Yes - but my point here is that the 75% of the market on any weekend would be unaffected by whatever LVR tightening may or may not be occurring.
Ok good. I would dispute though that the main source of existing equity is from the credit boom pushing up prices. There is such a thing as actually paying off your mortgage you know....I have paid off 2 completely (not through sale but by paying off with income until living rent/mortgage free), and won't have my current one around for much longer either (very very low LVR). So regardless of price growth or not, for whatever reason, most existing owners will always have low LVRs as they upgrade up the property ladder.
OK well that's good - here is the only point of real disagreement then surrounding the facts. You may be right, however, if the average deposit is in fact less than $70k, then the actual average purchase price for FHBs must also be lower than $350k, as we know for a fact that the average first mortgage is $280k - agree?
Therefore, whatever changes may or may not occur re required LVR, will only really have an impact in the sub $300k range, where it doesn't take that much extra saved to make up the difference anyway, therefore I still argue that LVR tightening down to a 90% level will have little impact on the market over-all, if any.
That's not the normally accepted definition of sub-prime in the US. It's all about borrowers with poor credit history and a whole range of other factors, not just the LVR! From wikipedia (http://en.wikipedia.org/wiki/Subprime_lending)
This is again where we disagree; I think the grant has provided an incentive, in addition to the prime drivers of low interest rates and flat/lower prices, for large numbers of people who have felt priced out for many years to feel the time is right to come into the market. FHB participation was below trend for 5+ years so that is the basis for my view, backed up by loads of anecdotal evidence amongst extended family, friends and colleagues who fit into this category. So really it's all about pent up demand being brought forward. When the grant is removed the market will be fine as all the activity at the lower end of the market will flow through; this takes 1-2 years to work through the market fully - wait and see!
The economic doom and gloom plus rising unemployment will stop any great boom from developing, but the fundamental factors that have been at play for the past 12-18 months will continue to shield the bulk of the AU market from any precipitous wholesale falls - certainly the major cities such as Sydney and Melbourne.
As you say you can believe what you want to believe as well! Time will tell...
Cheers,
Beej
