House prices to keep rising for years

[Mofra]

We had more "flexible" loans in Aus. Again, low doc loans with a no doc policies were available at RAMS right up until about the middle of 2007.

Low & No Doc loans are nothing like NINJA loans.
LVR restrictions apply (generally 70% for No doc & 80% for low doc) zero default policy except for the trigger happy telcos applies as well.

The majors also charge LMI above 65% LVR.

 

[CamKawa]

Low & No Doc loans are nothing like NINJA loans.
LVR restrictions apply (generally 70% for No doc & 80% for low doc) zero default policy except for the trigger happy telcos applies as well.

The majors also charge LMI above 65% LVR.

When I look at what we have in Aus, low and no doc and a combination of the two plus 100% loans, I'd use the word similar not "nothing like".

 

[Mofra]

When I look at what we have in Aus, low and no doc and a combination of the two plus 100% loans, I'd use the word similar not "nothing like".

I'd definately use the word nothing like. Comparing an 80% restricted Low Doc loan with verification of the company running at least 2 year, postcode & security restrictions & confirmation of a 20% saved equity where the borrower must cover costs if the security is sold and there is a shortfall in loan cover whilst the entire loan is LMI protected vs the US model where any idiot off the street can obtain a 100% loan with no Job, Income or Assets with impared credit and little zipcode restriction.

 

[Macquack]

I'd definately use the word nothing like. Comparing an 80% restricted Low Doc loan with verification of the company running at least 2 year, postcode & security restrictions & confirmation of a 20% saved equity where the borrower must cover costs if the security is sold and there is a shortfall in loan cover whilst the entire loan is LMI protected vs the US model where any idiot off the street can obtain a 100% loan with no Job, Income or Assets with impared credit and little zipcode restriction.

Just a suggestion Mofra, but can you put your point forward in plain english.
I am loosing it with the LMI's, LVR's, SRD's, Low Doc's, No Doc's RAMS and NINJA Turtles.

 

[Mofra]

Just a suggestion Mofra, but can you put your point forward in plain english.
I am loosing it with the LMI's, LVR's, SRD's, Low Doc's, No Doc's RAMS and NINJA Turtles.

Apologies, get used to talking in the lingo, forget it barely makes sense to 99% of the population.

Basically, in the US these NINJA loans (No Income, No Job, No Assets - think a bum walking in off the street) were given to all & sundry. Often this was the entire value of the house, 100% LVR (LVR = Loan to Valuation Ratio).

The mortgage brokers had no problems with this, because once they received their upfront commission, the trail was based on a very low interest rate, which would be reset a few years later.

Bascially, the US lenders wrote a truckload of loans for people who would never be able to see their commitment through. What made it worse was the fact that (generally) if you hand the security (the property which the borrower purchased, for example) back and the lender didn't recoup enough costs to repay the loan, they had no recourse to the borrower.


In Australia, the industry is not as mature & is more highly regulated so lending standards are much higher. The closest we have the the US subprime problems are either:
a. 100% loans which are only full doc (ie full evidence of income required) with no defaults on your credit history, or:
b. Low & No Doc loans, where evidence of income is not required (you sign a statement declaring what you think your current income is, or just that you will repay the loan if it is a No Doc)

With Low & No Doc loans, the amount you can actually borrow is limited to a percentage of what the security is worth; fopr example, a No Doc loan is generally capped at 70%, so for a $100k property you cannot borrow more than $70k. In other words, there is a buffer to cover the loan in the event of a property being re-possessed & sold.

In addition, in Australia if there is a deficit upon repossession & the loan is not fully cleared, the lender or the mortgage insurer (LMI) will keep pursuing the borrower for every last dollar.
LMI = Lenders Mortgage Insurance, a fee paid by the borrower (generally at higher LVRs) that protects the lender (not the borrower) in the event of default. Some securitised lenders like Suncorp or Macquarie (who provide the loans for Aussie, Virgin as well as their own branded products) will have all their loans protected by LMI, with teh client only paying for the LMI is the LVR is above 80%.

Any further questions (or if I've confused things again) don't hesitate to ask.

 

[robots]

hello,

another great day yesterday in melb, 64% clearance rate so things going well still,

mofra, would it be fair to say that with low-doc and no-doc that the LVR's where a bit higher "previously" and the ir rates where basically the same as a full doc from a big four?

previously=prior to credit crunch

now, low doc and no doc products have been hit with some big IR rises

thankyou

robots

 

[Temjin]

hello,

the ninja was for no income, no job or assets

we never had this stuff in aus,

Not true, no-doc loans have existed in Australia for a while, but not as widespread as the US.

its a great time to be be buying with what many have identified as a seasonal dip on the graph,

but we know many here arent interested in property at all except to dig the boots in

thankyou
robots

From a contrarian point of view, NOT BUYING is the thing to do right now. Go and ask everyone around on the street, you will still find 90+ people are a minimum have a neutral or bullish view on investment properties. I have observed the sentiment for quite a while now. Even though it got more negative since the credit crisis, a lot are still interested and are "blindly" believe that Australia is a UNIQUE place on this planet and that the China boom will go forever without a hipcup and that unemployment rate will remain low for the next 100 years.

 

[robots]

hello,

re-read mofra's posts, aus never had or had anything like ninja loans

give people a link to one please,

thats right temjin, I hope people stop buying off the plan, investors stay out of the prop market, it will be fantastic

you also right on aus being a unique place, the best country in the world, the land of opportunity

thankyou
robots

 

[wildkactus]

Robots,
Why have investors out of the prop market, as an investor I find this the best time to be looking at property, there are lots of property around that is at a good purchase price, some even well below market price.

The people that I would like to see out of the market are the sepculators that buy for the short term gain, (like to see prices double in just 1 or 2 years). plus most of these are the buy of the plan types.
This is where I see the Biggest problem in the current property market being the speculators not the investors, and the down side is that the people who want to own their own home suffer the most, they get caught in the middle of this crazy price drive and this is not right on them as most pay well above the market value for their home, then can not hold on to it when time get tough.

Most property investors I know like to hold for min 10 plus years, and see a good return over that period. I myself like to holder for ever if I can.

This is only one of the resons behind the current price rises there are many more as already mentioned above by others, but as I see it this is one of the biggest.

 

[robots]

hello,

in melb since around 03-04 we have not been building enough units/houses etc because many investors got out of buying because of numerous reasons,

some went to the existing 70's or 80's style units, where things are more transparent

one could point to the increases in re as a result of not building enough,

its a fine line because we need new stock for population issues but investors dont want to be ripped,

i see UK going thru same with demise of btL and now probably rental vacancy going like ours

thankyou

robots

 

[wildkactus]

Robots,
Your right one of the reasons investors moved from new homes / units was a lack of supply in the areas that they look in, this did not just happen in Melboure it happen all over.
For me I only like city areas 5-10 KMs form the CBD with all the goods, The old location thing, and for me it has to be a house or block of land that I can develope into two dewllings, as this is what I find rents the best in these areas smaller houses with all the goods.

Supply is becoming a big problem in this country we are just not building any where near the required dwellings to house everyone. there is a shortfall right across the country.
The master builders say this in their monthly newsletter month after month.

 

[Mofra]

mofra, would it be fair to say that with low-doc and no-doc that the LVR's where a bit higher "previously" and the ir rates where basically the same as a full doc from a big four?

The rates are higher for Low & No Docs than standard full doc loans, incentive for people to provide more financial evidence where they can.
LVRs are still where they have been for a number of years, even teh postcode restrictions have been fairly steady.

Only real changes have been LMI's reigning in high LVR loans which have are full doc in Australia anyway.

 

[pepperoni]

No surprise to those in the know ....

http://news.smh.com.au/business/house-prices-down-early-in-2008-survey-20080523-2hk7.html

At least 10% down is what Im seeing in mosman and the northern beaches of syd.

I expect these are the early effects of recent rate rises but that the full effects will be around 15%. Also expecting more like 20% is inflation and particularly oil continues to rise.

Of course none of this would mean anything if all you followed were the clearance rate.

"House prices to keep rising for years?" - M Y T H B U S T E D. :

 

[pepperoni]

So it's a short term investment then? Ok, stamp duty isn't much of a burden anyway

Ever heard of property development. Ever spend you days wondering why they sell asap and dont rent them out and negative gear like the mugs. SD is factored in when deciding to develop property.

Following a market down? Not every suburb in Australia is falling, and rents are rising. I'm happy with a short term fluctation a few suburbs further away whilst my rents rise.

Every suburb is falling there are just a few morons paying above market to get into the lucrative negative gear game. It will get worse. Rents spiked but have stalled or gone back. Watch this space.

We can agree rates are up though ... soon you will be able to lose $3 to save $1 in tax..

No, you are making approx 0.18% net regardless of the movement of the broader equities market, bananas or toy unicorns.

No the money is earmarked for property or shares both of which are down about 9% so Im about 17% on the average "follow that market downers". If I was going to buy 2mil of premium unleaded you would have a point.

 

[numbercruncher]

Seems RE is continuing its downward spiral .... Still in the denial phase I believe though ....

Auction rates plumb new lows

AUCTION results in every major city continued their disappointing run over the weekend.

Sydney sales were down $60 million from $172 million recorded on the same weekend last year, while both Adelaide and Brisbane auction sales were less than a third of last year's, The Australian reports.

In Sydney the clearance rate was 44 per cent, well down on last year's 66 per cent.

In Adelaide only $5 million in property sold at auction, down from $19.4 million for the same time last year. The clearance rate was only 39 per cent, down from 77 per cent.

In Brisbane $4 million in property sold, down from $13.5 million last year. The clearance rate was an abysmal 23 per cent, down from 48 per cent last year.

In Melbourne the clearance rate was 64 per cent across 547 auctions, compared to 87 per cent across 642 auctions for the same time last year.

http://www.news.com.au/business/money/story/0,25479,23758020-5013951,00.html

 

[Temjin]

Seems RE is continuing its downward spiral .... Still in the denial phase I believe though ....




http://www.news.com.au/business/money/story/0,25479,23758020-5013951,00.html

I forgot, what's the next stage after denial? Anger?

 

[numbercruncher]

I forgot, what's the next stage after denial? Anger?

Yes then Bargaining , Depression and finally Acceptance

 

[professor_frink]

Yes then Bargaining , Depression and finally Acceptance

according to the authority on everything, the simpsons, it's denial, anger, fear, bargaining and then acceptance

the deadly blowfish
Dr. Hibbert: Now, a little death anxiety is normal. You can expect to go through five stages. The first is denial.
Homer: No way! Because I'm not dying!
Dr. Hibbert: The second is anger.
Homer: Why you little!
Dr. Hibbert: After that comes fear.
Homer: What's after fear? What's after fear?
Dr. Hibbert: Bargaining.
Homer: Doc, you gotta get me out of this! I'll make it worth your while!
Dr. Hibbert: Finally, acceptance.
Homer: Well, we all gotta go sometime.
Dr. Hibbert: Mr. Simpson, your progress astounds me.

 

[pepperoni]

Silly warren has money in cash earning only .00000000000003 of a percent while the markets fails. What a fool ... he should come here to learn from the rich and successfull



Buffett says US is already in recession
Email Print Normal font Large font May 26, 2008 - 7:08AM

Advertisement
Warren Buffett, whose business and investment acumen has made him one of the world's wealthiest men, was quoted in an interview published on Sunday as saying the US economy is already in a recession.

Asked by Germany's Der Spiegel weekly whether he thinks the US could still avoid a recession, he said that as far as the average person is concerned, it is already here.

"I believe that we are already in a recession," Buffett was quoted by Spiegel as saying.

"Perhaps not in the sense as defined by economists. ... But people are already feeling the effects of a recession."

"It will be deeper and longer than what many think," he added.

The 77-year-old chairman and chief executive of Berkshire Hathaway Inc was in Europe last week for what he called a "deferred shopping tour", looking for possible acquisitions.

Omaha-based Berkshire has about $US35 billion ($A36.62 billion) in cash and is looking to invest. :

 

[gfresh]

He obviously doesn't believe in any of our "miracle stories" with China and the rest... Wonder if he even knows where Australia is :