Another bubble measure

Negative gearing has a lot to answer for. I was sent an article with this quote buried deep in it.

“If you desire to identify potentially overpriced markets, compare
the monthly cost of owning a given home to the monthly cost of
renting that same home. After factoring in taxes, if owning costs
significantly more than renting, than you’ve got more potential
downside risk,” Tyson added.

The original US Realty Times article is here.

In Australian capital cities renting is normally cheaper than owning. There is a premium paid for potential capital gains. But reread the quote… “after factoring in taxes” and “significantly more”. So add the tax refund at 30% to 48.5% on the loss and ask if the cost gap between renting and owning has grown?

I’d guess it has, but I don’t know where to get the data. It’s another point to ponder when assessing a market.

Long term investors deal with this uncertainty through buying quality for the long term. Short term market fluctuations do not concern them. “Time in the market” not “timing the market” is their slogan.

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