it maybe insane but it's unchecked capitalism, the very thing that's been written about in books since the 1800s. The warnings of unchecked capitalism are now all coming true.
Oh yeah, I fully agree it's the end game of the system everything we take for granted is built on, but I still find insane seeing it happen, and nothing will be done to stop it
yeah I hear you. it's insane and sad.
The only way to stop it is to move away from capitalism, but the propaganda machines have made sure that won't happen.
That’s not actually true. These systems are not huge monolithic beasts without nuance. Regulators just need to curb behaviours that are ultimately sociopathic. It is equally sociopathic to present economic systems as a black and white dichotomy. History has shown no economic extreme works well for humanity unchecked.
Assuming the planet survives the people with the capacity to address it continuing to ignore climate change, the bubble of late stage capitalism will probably burst in 50-75 years, shortly after I get to die, and I will get to spend the rest of my life in the ✨unprecedented historical times✨ which is everyone but the ultra rich experiencing their quality of life dwindling to basically nothing before the system collapses because it isn't sustainable and enough people finally revolt.
Millennials are tired. We just want to live in precedented times.
It's so grim. They actually know they can just keep raising prices and some will pay. They make more money each year from fewer people becuase they raise rents and just evict the poors. There should be laws against vacant rental properties.
Investors are still only 8-20% of the market depending on city and location in the US.
Apparently the renter proportional of properties in Australia is 25% or something, so one would think it is in the ballpark of the US. Perhaps a little higher.
Mum and dad investors can be just as speculative as big faceless companies, perhaps even more so.
Maybe a better comparison would be Ireland where you see the real international reach of these funds. I'm Irish and what is happening in Melbourne is where Ireland was 5-10 years ago. What is coming down the line for Australia is going to be brutal unless they start building public housing.
They certainly are turning them to Airbnb for higher profits. So, that's somewhat correct. Plus, a lot of investors won't touch real estate because of these returns. Of course, that starts the argument about whether more landlords getting into the market helps renters via more rentals available, or hurts first home buyers because investors are bidding on the properties.
The Airbnb issue alone is having an effect. So to that extent, you are right.
Its actually happening more than you might think....we have had 2 friends list their investment properties in the last month. The interest rate rises make young investments untenable.
Correct. There's two sides to every story. For every renter out there queueing up to view a rental and missing out, there's one new homebuyer able to move in.
The real question will be whether fewer investors actually do mean fewer apartments being built. It depends on those initial sales by developers. If they don't get enough investors, will homebuyers make up the difference?
All the new builds I'm seeing in my city are super expensive overpriced luxury apartments that most renters can't afford anyway (and if they can afford $1000+ a week rent, surely they'd just buy, the market for people who can afford it and only want to rent in that price range has gotta be pretty small)
O yeah we haven't sold ours overseas and likely never will. The 2 we know of bought at the wrong time and we're not great investments in the first place.
Except for when property earns more per year than the median salary of a worker: [https://theconversation.com/when-houses-earn-more-than-jobs-how-we-lost-control-of-australian-house-prices-and-how-to-get-it-back-144076](https://theconversation.com/when-houses-earn-more-than-jobs-how-we-lost-control-of-australian-house-prices-and-how-to-get-it-back-144076)
that hurts to read.
The rich literally get double the amount of money as the non-rich.
For the same job, at the same income.
just for owning a piece of land.
That's only part of the problem. The fact that property has been by far the most attractive asset class for investors in Australia has diverted a lot of capital away from other options in the past few decades. Other sectors of the Australian economy have suffered as a result of the property boom and the successive policies which sought to perpetuate it. After all, why would you invest in growing a small business when you can just park your money in bricks and mortar and watch it grow without having to do anything?
We entirely passed on some bloody big business too. More residential solar than any other country, yet no manufacturing here. We need vision for the future, not hanging onto dinosaur industries. Solar panels and inverters are built in high tech automated factories where the jobs are technical and well paid, and not impaired by old rules and styles of working.
Anecdotally I know of quite a few high-tech manufacturing businesses in Australia (including one that produces solar panels) which manage to turn a profit despite competing directly with much larger foreign manufacturers. They've all struggled to secure financing to scale up their operations. In one instance the founders had a visit from a "prospective investor". Said investor subsequently bought the building in which their factory and warehouse was situated and increased the rent. They were never interested in the business, just the property it occupied. It would almost be funny if it wasn't so sad.
Oh please what rubbish. The rates go up a bit and now they are upset their capital growth isn’t 50% year on year this year.
We have 2 properties from pre-pandemic and they are both outrageously positively geared. One was built in 2020.
Think of that as just the dividend, the capital gains is enormous too. It’s ridiculous. And it reminds me of the third world country my parents left decades ago.. the disparity of wealth is going that way.
Well I guess it’s fair enough considering how often negative gearing is used in this scenario as an advantage. It’s nice to hear a investor in the market be realistic for once. I appreciate it.
I've cross referenced this to my finance 101 reference chart. I can confirm "Outrageous" = a 20% yield on the borrowed money (only). The substantial deposit/equity is not considered in the equation.
Finance 101.
I would not have expected a new build to have positive income. Most I know are much older houses with granny flats, in good locations rented out as 2 separate leases.
Positive geared doesn't mean a good yield. If it has 50% LVR it would be positive geared whilst yields are bad.
Also if he is still on 2% fixed interest it's possible it's "outrageously positively geared'. Until it reverts to 6% of course. Tripling your interest expense does wonders to your tax deductions
Not to mention the IP market between 2010-2017ish was a licence to print money, with huge capital gains and moderately rising rents. You bought an IP, rented it out for three years, the interest rate had gone down, it was now positively geared. If you needed the equity you could sell for a steep profit.
Unless a landlord did something crazy, and took out a mortgage to purchase, at which point the added leverage would put them way ahead of super with no leverage.
Hmmm... I'm not convinced. I usually trade snails. Typically theres a 2% margin on each sold (about 4 cents each).
Property is a much better investment it seems
I have found that Putting my money in offset account is giving me better and more stable returns than any other investment.
My owner home loan is 100% offset
This gives me tax free return of 6%
One of my two investment home loan is more than 50% offset
This amounts to 6.15% and makes it positively geared. Second investment home loan is fixed rate which ends in 2024.
No other investment can compare to these returns with similar risk factors
You can’t get 80% LVR in super.
100k in super returning 7.4% is $7,400
100k at 80% LVR is a $500k property, returning 6.3% is $31,500
They don’t have a link to the source so hard to know how they’re calculating.
Assumptions are in the report: [https://www.pexa.com.au/staticly-media/2023/03/Whitepaper-2-Private-renting-in-Australia-a-broken-system\_compressed-sm-1679450145.pdf](https://www.pexa.com.au/staticly-media/2023/03/Whitepaper-2-Private-renting-in-Australia-a-broken-system_compressed-sm-1679450145.pdf)
They consider leverage as well. IRR cash on cash shows the average Super is still better
Really short holding periods though: IRR on 4-10 year holding periods plus all the transaction costs. On the basis that this is the typical holding period for a new investment property. However this distorts the fact that longer held properties should make up more of the overall investment stock so they’ve introduced some bias there.
They also exclude any capital growth cagr over 12% as outliers to exclude capital improvements which might make some sense but also identifies another gap in the methodology. Especially because property returns appear to me to be serially correlated so long periods of no real growth and then fast catch up.
They assume 3.2% and 3.7% yield for houses and units respectively based on capital city average and assume interest rates of 6.6% which I don’t think is internally consistent.
They’ve also assumed about 50/50 units to houses.
They assume a 65% LVR and income <$130k so not reflective of a higher income owner.
Assumes a 95% occupancy rate as well.
One of the benefits/ issues with property investing is that you can hold for a long time and let the levered capital gains compound without a tax event over several decades as the value of the land appreciates. They have not modelled this…
Interestingly the outfit that did the research, “long view”, literally invest in residential property so it raises the question of whether they’ve built a method that backs out their target message. Interestingly I think their position is more like investing in land appreciation is great but more retail property investors are bad at it. The spirit of that message may be true but they didn’t prove it out well…
Did they model super, cgt and personal tax rates at todays values or historic values? As many older properties are CGT exempt, no negative gearing in the past ect.
>100k at 80% LVR is a $500k property, returning 6.3% is $31,500
Does that subtract the amount you are paying in interest on the home loan? (also repairs, rates, connections etc)
I assume the same as any other brokerage account. Start using leverage and trading options, then jump on 'wall street bets' to discuss your 'loss porn'.
margin loans. I don't know the details but I doubt it is as easy to borrow as it is with mortgages. also when the market goes south there are margin calls. I've never done this, I'm way too conservative..
I dunno what margin you’re getting but I’ve never seen a product over 70%. And I guess derivatives are technically correct but you’re moving a long way from the 7% return benchmark in the article and heavily into the world of trading.
1. No link to the whitepaper to review methodology
2. Seems to assume landlords sold their property after 4-10 years, not held for 30
3. Doesn’t seem to account for leverage (which can go either way)
4. Includes the 1990s, when shares went great (pre 2001 crash) and property was lousy (pre 2001 boom). The same methodology from 2000 to present might have produced very different results, but we can’t see the methodology to compare (FWIW, I think the next 10 years will resemble the 90s for real estate)
5. Unclear whether it takes into account Share dividends and Property rent - only seems to talk about growth in both sectors
6. I’m a big fan of property, but if you want to ‘set and forget’ rather than renovate to add value with leverage you can afford, then property is a terrible choice. The comparison seemed to be “set and forget” so not taking into account different pros and cons.
7. Did I miss a discussion about the tax perks? Was that why they compared to Super?
8. Did it account for using leverage to buy a property and benefit from it’s growth, versus drip feeding into Super? A $1M property held for 10 years is different to $1M put into super over 10 years.
But let me know what I’ve missed. I’ve read two articles with the headlines and quotes, but not the sort of detail that we can use to (for example) show how the great Aussie housing crash is just beginning.
1. Here's the white paper: [https://www.pexa.com.au/staticly-media/2023/03/Whitepaper-2-Private-renting-in-Australia-a-broken-system\_compressed-sm-1679450145.pdf](https://www.pexa.com.au/staticly-media/2023/03/Whitepaper-2-Private-renting-in-Australia-a-broken-system_compressed-sm-1679450145.pdf)
2. Median hold for property is 7 years, and for landlords its actually slightly lower. Obviously there will be high variance, but that's the point of the distribution in the graph.
3. It does account for leverage. Read the methodology in the appendix.
4. Go look at the whitepaper if you want to read the methodology. Obviously every time period assumption is going to weight different assets. But actually, this is the most generous period for landlords because it is the time when interest rates were at their historic lowest. If you go further back, homeowners actually do worse.
5. It takes into account both.
6. True - but a lot of people don't see it that way.
7. Tax perks (cgt, -ve gearing etc) are all considered in the paper and probably why super was chosen.
8. It did account for leverage fully.
> 2. Seems to assume landlords sold their property after 4-10 years, not held for 30
There's an average length of home ownership that often gets dug up that's approximately 7 years. The only problem with this is that it's about as useful as a lot of average figures, like average income or average shoe size. i.e not very useful.
I would be wagering that there is a sizable minority of people who buy property and sell it within 3 years. Lots of people grow to dislike the area they moved into, or they discover building issues they don't want to deal with, or they just fall out of love with the person they set up a home with. Or, they just might be an investor and do wacky things if it generates profit.
Then you have the rest of home buyers, who for the most part just want a patch of land to call home for the long term.
In case you haven't seen it, here's the white paper: https://www.pexa.com.au/staticly-media/2023/03/Whitepaper-2-Private-renting-in-Australia-a-broken-system\_compressed-sm-1679450145.pdf
It sure can be! My issue isn’t with the finding, it may well be accurate given that time frame and for most Aussies probably a good predictor of the next 10 years. But it’s lousy reporting.
Had realestate.com.au put out an article “demonstrating” that property was better than super over X timeframe, with this little an explanation, you and I would both be tearing it to shreds.
But maybe I’m still disgruntled from my journalism ‘career’!
Well you know me mate, I’m not going to sugar coat it and say that’s the end of it. I think you will have to stomach a fair whack more of the same if the next few years.
Take solace in knowing you aren’t alone!
❤️
I’m still ok with our positions, but the biggest thing is taking responsibility. If your bigger forecasts come to pass, I’ll take a beating but it would have been of my own making - landlords playing the victim in the current market riles me up.
True, could go down a lot more!
(As noted in my other comment, I’m still confident in our holdings. If we had to liquidate in a hurry we’d lose even more compared to the peak, but we’d still be up a lot from when we bought them.)
One of the things these articles always miss is that property is leveraged to hell and you are massively incentivised to not sell a house because banks will literally do everything they can to help you.
>Real Estate Institute of Australia president Hayden Groves said the findings weren’t a surprise as the nation’s rental sector had changed over the years and the “allure for investors into property is becoming less enticing”. “And as a result what we are seeing right now is a massive shortage of rental supply in Australia,” Mr Groves said.
I've heard some deranged takes from the real estate industry in my time, but "Poor sad investors selling up their investment properties is what's causing the rental crisis", is a gold-medal winning reality-bending stance. Jesus wept.
Super as a net return will outperform most investment types because of the tax benefits. But what if an investor wants to access money before their preservation age? Different investment types all have their purpose. I think the true point of this article is the importance of diversification.
I've never heard of a landlord suddenly losing the entire value of their property.
However I've met many who had their super demolished overnight and weren't able to retire.
Whilst the gains in super may be better (which hasn't been the case of late), it's certainly way more safer to invest and to own property.
Definitely requires an explanation.
To my knowledge, that's only possible if they self managed and put it all in a single company, or leveraged their super. In either situation that's some 'wall street bets' level of degeneracy.
People on this sub don't understand diversification, it's hilarious.
The amount of times I've faced **MASS** downvotes on this sub for pointing to the benefits of diversification is frankly just shocking.
Which Super Fund?
I don't recall hearing about a Fund 'going under' - more that they perform terribly and were acquired, but members wouldn't lose all their super. Unless it was a SMSF, which is the on the trustees.
[Average AusFinancier](https://www.reddit.com/r/AusFinance/comments/11p84gj/-/jbwxfjc)
>An index fund? What's that? Stocks or sumthin? Nah, I know a bloke that lost money doing that "stocks" thing.
>Can't live in yer stocks? Can ye? Homes can't go to 0. Stocks can. All in on propadeeee.
>Average AusFinancier.
I'm curious too - how would you let the value of your entire super account 'go to zero'.
Did the person not make an investment choice? Did they put it all into Int Shares and just leave it?
Or is it typical "super funds stole my money!!!!11!!"?
Property is even more risky because it is typically leveraged. If you've only got 5% equity in a property and it falls by 10%, then you've lost all of your original investment and then some.
The reality is, and this is only becoming apparent to some people very recently, is that property is a dud investment.
Like tulip bulbs, olive groves, and FTX tokens, so to will go Aussie property.
Not if you are actually living in it. If you are there are a bunch of less “Tangible” returns on investment, as well as the usual financial ones.
As for the actual slumlord ones, you might hope that some of them might learn a valuable lesson, that no investment is risk free. But I doubt it, the reality is supply in Australia is still very much finite.
All Australian states should improve tenancy laws. It's good to see bad landlords are being punished by the legal system. These guys will open up mediocre bakeries and cafes with all their released capital continuing their assault on societal progression. Well done Australia. Really good to see all the run down crack dens and meth labs being put on the market now.
Unless you are the sort of person who would grab a toolbox and go around to your rental because an issue arose at 9pm on a Sunday night, you shouldn't be doing them. Rental properties are not a hands off investment.
If you have to get a tradie on a Sunday night you will be paying absolute top $$$. There have also been numerous scams were managing agents get kickbacks from overpriced tradies. If you own a rental and want to make any money you will need to be doing some work yourself.
There's not a lot of situations where you need emergency work done straight away and its not like these will happen every weekend, if you have a good agent and maintain your investment properly then rental properties are pretty low involvement investments.
Depends on the type of property - strata title yes but free standing house with a yard not usually: Tennants normally do the bare minimum in the yard(if youre lucky) and once a lease is up expect to have to do some work in gardens and with lawns. It is also getting less common for people to have handyman skills, so things like tap washers and lights can become an issue with those tennants.
60, You can access it at 60.
If you don’t even know when preservation age is, why comment?
The fact that you have positive upvotes sums up the financial literacy of this sub perfectly
Well unless you're running a business not paying yourself super, or are being paid cashies, then your super is being invested and inaccessible til you're in your 60s whether you choose to think about it or not.
People actively investing their super is just them having more direct control into the actual investment, in order to try get better results
I wonder if it would be a good time for a scheme where if you sell an investment property you could put it into your super at a very low tax rate ?
Full disclosure im not an economist !
Sounds like you are describing concessional contributions. It's not limited to proceeds of a property sale but it does allow you to put money in to super with only 15% contributions tax while reducing your taxable income, subject to caps.
Don’t these articles consider leverage you get in property investing!!!!
I don’t even understand the comparison.
Invest $120in property (20% deposit with $500k purchase price, stamp duty and other costs) and invest $120k in super.
Lets compare the 6.2% return on $500k property vs 7.4% return on $120k in super. The comparison is not even close.
$2.7m in property vs $1.07m in super. Now exclude mortgage costs, let’s say $700k including interest, you are still better off $1m with property investment.
So no, super investment isn’t better off by any means
Why would they be going bankrupt!!! Rental market is hot. Even if your property value dropped, your serviceability would still be pretty good given the current rental market. There is no reason for a property investor to go bankrupt.
That’s just bad investment. You will always get some bad investments. That’s just market doing it’s thing. That’s always the case with property investment in regardless of price movement
Tell this to those who have made millions of it. Seems like a dumb thing to say that all property is bad investment. If anything, property is relatively safe long term investment
“The report excluded homes that had price growth that more than doubled in the space of six years (a 12 per cent or more compounding annual growth rate) as that typically indicates a renovation or other additional investment in the property.”
But I thought property prices automatically doubled every 7 years?
The problem is that if being a landlord becomes unattractive, many landlords will sell their investment properties and invest via their owner occupier home instead. This reduces supply of rentals and pushes up rents. It's fine to get rid of the 50% CGT discount for landlords, but it needs to be matched with removal of the 100% CGT discount on the principal property.
If a landlord sells who buys it?
An investor, who rents it back out, or;
A first home buyer who lives in it and no longer rents.
Supply is unaffected.
Rents are unaffected.
I advocate for the removal of both tax concessions.
It reduces the incentive to invest in new supply. For the price of my house on a double sized block, I could have built 2 smaller ones and rented one. But f that. I’ve had investment property before. I’m spending it on something I can enjoy and not my problem if there’s not enough houses to go around. THATS how supply is reduced.
>sell them at cost.
That's just a terrible suggestion, you have to know that no one is ever going to risk their capital with no chance of profit to improve property supply
>I am happy to do so and there would be many others.
And this is proven by the plentiful housing available in the country currently?
You are delusional if you think a significant number of people will spend the time and incur the risks involved in property development for zero profit, even the government doesn't build housing without a long term goal of making money.
I’m defiantly willing to contribute to ethical investing which has a focus on returns in benefits to society, not money.
I’d say you’re the delusional one mate.
You’re fixated on making money and that’s not healthy for you.
I see a lot of comments about landlords and no-one is crying,which fair enough and well lets face it the returns were only a little less than super so hardly poor returns anyway
But a lot here seem to be missing one big point
as the REIA president said "“And as a result what we are seeing right now is a massive shortage of rental supply in Australia,” Mr Groves said."
there is always repurcussions, so landlords aren't making as much but the real losers out of this are tenants
This would have huge impact on results:
**\`The report excluded homes that had price growth that more than doubled in the space of six years (a 12 per cent or more compounding annual growth rate) as that typically indicates a renovation or other additional investment in the property.\`**
They are basically excluding all the properties that have done well. This will pull down the average A LOT.
“The report excluded homes that had price growth that more than doubled in the space of six years (a 12 per cent or more compounding annual growth rate) as that typically indicates a renovation or other additional investment in the property.” Not in every case though, will skew results.
[удалено]
And what’s worse, they’ll be bought up by conglomerates (like what’s happened in the US).
It's actually insane what's happening over there with the hedge funds buying property
it maybe insane but it's unchecked capitalism, the very thing that's been written about in books since the 1800s. The warnings of unchecked capitalism are now all coming true.
Oh yeah, I fully agree it's the end game of the system everything we take for granted is built on, but I still find insane seeing it happen, and nothing will be done to stop it
yeah I hear you. it's insane and sad. The only way to stop it is to move away from capitalism, but the propaganda machines have made sure that won't happen.
That’s not actually true. These systems are not huge monolithic beasts without nuance. Regulators just need to curb behaviours that are ultimately sociopathic. It is equally sociopathic to present economic systems as a black and white dichotomy. History has shown no economic extreme works well for humanity unchecked.
Vague, non-descript, conspiratorial nonsense. So weird to increasingly see this kind of rhetoric in financial subreddits.
If you think this is conspiracy nonsense you should pick up a few books and educate yourself.
Assuming the planet survives the people with the capacity to address it continuing to ignore climate change, the bubble of late stage capitalism will probably burst in 50-75 years, shortly after I get to die, and I will get to spend the rest of my life in the ✨unprecedented historical times✨ which is everyone but the ultra rich experiencing their quality of life dwindling to basically nothing before the system collapses because it isn't sustainable and enough people finally revolt. Millennials are tired. We just want to live in precedented times.
It's so grim. They actually know they can just keep raising prices and some will pay. They make more money each year from fewer people becuase they raise rents and just evict the poors. There should be laws against vacant rental properties.
Investors are still only 8-20% of the market depending on city and location in the US. Apparently the renter proportional of properties in Australia is 25% or something, so one would think it is in the ballpark of the US. Perhaps a little higher. Mum and dad investors can be just as speculative as big faceless companies, perhaps even more so.
Maybe a better comparison would be Ireland where you see the real international reach of these funds. I'm Irish and what is happening in Melbourne is where Ireland was 5-10 years ago. What is coming down the line for Australia is going to be brutal unless they start building public housing.
Keen to read more on this, best place to start for solid info?
https://youtu.be/YrPU3eHeimA
I’m interested in reading up on this, got any info for be to start?
https://youtu.be/YrPU3eHeimA
I recently bought an apartment and Blackrock owns like 10 of the other apartments in the complex. It's already here
Yeah when Zillow start sending teams over to buy to distress stock, things are gonna get dicey.
Oh no won't someone think of the small time scabs.
They certainly are turning them to Airbnb for higher profits. So, that's somewhat correct. Plus, a lot of investors won't touch real estate because of these returns. Of course, that starts the argument about whether more landlords getting into the market helps renters via more rentals available, or hurts first home buyers because investors are bidding on the properties. The Airbnb issue alone is having an effect. So to that extent, you are right.
Its actually happening more than you might think....we have had 2 friends list their investment properties in the last month. The interest rate rises make young investments untenable.
Oh no! Anyway...
No one is lookng for sympathy, but for rentals to exist someone has to own them. They sold them realizing they were bad investments.
If they sold to someone who isn't holding empty properties, there's no net loss of housing, the person who buys lives there or rents it.
Correct. There's two sides to every story. For every renter out there queueing up to view a rental and missing out, there's one new homebuyer able to move in. The real question will be whether fewer investors actually do mean fewer apartments being built. It depends on those initial sales by developers. If they don't get enough investors, will homebuyers make up the difference?
All the new builds I'm seeing in my city are super expensive overpriced luxury apartments that most renters can't afford anyway (and if they can afford $1000+ a week rent, surely they'd just buy, the market for people who can afford it and only want to rent in that price range has gotta be pretty small)
The person who buys may use their old property as a rental.
Sure. And forced selling will drop prices, will eventually drop rents. Good for everyone.
Unless the buyers are hedge funds and mega conglomerate who will never sell them again
Oh no, two whole people! The horror! The carnage! When will it end?!
Its 2 families out of a pretty small social group we have as expat. None of us that own properties overseas are in any pressure....
Just to add more anecdotal data, I know no families selling IPs, if it helps.
O yeah we haven't sold ours overseas and likely never will. The 2 we know of bought at the wrong time and we're not great investments in the first place.
In that case back to renting. It cant be dead money if its now the only option
Lol yeah hehe
Well if it's affecting landlords we better do something about it!
Except for when property earns more per year than the median salary of a worker: [https://theconversation.com/when-houses-earn-more-than-jobs-how-we-lost-control-of-australian-house-prices-and-how-to-get-it-back-144076](https://theconversation.com/when-houses-earn-more-than-jobs-how-we-lost-control-of-australian-house-prices-and-how-to-get-it-back-144076)
that hurts to read. The rich literally get double the amount of money as the non-rich. For the same job, at the same income. just for owning a piece of land.
Agreed. A property portfolio shouldn't be equivalent to having a staff working for you...
But isn't that the risk/reward of a business? Investing in anything comes with risk.
That's only part of the problem. The fact that property has been by far the most attractive asset class for investors in Australia has diverted a lot of capital away from other options in the past few decades. Other sectors of the Australian economy have suffered as a result of the property boom and the successive policies which sought to perpetuate it. After all, why would you invest in growing a small business when you can just park your money in bricks and mortar and watch it grow without having to do anything?
We entirely passed on some bloody big business too. More residential solar than any other country, yet no manufacturing here. We need vision for the future, not hanging onto dinosaur industries. Solar panels and inverters are built in high tech automated factories where the jobs are technical and well paid, and not impaired by old rules and styles of working.
Anecdotally I know of quite a few high-tech manufacturing businesses in Australia (including one that produces solar panels) which manage to turn a profit despite competing directly with much larger foreign manufacturers. They've all struggled to secure financing to scale up their operations. In one instance the founders had a visit from a "prospective investor". Said investor subsequently bought the building in which their factory and warehouse was situated and increased the rent. They were never interested in the business, just the property it occupied. It would almost be funny if it wasn't so sad.
Yeah but “no one wants to work”… apparently
If you are not a landlord then you are being scammed.
The sad thing about that is it shows just how much they can lose. And it will happen.
It will be a glorious day.
That will never happen
That doesn't mean it wouldn't be a glorious day, and idk how true that is
Oh please what rubbish. The rates go up a bit and now they are upset their capital growth isn’t 50% year on year this year. We have 2 properties from pre-pandemic and they are both outrageously positively geared. One was built in 2020.
>outrageously positively geared I lol'd. What a great way to describe an investment that returns *actual* income.
Think of that as just the dividend, the capital gains is enormous too. It’s ridiculous. And it reminds me of the third world country my parents left decades ago.. the disparity of wealth is going that way.
Lol yeah Australian's don't realize what the endgame is.
Well I guess it’s fair enough considering how often negative gearing is used in this scenario as an advantage. It’s nice to hear a investor in the market be realistic for once. I appreciate it.
What sort of yields are we talking after expenses?
Outrageous yields.
Outrageous gains
I've cross referenced this to my finance 101 reference chart. I can confirm "Outrageous" = a 20% yield on the borrowed money (only). The substantial deposit/equity is not considered in the equation. Finance 101.
I would not have expected a new build to have positive income. Most I know are much older houses with granny flats, in good locations rented out as 2 separate leases.
Yeah seems strange
Positive geared doesn't mean a good yield. If it has 50% LVR it would be positive geared whilst yields are bad. Also if he is still on 2% fixed interest it's possible it's "outrageously positively geared'. Until it reverts to 6% of course. Tripling your interest expense does wonders to your tax deductions
That’s because Op isn’t saying that they purchased it with little debt
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This is property we’re talking about, it’s completely risk free.
Not to mention the IP market between 2010-2017ish was a licence to print money, with huge capital gains and moderately rising rents. You bought an IP, rented it out for three years, the interest rate had gone down, it was now positively geared. If you needed the equity you could sell for a steep profit.
Don’t see why not outperforming super means something is broken. Sometimes you beat an arbitrary benchmark, sometimes you don’t.
Unless a landlord did something crazy, and took out a mortgage to purchase, at which point the added leverage would put them way ahead of super with no leverage.
Your SMSF can borrow money to leverage its investments- there are even SMSF specific loan products.
I guess it’s yet another reminder that property is indeed a dud investment.
Hmmm... I'm not convinced. I usually trade snails. Typically theres a 2% margin on each sold (about 4 cents each). Property is a much better investment it seems
I have found that Putting my money in offset account is giving me better and more stable returns than any other investment. My owner home loan is 100% offset This gives me tax free return of 6% One of my two investment home loan is more than 50% offset This amounts to 6.15% and makes it positively geared. Second investment home loan is fixed rate which ends in 2024. No other investment can compare to these returns with similar risk factors
So in real terms you’re getting negative returns. That’s hectic mate. Don’t you want your investments to actually grow?
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Adjust for inflation. He is going backwards.
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Yeah he did say “tax free return”.
Except you can sell your property before age 60, so there's that I guess?!
You can’t get 80% LVR in super. 100k in super returning 7.4% is $7,400 100k at 80% LVR is a $500k property, returning 6.3% is $31,500 They don’t have a link to the source so hard to know how they’re calculating.
Assumptions are in the report: [https://www.pexa.com.au/staticly-media/2023/03/Whitepaper-2-Private-renting-in-Australia-a-broken-system\_compressed-sm-1679450145.pdf](https://www.pexa.com.au/staticly-media/2023/03/Whitepaper-2-Private-renting-in-Australia-a-broken-system_compressed-sm-1679450145.pdf) They consider leverage as well. IRR cash on cash shows the average Super is still better
Really short holding periods though: IRR on 4-10 year holding periods plus all the transaction costs. On the basis that this is the typical holding period for a new investment property. However this distorts the fact that longer held properties should make up more of the overall investment stock so they’ve introduced some bias there. They also exclude any capital growth cagr over 12% as outliers to exclude capital improvements which might make some sense but also identifies another gap in the methodology. Especially because property returns appear to me to be serially correlated so long periods of no real growth and then fast catch up. They assume 3.2% and 3.7% yield for houses and units respectively based on capital city average and assume interest rates of 6.6% which I don’t think is internally consistent. They’ve also assumed about 50/50 units to houses. They assume a 65% LVR and income <$130k so not reflective of a higher income owner. Assumes a 95% occupancy rate as well. One of the benefits/ issues with property investing is that you can hold for a long time and let the levered capital gains compound without a tax event over several decades as the value of the land appreciates. They have not modelled this… Interestingly the outfit that did the research, “long view”, literally invest in residential property so it raises the question of whether they’ve built a method that backs out their target message. Interestingly I think their position is more like investing in land appreciation is great but more retail property investors are bad at it. The spirit of that message may be true but they didn’t prove it out well…
Did they model super, cgt and personal tax rates at todays values or historic values? As many older properties are CGT exempt, no negative gearing in the past ect.
>100k at 80% LVR is a $500k property, returning 6.3% is $31,500 Does that subtract the amount you are paying in interest on the home loan? (also repairs, rates, connections etc)
Yes. Read the report. It factors everything.
Well it's from real estate.com so they have an agenda to push too.
Spot on mate
You can gear up way over 80% in a SMSF.
I would like to know too, how to gear up in SMSF?
I assume the same as any other brokerage account. Start using leverage and trading options, then jump on 'wall street bets' to discuss your 'loss porn'.
Use derivatives.
Interesting, how?
margin loans. I don't know the details but I doubt it is as easy to borrow as it is with mortgages. also when the market goes south there are margin calls. I've never done this, I'm way too conservative..
Using leveraged instruments or derivatives and also access to margin.
I dunno what margin you’re getting but I’ve never seen a product over 70%. And I guess derivatives are technically correct but you’re moving a long way from the 7% return benchmark in the article and heavily into the world of trading.
I think we can both agree with the article, that property is a dud investment.
Oh definitely didn’t need the article for that
Happy to help. 😎
1. No link to the whitepaper to review methodology 2. Seems to assume landlords sold their property after 4-10 years, not held for 30 3. Doesn’t seem to account for leverage (which can go either way) 4. Includes the 1990s, when shares went great (pre 2001 crash) and property was lousy (pre 2001 boom). The same methodology from 2000 to present might have produced very different results, but we can’t see the methodology to compare (FWIW, I think the next 10 years will resemble the 90s for real estate) 5. Unclear whether it takes into account Share dividends and Property rent - only seems to talk about growth in both sectors 6. I’m a big fan of property, but if you want to ‘set and forget’ rather than renovate to add value with leverage you can afford, then property is a terrible choice. The comparison seemed to be “set and forget” so not taking into account different pros and cons. 7. Did I miss a discussion about the tax perks? Was that why they compared to Super? 8. Did it account for using leverage to buy a property and benefit from it’s growth, versus drip feeding into Super? A $1M property held for 10 years is different to $1M put into super over 10 years. But let me know what I’ve missed. I’ve read two articles with the headlines and quotes, but not the sort of detail that we can use to (for example) show how the great Aussie housing crash is just beginning.
Finally some sensible comment that goes beyond emotions and empty claims. Well done mate.
1. Here's the white paper: [https://www.pexa.com.au/staticly-media/2023/03/Whitepaper-2-Private-renting-in-Australia-a-broken-system\_compressed-sm-1679450145.pdf](https://www.pexa.com.au/staticly-media/2023/03/Whitepaper-2-Private-renting-in-Australia-a-broken-system_compressed-sm-1679450145.pdf) 2. Median hold for property is 7 years, and for landlords its actually slightly lower. Obviously there will be high variance, but that's the point of the distribution in the graph. 3. It does account for leverage. Read the methodology in the appendix. 4. Go look at the whitepaper if you want to read the methodology. Obviously every time period assumption is going to weight different assets. But actually, this is the most generous period for landlords because it is the time when interest rates were at their historic lowest. If you go further back, homeowners actually do worse. 5. It takes into account both. 6. True - but a lot of people don't see it that way. 7. Tax perks (cgt, -ve gearing etc) are all considered in the paper and probably why super was chosen. 8. It did account for leverage fully.
> 2. Seems to assume landlords sold their property after 4-10 years, not held for 30 There's an average length of home ownership that often gets dug up that's approximately 7 years. The only problem with this is that it's about as useful as a lot of average figures, like average income or average shoe size. i.e not very useful. I would be wagering that there is a sizable minority of people who buy property and sell it within 3 years. Lots of people grow to dislike the area they moved into, or they discover building issues they don't want to deal with, or they just fall out of love with the person they set up a home with. Or, they just might be an investor and do wacky things if it generates profit. Then you have the rest of home buyers, who for the most part just want a patch of land to call home for the long term.
In case you haven't seen it, here's the white paper: https://www.pexa.com.au/staticly-media/2023/03/Whitepaper-2-Private-renting-in-Australia-a-broken-system\_compressed-sm-1679450145.pdf
To summarise; Property is a dud investment.
It sure can be! My issue isn’t with the finding, it may well be accurate given that time frame and for most Aussies probably a good predictor of the next 10 years. But it’s lousy reporting. Had realestate.com.au put out an article “demonstrating” that property was better than super over X timeframe, with this little an explanation, you and I would both be tearing it to shreds. But maybe I’m still disgruntled from my journalism ‘career’!
You definitely make fair points mate. 👍🏻
I’m also down $100K on my property investments this year 😂😂😂
Well you know me mate, I’m not going to sugar coat it and say that’s the end of it. I think you will have to stomach a fair whack more of the same if the next few years. Take solace in knowing you aren’t alone! ❤️
I’m still ok with our positions, but the biggest thing is taking responsibility. If your bigger forecasts come to pass, I’ll take a beating but it would have been of my own making - landlords playing the victim in the current market riles me up.
You have such a great attitude mate. It’s easy to see why you are a success. I’ve got a lot of respect for you.
Paper losses though I'm assuming. Nothing realised till you sell.
True, could go down a lot more! (As noted in my other comment, I’m still confident in our holdings. If we had to liquidate in a hurry we’d lose even more compared to the peak, but we’d still be up a lot from when we bought them.)
Good to hear. We are also well up on our holdings and in the same situation as you described above.
One of the things these articles always miss is that property is leveraged to hell and you are massively incentivised to not sell a house because banks will literally do everything they can to help you.
Like a scythe, leverage cuts both ways.
**> Most Australian landlords since the 1990s would have been better off investing in super than property** This is a startling admission from REA!
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>Real Estate Institute of Australia president Hayden Groves said the findings weren’t a surprise as the nation’s rental sector had changed over the years and the “allure for investors into property is becoming less enticing”. “And as a result what we are seeing right now is a massive shortage of rental supply in Australia,” Mr Groves said. I've heard some deranged takes from the real estate industry in my time, but "Poor sad investors selling up their investment properties is what's causing the rental crisis", is a gold-medal winning reality-bending stance. Jesus wept.
They always seem to ignore the fact that for every new owner occupier there's one less renter.
And they also ignore that for every new Airbnb there's one fewer rental or home available.
FYI they're not an REA. They're an investment fund manager which specialises in property funds. Source: I looked it up
Sorry I thought it was just a journo who worked for REA group.
Good. Housing should not be a vehicle for significant wealth growth, it should be a human right.
Yep 100% mate. Housing as a speculative asset is a disaster for our society.
Super as a net return will outperform most investment types because of the tax benefits. But what if an investor wants to access money before their preservation age? Different investment types all have their purpose. I think the true point of this article is the importance of diversification.
Lol cue the smallest violin ever.
I've never heard of a landlord suddenly losing the entire value of their property. However I've met many who had their super demolished overnight and weren't able to retire. Whilst the gains in super may be better (which hasn't been the case of late), it's certainly way more safer to invest and to own property.
You know people who lost all their super "overnight"? Impressive.
Definitely requires an explanation. To my knowledge, that's only possible if they self managed and put it all in a single company, or leveraged their super. In either situation that's some 'wall street bets' level of degeneracy.
People on this sub don't understand diversification, it's hilarious. The amount of times I've faced **MASS** downvotes on this sub for pointing to the benefits of diversification is frankly just shocking.
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Which Super Fund? I don't recall hearing about a Fund 'going under' - more that they perform terribly and were acquired, but members wouldn't lose all their super. Unless it was a SMSF, which is the on the trustees.
[Average AusFinancier](https://www.reddit.com/r/AusFinance/comments/11p84gj/-/jbwxfjc) >An index fund? What's that? Stocks or sumthin? Nah, I know a bloke that lost money doing that "stocks" thing. >Can't live in yer stocks? Can ye? Homes can't go to 0. Stocks can. All in on propadeeee. >Average AusFinancier.
I'm curious too - how would you let the value of your entire super account 'go to zero'. Did the person not make an investment choice? Did they put it all into Int Shares and just leave it? Or is it typical "super funds stole my money!!!!11!!"?
If its self-Managed, anything is possible. Nicaraguan pineapple futures, Credit Default Swaps on US Fed, etc.
Property is even more risky because it is typically leveraged. If you've only got 5% equity in a property and it falls by 10%, then you've lost all of your original investment and then some.
The reality is, and this is only becoming apparent to some people very recently, is that property is a dud investment. Like tulip bulbs, olive groves, and FTX tokens, so to will go Aussie property.
Not if you are actually living in it. If you are there are a bunch of less “Tangible” returns on investment, as well as the usual financial ones. As for the actual slumlord ones, you might hope that some of them might learn a valuable lesson, that no investment is risk free. But I doubt it, the reality is supply in Australia is still very much finite.
4head move: buy an investment property with your super.
All Australian states should improve tenancy laws. It's good to see bad landlords are being punished by the legal system. These guys will open up mediocre bakeries and cafes with all their released capital continuing their assault on societal progression. Well done Australia. Really good to see all the run down crack dens and meth labs being put on the market now.
*/sad violin noises*
Unless you are the sort of person who would grab a toolbox and go around to your rental because an issue arose at 9pm on a Sunday night, you shouldn't be doing them. Rental properties are not a hands off investment.
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If you have to get a tradie on a Sunday night you will be paying absolute top $$$. There have also been numerous scams were managing agents get kickbacks from overpriced tradies. If you own a rental and want to make any money you will need to be doing some work yourself.
There's not a lot of situations where you need emergency work done straight away and its not like these will happen every weekend, if you have a good agent and maintain your investment properly then rental properties are pretty low involvement investments.
Depends on the type of property - strata title yes but free standing house with a yard not usually: Tennants normally do the bare minimum in the yard(if youre lucky) and once a lease is up expect to have to do some work in gardens and with lawns. It is also getting less common for people to have handyman skills, so things like tap washers and lights can become an issue with those tennants.
Invest in money I can't access till 67, nah thanks
60, You can access it at 60. If you don’t even know when preservation age is, why comment? The fact that you have positive upvotes sums up the financial literacy of this sub perfectly
Well unless you're running a business not paying yourself super, or are being paid cashies, then your super is being invested and inaccessible til you're in your 60s whether you choose to think about it or not. People actively investing their super is just them having more direct control into the actual investment, in order to try get better results
You can access it at 60
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I wonder if it would be a good time for a scheme where if you sell an investment property you could put it into your super at a very low tax rate ? Full disclosure im not an economist !
Sounds like you are describing concessional contributions. It's not limited to proceeds of a property sale but it does allow you to put money in to super with only 15% contributions tax while reducing your taxable income, subject to caps.
Don’t these articles consider leverage you get in property investing!!!! I don’t even understand the comparison. Invest $120in property (20% deposit with $500k purchase price, stamp duty and other costs) and invest $120k in super. Lets compare the 6.2% return on $500k property vs 7.4% return on $120k in super. The comparison is not even close. $2.7m in property vs $1.07m in super. Now exclude mortgage costs, let’s say $700k including interest, you are still better off $1m with property investment. So no, super investment isn’t better off by any means
Like a scythe leverage cuts both ways. That’s why I’m seeing so many property investors go bankrupt the last 6 months.
Why would they be going bankrupt!!! Rental market is hot. Even if your property value dropped, your serviceability would still be pretty good given the current rental market. There is no reason for a property investor to go bankrupt.
Lots of places the rental market being hot doesn’t matter. Yields in Sydney for instance are pathetic. The place I’m in is yielding less than 1%.
That’s just bad investment. You will always get some bad investments. That’s just market doing it’s thing. That’s always the case with property investment in regardless of price movement
Generally all property is a bad investment.
Tell this to those who have made millions of it. Seems like a dumb thing to say that all property is bad investment. If anything, property is relatively safe long term investment
It’s so rare. Most property investors are just mortgage prisoners. Slaves to debt. Really sad actually.
“The report excluded homes that had price growth that more than doubled in the space of six years (a 12 per cent or more compounding annual growth rate) as that typically indicates a renovation or other additional investment in the property.” But I thought property prices automatically doubled every 7 years?
The problem is that if being a landlord becomes unattractive, many landlords will sell their investment properties and invest via their owner occupier home instead. This reduces supply of rentals and pushes up rents. It's fine to get rid of the 50% CGT discount for landlords, but it needs to be matched with removal of the 100% CGT discount on the principal property.
If a landlord sells who buys it? An investor, who rents it back out, or; A first home buyer who lives in it and no longer rents. Supply is unaffected. Rents are unaffected. I advocate for the removal of both tax concessions.
It reduces the incentive to invest in new supply. For the price of my house on a double sized block, I could have built 2 smaller ones and rented one. But f that. I’ve had investment property before. I’m spending it on something I can enjoy and not my problem if there’s not enough houses to go around. THATS how supply is reduced.
Sure you might do that, but I’d build 4 townhouses and sell them at cost. THATS how you improve supply.
>sell them at cost. That's just a terrible suggestion, you have to know that no one is ever going to risk their capital with no chance of profit to improve property supply
I am happy to do so and there would be many others. Profit motive is not a factor in everyone’s decisions.
>I am happy to do so and there would be many others. And this is proven by the plentiful housing available in the country currently? You are delusional if you think a significant number of people will spend the time and incur the risks involved in property development for zero profit, even the government doesn't build housing without a long term goal of making money.
I’m defiantly willing to contribute to ethical investing which has a focus on returns in benefits to society, not money. I’d say you’re the delusional one mate. You’re fixated on making money and that’s not healthy for you.
I see a lot of comments about landlords and no-one is crying,which fair enough and well lets face it the returns were only a little less than super so hardly poor returns anyway But a lot here seem to be missing one big point as the REIA president said "“And as a result what we are seeing right now is a massive shortage of rental supply in Australia,” Mr Groves said." there is always repurcussions, so landlords aren't making as much but the real losers out of this are tenants
“I've seen gluts not followed by shortages, but I've never seen a shortage not followed by a glut.” Taleb.
This would have huge impact on results: **\`The report excluded homes that had price growth that more than doubled in the space of six years (a 12 per cent or more compounding annual growth rate) as that typically indicates a renovation or other additional investment in the property.\`** They are basically excluding all the properties that have done well. This will pull down the average A LOT.
“The report excluded homes that had price growth that more than doubled in the space of six years (a 12 per cent or more compounding annual growth rate) as that typically indicates a renovation or other additional investment in the property.” Not in every case though, will skew results.