Its the same story in the luxury rental market in the CBD.

I have been looking into 2 bed apartments to purchase in the 550-600k range.

At the weekend I went to a rental open home to see what demand was like, it had been on the market 2 weeks at $720/week and I was told that they would take $680 per week. I was the only person at the open home.

It was a beautifully furnished (leather lounge suite, 40+ inch tv screen and the all rest) with views over Hyde Park, the Cathedral and over Sydney Harbour.

The properties I was looking at were inferior to this one, but have been rented at $720-800 to the current tenants. It seems that these rents that made them cashflow positive are no longer available as the execs are no longer getting top jobs in Sydney.

I just came across this article in Perth now.

http://www.news.com.au/perthnow/story/0,21598,24207506-5013244,00.html

Try calling the guy on the number at the bottom of the page.

In the current market conditions the most likely reason for interest rate rises is if the rest of the world decides it is too risky to lend to us at low interest rates. In that scenario expect house prices to collapse as house loans will be very hard to come by and only under  very tight conditions as credit is rationed.

I was thinking of a similar thought recently to redress the balance, but instead of a home owner CGT I was thinking they should remove the negative gearing benefits of investment properties.

I can see a big issue with CGT on your own home. Imagine if you buy a house for 300k, 20 years later it is worth 1 million. You want to shift to another suburb in the same city to move into another house also worth 1 million and get charged 40% of 350k = 140k CGT PLUS have to pay maybe another 50k in stamp duty on top of your real estate agents fees, maybe another 30k.

In total to switch houses of exactly the same value you lose 220k = 22% of the value!!

In the USA they have this interest deduction from your tax bill and i see it as a key contributor to the mortgage crisis. Everyone borrowed to the hilt against the value of their house to take advantage of these benefits. Would anyone ever even try to pay off their house and therefore lose their tax benefits? Of course not.

I should also mention that NZ interest rates dropped today for the first time in 5 years. Expected to lower the official cash rate from 8.25% to 6.75% in the next couple of years.

No stamp duty or capital gains for a start. almost 1.3 times the buying power, great huh.

I think it will be slow the next couple of years, hopefully drop a bit even.

All other things being equal, in 2 years interest rates should have dropped, and the equivalent of the first home buyers grant will have started (3k per person for those in kiwisaver plus they can access their super savings and it accumulates for couples. Over the first 2 years of the grants they increase to 5k per person).

Basically the scenario will be similar to 2000 when Australia introduced the first home buyers grant and we know what happened for the next few years following. Its just a pity that NZ house prices are already so high which will limit the gains due to affordability issues.

Cheers,
Matt

Where are you finding properties in this price range as I can't see any advertised with land under 200k let alone 165k.

Thanks,
Matt