The Banking Royal Commission

[Number37]

Most properties are only in the negative gearing stage for three to four years before becoming positively geared and the impact on rents from removing negative gearing will depend, in some cases it will cause rents to rise but there will be cases where it wont make any real different.

The chickens are coming home to roost. It is no wonder house prices are falling.

A sizeable proportion of the home loan market are 'interest only' loans which 'reset' to 'principal + interest' loans after a period of time.

Almost half a trillion dollars in interest-only mortgages will convert to principal and interest loans over the next four years – jacking up monthly repayments for almost 1.5 million borrowers by as much as 40 per cent and creating a fresh threat to house prices.
In a sign of unease within the Reserve Bank of Australia about an unprecedented situation, officials for the first time published figures showing that around 30 per cent of all outstanding national mortgage debt will be subject to the reset, which has been likened to the wave of adjustable-rate loans that triggered the 2008 US subprime crisis.

https://www.afr.com/news/economy/mo...sets-over-the-next-four-years-20180413-h0yppv

 

[Taylor]

That could get ugly.

 

[Maggie5]

The chickens are coming home to roost. It is no wonder house prices are falling.

A sizeable proportion of the home loan market are 'interest only' loans which 'reset' to 'principal + interest' loans after a period of time.

Almost half a trillion dollars in interest-only mortgages will convert to principal and interest loans over the next four years – jacking up monthly repayments for almost 1.5 million borrowers by as much as 40 per cent and creating a fresh threat to house prices.
In a sign of unease within the Reserve Bank of Australia about an unprecedented situation, officials for the first time published figures showing that around 30 per cent of all outstanding national mortgage debt will be subject to the reset, which has been likened to the wave of adjustable-rate loans that triggered the 2008 US subprime crisis.

https://www.afr.com/news/economy/mo...sets-over-the-next-four-years-20180413-h0yppv

Given house prices have notably fallen for the past 6 months, how will this be Labor's fault?

 

[Taylor]

Given house prices have notably fallen for the past 6 months, how will this be Labor's fault?

That would be an odd thing to claim.

The people in this sort of trouble that I know in WA are there because they took their security for granted in the post mining boom phase and upgraded their homes, then something happened like an illness or injury that has put them behind the mortgage.. Then the time comes to catch back up and they are too far in the hole.

 

[Number37]

That could get ugly.

The more prices fall the faster the chickens will come home to roost.

Falling house prices push mortgages further up the loan-value chain.
The greater the percentage of loans in the high risk loan-value categories, the faster the chickens come home to roost.
Nobody has ever left a panicked market (equities, housing, bond) in an orderly fashion.
Once panic sets in, it becomes a vicious circle.

 

[Maggie5]

That would be an odd thing to claim.

The people in this sort of trouble that I know in WA are there because they took their security for granted in the post mining boom phase and upgraded their homes, then something happened like an illness or injury that has put them behind the mortgage.. Then the time comes to catch back up and they are too far in the hole.

Why would you post that? They are already claiming that they would fall with the possible Labor changes to NG even though those currently NG will be grandfathered.

As to the rest of your post, it is always a case of buyer beware. (Members of my family are NG but not interest only).

 

[Taylor]

Perhaps, but there will be a point where people decide that if they are going to be paying the mortgage after moving out and selling for less than borrowed, they may as well stay living in it.

 

[Number37]

Given house prices have notably fallen for the past 6 months, how will this be Labor's fault?

The RBA recognized the problem more than 2 years ago whether enough has been done to mitigate the risk is debatable.
Whoever is in power when it goes pear shaped will get blamed.

 

[Taylor]

Whoever is in power might open the rules to encourage more international investment again, building boom, price stabilising then goes up too much again.

 

[Maggie5]

The RBA recognized the problem more than 2 years ago whether enough has been done to mitigate the risk is debatable.
Whoever is in power when it goes pear shaped will get blamed.

It is already going pear shaped, can't see anyone pointing the finger to this government as yet.

Would be very surprised if anyone is getting an interest only loan at the moment.

 

[Number37]

Why would you post that? They are already claiming that they would fall with the possible Labor changes to NG even though those currently NG will be grandfathered.

As to the rest of your post, it is always a case of buyer beware. (Members of my family are NG but not interest only).

Won't matter if interest only loans or not if the property is negatively geared.
The maths would tell you that for a property to be negatively geared the loan-value ratio must be north of ~70%.

 

[Maggie5]

Whoever is in power might open the rules to encourage more international investment again, building boom, price stabilising then goes up too much again.

Only caught the end of a news item this evening about Real Estate.com and their earnings were down a lot, mainly from the International (read China) market.

 

[Number37]

Would be very surprised if anyone is getting an interest only loan at the moment.

Looks like about 10%.

 

[its free real estate]

It’s always labor’s fault!!!!

Iron clad guarantee, when by the election Sydney’s property prices have fallen 20% from peak, the Liberals will be saying it was Shorten’s fault for spooking the markets with his negative gearing policy.

 

[Number37]

It is already going pear shaped, can't see anyone pointing the finger to this government as yet.

If anyone should be blamed it is Howard + Costello.

 

[Maggie5]

If anyone should be blamed it is Howard + Costello.

I think that there a number of factors including the RC into Banks. My point is that LNP will blame Labor irrespective.

Sydney market has been falling for the past 12 months, Melbourne for the past 7 months.
I have been following as I have just put my house on the market (downsizing) but not so concerned as my area not fallen that much and anyway, will be buying so likely a nil affect.

 

[CheapCharlie]

I think that there a number of factors including the RC into Banks. My point is that LNP will blame Labor irrespective.

Sydney market has been falling for the past 12 months, Melbourne for the past 7 months.
I have been following as I have just put my house on the market (downsizing) but not so concerned as my area not fallen that much and anyway, will be buying so likely a nil affect.

The next couple of months could be interesting in areas out of Western Sydney and other places west of Brisbane also the Sunshine Coast area if a lot of investors decide they all need to get out of the market and minimise losses

 

[Maggie5]

The next couple of months could be interesting in areas out of Western Sydney and other places west of Brisbane also the Sunshine Coast area if a lot of investors decide they all need to get out of the market and minimise losses

I agree, I think Sydney is in a worse state. Further driving around Melbourne, so many buildings units have no idea how they expect to get a decent return.

Seriously almost every area, units everywhere. Good if one is buying only.

 

[Taylor]

The commercial vacancy rates have been bad in Perth for a while, lots of rounds of rental negotiations going down and down and down

 

[Number37]

I think that there a number of factors including the RC into Banks. My point is that LNP will blame Labor irrespective.

Sydney market has been falling for the past 12 months, Melbourne for the past 7 months.
I have been following as I have just put my house on the market (downsizing) but not so concerned as my area not fallen that much and anyway, will be buying so likely a nil affect.

No doubt the LNP will blame Labor. Only the morons will fall for that kinda nonsense.

The RC won't have any more affect IMO. There is nothing in there to have any more affect.
Most of what was dangerous has already been dealt with ...e.g. tightening of lending to investors, crackdown on interest only loans.

Sell if you get your price, then take a nice holiday, before you buy again Maggie.
There is nothing to suggest there isn't going to be a large correction in the property market, Australian property has been overvalued for at least 20 years.

IMO a 30-40% fall will happen.

 

[Hawk Dork]

I agree, I think Sydney is in a worse state. Further driving around Melbourne, so many buildings units have no idea how they expect to get a decent return.

Seriously almost every area, units everywhere. Good if one is buying only.

House prices collapsed in my town during the GFC and have been dropping since.

I had a friend who is about the only guy I know who picked the market,sold at 1.3 mill just before and he could buy his house back for less than half that today.
I would say most of rural Qld apart from maybe parts of the Sunshine coast would be similar.
Friends bought a cheap house in Byron while they where trying to sell here.
The house in Byron tripled and this house halved in the time it took to sell

 

[Maggie5]

No doubt the LNP will blame Labor. Only the morons will fall for that kinda nonsense.

The RC won't have any more affect IMO. There is nothing in there to have any more affect.
Most of what was dangerous has already been dealt with ...e.g. tightening of lending to investors, crackdown on interest only loans.

Sell if you get your price, then take a nice holiday, before you buy again Maggie.
There is nothing to suggest there isn't going to be a large correction in the property market, Australian property has been overvalued for at least 20 years.

IMO a 30-40% fall will happen.

Actually not in a hurry, house is on sale 'off market' so in no hurry and if I do happen to sell a friend has a unit that he is not happy with his tenant and their lease is due to expire so has offered me the place as he wants to renovate and I can work off the rent helping him. So yeah no big hurry for me.

 

[AM]

 

[Baltimore Jack]

 

[Cuzz09]

Give everyone in Australia $20k.

Because banking

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