Was wondering if i could get some of your opinions on this below. I was talking to a guy who is big on the markets about property and asked him if there is a bubble, this is what he told me.
Historically housing has been safe as it is not very volatile, the falls are small but so are the gains, so over all you dont put yourself at any risk with it as it holds its own over time.
Apparently in 1999 the government changed the taxing on investment in housing changing it so your only taxed on half, and this is what opened up the market for prop investors who at the time were weary from the markets in stocks going through a bad period due to the safe nature mentioned above. as well as being able to write any costs off against your income.
He said that 10 years ago there was less than about 1 in 10 houses in Melbourne were a rental, with a little more in Sydney.
Apparently for the last few years property investors are buying houses faster than new buyers which is increasing the supply of rentals vs owner occupied, which apparently these rentals are being filled as the house prices climb more people are forced out the buying market and into rentals which is why they are able to be filled and why there is a rental shortage as so many people are priced out.
He raised a good point that a first home buyer has a limited buying power as he has to pay his own interest, where as a investor has a larger buying power as he has a tenant to pay the interest for him.
Basically he was suggesting that investors had more buying power than a first home buyer, and with more investors entering the market after 1999 buying up the property its pushed the prices up as they have been adding more buy pressure, which can be seen in the higher number of rental propertys in the country compared to prior to 10 years ago. And why the cost of property is no so much higher than it ever was before.
It kind of makes sense.... ?
He said the risk for me to buy a investement property now is that there are so many investment properties in the market that are full of first home buyer wannabies, and that if for some reason housing becomes affordable again, through inflation on wages, or falling house prices, there would be a huge number of buyers leaving their rentals they once tenanted out, creating a large vacancy rate in the rental market.
The risk being that land lords would be forced to drop their prices, or forced to sell the house if they cant pay all the costs to hold it. So what was originally buy pressure on the market from 1999 to now would now reverse and become sell pressure pushing the prices back down.
Apparently in all history house prices have never surged this high before, he recons its due to the new tax law in 1999 and banks lending out more money, and says there is a real risk that the prices can correct?
