Hello,
My prediction for the next 5 years: Interest rates will go up ,how much i dont know. Property prices will drop and sharemarket will bounce higher.
Wages and rent will increase to catch up with inflation (dont need to be a scientist to work that one out) and for property investors bargains will appear.
What are your predictions.
Dom
[biggrin]Yep, spot on. All ords reached record high today. Over next few years time for investors to re-group and expand for the next property boom about 2011.
Oh by the way, watch the gap between the rich and poor widen. ie- watch the middle class dissapear.
Originally posted by SALACIOUS:Hello,
: Interest rates will go up ,and sharemarket will bounce higher.
[biggrin]
I’m no expert but thought when rates rise the stock market will drop. Cost of capital is higher, and the rate of return compared to risk, is lower.
Got to factor the inflation rate in there somewhere, but don’t think that the market should jump, when rates jump.
Could be wrong, will depend on which way the Lemmings run.Spot on Salicious,
However, the bit about bargains in property appearing…..look around, they’re here now!!!
[juggle]Jo
I tend to agree. I just sold my latest purchase which was made 2 yrs ago. Will bank a nice profit and now i can look forward to buying in the next year or two.
As the US economy recovers interest rates will rise and property prices may fall.
This post has me very interested… are we sure rents are going to rise? They seem to have been fairly stagnant for some time.
If this is true it could change my investment strategy. Instead of searching for the elusive +ve geared IPs it may be more worthwhile in the long run to pick properties that are close but will have more rental gains.Ben
My predictions (for what their worth)
Problem today is that house prices are historically too high for first home owners. Present property prices are not supported by current incomes and yields are low. If market does not correct government may intervene. Market has not corrected as baby boomers have seen benefits of property investing and have invested for the future.
As the US economy picks up interest rates will rise. Those overcommitted will feel pressure of interest rate rises. Some developers may find it expensive holding properties and profit margins may deteriate as properties are completed. If property values are not rising investors and developers may no longer be prepared to keep pumping money into non productive investments.
Therefore I expect rents will rise as interest rates rise (increased costs of ownership) or remain flat if investors are prepared to hold investments at lower returns like present. I expect rents to remain stable and increase a bit as property values will fall as interest rates rise.
I also predict over the next 3-5 years some may get disillusioned as they will not realise what they expected from property investing as they may no longer be prepared to keep pumping money or their time into properties that have not met their goals – growth or positive cash flow. Some may also be over committed and need to sell quickly.
Hi Banderos,
The likelihood of rents rising is inevitable (in the long run) as they cannot stagnate forever, however I do not believe the increases will be overnight….that is, you’re not going to see a house renting for $200 one week, and then $300 the next!!! Whatever happens the increase in rents, and rates, and house prices, and and and ….. come about over time.
Hasty decisions can prove disasterous; either when buying and/or selling. Carefully thought out decisions are the order of the day IMO, especially when making decisions on what to do with your investments; for any wrong move could COST YOU MONEY!!!! Think things through before acting!!
Cheers,
Jo
Hi Dom
i go against the opinions here. i don’t see rates rising much at all in the near future (next few years).
Interest rates largely reflect both inflation and economic activity, the Reserve bank has made it clear that the reason why rates are rising has been the property boom, this is now under control.
There is a huge endevour by world Governments to keep the world in a low inflation range and while australia’s target of about 3% is being maintained there will be no inflationary pressure or need to lift interest rates. The economy which is travelling nicely is not in a boom patern and there is no need to slow it down by lifting rates. Lifting rates will raise the value of the aussie dollar once again something the govt doesn’t really want to do as our low dollar has helped us ride the major crisis in the economic world such as the asian meltdown a few years ago.
If the property market went into freefall which is something the govt doesn’t want and i believe would lower interest rates if this happened. Australian interest rates are already just about the highest in the developed world.Look at where 5 year fixed rates are , clearly the banks don’t expect interest rates to be too much higher in the near future
regards westan
probably a further rise of .25% but then who really knows what the future holds. The oil price has saved us and acted as a brake on the economy which is an example of a strange circumstance that happened to work in our favour. yields are low and as investors sit there not seeing their portfolios double in value every two years I am sure they will get bored and sell out, decreasing the supply of renatls and increaing yields and so on. If governments don’t play with the market too much it will find its own balance.
Predictions that ‘The End is Nigh’? – well I am sure one day someone will call it right.
Extensive list of ‘Off The Plan’ property available for sale in Perth.John – 0419 198 856
If unemployment in Australia rises to any great extent… interest rates will fall. That could be the next move in IR’s. Given that much of our recent economic growth and low inflation has been premised upon the housing boom… and that the boom is now slowing, and consumer confidence has chilled somewhat… unemployment could easily rise. Could happen!
kay henry
I agree with Westan that interest rates will not rise and may even decline as the govt prepares for an election.
On the matter of rents increasing. Practically the only thing that changes rents is supply and demand. At the moment one has to admit that there is an oversupply of almost everything. Certainly inner city units in almost all capitals. There have also been more houses built in the last 3 years than ever before in history. So I expect rents to actually decline a bit and then level out until the oversupply is eaten away. This should take a few years at the least as immigration is not large enough to affect the whole picture domestically. In other words I think that immigration is overstated by too many RE agents and others in the industry with investors just blindly accepting and believing all the immigration hogwash. “Total immigartion” is about 1/2% of total population!
I expect property prices to continue downward until equilibrium (where incomes match house prices).
HousesOnly,
The immigration stuff might be hogwash (seriously, thogh- 40,000-50,000 people move to sydney each year), but it is also skewed towards different locations. I guess the trick is in finding an area where there is large amounts of internal or external migration, and that is not oversupplied- is there such a garden of eden in the IP world?
kay henry
Kay
50000 people per year into Sydney is about 1% increase of the population (very roughly) and that is not very much at all. It certainly is not enough to move a market up or down as much as you would like it to.
There are such gardens of Eden but the yields are only 2-3%!
I think PI’s are expecting too much from IP’s. They want a 4-5% rental yield and a CG of 20%pa. It used to be acceptable that the overall return from property (rental yield + CG) could be 7-10%pa (similar to the long term trend in shares) but greed has prevailed in the existing market.Hi HousesOnly,
I understand exactly….I guess part of the problem for many PI’s (self included) is more often than not, their expectations do not rise and fall in line with the market trends….This is not a criticism of investors by any means, it is simply a pattern that we (as human beings) so often get caught up in.[blush2]
Cheers,
Jo
Thanks for your imput guys.
Good to see different opinions.
Westan can’t argue to much with your answer except that on the interest rate issue i locked some of my ips at 6.19% for 5 years 6 months ago and now it is at 7.19% so if that trend continues by the end of the year it will have risen buy 2% or more so someone has to pay?Yes the Greenspan announcement…….. even if as most commentators are saying the rise will be .25% (possibly .5%) . i think the significance and follow on for the Aus scene will cause much concern.
Anyway heading of to new zealand on monday for two weeks with the family for a cold holiday but will check out what all the fuss is about RE over their.
Bye Dom
[biggrin]Here are some interest rate forecasts from the US.
WASHINGTON (CBS.MW) — The Federal Reserve will move cautiously to raise interest rates despite signs that inflation has picked up, the American Bankers Association’s economic advisory committee predicted Wednesday.
The Fed will raise rates by 25 basis points at the Federal Open Market Committee meeting next week, the panel said. After that, the central bank will raise rates only gradually for the remainder of the year.
The target federal funds rate — now at a historically low 1 percent — will hit 2 percent by the end of 2004, the panel said.
Rates will continue to rise from there, according to the bankers’ forecast, hitting 3.35 percent by the end of 2005 and not reaching a neutral range above 4 percent until 2006.
The committee said the economy “can easily withstand” the expected rate hikes.
Economic growth should average 4.5 percent in the second half of the year and nearly 4 percent over the course of 2005, according to the committee.
Your comments appreciated!!!! Should this be another thread?
Yack
I don’t understand why americans make such a big deal about their IR’s- ours rise and rise, as do India’s and NZ’s IR’s, and it all passes without a moment’s glance. The Americans have been talking up this IR rise for so long- i wish they’d just hurry up and do it!
As for us, I doubt their measly IR rise will affect us. Our market conditions are still pretty stable.
kay henry
Originally posted by kay henry:Yack
The Americans have been talking up this IR rise for so long- i wish they’d just hurry up and do it!
As for us, I doubt their measly IR rise will affect us. Our market conditions are still pretty stable.
kay henry
We are currently up 4.+% on the US rates. O/S investors like that and buy our funds. Our $$ moves up, net result imports cheaper and inflation stays low. (simplification)
If they raise their rates 3% we follow or our $$$ drops and inflation starts.
Reserve can raise rates to :-a) Halt inflation
b) Support the $$, ….something they don’t normally do.
Oh yeah …don’t forget China, it has a inflation problem right now.
My guess anyway.
Hi everyone,
I thought i would bring an old post back to life,to see if it would interest anyone to add or change on their prediction for the next 5 years.Dom[biggrin]
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