Society/Culture Australian Property Prices to Crash?

Frank Grimes

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As a future first home buyer (eventually) would this be good for me or bad? Wouldnt this just mean banks tighten up and its harder to get a loan?
The best time to buy as a first home buyer is when you have a very healthy deposit, a good stable job and able to obtain a loan where you can make repayments comfortably ( also being able pay extra in the loan or savings in case you hit hard times).

It's hard to 'time' the market, many economists have been trying to predict the market every year and are often wrong. If they have trouble determining the market, then the average Joe citizen is unlikely to be better at predicting it.
 

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Footyfan60

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The best time to buy as a first home buyer is when you have a very healthy deposit, a good stable job and able to obtain a loan where you can make repayments comfortably ( also being able pay extra in the loan or savings in case you hit hard times).

it.
That’s your problem right there the youth of todo has a sense of entitlement and instead of saving they whinge

The second is thanks to the old circus labour & greens stabbed all their union buddies in the back when setting up fair work and see the abuse of the casualised work force told!
 

TimmeT

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The best time to buy as a first home buyer is when you have a very healthy deposit, a good stable job and able to obtain a loan where you can make repayments comfortably ( also being able pay extra in the loan or savings in case you hit hard times).

It's hard to 'time' the market, many economists have been trying to predict the market every year and are often wrong. If they have trouble determining the market, then the average Joe citizen is unlikely to be better at predicting it.
Totally but the post below this also highlights some of other issues relevant as to why this is actually merely just a theory.
That’s your problem right there the youth of todo has a sense of entitlement and instead of saving they whinge

The second is thanks to the old circus labour & greens stabbed all their union buddies in the back when setting up fair work and see the abuse of the casualised work force told!
Highly hilarious how Labor lets us know neg gearing reform will help them then totally forgetting (either by accidnet or deliberately) that their actions are responsible for the issues with work toda.
 

CheapCharlie

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As a future first home buyer (eventually) would this be good for me or bad? Wouldnt this just mean banks tighten up and its harder to get a loan?
It would be good if proves are down where u want to buy as you get a cheaper house
House at $700,000 1 year ago
Market corrects 20% over 24 months
Same house now $560,000
You save $140k
20% deposit on 560k is less than 20% 700k
 

its free real estate

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That’s your problem right there the youth of todo has a sense of entitlement and instead of saving they whinge

The second is thanks to the old circus labour & greens stabbed all their union buddies in the back when setting up fair work and see the abuse of the casualised work force told!
Totally but the post below this also highlights some of other issues relevant as to why this is actually merely just a theory.


Highly hilarious how Labor lets us know neg gearing reform will help them then totally forgetting (either by accidnet or deliberately) that their actions are responsible for the issues with work toda.
I don’t understand what these arguments have to do with the housing market
 

Bombermania

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That’s your problem right there the youth of todo has a sense of entitlement and instead of saving they whinge

The second is thanks to the old circus labour & greens stabbed all their union buddies in the back when setting up fair work and see the abuse of the casualised work force told!
It isn't just the young because many older people seem to have poor financial plans.
 

_Swoon

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As a future first home buyer (eventually) would this be good for me or bad? Wouldnt this just mean banks tighten up and its harder to get a loan?
You're correct in the bolded, but what first home buyers can afford now compared to what they could afford pre-decline hasn't changed much if at all. It's still going to be overall good for you though, as you won't need to borrow as much from the bank for the same house and your repayments will be less. But you still won't find yourself in a position to buy in any of the suburbs that you might have been hoping for.
 

Hamingja

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As a future first home buyer (eventually) would this be good for me or bad? Wouldnt this just mean banks tighten up and its harder to get a loan?
The crack down from the banks at the moment is mostly around customer's living expenses.

People have been taking the piss with these for years.

At a big 4 bank, up until like 18 months ago, you didn't even need to categorise your expenses. Just declare a monthly living expense amount and it would be compared to a HEM table figure and the bank would use the higher of the two in their serviceability calculations. No more questions asked.

The HEM figure is based off a person's income, marital status, dependent situation, postcode etc and is just a model done by a few different organisations. I think Melbourne University do one, Melbourne Institute do another. It is supposed to capture the BASIC living expenses of a person.

At the big 4 bank I think the stat was that 80% of people declared their expenses as less than the HEM total which again is only supposed to represent a BASIC cost of living.

Something like 50% of people in Sydney declared living expenses that would have them living under the poverty line.

So when the banks now ask for 3 months of transaction statements and compare the debits from those statements with the categorised declared expenses they are now catching a lot of people out.

Generally speaking a lot of first home buyers genuinely have lower living expenses so I don't think it hits them as hard as others.

It kills people with multiple investment properties the most because banks never used to take into account the costs of these at all - rates, water, insurance, agents fees, repairs etc. You get someone's tax return and they will claim like $8,000 a year per property for those expenses with the tax man yet turn around and say their investment property only costs them $100p/m to manage with the bank. In the past the bank would just accept the $100p/m no questions asked.

You get people that have two investment properties and are now trying to come back and cash out equity to buy a third and with the harsher lending criteria they wouldn't have even been able to afford the second one in the current environment.

With falling house prices banks may adjust maximum LVRs or play around with their minimum servicing floors and that would effect first home buyers as well if it comes to fruition.

I wouldn't be buying any shares in the big mortgage insurers at the moment. They were apparently dragging the chain in a strong property market. Good luck when people start defaulting in a falling market.
 
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_Swoon

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The crack down from the banks at the moment is mostly around customer's living expenses.

People have been taking the piss with these for years.

At a big 4 bank, up until like 18 months ago, you didn't even need to categorise your expenses. Just declare a monthly living expense amount and it would be compared to a HEM table figure and the bank would use the higher of the two in their serviceability calculations. No more questions asked.

The HEM figure is based off a person's income, marital status, dependent situation, postcode etc and is just a model done by a few different organisations. I think Melbourne University do one, Melbourne Institute do another. It is supposed to capture the BASIC living expenses of a person.

At the big 4 bank I think the stat was that 80% of people declared their expenses as less than the HEM total which again is only supposed to represent a BASIC cost of living.

Something like 50% of people in Sydney declared living expenses that would have them living under the poverty line.

So when the banks now ask for 3 months of transaction statements and compare the debits from those statements with the categorised declared expenses they are now catching a lot of people out.

Generally speaking a lot of first home buyers genuinely have lower living expenses so I don't think it hits them as hard as others.

It kills people with multiple investment properties the most because banks never used to take into account the costs of these at all - rates, water, insurance, agents fees, repairs etc. You get someone's tax return and they will claim like $8,000 a year per property for those expenses with the tax man yet turn around and say their investment property only costs them $100p/m to manage with the bank. In the past the bank would just accept the $100p/m no questions asked.

You get people that have two investment properties and are now trying to come back and cash out equity to buy a third and with the harsher lending criteria they wouldn't have even been able to afford the second one in the current environment.

With falling house prices banks may adjust maximum LVRs or play around with their minimum servicing floors and that would effect first home buyers as well if it comes to fruition.

I wouldn't be buying any shares in the big mortgage insurers at the moment. They were apparently dragging the chain in a strong property market. Good luck when people start defaulting in a falling market.
It's worth noting that the banks previously let FHBs borrow amounts that would have their repayments amounting to 50% or more of their weekly income and I don't think that's changed too much in the last few months either. FHBs don't tend to earn more than the average Australian given they're young and just starting their careers, and even worse is that they don't tend to have a lot of equity to draw upon either if their capacity to earn took a hit or encountered an unexpected expense. Previously it didn't matter as they could simply sell their house at a profit, however that might not be the case anymore.

Anyway, moral of the story for any first home buyers is don't let the bank tell you how much you can safely afford because they're wrong. You should be saving a minimum $1000 a month for rainy days and your future well being.
 

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Footyfan60

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Totally but the post below this also highlights some of other issues relevant as to why this is actually merely just a theory.


Highly hilarious how Labor lets us know neg gearing reform will help them then totally forgetting (either by accidnet or deliberately) that their actions are responsible for the issues with work toda.
It was the Keating who scrapped negative in the 80s that lead to a recession

The origin research for the reforms to NG was done like 5 years ago when the house prices were nuts

They capped foreign investment and stopped immigration numbers and FMD the house prices tumble!

Now you have the dumb shits at labour and blantent oxygen thieving greens still blaming NG!

Along with the loons open borders bring the boats in and recession that it will bring we will end up with even more stupid house prices!
Along with these spending promises that will be funded buy this utopian money tree it’s goona be all skittles and rainbows
 

Footyfan60

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The crack down from the banks at the moment is mostly around customer's living expenses.

People have been taking the piss with these for years.

At a big 4 bank, up until like 18 months ago, you didn't even need to categorise your expenses. Just declare a monthly living expense amount and it would be compared to a HEM table figure and the bank would use the higher of the two in their serviceability calculations. No more questions asked.

The HEM figure is based off a person's income, marital status, dependent situation, postcode etc and is just a model done by a few different organisations. I think Melbourne University do one, Melbourne Institute do another. It is supposed to capture the BASIC living expenses of a person.

At the big 4 bank I think the stat was that 80% of people declared their expenses as less than the HEM total which again is only supposed to represent a BASIC cost of living.

Something like 50% of people in Sydney declared living expenses that would have them living under the poverty line.

So when the banks now ask for 3 months of transaction statements and compare the debits from those statements with the categorised declared expenses they are now catching a lot of people out.

Generally speaking a lot of first home buyers genuinely have lower living expenses so I don't think it hits them as hard as others.

It kills people with multiple investment properties the most because banks never used to take into account the costs of these at all - rates, water, insurance, agents fees, repairs etc. You get someone's tax return and they will claim like $8,000 a year per property for those expenses with the tax man yet turn around and say their investment property only costs them $100p/m to manage with the bank. In the past the bank would just accept the $100p/m no questions asked.

You get people that have two investment properties and are now trying to come back and cash out equity to buy a third and with the harsher lending criteria they wouldn't have even been able to afford the second one in the current environment.

With falling house prices banks may adjust maximum LVRs or play around with their minimum servicing floors and that would effect first home buyers as well if it comes to fruition.

I wouldn't be buying any shares in the big mortgage insurers at the moment. They were apparently dragging the chain in a strong property market. Good luck when people start defaulting in a falling market.
Pfft
Just have to learn to read the market!
The landscape of bigger than Sydney and Melbourne
Anyone who brought at the top of the market and is being burnt only deserves to be burnt for being nieve and stupid
 

its free real estate

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That’s your problem right there the youth of todo has a sense of entitlement and instead of saving they whinge

The second is thanks to the old circus labour & greens stabbed all their union buddies in the back when setting up fair work and see the abuse of the casualised work force told!
Young people have a sense of entitlement? Are you serious?

Baby boomers expected full time permanent jobs with lots of perks and big drunken lunches every friday afternoon (you are even complaining about casual jobs and reduced union power in the very next sentence - do you not see the hypocrisy). Baby boomers also expected cheap house prices in their late 20s, free university education in their early twenties, dramatic reductions in income taxes in their 30s-60s and investment property rorts like negative gearing and capital gains reductions, and now expect no increase in the retirement age for pensions even though life expectancy has risen dramatically. They are also happy to constantly go on overseas trips using that pension money.

Baby boomers are so entitled its makes everyone else feel sick.
 

medusala

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Great info.

Someone posted in here analysis that Australian banks could withstand a 40% decline. Would have to be something very special about our banks for them to be better than triply resilient than the average in other housing busts.
Not sure about now but historically Australia's banks have been historically very highly exposed to residential real estate compared to their overseas peers.

Also i would be surprised if there wasnt at least one bank with an average lvr of more than 70%. Found the below from nov 2016

https://www.brokernews.com.au/news/breaking-news/average-lvr-waning-across-australia-226188.aspx

Australia’s national average application loan-to-valuation ratio (LVR) is now at 74.3%, significantly lower than the 2013 peak, according to a recently released property index.
 

Bombermania

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Great info.

Someone posted in here analysis that Australian banks could withstand a 40% decline. Would have to be something very special about our banks for them to be better than triply resilient than the average in other housing busts.
Not sure about now but historically Australia's banks have been historically very highly exposed to residential real estate compared to their overseas peers.

Also i would be surprised if there wasnt at least one bank with an average lvr of more than 70%. Found the below from nov 2016

https://www.brokernews.com.au/news/breaking-news/average-lvr-waning-across-australia-226188.aspx

Australia’s national average application loan-to-valuation ratio (LVR) is now at 74.3%, significantly lower than the 2013 peak, according to a recently released property index.
Australian banks are heavily exposed to property because that is their core business they are commercial banks, whereas many of the major American banks are investment banks, the closet equivalent here is Macquarie Group, and this is why the RC found the big four were obsessed with sales because they have to keep churning out mortgages and loans. That isn't to say Macquarie and the other investment banks are not focused on sales but because they are focused on a wider range of activities they can set their targets to fee income from those activities.
 
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The crack down from the banks at the moment is mostly around customer's living expenses.

People have been taking the piss with these for years.

At a big 4 bank, up until like 18 months ago, you didn't even need to categorise your expenses. Just declare a monthly living expense amount and it would be compared to a HEM table figure and the bank would use the higher of the two in their serviceability calculations. No more questions asked.

The HEM figure is based off a person's income, marital status, dependent situation, postcode etc and is just a model done by a few different organisations. I think Melbourne University do one, Melbourne Institute do another. It is supposed to capture the BASIC living expenses of a person.

At the big 4 bank I think the stat was that 80% of people declared their expenses as less than the HEM total which again is only supposed to represent a BASIC cost of living.

Something like 50% of people in Sydney declared living expenses that would have them living under the poverty line.

So when the banks now ask for 3 months of transaction statements and compare the debits from those statements with the categorised declared expenses they are now catching a lot of people out.

Generally speaking a lot of first home buyers genuinely have lower living expenses so I don't think it hits them as hard as others.

It kills people with multiple investment properties the most because banks never used to take into account the costs of these at all - rates, water, insurance, agents fees, repairs etc. You get someone's tax return and they will claim like $8,000 a year per property for those expenses with the tax man yet turn around and say their investment property only costs them $100p/m to manage with the bank. In the past the bank would just accept the $100p/m no questions asked.

You get people that have two investment properties and are now trying to come back and cash out equity to buy a third and with the harsher lending criteria they wouldn't have even been able to afford the second one in the current environment.

With falling house prices banks may adjust maximum LVRs or play around with their minimum servicing floors and that would effect first home buyers as well if it comes to fruition.

I wouldn't be buying any shares in the big mortgage insurers at the moment. They were apparently dragging the chain in a strong property market. Good luck when people start defaulting in a falling market.
Yep. Also, new lending criteria mean stuff like credit cards are accounted for differently.

Say you have a card with a $50k limit, but you've only used $3k of that. Previously you might tell the bank about the $3k. Now, they will knmow about it, and they'll assume you have to pay monthlys on the full $50k when they assess how much to lend you.

Australia's housing market is going to fall as long as credit is tightened and wages do not rise. Wages aren't rising any time soon, credit will only get tighter once RC reports, and as US keeps raising rates. Thus prices will keep falling.
 
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Young people have a sense of entitlement? Are you serious?

Baby boomers expected full time permanent jobs with lots of perks and big drunken lunches every friday afternoon (you are even complaining about casual jobs and reduced union power in the very next sentence - do you not see the hypocrisy). Baby boomers also expected cheap house prices in their late 20s, free university education in their early twenties, dramatic reductions in income taxes in their 30s-60s and investment property rorts like negative gearing and capital gains reductions, and now expect no increase in the retirement age for pensions even though life expectancy has risen dramatically. They are also happy to constantly go on overseas trips using that pension money.

Baby boomers are so entitled its makes everyone else feel sick.
The Boomers have lost their population advantage though - Howard and Cotello baby boom has seen to that - so life is about to get a lot tougher for the old coots.
 

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Australian banks are heavily exposed to property because that is their core of business they are commercial banks, whereas many of the major American banks are investment banks, the closet equivalent here is Macquarie Group, and this is why the RC found the big four were obsessed with sales because they have to keep churning out mortgages and loans. That isn't to say Macquarie and the other investment banks are not focused on sales but because they are focused on a wider range of activities they can set their targets to fee income from those activities.
Macquarie also have a huge mortgage book but it's securitised meaning they are holding little of the risk (it also means they are far more exposed to international events, hence they basically shut down their securitised lending business overnight during April 2008)
 

Bombermania

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Macquarie also have a huge mortgage book but it's securitised meaning they are holding little of the risk (it also means they are far more exposed to international events, hence they basically shut down their securitised lending business overnight during April 2008)
Macquarie has been growing their retail mortgage book for sometime but it is still a responsibly small part of what they do.
 
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