Housing market 2021

[Madas]

Yep absolutely, there would be nuance to such a policy. It creates an incentive for those responsible for such matters to get people into homes so they can raise families and live the Australian dream!

Agreed
I hate to look back retrospectively but the Morrison government missed a once in a lifetime opportunity to bolster the affordable housing stock by not focussing all of that Covid stimulus money into First Home Buyers and Social Housing.

From an opportunity that could have created generational change they have in fact set us back another 10-15 years in housing being affordable .

 

[Lyyynnnchy]

I’ve started up a development company with a colleague of mine and we recently purchased our first development site, a commercial office development site in Surry Hills. Not entirely housing related however the company will look to have about 75% of its developments being resi

Website is here for anyone interested - www.clifton.com.au

This is what we’re proposing, hopefully the prospective tenants agree it’s a higher quality development than what is generally available in Surry Hills
View attachment 1314574
We’re about to reach acceptance on a townhouse development in Melbourne. I’ll give details once we exchange contracts

Feel free to ask any questions about development in general! I’ll give my view on the housing market a bit later

It's been a while since I posted this but thought I would share an update. CGIs are complete, though not 100% to my liking. We needed to get them done as we're set to commence an informal leasing campaign now with a formal campaign to commence post Aus Day weekend

Demo set to commence 1 December which is the day of settlement. Has been a long slog from exchanging on the property in June last year. Looking forward to it getting out of the ground

 

[Lyyynnnchy]

Websites live!

Www.cliftonhouse.com.au

 

[Jello_B]

It's been a while since I posted this but thought I would share an update. CGIs are complete, though not 100% to my liking. We needed to get them done as we're set to commence an informal leasing campaign now with a formal campaign to commence post Aus Day weekend

Demo set to commence 1 December which is the day of settlement. Has been a long slog from exchanging on the property in June last year. Looking forward to it getting out of the ground

Well done on this. Out of interest what are the energy ratings and did you go with a greenstar?

 

[Lyyynnnchy]

Well done on this. Out of interest what are the energy ratings and did you go with a greenstar?

5.5 NABERS And net zero carbon

We initially targeted 5 star green star but it’s incredibly difficult with a building this small to achieve it. You lose a lot of efficiencies. The fact that solar panels wouldn’t achieve a lot given the over shadowing from 1 Oxford st pretty much sealed the deal and we dropped the green star target

 

[fs88]

Random question, how does the increase in rates from the RBA work in the back end? Eg. if rates are currently 2.85% and an ave mortgage rate is 6.5%, does the bank get 3.65% and RBA gets 2.85%?

 

[Lyyynnnchy]

Random question, how does the increase in rates from the RBA work in the back end? Eg. if rates are currently 2.85% and an ave mortgage rate is 6.5%, does the bank get 3.65% and RBA gets 2.85%?

Mostly domestic deposits - How do banks fund mortgages?

The deposit rates generally go up with interest rate increases and therefore the banks require to raise interest rates to match the increase in deposit rates theyre having to pay

 

[fs88]

Mostly domestic deposits - How do banks fund mortgages?

The deposit rates generally go up with interest rate increases and therefore the banks require to raise interest rates to match the increase in deposit rates theyre having to pay

thanks!

 

[Orange Agent]

Random question, how does the increase in rates from the RBA work in the back end? Eg. if rates are currently 2.85% and an ave mortgage rate is 6.5%, does the bank get 3.65% and RBA gets 2.85%?

The cash rate is for day trading. Banks lend/trade between one another and the RBA sets the rate of interest to be repaid on those transactions. Mortgage rates are a separate market but they use the cash rate as a marker for determining their own interest rates just because they can.

 

[Sqotty from office works]

Nephew sold his property at the height pre Xmas and is renting for 12 months with $ 750,000 in hand.
He thinks the pay-off will be well worth the wait.

 

[Jordie_tackles]

Nephew sold his property at the height pre Xmas and is renting for 12 months with $ 750,000 in hand.
He thinks the pay-off will be well worth the wait.

A couple more rate rises and things will be very interesting, repayments have become very noticeable at my end.

 

[Sqotty from office works]

A couple more rate rises and things will be very interesting, repayments have become very noticeable at my end.

I have under 40s laughing at me.
But this xmas is going to be very painful

 

[Kanga Commando]

Nephew sold his property at the height pre Xmas and is renting for 12 months with $ 750,000 in hand.
He thinks the pay-off will be well worth the wait.

He could be right. Personally, i think we will have rate rises for at least 8 of the remaining 10 months this year.

 

[Jordie_tackles]

He could be right. Personally, i think we will have rate rises for at least 8 of the remaining 10 months this year.

Why 8 that’s very high end?

 

[Kanga Commando]

Why 8 that’s very high end?

As time goes on, uncertainty grows. Inflation is after all a rolling 12 month calculation

 

[sabre_ac]

He could be right. Personally, i think we will have rate rises for at least 8 of the remaining 10 months this year.

If the US (market maker) and Canada (comparable economy) are on the cusp of pausing their rates, why would Australia plow ahead? Is Australia that far behind on the rate rise curve?

 

[kriles76]

If the US (market maker) and Canada (comparable economy) are on the cusp of pausing their rates, why would Australia plow ahead? Is Australia that far behind on the rate rise curve?

Not sure The Fed is looking to pause just yet given the recent US job figures report.

Fears come on the heels of a surprise boom in half a million US jobs that sent equities and bonds tumbling last week.

Economists were looking for growth of only 188,000 jobs, and the result smashed the 2022 average monthly gain of 401,000. The US unemployment rate is back at 3.4 per cent, a 53-year low, from 3.5 per cent in December.


“We think we are going to need to do further rate increases,” Fed chairman Jerome Powell said during a question and answer session at the Economic Club of Washington. “The labour market is extraordinarily strong.”

Since then, markets have lifted terminal US Fed pricing to 5.15 per cent from 4.9 per cent and are estimating around 30 basis points of cuts in the second half of 2023.

Markets alert to US CPI surprise as rate fears intensify


The local futures market is predicting a further 83.5 bp increase in the cash rate, peaking in August 2023 at 4.135%, so that's potentially three 25 bp increases by the RBA.

ASX 30 Day Interbank Cash Rate Futures Implied Yield Curve

 

[Gigantic]

If the US (market maker) and Canada (comparable economy) are on the cusp of pausing their rates, why would Australia plow ahead? Is Australia that far behind on the rate rise curve?

Both US and Canada hiked earlier and harder

 

[Kanga Commando]

If the US (market maker) and Canada (comparable economy) are on the cusp of pausing their rates, why would Australia plow ahead? Is Australia that far behind on the rate rise curve?

imho - yep. Our economy is still quite hot, unemployment low, CPI strong, and remember, our inflation data is based on a 12 month average so the tail still has some time to wag.

However, also consider this point for the USA where I do not think inflation is done yet - Every time inflation ( in the USA ) has gone over 5%, the Fed rate has had to go OVER the inflation rate. On that basis, the Fed rate in the USA still has some time to grow, unless inflation dives sharply. That does not appear to be happening as yet - so rates still going up still a high possibility . ( source : Stan Druckenmiller )

I am a little more vague on the next point ( for the USA ) because I cant find the chart, but for some reason I recall that each of the last 3-4 great inflation peaks in the US over the last 120 years ( so include the 1914 peak ) has come in 2 or 3 waves. On that more flimsy basis, I dont think the USA is finished either.

EDIT - I found a similar chart for my third paragraph... Interesting the effect M2 has had on previous inflation bursts... Now look at the most recent M2 burst. Definition of boom & bust economics.

 

[Jordie_tackles]

How does interest rate hikes affect the us where people refinanced for 30 years at low rates surely this doesn’t affect so many peoples mortgages like it does here?
do they need to go harder for the same affect?

 

[Kanga Commando]

How does interest rate hikes affect the us where people refinanced for 30 years at low rates surely this doesn’t affect so many peoples mortgages like it does here?
do they need to go harder for the same affect?

There is still the increasing cost of capital for the broader economy, not just housing. tech companies are especially exposed.

 

[Jordie_tackles]

There is still the increasing cost of capital for the broader economy, not just housing. tech companies are especially exposed.

Yeah I get that but more thinking it isn’t affecting peoples Morgan age repayments like we are, they are targeting different parts of the economy than we do?

 

[Kanga Commando]

Yeah I get that but more thinking it isn’t affecting peoples Morgan age repayments like we are, they are targeting different parts of the economy than we do?

Seems like a reasonable assumption. It's interesting that CPI data is collected from multiple price components, but the only real lever to stop inflation is based on controlling housing costs. ( IIRC CPI includes rental data but not mortgage costs )

From : 15-Year Fixed vs. 30-Year Fixed: The Pros and Cons.

"If we drill down further, about 80% of home purchase loans are 30-year fixed mortgages. And just 2% are 15-year fixed loans."

I didnt read if this was all mortgages or new...

 

[Kanga Commando]

Yeah I get that but more thinking it isn’t affecting peoples Morgan age repayments like we are, they are targeting different parts of the economy than we do?

recent retail sales data from the USA - still hammering ( forecasted )

 

[sabre_ac]

imho - yep. Our economy is still quite hot, unemployment low, CPI strong, and remember, our inflation data is based on a 12 month average so the tail still has some time to wag.

However, also consider this point for the USA where I do not think inflation is done yet - Every time inflation ( in the USA ) has gone over 5%, the Fed rate has had to go OVER the inflation rate. On that basis, the Fed rate in the USA still has some time to grow, unless inflation dives sharply. That does not appear to be happening as yet - so rates still going up still a high possibility . ( source : Stan Druckenmiller )

I am a little more vague on the next point ( for the USA ) because I cant find the chart, but for some reason I recall that each of the last 3-4 great inflation peaks in the US over the last 120 years ( so include the 1914 peak ) has come in 2 or 3 waves. On that more flimsy basis, I dont think the USA is finished either.

EDIT - I found a similar chart for my third paragraph... Interesting the effect M2 has had on previous inflation bursts... Now look at the most recent M2 burst. Definition of boom & bust economics.

View attachment 1606974

Economies like Australia normally just follow the Fed, is Australia behind in terms of rate rises this cycle when compared to the Fed? I don't know the answer, I haven't been following.

The only certainty in my mind for Australia to continue to raise its interest rates is if it's either behind the Fed or its instep with the fed and the Fed goes again.

Your graph is interesting, though I'm not sure how much we can learn from history in regard to the COVID cash injections, that was fairly unique. In general, we've been in a new dynamic since 2008 as governments around the world have printed money, and risky (Crypto) or familiar investments (homes) have exploded.