Do markets with lowest rental yields (e.g. Syd, Melb) have the most room to fall?

[conniverouss]

@alchemist_jay Great example. In that format it is quite clear there are only a handful of Nasdaq 100 companies down >50% YTD.

 

[hedeliveredme]

@believer117 Most of the companies that are down that much - and there aren’t that many of them - are only down 50-70% from all time highs a month or two ago. It’s not from where they were 12 months ago.

I’m sure that there are outliers, but can’t be that many.

 

[david150]

@believer117 In theory yes, but in reality I think most investors stopped buying in Sydney and Melbourne before the boom of the last 18 months and probably have a reasonable enough cashflow position to absorb a few hikes.

The exception is the outer suburb new developments where people were still investing in house and land packages at sub 3% yields over 2020-2021. There will be some pain ahead in those areas and limited capital growth prospects for the next 5 years.

 

[resjudicata]

@believer117 generally high yield house market indicates low demand of buyers, so not necceassarily

 

[enlightenmyway]

@resjudicata In Canberra it means there isn't enough properties to rent or buy

 

[ibelive30]

@believer117 an investment that makes nothing is not much fun is it?

 

[horation]

@ibelive30

• Some people buy and are happy with negative gearing (more expenses than income each year) if the eventual capital growth makes up for it.
• Some people buy for income in the meantime and eventual capital growth.
• Some people are happy to buy and even if it loses a little capital, they’re happy because the alternative was that their money was possibly going to lose a lot more if it was kept where it was.

People don’t buy for the same reason.

 

[ibelive30]

@horation negative gearing hasn't really worked in the past few years but might again if prices go down, if the income is not covering the loan it's no income for you, a losing investment is not an investment really, it's a bit of a waste of time

 

[lilreb85]

@believer117 In short yes, they should. But I think the logic in getting to your answer is a bit spotty.

Remember yield is a function of rental return/property price. So it's not because yield is low that the properties in Syd/Melb have the most room to fall. Yield is low because of the high prices and it is because of the high prices that they will fall.

The comparison of shares to property doesn't really work as house prices are influenced by housing consumers and investors, versus just investors for shares. Also, not all companies generate returns or even a profit, so it is only logical that companies which generate real returns and can be valued on a tangible metric such as their future cash flows, will fare better in an inflationary environment.

 

[believer117]

@lilreb85 That's fair. Do you have an assessment of Sydney north shore property? Super low yields, I am tempted to sell, cash out my equity, and buy some stocks at a good discount.