The future of Australian property prices

[againsthegrain]

Banks rising interest rates makes no effect on many, as they have no debt.

Im happy collecting Interest on my savings each month, a healthy 6% maybye soon 6.25%? pays 1/4 of my rent so far

There is going to be alot of wingers at work tomorrow, oh no my 500k debt on my 45k income went up again

amazing stuff, going to have a dirty long black with no sugar or milk on my balcony

Supreme Komendant

 

[medicowallet]

Im happy collecting Interest on my savings each month, a healthy 6% maybye soon 6.25%? pays 1/4 of my rent so far

There is going to be alot of wingers at work tomorrow, oh no my 500k debt on my 45k income went up again

amazing stuff, going to have a dirty long black with no sugar or milk on my balcony

Supreme Komendant

only 6%, perhaps you should shop around!!

However there are believers that when interest rates go up, so do house prices... so if you believe their logic, then you can expect rent to go up too.

 

[explod]

Im happy collecting Interest on my savings each month, a healthy 6% maybye soon 6.25%? pays 1/4 of my rent so far

There is going to be alot of wingers at work tomorrow, oh no my 500k debt on my 45k income went up again

amazing stuff, going to have a dirty long black with no sugar or milk on my balcony

Supreme Komendant

Yeh great post there againstthegrain. Borrow borrow borrow was the call. Oh well "you can take a donkey to water..."

Anyway, silver up 25% the last month. Robots is on to it, told him to buy round 50 cent 1966 coins a week and a half ago so up 5% plus already.

Happy cup day, lovely latte in Main Street, Mornington this morning. Lot of nice properties around the 2 to 5 mill selling along the beaulevard here, good mate picking up heathy fees, 2.5% so all smiles. Some pretty amazing people starting to sell. All party and bubbles.

General, 5 star plod (self proclaimed)

 

[Uncle Festivus]

only 6%, perhaps you should shop around!!

So who gives the best 'at call' rate, excluding the 'dodgy' ones? Getting 6.2% at call with St George, hopefully 6.45 soon? (negotiated rate ie ring them up and haggle!)

 

[prawn_86]

So who gives the best 'at call' rate, excluding the 'dodgy' ones? Getting 6.2% at call with St George, hopefully 6.45 soon? (negotiated rate ie ring them up and haggle!)

Virgin money has a 4 month intro rate at 7%

 

[againsthegrain]

The only reason im still on 6% with nab isaver is that there is no lock in and unlimited withdraws/deposits so if I need to access my money today for instance if I want to buy shares I can and I won't be penalized.

Interesting about the Virgin 7% rate, might need to investigate that, thanx for the tip prawn

At 6% it is $60 from every 10k, so if my rent goes up by the time my 1 year contract is up (which i expect it to regardless of rates going up or down) I will have another 15 - 20k if not more saved up, so another $120 extra interest per month. I would be expecting my rent to go up $20 - 50 max for another yearly lease so I still see myself ahead.

p.s regardless of interest rates up or down rents always go up, never down

 

[Julia]

Instead they incentivise naive people into a bubble market and then get angry when they start to look like fools when things start to unravel.

Exactly. And the government then seeks to divert attention from this very fact by demonising the banks.

Banks rising interest rates makes no effect on many, as they have no debt.

Quite so. And Mike Smith said last week that there are in fact more Australians who have bank deposits than those who have variable mortgages.
CBA have announced their basic deposit rate will rise by .25 %.

lol So Australia is now a totally isolated country and its economy is completely independent of China and USA, or the rest of the world?

Trying to censor what you don't want to hear may not be the best way to tackle the debate.

Ably encouraged by the government, of course. Let's blame the banks.

Now onto interest rate, I am geninuely surprised at the rise, and also at how fast CBA announced to go even further. I certainly know the global credit cost has increased due to the renew worries with banks/government insolvencies over in Europe, but didn't expect it to go that fast.

I can't help wondering if this extraordinary move by CBA includes an element of their way of saying to Swan and Hockey "you can't touch us, and you know you can't", i.e. a direct calling of their bluff on recent bank bashing statements.

They've been warning about the need to raise lending rates because of their increased funding costs for some time. I expect, in order to maintain their profits, they do need to do this, but wouldn't be surprised if there was just a thought of "sticking it to the government" amongst it.

Wayne Swan's response was notably that there really wasn't much government could do about it.

Joe Hockey, meantime, speciously alleged CBA's move was entirely due to the government's policies.
Yeah, right. You, of course, Joe, would be able to do things quite differently?

The only reason im still on 6% with nab isaver is that there is no lock in and unlimited withdraws/deposits so if I need to access my money today for instance if I want to buy shares I can and I won't be penalized.

I think you'll find most of the online rates operate under the same conditions.

 

[GumbyLearner]

Exactly. And the government then seeks to divert attention from this very fact by demonising the banks.


Quite so. And Mike Smith said last week that there are in fact more Australians who have bank deposits than those who have variable mortgages.
CBA have announced their basic deposit rate will rise by .25 %.


Ably encouraged by the government, of course. Let's blame the banks.


I can't help wondering if this extraordinary move by CBA includes an element of their way of saying to Swan and Hockey "you can't touch us, and you know you can't", i.e. a direct calling of their bluff on recent bank bashing statements.

They've been warning about the need to raise lending rates because of their increased funding costs for some time. I expect, in order to maintain their profits, they do need to do this, but wouldn't be surprised if there was just a thought of "sticking it to the government" amongst it.

Wayne Swan's response was notably that there really wasn't much government could do about it.

Joe Hockey, meantime, speciously alleged CBA's move was entirely due to the government's policies.
Yeah, right. You, of course, Joe, would be able to do things quite differently?


I think you'll find most of the online rates operate under the same conditions.

I agree with your post for the most part Julia. But I think competition is still an important issue in Australia. The smaller banks haven't had it anywhere near as easy during the GFC as their larger rivals. Just my 2 cents.


On access to wholesale funding
http://www.theage.com.au/business/b...by-cost-of-wholesale-funds-20091026-hgtf.html

On the banking guarantee
http://www.theage.com.au/business/b...-in-bank-funding-guarantee-20090406-9uw4.html

Bendigo can't blame all its woes on the higher costs it faces for funding — more of this later — but there is some legitimacy in its claim that it continues to be left out of a process aimed at keeping all banks — big and small — well funded.

Since its introduction, smaller banks have barely tapped the funding guarantee, given they are still paying a significantly high cost of funds relative to the major banks. Bendigo, with its BBB-credit rating, must pay more than twice the amount to rent the Government's AAA balance sheet compared with a major such as Commonwealth Bank that has a AA rating. At the same time, Bendigo must remain competitive on deposits and loans. The result is that smaller banks' interest margins are crunched.

 

[Mofra]

At 6% it is $60 from every 10k, so if my rent goes up by the time my 1 year contract is up (which i expect it to regardless of rates going up or down) I will have another 15 - 20k if not more saved up, so another $120 extra interest per month. I would be expecting my rent to go up $20 - 50 max for another yearly lease so I still see myself ahead.

p.s regardless of interest rates up or down rents always go up, never down

Have you factored in deflation at ~3% pa on your original investment (cash)?

 

[againsthegrain]

Yes, I am aware of that. I guess you can't win them all, usually deflation would be offset by the compounding interest but in this case I already said it covers 1/4 of rent. So the only thing I can compare deflation of investment to is house maintenance, council rates and eventual renovation if owning.

At the moment with house prices going sideways interest would be eating capital and overall profit from purchase if selling within the next few years would be just as bad as deflation on savings/investment - if I was to enter the home owners scene at this time, but that is just me.


Supreme Komendant

 

[UBIQUITOUS]

The party is over for real estate I'm afraid. Why would anybody now borrow to buy a property when the lenders are concerned about property prices? Roll up, Roll up, get your mortgages while they're hot!!

http://www.smh.com.au/business/house-bubble-risks-behind-rate-moves-aba-20101103-17czs.html

The Australian Bankers' Association, the industry's main lobby group, today attributed worries about Australian house prices on overseas markets as part of the reason for any extra rate hikes by its members.

“Over the last few weeks, we've had a lot of international investors asking very detailed and probing questions about why it is Australia thinks it doesn't have a housing bubble,” said ABA's chief Steven Munchenberg.

"Bankers were grilled at length as to why investors should not be worried Australia has a housing bubble,” he said. Australia's banks remain “very conscious of the risks of international investors becoming nervous about investing in Australia. “

Global investors like US fund GMO and bodies like the International Monetary Fund suggested the local housing market, where the median city home now costs $406,500, is over-priced. Some analysts argue the rising prices could be developing into a price bubble, similar to those experienced in the US, UK, Ireland and Spain in recent years - all of which have burst.

ABA's Mr Munchenberg said global lenders weren't about to cut off funding for Australia, but the concerns over the housing market, “demonstrated how nervous international investors can get very quickly, if they feel there is something in Australia that can destabilise the banking system.”

 

[Dowdy]

Probably the reason why the CBA nearly doubled the rate rise of the RBA.....Since they know the bubble is nearly popped, they want less people to apply for loans and the ones that do apply better be able to afford the higher rates of the CBA

 

[prawn_86]

We asked to renew our lease for another year. inner West of Sydney and they came back saying they will renew it straight away for a year and dont want an increase.

That means in 6 years of renting we have had one increase by less than 5% at the time.

Obviously it's not a representative sample, but 5% over 6 years has been great for us.

 

[robots]

hello,

I guess no replies is a strong indication that you are 1 out there prawn, great stuff

i wouldnt be renewing any lease at the moment either, oh yeah alls well againstthegrain, great day

Anyone know how Melbourne went in the latest ABS figures?

The problem is the RBA, ring them on 02 9551 8111

Thankyou
Professor robots

 

[sinner]

We asked to renew our lease for another year. inner West of Sydney and they came back saying they will renew it straight away for a year and dont want an increase.

That means in 6 years of renting we have had one increase by less than 5% at the time.

Obviously it's not a representative sample, but 5% over 6 years has been great for us.

In Sydney I lived in a townhouse approx 30 mins from the city. 2 story concrete filing cabinet, 3br, tiny tiny backyard (really just a courtyard with grass). Nothing even remotely interesting to do 10-20ks in any direction (standard suburbia). When I moved in, 2006 I think, rent was $300/wk. By the time I moved to Melbourne last year was $360/wk.

In Melbourne living approx 30 mins from the city (takes me 26min on the tram to work) in a huge awesome house 2br, 2 living rooms, with huge beautiful backyard right near all possible amenities for any sort of person. Vibrant community, awesome food/pub/cafe/music culture. $350/wk, no other applicants in 3 weeks of listing. We had 10-20 houses to pretty much choose from in the area in our price bracket. Could've had an almost identical but slightly less awesome/conveniently located house for $300/wk no worries. Friends who moved recently report the same. Plenty to choose from, eager to be rented out, at whatever rate can be reasonably had.

My experience has generally been of $300/wk for a $300,000ish house, $400/wk for a $400kish house, etc. You could safely see the houses described selling in the $400-500k bracket in todays market, which indicates a bit of a gap, rents are definitely cheaper than owning for now in this area.

 

[explod]

Anyone know how Melbourne went in the latest ABS figures?

The problem is the RBA, ring them on 02 9551 8111

Thankyou
Professor robots

That comment sounds a bit socialist there Confessor.

A bit of a turn in the market and you are suddenly a Marx fan.

Great here on the Peninsula today after the last few days of rain. Green vegies bursting out of the ground. Fat baby magpies skawking bubbles and lolliepops. Max my new dog lazing in the sun.

Self Proclaimed five star Major General plod.

 

[Temjin]

hello,

I guess no replies is a strong indication that you are 1 out there prawn, great stuff

i wouldnt be renewing any lease at the moment either, oh yeah alls well againstthegrain, great day

Anyone know how Melbourne went in the latest ABS figures?

The problem is the RBA, ring them on 02 9551 8111

Thankyou
Professor robots

Just wondering, what exactly would you like RBA to do? Or what will you be asking, or rather, demand, when you make the call?

http://www.abc.net.au/news/stories/2010/11/03/3055920.htm

Building slide worsens as Reserve 'gets it wrong'

"The weak housing outlook is compounded by yesterday's interest rate hike by the Reserve Bank which, due to the additional independent 20 basis point increase by the Commonwealth Bank, will act like a sledgehammer on confidence and economic activity in the non-resource sectors," he said in a statement.

"This total 45 basis point increase in home-lending rates will seriously dent new home demand and confidence, and is worrying as it follows the removal of the First Home Owners Boost and the impact of previous rate hikes.

"Indeed, it appears that we have a near perfect storm of poor conditions for the house-building market at the very time a sustainable boost to Australia's housing supply is needed to allow a balanced economic recovery."

Ok, so the mainstream economists are saying the RBA got it wrong.

Tell them to lower interest rate back down?

But then I thought house prices never drop regardless of what the interest rates would be? Demand is always higher than supply right?

If so, then what RBA did should not affect house prices anyway.

I'm pretty sure the happy days will continue if RBA raises the rate by another 5%. Always foreign investors going to buy our great country, and international lenders will always lend money to us at a very cheap rate cos US is crap, and Australia is great.

Happy days indeed.

 

[KurwaJegoMac]

The RBA did not get it 'wrong' like that silly article stated. The main role of the RBA is to control inflation. Last time they met it was at the top of their target band - Meaning unless conditions deteriorated, an upcoming rate rise was necessary to avoid inflation going over the target band.

 

[Mofra]

My experience has generally been of $300/wk for a $300,000ish house, $400/wk for a $400kish house, etc. You could safely see the houses described selling in the $400-500k bracket in todays market, which indicates a bit of a gap, rents are definitely cheaper than owning for now in this area.

Personally I have a very good relationship with my landlord so pay well below market rates, but happily do the small maintenance around the house and keep the place in order.

Even if I was paying market rates of ~$400 to $450pw I would still be better off (after tax) renting and owning investment property than I would trying to pay off my own home.

 

[trainspotter]

Even if I was paying market rates of ~$400 to $450pw I would still be better off (after tax) renting and owning investment property than I would trying to pay off my own home.

Please explain? How does this work? Rent is DEAD money and pays off investment mortgages for people like me. You keep on renting and pay off my mortgage for me. Thanks.

If I sell my PPOR there is no capital gains tax. The equity in my PPOR allows me to leverage against it to buy other "stuff".

$450 per week x 52 weeks = $23,400 per annum or $1950 per month. RENT

$322,500 x 7.25% Interest Only = $1950 per month. HOME OWNERSHIP

So you are happy to get rid of $2000 per month of DEAD money instead of investing into the lowest taxable form of investment available in Australia?