Quote Originally Posted by Skol View Post
If house prices double every 10 years that's 10% a year. Do wages and salaries go up 10% a year-no. Eventually either the rents would be exorbitant and unaffordable or the yield will drop to 3% then 2.5% and so on. That's assuming 100% tenancy. When you can get 5%+ at the bank and housing yields are less, something will happen eventually. Who can afford $1000 (after tax) a week rent, because that's what you'd need to make the numbers stack up?

One of 2 things will happen-house prices will drop to their real value or there'll be years of stagnation.
Hi Skol. You have forgotten leverage. RE is the one place where historicly Joe Average is able to get some serious leverage on his investment and that changes the numbers quite a bit.