The future of Australian property prices

[Dowdy]

hello,

maybe so, the media is still pumping up the negatives more than anything i believe

would be 5 negative to 1 positive article, been that way for a long time because of the vested interests the media outlets have (ie. fund businesses/interests)

thankyou
robots

Got to laugh at Fairfax media. A few weeks ago they were saying

Red-hot Melbourne market starts to glow white
"MELBOURNE'S property market is shaping up to record its strongest pre-Easter results due to insatiable demand."

now they are saying

Housing market to weaken as buyers retreat
"BUYERS are retreating from the Melbourne property market at the rate of 600 a month, causing real estate professionals to predict an ''exhausted market'...'

lol

Then going by Robots logic then that would mean a few weeks ago the media was run by people invested in the RE market which would explain all the good news.

Due to the recent stories about the weakening RE market does it means that the media has had a takeover bid and it is now owns by the evil hedge funds.

 

[Mofra]

An interesting byline to the property debate - will the flood of Chinese borrowers collapse at some stage?

http://www.theage.com.au/business/the-china-bubble-20100412-s34b.html

The China bubble

Edward Chancellor, a member of the asset allocation team for Boston-based GMO and, interestingly, the author of a recent Financial Times piece on Australian property, is a financial historian and bubble expert.

His 1999 book, Devil Take the Hindmost: A History of Financial Speculation, examined past speculative manias. Perhaps you've read articles comparing the tech boom and 1990s' bull market to tulipmania in 1630s' Holland.

 

[Beej]

A property investor said that investment property loans are similar to margin loans on shares. If the value of the property falls under the loan value by x amount, the bank wants the difference. If the investor cant pay, this property and other assets may be liquidated to cover the shortfall, could include their primary residence.
With home loan rates forecast to rise upwards of 10% and investment loans higher are investors locking themselves into a dangerous situation?

Urban myth - totally false. Most investment loans work just like regular mortgages - make the payments and all is sweet. The bank can/will only perform a re-valuation/LVR assessment etc if you want to change something in the loan contract (like borrow some new funds against equity and so on). Not at all like a share margin loan.

Cheers,

Beej

 

[Uncle Festivus]

1) I am saying that if a valuer places a value on a certain property and if there is LMI involvement and a bank forecloses then the Valuer is liable for the LOSS made by the LMI (in certain mitigating circumstances) The insurers will pursue the Valuer involved if he has placed a value on the property and the financier/LMI suffers a loss.

Only if the valuer is proven to be negligent in his methodology of valuation, which is then a court case, so as far as being an issue if property prices fall, it is a non issue if the valuer has valued correctly. It (insurers having to pay up) in itself has no bearing or influence on property prices...

3) robots is of an idealogy that has it's place in here and he believes in property. Balance is required for sure but if you read between the lines the blogger has not been wrong yet. No bubble, no reversing of prices, auction rates still clearing at high %. What more do you want?

He has been wrong, as property prices fell last year. If it's not a bubble are you or would you be buying at these prices? At the very least it's not sustainable, a symptom of bubbles..

 

[satanoperca]

I know of three couples in recent years who were asked by the banks to come foward with extra money as they were over their LVR's on investment properties.

All three cases were the same, retired couples who had drawn equity out of their PPOR to by risky off the plan apartments.

In one case, the IP was sold by the banks and the couple had to give the bank the difference about $20K

Second case, bank sold the IP and the PPOR and the couple were down about $200K.

Third case, couple paid the bank the extra money and later sold the IP for break even.

So it can happen, depends on how leveraged up you are and how well you can service the debt.

Note : in all three cases the couples were retired, so income was an issue.

Cheers

 

[robots]

He has been wrong, as property prices fell last year. If it's not a bubble are you or would you be buying at these prices? At the very least it's not sustainable, a symptom of bubbles..

hello,

yes robots got it wrong, the melbourne median dropped a MASSIVE 6% during the BIGGEST financial/economic event since 1929

thats right brothers a HUGE 6% and now reached even higher figures than pre-GFC, oh yeah paradise (hope macca can repost that graph)

go with the flow brothers, yeah i'm in for another one right at the moment, 100% LVR thanks to working hard, reducing debt and not sitting out the front of coles

thankyou
robots

 

[Beej]

I know of three couples in recent years who were asked by the banks to come foward with extra money as they were over their LVR's on investment properties.

All three cases were the same, retired couples who had drawn equity out of their PPOR to by risky off the plan apartments.

In one case, the IP was sold by the banks and the couple had to give the bank the difference about $20K

Second case, bank sold the IP and the PPOR and the couple were down about $200K.

Third case, couple paid the bank the extra money and later sold the IP for break even.

So it can happen, depends on how leveraged up you are and how well you can service the debt.

Note : in all three cases the couples were retired, so income was an issue.

Cheers

Sounds to me like in your examples their were serviceability issues - miss a payment and the bank has the right to review everything.

 

[Uncle Festivus]

go with the flow brothers, yeah i'm in for another one right at the moment, 100% LVR thanks to working hard, reducing debt and not sitting out the front of coles

thankyou
robots

Another property? How much are you paying for it, house, unit or ?? Maybe we can follow along for the whole cycle from buy to sell again? Hit us with some details Robots

 

[trainspotter]

Only if the valuer is proven to be negligent in his methodology of valuation, which is then a court case, so as far as being an issue if property prices fall, it is a non issue if the valuer has valued correctly. It (insurers having to pay up) in itself has no bearing or influence on property prices...

He has been wrong, as property prices fell last year. If it's not a bubble are you or would you be buying at these prices? At the very least it's not sustainable, a symptom of bubbles..

Note I did write and even placed it in brackets (in certain mitigating circumstances) - hopefully this has cleared it up for you Uncle. Ummmm ... where did I mention that this would influence property prices? You mentioned that PI did not work this way? I mentioned that there is a clawback for the bank, the LMI and that the Valuer would ultimately be reposnsible and the client would be responsible for their debt to the bank and the bank has a legal right to pursue the person/company/entity that borrowed the money.

robots was wrong ?? Prices fell exactly where last year? Have you got a graph or a pie chart or a link to a website to back this statement?

Adviser Edge research director Louis Christopher said it was very unusual for the level of housing finance to be falling at the same time as auction clearances remain strong, with prices rising.

http://www.theaustralian.com.au/bus...loans-in-decline/story-e6frg9gx-1225852932552

The softening of housing loans should allay any fear of bubble territory IMO.

 

[robots]

hello,

yes, i think you right Trainspotter

they actually went down a MASSIVE 6% in 2008, how time flies, and now they up BIGGER and BETTER than pre-GFC

the BIGGEST and BADDEST financial/economic event since 1929

more details will come Uncle Fest, contracts exchanged, i hope you still around at ASF in twenty years time because i wont be even considering selling till then

thankyou
robots

 

[kincella]

trainspotter...the puzzle with falling finance but rising house prices.....indicates to me...
1. it is quite obvious....there are cash buyers out there...they have no need for finance...they are cashed up...probably foreigners.....
2. I know of couples, who have traded up, the equity gained from the first home purchased 5 years ago, say plus 300k's, meant their loan remained the same....hence no increase in finance

the chinese may be land banking, others are also providing a home for their student children.....there is no requirement on them to sell the house when the situation changes......(another goof up by the policy makers)
the indians and other groups are pooling resources, accordingly they can afford to pay more and are sqeezing 10 or more into one house....

in china, fhb have to put up 20-30% deposit, 40% for a 2nd home, 60% for a 3rd house....so there is an incentive for them to come over here and do what they like, without such restrictions...
they have removed any discounts for those buyers......
just google 'chinese housing market'....for a variety of comment...

http://wallstreetpit.com/22962-no-housing-bubble-in-china

 

[Uncle Festivus]

hello,

yes robots got it wrong, the melbourne median dropped a MASSIVE 6% during the BIGGEST financial/economic event since 1929

thats right brothers a HUGE 6% and now reached even higher figures than pre-GFC, oh yeah paradise (hope macca can repost that graph)

go with the flow brothers, yeah i'm in for another one right at the moment, 100% LVR thanks to working hard, reducing debt and not sitting out the front of coles

thankyou
robots

Note I did write and even placed it in brackets (in certain mitigating circumstances) - hopefully this has cleared it up for you Uncle. Ummmm ... where did I mention that this would influence property prices? You mentioned that PI did not work this way? I mentioned that there is a clawback for the bank, the LMI and that the Valuer would ultimately be reposnsible and the client would be responsible for their debt to the bank and the bank has a legal right to pursue the person/company/entity that borrowed the money.

robots was wrong ?? Prices fell exactly where last year? Have you got a graph or a pie chart or a link to a website to back this statement?

Adviser Edge research director Louis Christopher said it was very unusual for the level of housing finance to be falling at the same time as auction clearances remain strong, with prices rising.

http://www.theaustralian.com.au/bus...loans-in-decline/story-e6frg9gx-1225852932552

The softening of housing loans should allay any fear of bubble territory IMO.

Um, according to Robots prices fell a HUGE 6%.

I can assure you that the valuers won't be held responsible for valuing a property at the prevailing conditions. Actually I don't understand where you are going with this??

I might add, further to Robots request for new reasons as to why property is due for a fall - perhaps a hard landing - and that is a credit crunch is unfolding right now globally. The Fed purchased $1.25 Trillion in MBS, but has now stopped. Global competition for credit will take Australian interest rates much higher in order to compete with the rest of the world.

Along with the unwinding of the low interest currency carry trade which will start to look at the relative safety of US Treasuries out of Australian instruments ie local banks funding requirements. Tis only a matter of time "brothers"?

 

[Trembling Hand]

Along with the unwinding of the low interest currency carry trade which will start to look at the relative safety of US Treasuries out of Australian instruments ie local banks funding requirements. Tis only a matter of time "brothers"?

Unless the Yuan gets revalued then the Skippy will be a proxies for it and become super charged. Leading to Risk trade on steroids!!

 

[robots]

Past that........

REIV

cheers

hello,

i knew macca350 (probably busy back at school) had posted this up earlier in the thread, OH YEAH

going down to get a slab of ruski's

thankyou
robots

 

[trainspotter]

And to which the prices have now surpassed pre GFC? GOSH ! Some shares went down 50% and Superannuation went down 30% and certain parts of Melbourne property dropped 6% ??? If robots says this has happened then it must be true !

Got any documentary proof of the "free fall"or "hard landing" as you put it?

You asked the question in relation to PI for valuers and if they are reposnsible for a shortfall. I am not driving this buggy anywhere? You asked a question and I provided an answer as to WHY the housing market in Australia has mechanisms in place unlike USA with their sub prime lending and NO RECOURSE loans. AND that LMI rely on panel valuers who have PI in place as another layer to reduce the impact of a repo sale.

If Australia is at 4.25% IR and America is at .25% an Japan is at .01% interest rates WHY would there be a funding shortfall for Global competition for credit? Surely they would be lining up at the door to get their grubby little mits onto such high rates??

 

[kincella]

couple of more interesting points.....
our % of household debt....as a % of assets...is only around the 17% mark
equals equity of 83%....see graph 3
thats the affect high house prices have on that little old loan, taken out years ago

http://www.bis.org/publ/bppdf/bispap46e.pdf

I note our debt as a % of disposable income is at 135%....
see graph 2 of the link above......comparable with the US and UK...

but see China at only 40% (Australia is not in this graph)...link below

http://wallstreetpit.com/22962-no-housing-bubble-in-china

I guess everyone can take things out of context...focus on the adverse side...
but at the end of the day...when you see the ratio of debt to assets...it looks very different...

also, as the news of 10% rates as in yesterdays news....one would think the banks would be factoring in those giant fixed rates by now....they are not, so maybe they are conditioning the kids to lock in some fixed rates...that part of the market has been lagging......
see how the banks manipulate the players....

....their books are full...they dont want any more home loans at the moment...
neither do they want to lend to business.....not when they have it so easy with the credit cards....also they have the govt attacking for rate rises....so the best ploy is to get the worker drones into the higher fixed rate market

interesting times we live in

 

[trainspotter]

Lender Product Rate
ANZ 3 year Fixed 7.83%
Citibank 3 year Fixed 7.99%
Commonwealth Bank 3 year Fixed 7.74%
Heritage Building Soc 3 year Fixed 7.75%
ING DIRECT 3 year Fixed 7.59%
RAMS Home Loans Fixed Rate 3yr 7.54% 7
St George Bank 3 year Fixed 7.69%

If rates are going to 10% then why are the lenders still offering under 8% for a 3 year fixed rate? It does not make sense? Banks NEVER lose.

 

[cutz]

If rates are going to 10% then why are the lenders still offering under 8% for a 3 year fixed rate? It does not make sense? Banks NEVER lose.

Rates will slowly grind up,

Banks will lock you in for 3 years, who cares, they have already sourced the cheap funding (check out the 3 year term deposits) and even if rates eventially do go up to ten percent, you will have already paid the bank's cost plus more averaged over the term of the loan.

Remember the 363 rule,

Borrow at 3, lend at 6, golf course at 3.

 

[Mofra]

Note : in all three cases the couples were retired, so income was an issue.

So they weren't standard mortgage products? They sound like reverse mortgages which have much more stringent LVR restrictions than standard products.

 

[kincella]

I agree Mofra....they fall outside the consumer credit code....and off the plan would fall into that category....plus as another poster suggested, if you refinance etc its all up for review....
I noticed some ridiculous valuations from the scaredy cat valuers at the height of the GFC....in one case a difference of 100k within 3 months from 2 different valuers..of course prop prices never went down to those levels....which makes them look pretty stupid...
also know of a valuer that is no longer contracted to the big banks.....he kept getting it so wrong....
so if you are unlucky enough to be caught in that scenario....no wonder some lose out....
some times its best to just keep quiet...dont make any changes in borrowings...wait for the tide to go out...wait for sense to return to the market