WHY are rents so high?

[asy]

Hi Shell,

Which state is the house in (other than the state of confusion!)?

Contact the Residential Tenancies Tribunal in your state and ask them for the appropriate forms. Usually they have a 'landlord kit' which you can get for free (or close to).

Oh, and, AJ's really REALLY right about the landlord insurance. You can't stop someone squatting (although the instance of such is REALLY low), but get insurance against them wrecking the house, as damage by tenants is NOT usually covered in your household insurance (as they're invited persons).

The other thing is, you really want to do a TICA check (tenancy "black list") on any prospective tenant, which you can't do unless you're an agent, but, there are some nice agents out there (I used to be one!) who will do a TICA check for owners.

And lastly, you might consider having an agent do a "letting only", where they find the tenant for you (with your approval of the tenant) and they do all the forms (to make sure they're done properly and legally) and they will do the TICA and reference checks for you and lodge the bond. They usually take the first 2 weeks rent to do this, but it will mean that all the paperwork is set up right. The last thing you want is to have the tenant get in there, then find the paperwork isn't binding. If there really AREN'T any agents in the area, you can use any agent in the state to do the paperwork for you and the reference/TICA checks, even if you do the advertising and tenant vetting yourself.

Hope this helps.

asy.

[shell]

Thanks Asy,

That is very helpful.
I am in Victoria.

I will have a chat to the lady that I have my house listed for sale with- if I can ever get hold of her!
She might be able to help with the TICA.

Thanks for the help.
Shell

[Kohinoor]

Hi all,

Well, the cycle is moving on - and my smile is getting broader !!

Since August, we've seen 4% come off the RBA rate (lowest rate since the 1960's) Shame the Banks are still holding 0.75% more than what they were in Nov 2007 - though the Banks always have a margin ABOVE the RBA rate....

Until last election, their rates were typically 1.2% to 1.3% above RBA - today, they are 1.9% to 2% above !!! No wonder our Banks are "stable" Still, despite that gouging, my position is getting better and better.

With Feb's 1% rate cut, my costs are now down to only 65% of what I was paying 4 years back. And that is NOICE !!! My wage can handle those few $$ on its head. And if March 09 brings another cut, it all just gets better and better. My wage can have a break !!!

No need to sell anything now !!

Of course, that good news for me is also good news for everyone else with a mortgage (unless it's Fixed). So, enjoy

Buyer's costs are also getting better and better. So those wanting to "get in" have a pretty good shot even now - but it may even get better. Perhaps aim to buy within the next 12 to 18 months, and you'll be buying in the right part of the cycle.

Of course, with the "world" in a bit of turmoil, any "pick up" in the market could still be some time away.... We really are in a place that I've not seen before - but the "numbers" are looking good..... real good.

Koh

[Kohinoor]

With Feb's 1% rate cut, my costs are now down to only 65% of what I was paying 4 years back. And that is NOICE !!! My wage can handle those few $$ on its head. And if March 09 brings another cut, it all just gets better and better. My wage can have a break !!!

hehe - well, the dream was nice !!! Reality has turned out to be less pretty!! On one hand, my wage cut hasn't helped (and, for various reasons, that so-called 10% cut has effectively ended up as a 25% cut !!!) Ouch !!!!!

Then, in Apr 09, when RBA cut a further 0.25%, a couple of banks said "We'll drop 0.1%" and one said "Nup, we're not going to cut ours at all".

THEN, this week, most banks have suddenly LIFTED their Fixed Rates (for 5 years and up). If you recall, I had said that Fixed Rates lead Variable - both on the way up, and on the way down. For some months now, Variable has sat around the 5 year Fixed Rate - but now they've swapped places, and Fixed are higher. So, we are in that timezone when Fixing Rates is worth considering.

The only thing that still baffles me, is that there is STILL talk that Variable will drop further (some say as low as 2% by end of 2009). So, given that were true, are Fixed Rates likely to drop any more in that time?

As I am enjoying "Professional Rates" on my mortgages, my rates (Variable) are around 5.1% - so leaping to high 6's on Fixed doesn't suit me right now. Short term (1 year, 2 year) Fixed are still cheap - but then, I'm not planning on "locking up" a property right now on a rate that I am currently getting on Variable anyway. And that "locking up" on Fixed can hurt if we suddenly need to SELL something.



So, for now, for me, it is still a puzzle. Variable Rates ARE still dropping - but Banks are not looking like they want to pass any more on to us !!! Hmm, so why the hell aren't the Govt. looking at REMOVING that "Govt. Guarantee on Bank Deposits". I mean, the banks want it BOTH ways !! They will accept the lower Interbank exchange rate (based on the RBA figure) but they WON'T drop OUR costs of mortgages when THEIR costs drop.

For now, people, if you have a long-term mortgage, it seems now (or soon) is the time to start considering going Fixed. For sure, Fixed will be "leading Variable" back up again - so, like me, the pressure is not on to Fix (as Variable is so NOICE). But, the kicker is that Variable could face more heat into the future once we are out of the current financial crisis.... so a Fixed rate of <7% could look pretty sweet in 2 - 3 years time.

While the Govt keeps on borrowing (for stimulus packages, etc.) the pressure will be on for Inflation to rise down the track (and Interest Rates will surely follow).

It's up to each of us to "do what suits". Even at ~7% on long-term Fixed, that really IS a good rate. Crystal balls required perhaps

Koh

[Kohinoor]

Hi all,

Well, we are now 8 months on from my last post...... and I'm NONE the wiser....

On one hand, we are now seeing the RBA ticking rates back up from that SWEET low Interest rate..... Why? Maybe they KNOW I was enjoying the low rate - they had a good go at me in late 2007 and most of 2008 - cost me tens of thousands (while the rest of the world was cutting Interest rates.... I guess WE were just lucky eh?)

Now, GOKW, they are raising them again, even as small business here struggles, the USA has NOT increased rates, even NZ remains at 2% at its Reserve Bank cash rate level. But not here So, they increase the cash rate, leading to a STRONGER Aus $, making it HARDER for our exporters, and putting any/all recent home buyer borrowers in a quandary.

Over the last three months, we've had 3 x 0.25% increases, from 3% to 3.75% (and they are talking of more to come).

So, how hard does a 0.75% increase bite? Back to post #1 for the answer ..... That 0.75% (from a 3% base) is a 25% increase !! I hope everyone has had a 25% wage increase - yes? Of course, right? Pig's eye (or was it another part of a pig's anatomy???)

Did any new home buyers factor in a 25% increase in their costs? Are they going to manage OK? Lots of luck to them....


From my side, things HAD been going pretty good until Nov 2007 - and, when the RBA finally woke up in Sep 08 (when they finally did a backflip, and slashed rates to un-heard of levels). Problem for me, though, is they had already "sucked out those extra $$" during 2008 - and, with my wage CUT, and the Banks tightening their lending, any chance of a further Equity loan to stay afloat is rapidly diminishing. If it is hurting me, I suspect it is hurting HEAPS of others too....

What's the answer?

For mine, it is to bring back (quickly) a Fed Govt that has SOME idea of how business works.... The current incumbents seem to be spending BORROWED money like drunken sailors - and where will that leave us? With huge debt, and a high Interest bill on that debt. But, they have a plan - its called ETS - where the cost of an airborne gas will be TRADED on the world stage (subject to the vagaries of a Stock Market - yeah, that'll work Bring on the NEXT Global Financial Crisis....) HOW does one quantify the value of a gas in the air? They have enough trouble MEASURING it.....

In the end, the ETS is simply a TAX - no more, no less - SOMEONE has to pay for the largesse of this current lot !! Looks like you'n'me are the bunnies !!

Of course, anyone like me, who speaks against the ETS is a "climate change denier, a troglodyte, a flat-earther". Hmm, what DID happen to free speech? Were we asleep at the watch?

They talk of "denying Climate Change".... Ho-ly, that's NOT me - I've known the climate has been changing forever, and have observed a bunch of it over the last 60-some years. No, I don't deny climate change, but I DO deny the imposition of a TAX that is built on airy-fairy detail (I insult the word "detail" by even using it in this regard). Perhaps I should've said "the imposition of a tax that has no programmatical specificities"

For those who really want to "save the world", I understand - and I totally AGREE we can do things better. e.g. Let's only build more homes in areas where we DON'T chop down trees to make it happen, and let's spend some serious money on "greening Australia" (divert some of those northern rivers INTO the Murray-Darling to allow us to have a way to feed all of Asia if needed). Also, spend some $$ on finding alternative fuels - we have over 40% of the world's uranium - how's about building cars that will run on a uranium tablet for 40 years....

There are hundreds of ways that WOULD make sense to me - but this bloody ETS is NOT one of them - too many of our $$ pass out of OUR control !!

If you are STILL convinced that ETS is the way to go, do try to get answers re "How much CO2 will be reduced, and how, by spending $xx billion on them". To me, the LACK of answers to reasonable questions is a big neon sign that says "Don't GO there"..... Convince me how all this works - 'cos I don't "see it" as anything more than a money-making machine for others (invisible, international, others),

Koh

[mcpsych]

koh- you should try a rate rise combined with losing a job - real comfortable feeling.
raising rates makes more sense than what the US is doing- keeping rates low and printing huge volumes of notes to cover federal debt.
I recall a time when rates were at about %18 so we really cant complain unless we failed to plan on an obvious rate cycle.

[Kohinoor]

Hi mcp,

koh- you should try a rate rise combined with losing a job - real comfortable feeling.

You won't mind if I "Pass" on that, will you? Doesn't sound nice at all
I hope it didn't happen to YOU....

raising rates makes more sense than what the US is doing- keeping rates low and printing huge volumes of notes to cover federal debt. I recall a time when rates were at about %18 so we really cant complain unless we failed to plan on an obvious rate cycle.

Hey, I agree to THIS extent :- Raising rates NOW is not too much of a surprise (but, I wonder if they are doing "too much, too soon" - like, they haven't even seen the results of October's rise yet - but they continue to crank them. But, yes, they were ABNORMALLY low !!!

WHY? Because they REALISED their HUGE mistake from Nov 07, and early 08 - when they RAISED rates that should NEVER have happened. Now THAT one was one I didn't see !!!! And it helped them to put their hands well into MY pocket, and serve to cut the ground out from under me !! They tried to "make up" by cutting MADLY - to unheard of rates. Thus, I believe they overshot in early 08, and UNDERshot in late 08....

Hardly designed to build any kind of "faith" in the mob, is it?

The GFC started mid 2007, and the signs were ALREADY obvious when Kevin Rudd made his (in)famous "Inflation genie is out of the bottle" statement !!!) The RBA and the Banks jumped ALL over that statement, and carved a further 1.3% from ALL of us, even as the rest of the world were cutting their Rates. Now, what's 1.3% REALLY? (hehe, see Post #1!!)



And hey, I too recall 18% Rates and survived them. Back then though, the loan amount was like $70,000 - so 18% was $12600 a year (or ~$250 a week). Hard on wages at that time, for sure !! But wait on, TODAY a similar house would likely have a $280,000 loan - thus 4 times as much to find from a wage that HASN'T quadrupled over that time !!! As such, I think even a 9% rate today will have AS MUCH effect as an 18% rate did "back then".

Thanks for your thoughts, McP - I wish us ALL the best - I'm STILL not sure that "the world" is in such good financial shape - thus, SHOULD our Rates be going up much more right now? I hope the RBA takes a cold shower before Feb 2010's meeting.

Koh

[Kohinoor]

Originally Posted by Kohinoor

Thanks for your thoughts, McP - I wish us ALL the best - I'm STILL not sure that "the world" is in such good financial shape - thus, SHOULD our Rates be going up much more right now? I hope the RBA takes a cold shower before Feb 2010's meeting.

Hmm, maybe the opening of the desalination plant in Sydney meant there was "lots of cool water" available.... for their "cold shower"

Whatever, this time, the RBA gets a tick from me - they DIDN'T raise the rates !! Instead, they are "watching" what happened from the previous three rate rises (a sound idea for mine !!!) Perhaps the fact that most of the major's raised WAY above the last 0.25% had them thinking...

Or, the overall "world shakiness" is having them cool their ardour !!

Anyway, no move was a good move in my books.

Koh

[Kohinoor]

Sheesh, I should re-read my posts more often

Right now, I'm struggling - bigtime. I'll be OK though, so don't get too concerned. But what I'd missed was a REALLY big point (that can easily apply to MANY others) - here we go :-

I mentioned earlier that I had endured a 10% pay cut - it turned out to be way more than that, but, let's keep it simple !! I'm sure there will be many who have similarly faced a "10% pay cut" - certainly, it was quite widespread in my industry (IT).

Consider that for MANY years, we have been storing dollars in our properties from my "discretionary $$" (the amount left at the end of a month after paying living costs that can then go toward building/holding a property portfolio) !! And, with costs expanding, more and more of my wage was being "taken up" just to "hold on". And those properties were growing in value (which is nice) but any business needs "cashflow" to survive - so, growth in value isn't much help if that growth can't be transformed into Income !!


So, in any situation, what was that 10% really? Well, let's take a simple example (I won't use MY numbers, but maybe an "Average Wage" person). Let's say that average wage earner was earning $1200 a week - and receiving around $1000 a week in his hand - out of that, after paying a mortgage, rates, Insurance, food, school fees, clothing, travel, etc - let's say they were lucky enough to be able to save $150 a week !!!

Then, they face a 10% wage cut (because of the Global Financial Crisis ) What happens? Well, their initial wage drops to $1080 a week, and money "in the hand" drops to ~$900 a week (just a guess really... I don't have the Tax scales in front of me).

Hasn't his "discretionary cash" suddenly dropped from $150 a week, to $50 a week? (It cost him $850 a week to live before, and that hasn't changed). So, was that a 10% cut?

In the terms of "discretionary cash" that was a 66% cut !! And, it is THIS factor that had eluded me (again... still some learning to go yet, eh?). Little wonder that I was finding it "hard to keep going" !!

I think we can be lulled into thinking of our wage as being simply $xxx per week, and a 10% cut as being "just a 10% cut" - but, the reality is SO much more subtle when putting it under the microscope. So, if YOU are suddenly finding things "so much harder", maybe that gives you a clue or two.


As I said, though - I'll be OK - I'll sell one property relatively soon, and that will buy lots of time to consider my NEXT move (may even sell another - the "millstone" !!)

Meanwhile, I wonder how OTHERS are coping? In my case, a sale of a property doesn't overly disrupt me - but, what about those "just starting out?" We won't need to "move home" - but, what of those who find they HAVE to?

Koh

[mcpsych]

hey koh
yep lost job due to gfc- as a result used 2.5 months worth of discretionary cash ( savings and payout) while finding a new job
anyway
interest rates need to be at a point where they discourage people from useing discretionary cash to pay for their mortgage . It need to preferably go into super or other savings where it can be recirculated into the economy.
rates are way too low and as we know , people dont consider potential rate rises . if people calculated their ability to pay at ,say 7% interest, there would be far fewer defaults and greater saving.
no new loans to gen y eh? hehe
cheers

[Kohinoor]

Hi mcpsych,

Just re-visiting this old thread, and having a think on your words.... and, I'm struggling a bit to "get your point" here (almost sounds like "two bob each way") :-

interest rates need to be at a point where they discourage people from useing discretionary cash to pay for their mortgage

Are you saying there that Interest Rates should be lower, so that "discretionary cash" isn't included in paying off a mortgage? What is left EXCEPT Discretionary Cash to pay the mortgage if Interest Rates keep getting hiked!!

It need to preferably go into super or other savings where it can be recirculated into the economy.

Hmm, yeah, discretionary cash is a good vehicle for "investing" in whatever. Bit tough if there is none available though....

rates are way too low and as we know, people dont consider potential rate rises

With the rest of the world at 0.25% up to 2%, how do you determine that Australia is "way too low" with a Cash Rate of 4% ? Are we immune to the rest of the world? Is the RBA blind to the number of small businesses that are "doing it tough right now" because rates are too high? Do the RBA ONLY look at housing (as it appears) when determining the new rate (Mel and Syd house prices increased - shock, horror - while small business is "cap in hand", and struggling to keep going).

How does your call for a higher Interest Rate align with your earlier comment - interest rates need to be at a point where they discourage people from useing discretionary cash to pay for their mortgage....

Is it two bob each way, or, if not, what am I missing?

Could it come down to "Define discretionary cash" (maybe you define it differently from me )

Koh

PS And thanks hey - it is ALWAYS good to have a "sounding board" or "counterfoil" - it is hard to learn when no-one has an alternative view.

[thenewvee]

Actually Koh, there is even less discretionary cash, cause when you take that 10% cut, the cost of everything else still increases, so living expenses jump up as well leaving less discretionary cash.

I hope now that everything seems to be recovering from the GFC that your employer has increased your pay again!

Vee

[Kohinoor]

Hi Vee,

I hope now that everything seems to be recovering from the GFC that your employer has increased your pay again!

Aww, I wish !! But I AM at the point where "the next 6 months" is being considered (and I've said my piece re "What they get from me vs what they pay for it - so, here's hoping....")

Thanks for thinking of me

Koh

[thenewvee]

Yeah, it sucks. They are quick to make cuts, but oh so slow to reward/appreciate the value! You should have the bargaining power this time around!

Vee

[Kohinoor]

Hi all,

Well, I'm just a week away from Settlement date - at which time, the Sale of that property will put enough cash in my pocket to be able to survive for some months (keeping in mind that CGT will come around soon enough).

My ORIGINAL plan was to NEVER sell, thus CGT was never going to be an issue for me - but, we do what we need to do eh?


Back to the original thrust (title) of this thread :-
When I was going through the motions of selling, we found that the tenants weren't able to leave as arranged !! WHY?? Because the property manager couldn't find a vacant rental property to move them to !! We were lucky that it only cost us one week - it could've been worse. And, now it seems there is one less rental property available in that suburb, as the buyer is buying it to live in. Good luck to him - it's a lovely house in a damn good area.


What does THAT say about "supply/demand"? Thus, about future rents?



And WHY am I selling? Well, you will all KNOW that if you have read my earlier rantings - I never did WANT to - and now, knowing the above, even less do I want to.

It seems this rental shortage is common in major Aussie cities right now. Rents are going to climb more (they HAVE to, really, thanks to the RBA and that other mob).

Investors better placed than I seem to be making their moves (buying in), so rentals will become available again - but at a price !! Be prepared, if this is where you are at right now...

Good luck to all - I hope you are able to handle the current turmoil in a good way for you.

Koh

[Kohinoor]

Hi all,

Well, it is 6 months on, and where are we?
(Wow, is THAT a loaded question....)

We've seen a Federal Election, wherein MANY decided they didn't want EITHER of the usual suspects - so, they voted Green !! Which was an indirect vote for Labor anyway....

Nice name, but it seems (to me) to bely the underlying motives of that party.

To me, it sounds like Greens want "No burning off of forests" (thus leading to future disasters, as in Victoria not too long back).

No more dams - which would harvest water, and allow us to eat, and even FEED many others....

Death duties - to fill Govt coffers once again, allowing the indiscriminate spending that "some" flavours of Govt like to indulge in.

Open borders - just "let 'em all in - doesn't matter"

No fishing, or at best, "limited fishing".... Any fishermen out there?

Carbon Taxes - the bloody ETS once more - as Prof Bob Carter of JCU says "A non-solution to a non-problem". And Viscount Christopher Monckton even presented figures to Kevin Rudd that proved that the spending of Trillions of $$ might make 1/50th of a degree Celsius difference over TEN years. Do we really WANT this? If so, WHY?

And, with a hung Parliament, the current Labor Govt has sold their soul to the Greens, making Bob Brown the de facto Prime Minister, along with all of his hair-brained ideas (see above) !!

Yet, TWO Independents ended up calling the shots (pun intended re Rob Oakeshot). And they were voting for "stability"????



So, we are left with (again) a Labor Govt who need to pander to the idealogy of the Greens - GHU when July next year comes, and Greens call the shots in the Senate !!! If it seems hard now......... you work it out !

Recently, the RBA popped Interest Rates up once more - to 4.75% OK, sort of "middle of the road" - but then, the Banks have over-ridden that, and put their hands into our pockets for even more.

With the RBA, I struggle to understand WHY they seem fixated on this "Inflation within a 2% - 3% band" thing. Isn't that a bit like saying "This road can handle 120Kmh traffic - but we'll limit speeds to 80Kmh" just in case..... In case of WHAT????

Haven't they been LISTENING as small business "goes to the wall"? Sure, we might be booming in Resources, but small business is doing it tough. And now, within spitting distance of Christmas, they are hiking Rates again (with Banks sticking the boot in)....

How many small businesses had a crook year last year, and were "holding on" hoping for a miracle this year? Good luck to them... BTW, as small business is the LARGEST employer in this country, where does that leave YOU?

Well, my latest take is that property prices are settling and/or trending down. Fair enough - it is a cycle.... Meanwhile, small business is struggling - that includes Landlords - so don't be too surprised if you are requested to leave your accommodation. What will happen then?

Coincident with that, Banks are forcing more and more to the wall - what happens as they sell off properties? People who were buying their homes are now OOTA - and must rent !! Meanwhile, some Landlords are also feeling the heat, and could choose to sell - or have their properties re-possessed.

We end up with more people needing to rent, and less properties available for rent - guess what happens next? Supply and demand, right? It's not rocket science.

It's tight times, people - I just hope you all are above, or out of, the current melee - it's not pretty !! And, if you are not, at least you will now have a bit of understanding re WHY this is happening...

Of course, this is all MY opinion only, and I could be quite wrong, so do your own research too.

Koh

[winghama]

Thought this looked interesting, saw the length of your post Koh and thought "I am far too tired to read all that"!

Andrea

[Kohinoor]

Hi Andrea,

Thought this looked interesting, saw the length of your post Koh and thought "I am far too tired to read all that

Since this applies more to Aussies, I can understand .... but to Aussie people, I hope it rings a few bells .....
Koh

[mcpsych]

if you are a buyer to live in - it makes sense to plan for 20 years and to understand cycles and potential disaster
i beleive in this post i noted that i lost my job due to the GFC the day after we settled on a house purchase
luckily the govt ( yes labour Koh ) had struck a deal with the banks to cut people affected by the gfc a bit of a break and we were given 4 months of payment free- yes i know this was added to the tail and earned interest but it could have been foreclosed and we would have been bankrupt.
Anyway- my point and i do have one- is that we committed to a loan that had lower repayments than the rent we were paying, we do , when able, make payments larger than required and our payments can be covered ( painfully) by one income.
This means we have bought a house which requires repair in a less desirable location ( ipswich instead of brisbane so there is a bit of travel)
but it also means that we are not going to be killed by a small change in interest rates.
I have no sympathy for young couples who spend 4 - 5 hundred thousand on a house because they want to be close to the city when for the sake of 1/2 hour travel they could save 200 thousand dollars

by the way, if you have the ability , take yourself off the grid. power, water , sewage, food etc- wherever possible get self sufficient because these costs will rise

rent- again it is possible to rent reasonably - unless you insist on inner city living- no sympathy
We do live in a socialist state- you can only be homeless, unclothed and unfed by choice - if you so choose you are on your own. all you have to do is ask for help and it will be provided but once you ask you should not be so proud as to expect to have a choice
cheers
mark

[Kohinoor]

Hi Mark,

Well, this sounds like good news at least...

luckily the govt ( yes labour Koh ) had struck a deal with the banks to cut people affected by the gfc a bit of a break and we were given 4 months of payment free- yes i know this was added to the tail and earned interest but it could have been foreclosed and we would have been bankrupt.

With Labor having granted the "big Four" Govt backing up to $1m for EACH account, I would've HOPED there would some "pay back" - so, maybe they got THAT bit right.... Still, I don't hear the same re "small business" loans.

What that move did was to effectively kill competition by having people rush TO the big Four, and away from the smaller lenders (Building Societies, Credit Unions, etc).

And, with competition now minimal, the big Four are once more flexing their muscles. What do we get from the Govt? "Oh, that is shocking, terrible, we feel your pain!"

Hogwash !!!

Meanwhile, I don't see things getting much brighter while the Govt continues throwing money around without debate, consideration, listening to "both sides", etc.

Enjoy "stability" people - I hope it works for you, 'cos I'm seeing little of it.... Thanks so much, Rob and that other bloke - NOT !!



Mark, I am genuinely happy that it has worked out for you - and yeah, we started out in a similar way (buying a second-hand home on a battle-axe block, and I even took a second job to help - and it was an hour from work - worked for me, as it had appreciated from $17k to $45k in about 7 years. That was our start, and was always "the way to do it". As I have said elsewhere "First, get on the train - you can always change carriages".

Congrats for "getting on the train"....

Koh