I get a lot of investors from Australia asking me how I get such great returns on my rental properties.
I have my 11th rental property under contract and I get $400 to $500 cash flow on my rental properties that I buy from $80,000 to $130,000 with 80 percent loan to value mortgages in place.
It is pretty easy to answer them why I can get better returns than them; I am not in Australia! I had heard house prices in Australia were out of control, but I had no idea how out of control until I looked up the numbers.
What are House Prices like in Australia?
The median rent in Sydney is AU$500 (US$ 456.85) for houses and AU$470 (US$ 429.44) for units. Sydney is the highest priced area in Australia with a median house price of AU$633,200 (US$574,667). Next time you complain about houses not meeting the 2% rule, think about the poor investors in Australia! They can’t even hit the .02 percent rule!
Why are House Prices so High in Australia?
Australia has had rising house prices for years and many experts have predicted a housing crisis is right around the corner in Australia. However, it has not happened yet.
The government pumping a lot of money into first time home owner programs so that people can buy houses and the government is keeping interest rates extremely low. The biggest reason housing is so expensive is there is extremely high demand and little housing available (like much of the US right now).
One of the main causes of the crazy housing market in Australia is foreign investment. China has become a major player in the world economy and right now many wealthy Chinese have chosen Australia as the place to invest in real estate.
Why Don’t they Build more Houses in Australia?
This is pure speculation on my part, but I think builders are scared of a housing bubble. I remember 7 years ago in Colorado when our bubble burst.
There were half-finished subdivisions and houses all over with many builders going bankrupt. I think many builders are still scared to build in the US, because they are not sure how stable our recovery is. When builders won’t build and there are not enough houses for everyone, prices are going to increase.
What Will Happen to Australia’s Housing Market?
Your guess is as good as mine, I am not an expert on Australia housing, but it is an interesting situation. I imagine the prices cannot keep increasing and prices will come down.
However, I also know there are many Australian investors waiting for those prices to come down so they can buy some decently priced homes. Will those investors and other home buyers waiting for a decent priced home let prices drop like they did in the US? Doubtful, but we will see.
Any Aussies out there? What is your take on the market?
Be sure to leave your comments below!