The future of Australian property prices

robots · 16 May 2010

kincella said:
Trainspotter, spot on.....and another wee hint why the banks dont want your term deposit as security for a mortgage......they need to maximise their earnings, and require an asset that increases with inflation over time....
or to put it another way....that does not devalue..
cause rather than house prices going up as the 'crowd' understands.....its the reverse....the devaluation of the dollar...that is behind it....

thats why the banks prefer to lend over other asset classes, or risk it with derivatives, anything but reliance on your cash deposit to generate a return...
cause the cash deposit keeps losing its value, bit by bit, every day, and has less buying power against inflation...
most home loans have an average life of about 15 years....thats when people pay them out....not the initial 25-30 years as the contract states...
so if a bank expects to lend against an asset that covers a decade or more, it really wants to be able to recover any debt on a current dollar basis after inflation...
it will not get that security from cash...cash will be worth less than half the value after 15 years....

hello,

good morning fellow ASF members and guests, great day on the cards

outstanding posts from Kincella and Trainspotter the last couple of days, especially this one above, superb

apologies for not posting this week have been in Inverloch on assignment and dont have computer, looks like might have to get a netbook

well my settlement is all complete with the banks handing over a cool 100% (hahahahahahaha), its just fantastic as once I move i still wont be negative geared (hahahahahahaha)

so, a special thankyou to my tenants

i'm with you BillM

thankyou
robots

UBIQUITOUS · 16 May 2010

Buying at the top Robots? It certainly looks like it.

This is from your mentor, Enzo:

http://reiv.com.au/home/inside.asp?ID=162&nav1=1226&nav2=162

Stock levels are so high that there have only been three months
with more auctions, October 2007, December 2007 and 2009, all in
spring when around 8-900 auctions over the weekend are a regular
feature.

trainspotter · 16 May 2010

medicowallet said:
NO

You obviously cannot understand what I am saying. The asset does not matter, it is the fact that the bank mortgages it readily that matters. As long as the bank has rights to the asset, it does not matter what it is, and as a previous poster outlined, you can get 100% LVR for cash. This confirms your original post misleading.

Banks need to approve sale of a car under finance.

So are you saying that a car is a good investment?

Diagnosis: myopia

It is easier to get a loan against a house, but that does not make a house a better asset to take a loan out against, just more convenient.

YES!

You are obvioulsy not explaining it well enough for me to understand. You also obviously missed this post from me "OK OK OK ...... I might have fudged the FULL STOP bit. YES banks will take a "lien" over cash and shares. My big sorry to all and sundry. BUT they will freeze the asset so therefore it is no longer liquid"

Where in blue blazes did I say a car is a good investment or even try to suggest this? Once again ... your words and not mine. Unless you bought a XY GT HO 351 Super Roo in 1972 for about $3,500 and are now worth over $500,000. OFF TOPIC I KNOW!

Diagnosis: Splitting definitives

Give me real estate any day so I can get a loan from a bank on it.

robots · 16 May 2010

UBIQUITOUS said:
Buying at the top Robots? It certainly looks like it.

This is from your mentor, Enzo:

hello,

yeah, people were buying at the top in 1999, 2001, 2002, 2003, 2004, 2005, 2006, 2007, 2008, 2009

look at Gav's result buying at the top last year (already 20-30% up), hahahahahahaha

will just increase the rents or get another bunk bed to offset any issue

thankyou
robots

satanoperca · 16 May 2010

REIV clearance rate for the weekend 76%. A small decrease on previous weeks but still a good result.

given the unseasonably high number of auctions this
May. Stock levels are so high that there have only been three months
with more auctions, October 2007, December 2007 and 2009, all in
spring when around 8-900 auctions over the weekend are a regular
feature.

Found this comment interesting. Why the unusually high number of auctions?
Interest rates ain't even at normal, so it cannot be that.
People taking profits? Maybe

Only time will tell.

Congratulations to Robots new purchase, wishing you all the best and hope the dream continues.

Cheers

Fog lifted in Melbourne to reveal a splendid day.

kincella · 16 May 2010

does not sound like much of a good investment to me....
I lend the bank some cash and they pay me about 5%...at top rates, they lend me back the same money and charge me 7%......

have a great day
I am off to the million paws walk today

UBIQUITOUS · 16 May 2010

kincella said:
does not sound like much of a good investment to me....
I lend the bank some cash and they pay me about 5%...at top rates, they lend me back the same money and charge me 7%......

Got to agree with you there Kincy. Only if the ATO allowed that loss to be offset against other income, would it be a fantastic investment

drsmith · 16 May 2010

One should never bet the house on being able to just increase the rent to offset any issue.

That at some point may not be to Mr Market's liking.

medicowallet · 16 May 2010

trainspotter said:
YES!

You are obvioulsy not explaining it well enough for me to understand. You also obviously missed this post from me "OK OK OK ...... I might have fudged the FULL STOP bit. YES banks will take a "lien" over cash and shares. My big sorry to all and sundry. BUT they will freeze the asset so therefore it is no longer liquid"

Where in blue blazes did I say a car is a good investment or even try to suggest this?

I apologise that you cannot understand that the bank doesn't care what asset you put up against a loan, as long as they have control over it to recover their losses. (which you have admitted, but wont admit to me that you admitted)

It is quite obvious to me that you are just arguing for argument's sake. It is typical internet attitude that to just keep ignoring fact makes your pathetic counter argument correct.

Also I never said that you said that a car was a good investment. If you consider that there is a question mark, then you can deduce that. What I was pointing out, is that a poor investment (exceptions obviously) still attracts a loan from the bank, as long as they can control the asset.

I find it mildly amusing that you keep trying to defend your incorrect position, which has been pointed out to be flawed, just to save face.

robots · 16 May 2010

UBIQUITOUS said:
Got to agree with you there Kincy. Only if the ATO allowed that loss to be offset against other income, would it be a fantastic investment

hello,

what a classic, so if can claim the loss against income, "CASH" becomes a fantastic investment, Oh Yeah

great day brothers, went down to South Melbourne for usual shopping trip, plenty from the paws walk around

good to see the auction clearance % down as the RBA uses this as a leading indicator for setting monetary policy,

thanks Satanoperca, will catch up soon

thankyou
robots

MACCA350 · 16 May 2010

This is a little interesting. I've merged two of REIV's graphs, Quarterly Median(5yr) and Finance Commitment on Secured Housing(5yrs, sourced from ABS). I've lined up the time axis as close as I can as they seem to be reported one month different from each other.

cheers

drsmith · 16 May 2010

MACCA350 said:
This is a little interesting. I've merged two of REIV's graphs, Quarterly Median(5yr) and Finance Commitment on Secured Housing(5yrs, sourced from ABS). I've lined up the time axis as close as I can as they seem to be reported one month different from each other.

cheers

Interest rate rises have bitten early when compared to the long rising phase pre GFC.

It will get very interesting if the RBA has to keep responding with higher interest rates to contain inflation.

cutz · 16 May 2010

drsmith said:
Interest rate rises have bitten early when compared to the long rising phase pre GFC.

It will get very interesting if the RBA has to keep responding with higher interest rates to contain inflation.

Very worrying indeed,

Looking at official RBA data the cash rate is still at the lower level of the 4-8% band, just lifted from a historically low level. I’m also very concerned that many won’t have much room to maneuver as rates do have to go up further.

Another phenomena that has gained momentum over the past decade is the funding of big ticket items via the family home, things like cars, holidays, kitchens, boats ect. ect. So it’s good and well to say that the banks will only lend against property at favorable rates but are they really doing you a favour ?

What I need to research next is how much exposure our banks have to marginal loans as a percentage, any pointers ?

medicowallet · 16 May 2010

robots said:
[/B]

what a classic, so if can claim the loss against income, "CASH" becomes a fantastic investment, Oh Yeah

Cash is a fantastic investment.

You just need plenty of shares and a lot of property to go with it

You are correct, housing is an excellent investment, but always beware the investor who puts all their eggs in the one basket.

Housing has to stop somewhere, but when it happens the people who have only 40% or so of their value in it ride it out much more nicely than those who are highly geared and exposed to an ever increasing bubble.

medicowallet · 16 May 2010

cutz said:
What I need to research next is how much exposure our banks have to marginal loans as a percentage, any pointers ?

When our property market corrects or stagnates, and interest rates increase, people may well flock to cash.

Our banks might find things interesting then.
Lower revenue from property loans, pummelled balance sheet, increased cost of funding.

Could be self perpetuating.

robots · 16 May 2010

medicowallet said:
Cash is a fantastic investment.

You just need plenty of shares and a lot of property to go with it

You are correct, housing is an excellent investment, but always beware the investor who puts all their eggs in the one basket.

Housing has to stop somewhere, but when it happens the people who have only 40% or so of their value in it ride it out much more nicely than those who are highly geared and exposed to an ever increasing bubble.

hello,

whys that?

thankyou
robots

cutz · 16 May 2010

robots said:
hello,

whys that?

thankyou
robots

Less downside risk, that's the one to keep an eye on.

cutz · 16 May 2010

medicowallet said:
Housing has to stop somewhere

Correct,

It's in the math,

2001, 2002, 2003, 2004, 2005, 2006, 2007, 2008, 2009, 2010, ? , ?, ?, ?, ?, ?, ? .....

robots · 16 May 2010

hello,

just let it slow down a bit? stabilize? downside risk?

thankyou
robots

drsmith · 16 May 2010

cutz said:
Very worrying indeed,

Looking at official RBA data the cash rate is still at the lower level of the 4-8% band, just lifted from a historically low level. I’m also very concerned that many won’t have much room to maneuver as rates do have to go up further.

The current cash rate of 4.5% is regarded as neutral by the RBA from a borrower's perspective.

http://www.rba.gov.au/media-releases/2010/mr-10-07.html

Any further rises over the next several months (pre election) will be in response to inflation/inflation expectations. These are rises I suspect the RBA will be very reluctant to make. Only a reactionary response if core inflation sneaks over the top of the target range (3%) I suspect.

cutz said:
Another phenomena that has gained momentum over the past decade is the funding of big ticket items via the family home, things like cars, holidays, kitchens, boats ect. ect. So it’s good and well to say that the banks will only lend against property at favorable rates but are they really doing you a favour ?

A likely contributing factor to the rise in household interest expense relative to household income over the same period.

The future of Australian property prices

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