House prices to keep falling for years

[explod]

I just walked past my local ANZ branch, they have lowered the 6 month term deposit rate from 8.15% to 7.80% . The banks are pretty good at picking which way rates are going to move, they wouldn't be lowering rates if they thought they were going up. It would suit me if they kept going up but I don't think they are going to.

Maybe you should have a good think?

I THUNK I was referring the a "real drop" in rates. Fluctuations up and down continue even when we are going up or down. The overall issue is that money supply is becoming a problem because even fellow banks no longer trust each other as a result of sub-prime and concern now over prime.

It is the overall money supply that will hit the housing bottom line as it plays out further IMHO

 

[explod]

Further to my last it is revealed that the ANZ loan is fixed for 12 months. A bit like Harvey Norman, buy now and pay nothing for 12 months and you find the final cost is almost double that of cash.

Must be hard to get people to borrow so suck em in with a honeymoon rate.

Who needs to think.

 

[robots]

Further to my last it is revealed that the ANZ loan is fixed for 12 months. A bit like Harvey Norman, buy now and pay nothing for 12 months and you find the final cost is almost double that of cash.

Must be hard to get people to borrow so suck em in with a honeymoon rate.

Who needs to think.

hello,

good onya explod,

and the 5yr or 7yr fixed rate terms?

thankyou
robots

 

[explod]

hello,

good onya explod,

and the 5yr or 7yr fixed rate terms?

thankyou
robots

On you too Robots.

The 5 and 7year are some of the ones running out now in the US and causing all the sub prime problems. Some coming due for readjustment soon here too.

 

[motion]

My advice to you is that be very aware of your recency bias and REAL about the history of economic first. Consider the advises that those "everyone" have been giving you. Try to look at it from an unbiased way. If you find a point that you do not agree, ask yourself why you believe so? Also try to consider where did you get your information from? From the media? From the real estate agents who claim house prices never fall? Or from "similar age" friends who has done this 2-3 years ago and is now better off? (in which you would automatically assume that history will repeat itself forever)

My observation has been that alot of young people, especially those who are very well educated, are very prone to being too confident of themselves and ignore information and history that they have not personally experienced before.

To give you my perspective, and a surprise as well, I am ALSO a Master educated 26 years old with a combined income over $100k with my girlfriend (not yet my Fiancée yet hahah). We decided to put off buying house until the whole global credit crisis mess has sort out itself and when the economy has go through it's recession (and hopefully not), a depression.

Regardless, if you don't really care about the investment aspect of owning your house and that your decision to purchase it is an emotion one where you would like your own home and avoid renting, and that you are VERY CONFIDENT of your ability (and your Fiancée) that you will not be out of jobs over the next several years, then go ahead and purchase it. However, do not expect your house prices do go up as much as what has been observed over the last 7-10 years. This once in a life time global credit boom will not happen for a LONG LONG time again.

Very wise words.....

 

[theasxgorilla]

Of course, I said to be wary of information from the media, and this is no exception. However, I would not look at the comments made by the journalists, rather, I would look at the data presented and find out if what was said is true.

Wise advice Temjin.

 

[WaySolid]

I just walked past my local ANZ branch, they have lowered the 6 month term deposit rate from 8.15% to 7.80% . The banks are pretty good at picking which way rates are going to move, they wouldn't be lowering rates if they thought they were going up. It would suit me if they kept going up but I don't think they are going to.

Maybe you should have a good think?

As far as I'm aware no prediction is implied by the bank rates, they simply have a cost of money and add a margin on top of that. So you can't read anything into these movements other than a reaction to what has already happened. I would be interested in why they are any better at predicting rates than the average economist.

 

[Tysonboss1]

As far as I'm aware no prediction is implied by the bank rates, they simply have a cost of money and add a margin on top of that. So you can't read anything into these movements other than a reaction to what has already happened. I would be interested in why they are any better at predicting rates than the average economist.

generally if the banks are offering fixed rates at lower than the current varible rate then that is a sign that varible rates may be on the way down,... if fixed rates are higher than varible and increase as the term gets longer then that is a sign the banks believe rates will be trending up.

the banks can't predit future interest rate movements but they will form an opinion and set there interest rate stratergy accordingly

 

[motion]

"Rates cut could come too late"

http://www.news.com.au/business/money/story/0,25479,24147797-14327,00.html

This is the first time I have seen news.com.au say something that we have all been saying for a while...

A good read and while people are still waiting on the site line to see what happens it's food for thought...

 

[tech/a]

In the early 80'S I was at the age of many here.
Banks threw money at you much as they did in the late 90s early 2000s

I took it and held 7 figures of commercail property.
Interest went to 18%
Tennents went broke.
Property was vacant and the banks came knocking.
Missed bankruptcy by the skin of my teeth.

Market remained flat till the 1990's

Off it went again.
I went again but with residential.
Was in the position to go harder.
This time took some profit and geared
back from 80% to 38%

So it will go flat again.
It will all happen again.
If you cant gear below 50%
Then wait for the opportunity which will come again in 12-18 yrs.---if your young enough.

Just like trading there are times when you place all your chips and others when you best remove some or even ALL.

Things to look for in 12-18 yrs.
(1) Interest rates lower than seen for 10 yrs or so.In the late 90s this was the case--30 yr lows.
(2) Cheaper to buy an established house than buy new and fit out.(Landscape,Carpet,Curtain etc)
(3) Positive gearing is not only possible but almost impossible NOT TO.
This was the case in the late 90's
(4) get in early it will last 7 yrs.The earlier your on to it the more youll be able to gear for the first 4 yrs---use the last 3 to gear down.
(5) Commercial and Industrial will always follow 3-4 yrs later,so you get a second bite.
(6) (5) Lasts only 4-7yrs so be very quick
(7) Gear down but save the rest---the worm turns.

 

[WaySolid]

generally if the banks are offering fixed rates at lower than the current varible rate then that is a sign that varible rates may be on the way down,... if fixed rates are higher than varible and increase as the term gets longer then that is a sign the banks believe rates will be trending up.

the banks can't predit future interest rate movements but they will form an opinion and set there interest rate stratergy accordingly

Tyson I'm saying I don't think the banks are making any predictions. Perhaps we both need to find some source material, I haven't researched this past a friend who is an economist and did some research on the subject himself; so I could be partially or completely wrong.

If fixed rates are lower than the SVR then it might well be a sign that rates are going down, just that I don't think the banks are in the prediction game in this instance. I believe they simply add the margin onto their cost of funding to determine rates, both fixed and SVR.

 

[WaySolid]

Tech, what's your view on Sydney in terms of resi property?

They have had a slow down in some areas for several years now, and I'm seeing some deals at the moment that must be very close to +ve cashflow even at present rates, some very 'cheap' prices in W. Sydney in particular.

I guess if you look for the next boom to be a copy of the 00-03 boom then you need a period of extended stagnation and disinterest lasting several years to a decade or so, though who says it has to be a copy? Each cycle is just like the last cyle, except different imo. Was the boom (described as a mini boom at the time) in Brisbane in 07 an echo boom? fakeout boom? Or the real thing?

Questions...... I have plenty more than I have answers anyway..

Interesting times to be guessing about the market, that's all it mostly is I think.. Educated guesses. My guess is for a period of extended stagnation in Brisbane to allow rents to push up in relation to property values, though I don't think they need much time to do that at the rate they are presently moving.

 

[WaySolid]

Credit crunch... where?

Just some small feedback from my own experience about credit at the moment. I'm moving some loans from one of the small fish that got squashed in the crunch to a major and am surprised how liberal credit appears to still be, throw in robust valuations and... it's still peachy, no guarantees how long that will ever last of course.

The majors appear to be loving all this new business, might well be a chance for their spreads to widen a bit on loans now the smaller players are dropping off, makes you take a closer look a the bank shares anyhow.

So LoDoc and credit are still viable, at least for me at the moment. No prediction about where that game is going.. but thought it might be interesting feedback for some, surprised me a little bit.

 

[explod]

Credit crunch... where?

Just some small feedback from my own experience about credit at the moment. I'm moving some loans from one of the small fish that got squashed in the crunch to a major and am surprised how liberal credit appears to still be, throw in robust valuations and... it's still peachy, no guarantees how long that will ever last of course.

The majors appear to be loving all this new business, might well be a chance for their spreads to widen a bit on loans now the smaller players are dropping off, makes you take a closer look a the bank shares anyhow.

So LoDoc and credit are still viable, at least for me at the moment. No prediction about where that game is going.. but thought it might be interesting feedback for some, surprised me a little bit.

Nothing surprises. Looking at Domain dot.com awhile back (3 weeks) and a mob are still offerring 105% finance to approved customers.

And that John Bloke from /Aussie Home Loans has stepped down from CEO to concentrate on pulling small loan brokers together, probably those ones GE are spitting out of Wizard before they sell it off to the banks. Remember the old catch cry "AUSSIE WILL SAVE YA"

 

[WaySolid]

Nothing surprises. Looking at Domain dot.com awhile back (3 weeks) and a mob are still offerring 105% finance to approved customers.

And that John Bloke from /Aussie Home Loans has stepped down from CEO to concentrate on pulling small loan brokers together, probably those ones GE are spitting out of Wizard before they sell it off to the banks. Remember the old catch cry "AUSSIE WILL SAVE YA"

Explod my post was probably misleading. Credit is getting tighter, and more expensive, just that it seems to me that it's happening in a very orderly fashion at least for the moment. You might still be able to get 105% loans, but I would guess you would be looking at one ugly rate if that was even possible, it's certainly no longer the environment it was even a year ago.

Nodocs appear to be under threat, banks will no doubt pass on less than any rate cut the RBA make allowing their margins to increase, credit is much tighter and any mortgage broker will give you some examples of what is happening.

I'm pretty impressed by how well the markets discount, and by how well some of the majors here are handling themselves now, just that I'm interested to see how things play themselves out. At some point all of the bad news and them some will be priced in and that will be a buy point, wonder where that will be?

 

[Tysonboss1]

If fixed rates are lower than the SVR then it might well be a sign that rates are going down, just that I don't think the banks are in the prediction game in this instance. I believe they simply add the margin onto their cost of funding to determine rates, both fixed and SVR.

When it comes to giving out loans at fixed rates for long period of times they have to form an opinion and make a best guess and add the risk of their interest payments changing to the rate.

For instance if the bank is going to write you a 5 year fixed interest loan and they just add a standard margin of 2 % then over the 5 years the interest rate that the bank borrows moves up by 3% then the bank is losing money.

If they were just adding a standard margin then why are the rates on fixed intrest loans different depending on the term you select. a year ago the longer the term you choose the more expensive the interest rate but that is starting to change where the longer term periods are becoming cheaper than the shorter term periods.

Your last sentence says it all,..." they add a margin to their cost of funding", If they are signing up fixed interest loans for long periods they have to make an assessment of the chances that there costs of funding will rise during that period ( a prediction or forecast) and include this risk into the interest rate.

 

[theasxgorilla]

For instance if the bank is going to write you a 5 year fixed interest loan and they just add a standard margin of 2 % then over the 5 years the interest rate that the bank borrows moves up by 3% then the bank is losing money.

Really? I thought they bought a bond or some such with 5 year maturity and added a margin to it, so they're not exposed at all.

 

[numbercruncher]

Auckland's largest real estate agency group, Barfoot and Thompson, has reported that its average sale price fell 5.3 per cent to NZ$497,479 in July from NZ$525,316 in June as sellers start to to adjust their price expectations.

http://http://www.nzherald.co.nz/section/3/story.cfm?c_id=3&objectid=10525627


5% in a Month for the Bros !

We are immune though I remember reading !

How are we all doing ?, Ive been awol for a while !

Good to see loads of rational advice and tales of personal experience entering the thread, love it .....

 

[Mofra]

Really? I thought they bought a bond or some such with 5 year maturity and added a margin to it, so they're not exposed at all.

The CDOs written on fixed rate loans can be written for a few years out, however margins aren't fixed (for example, margins are squezed when delinquincy rates are higher). Most loans are written on balance sheet at the moment (can't securitise much in the current market, regardless of asset/tenant quality) so losses on fixe rate loans is not just realistic, it's part of bank SOP. Fixed rates are seen as "loss leaders" to try and leverage profitable business off (insurance, short term consumer finance etc.)

 

[wayneL]

In the early 80'S I was at the age of many here.
Banks threw money at you much as they did in the late 90s early 2000s

I took it and held 7 figures of commercail property.
Interest went to 18%
Tennents went broke.
Property was vacant and the banks came knocking.
Missed bankruptcy by the skin of my teeth.

Market remained flat till the 1990's

Off it went again.
I went again but with residential.
Was in the position to go harder.
This time took some profit and geared
back from 80% to 38%

So it will go flat again.
It will all happen again.
If you cant gear below 50%
Then wait for the opportunity which will come again in 12-18 yrs.---if your young enough.

Just like trading there are times when you place all your chips and others when you best remove some or even ALL.

Things to look for in 12-18 yrs.
(1) Interest rates lower than seen for 10 yrs or so.In the late 90s this was the case--30 yr lows.
(2) Cheaper to buy an established house than buy new and fit out.(Landscape,Carpet,Curtain etc)
(3) Positive gearing is not only possible but almost impossible NOT TO.
This was the case in the late 90's
(4) get in early it will last 7 yrs.The earlier your on to it the more youll be able to gear for the first 4 yrs---use the last 3 to gear down.
(5) Commercial and Industrial will always follow 3-4 yrs later,so you get a second bite.
(6) (5) Lasts only 4-7yrs so be very quick
(7) Gear down but save the rest---the worm turns.

The best post for a long time on any RE thread.