Thursday, April 22, 2010

Median price rises are getting ahead of rises in rent

InsideStory followers,

This is hot off the press, the latest movement in rental yields and Adelaide is doing OK.

"Currently, it costs 63 per cent more to service the debt on a house than it does to rent whilst for units housing is 42 per cent more expensive."

Look at how the median price rises are getting ahead of rises in rent, and the Yields are therefore coming down.

PropertyPulse-RPData (pdf)

On Wednesday the 5th of May we have SHOWDOWN 1, the Great Debate "PROPERTY V SHARES" will be edgy and it will be informative. Adelaides biggest hitters will go head to head live on so register at to be sure we send you a reminder email before the show!!

Enjoy the read.



Anthony Toop, Managing Director.

© Toop Real Estate Group


Paul said...

In the past 10 years you could have returned up to 300% on a residential property purchase depending on where & what you purchased (excluding net rental returns). 10 years ago, BHP was trading around $8.00, today BHP is around $42, so a 500% return (excluding net dividends). 10 years ago, QBE was trading around $7.00, today QBE is around $22, so a 314% return (excluding net dividends). 10 years ago, RIO was trading around $19.00, today RIO is around $77, so a 400% return (excluding net dividends). 10 years ago, WES was trading around $9.00, today WES is around $30, so a 333% return (excluding net dividends). Residential property generally incurs council rates, SA water rates, maintenance costs, insurance costs, wear & tear, stamp duty, higher brokerage costs & it takes at least 60 days to receive funds upon sale & rental yield is generally crap! Shares incur none of the above & you receive your funds in about 7 days of selling shares. It's obvious to me who the winner is!

Rob said...

I rent a top end property (purchased late 2009) for 2% gross yield. Taking into account rates, insurance, management fees, maintenance costs, etc, the landlord would receive a net yield = about 1.5%! compared to home loan rates around 7% which is about 465% greater then the net yield to the landlord! This suggests to me that top end property values are too high & purchasers may still be speculating that property values will continue to rise to offset the poor yield.

Joe said...

A mate owns several 3 bedroom new homes (about 8km from CBD) each worth around $440,000- He gets gross $380/week rent. After management fees, rates, taxes, insurance, maintenance, etc, net income yield is around 3.4% which is less then half current home loan rates! I can only assume my mate is speculating in ongoing capital growth otherwise he would be better off selling and investing the cash elsewhere. Personally, I currently rent a substantial property in a premier inner suburb for net yield = 2%, thats right, 2%! which is 70% less then current home loan rates! Seems quite obvious to rent if one is not prepared to speculate with ongoing capital growth.

Eden said...

Property: stamp duty, council rates, water rates, insurance, maintenance, wear & tear, over 1.5% brokerage to sell, at least 60 days to obtain cash from time of placing house on market, though last 10 years could have produced a total capital gains of between 100% to 300% depending on where & what was purchased.
Shares: No duties, No taxes, No insurance, No maintenance, No wear & tear, brokerage under 1% to sell, only up to 7 days to obtain cash from time of sale. Last 10 years could would have produced substantial capital gains if you purchased well run strong boring companies, eg. BHP 500%, RIO 375%, WES 300%, QBE 300%, CBA 200%, WBC 256%, etc (with QBE, CBA, WBC also paying big franked dividends along the way) and whom have clearly out-performed residential property returns. Though you can loss money with shares if you buy crap speculative companies or heavily over geared with bad business plans!

Anthony Toop said...

Hi Eden

Your blog will be answered next Wednesday, and I will respond in the Saturday Advertiser Saturday week in my InsideStory weekly article.

SHOWDOWN 1 the great debate of shares against property will be held live and interactive this coming Wednesday on and it will be fierce and it will be fun, I will ensure your comments are included in the debate….but there is little doubt they will be already!!!

Check out last Wednesday’s precursor edition of Toop.TV where we had a stock broker on the show.

It is at 1pm Wednesday 5th then after on our archive log and pod cast, so do not miss this..



Anthony Toop said...

Hi Rob

I agree, with out both tax relief with negative gearing and capital gain, the returns are just not there, BUT property never just vaporises and always has a value emotionally, monetary, and as shelter.

Rents are/will continue to rise with the increased shortage of property and Adelaide is underpriced at the top end compared with all but Hobart.

Great feedback…join the Showdown voters Wednesday 1pm