Final bullet into a dropping property bull?

[Year of the Tiger]

I've been thinking that if the Housing Boom is about to go 'pop', and Investors start to sell off some of their rentals due to high mortgage interest rates, then surely there will be a bit of spare cash around looking for a home.

Does anyone have any thoughts on where investors might channel their funds and what effect it will have on other investment options, e.g sharemarket??

YOTT

[Jess9]

You assume that such houses sold are not 90+ financed, if these sell into falling prices (or are pushed by lenders) the investor won't keep very much at all (may even be sued by bank for any remaining debt)! Investors with high equity however, may simply choose to ride out the slump - as they can.

[Hommel]

I think Jess is correct. Most rentals bought in the last few years are probably at least 90% financed. If the market drops even a small amount people will owe more than they own after a sale.

[tricha]

Anyone buying rental properties [?][?][?]

I'd say if anything the last two interest rate rises will have been the final bullets.

Lets say 9% average new mortgage.

Borrow $100,000 = $180 a week.
$200,000 = $360 a week.
$300,000 = $540 a week

Plus costs rates,insurance and maintenance = $60 a week

So I borrowed $200,000 for a $250,000 house, I do not think I would get anything near $420 a week to cover costs. Ouch!

To top it off if Govt put in a capital gains tax or take away the tax loss rebate, Ouch!, Ouch!, Ouch!

Not that there will be a capital gain for a while anyway, more likely a 10% capital loss coming.[xx(]

[Sideshow Bob]

Interesting how when the talk this week about the removal off tax advantages for rental owners, it was all talk about rents going up, to cover this shortfall.

I would have thought that there would be little movement in rents, and effect would be on house prices. If rents could go up, sure the majority of landlords would have gone there already.

[peat]

yes that article in the Herald about that poor landlady with a 500k fixed mortgage to renew didnt seem to question how rents could go up if landlords become squeezed. Why would they not be charging what the market can bear already.

Everyone seems to think that price determines yield but its the other way round surely.

Rents will not go up to match the OCR, this is the risk phase of being a landlord starting to appear now.

[Sideshow Bob]

quote:Originally posted by peat



Everyone seems to think that price determines yield but its the other way round surely.

Just have took around scarfie-ville here in Dunners. Houses are sold on the basis of number of bedrooms x rent x 52 week lease. Little account of condition, land size etc - purely yield based.

[tricha]

Anyone buying rental properties or any property [?][?][?]

I've noticed price drops, urgent sales, etc appear in advertisements.

So I take it the property market is screwed for a year or two.

[nelehdine]

Iv'e bgt 6 rentals in the last eight weeks, 4 in Wanganui, 2 in Blenheim. Looking to add another 6 in the next 12 months. Will be patient and look to buy at 5-10% below asking price. TradeMe is great in that it tells you how long the property has been listed. Minimum rental yield I will accept is around 6% . Looking to hold for a minimum of 5 years to catch the next interest rate cycle, have fixed all mortgages for 2 years at 8.60% ... hopefully in two years time I will be looking at rates in the high 6's or low 7's ... rents will have increased 15-20% and the properties will be cashflow positive. I have plenty of other investments in shares, dairy farms, vineyards so these can just be sleepers for the time being.

PS: All properties rented within days of advertising in local papers , heaps of enquiries and rents some 20-25% higher than local agents rental appraisals.

[trackers]

quote:Originally posted by tricha

Anyone buying rental properties or any property [?][?][?]

I've noticed price drops, urgent sales, etc appear in advertisements.

So I take it the property market is screwed for a year or two.

Housing market powers on
5:00AM Monday July 09, 2007
By Martha McKenzie-Minifie


New housing figures show interest rates hikes have done little to slow the property boom, with the average sale price in the Auckland region rising by more than $20,000 in the past two months.

Quotable Value statistics released last night showed average property values rose 12.2 per cent nationally over the past year to $378,672.

http://www.nzherald.co.nz/section/8/...ectid=10450393