There's lots of talks of huge housing prices/huge mortgages at the moment.
Lets think about the definition of 'huge'.
To me, whether something is huge depends on your ability to service the mortgage.
There's a perception that many investors cannot.
So what affects an investors ability to service the mortgage? Yields. Primarily, typical residential rental yields hover around 4-5%. In some (inner city) areas, we are seeing 2%-3%, leading people to think that asset prices are inflated, and that investors are relying on capital growth.
However, we are increasingly seeing (in the inner city) homes/rooms being let out via AirBNB, at a very attractive rate.
For example in my city, Hobart, I could make 50% extra yield over my current 12 month tenants if i let my entire house through AirBNB (on a 50% vacancy rate, i.e 3.5 days/7).
These are very, very attractive returns, and suddenly make asset prices much more sustainable and justifiable.
