 6.00% is not over the top, I recall interest rates for housing at above 10.00%.
In my opinion if negative gearing is done away with housing rentals will skyrocket as their will be limited supply bought to market.
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