Perth housing crash

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Scotland said:
I don't buy this, either. It's a correlation passed off as causation IMO. Women have been working for decades, property prices have only started to get out of control the last 5-10 years.
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Yep, not because of women. It's because of the banks.

Anyone gone and asked for a mortgage lately (or refinance, etc)? We bought a house at the start of the year, did some renovations with our remaining cash, and then around a month ago asked for a little more to build a deck. The bank (one of the big four) approved our money:

1. Without actually meeting anyone in person. It was negotiated with a woman who was working remotely via video link to do one of these every 20 minutes (and she was not the only one in her call centre). We went to the branch but no one in the branch was capable of approving the loan.
2. No valuation on the house. We were asked how much we thought it was worth, and our figure was a ballpark of what we paid + the value of the renovations done. They accepted it. I was expecting someone to come out and look.
3. They were willing to give us many multiples of what we borrowed on top of our existing mortgage based on my salary alone, and were effectively urging us to borrow far in excess of what we asked for.

Now, I'm a better than average earner, and we are 'good' borrowers (less than 80% LTV). The sum we asked for was tiny in comparison to our mortgage. But the entire experience left me feeling ill at ease - like I wasn't dealing with a reputable organisation, but flimflam operation that was cutting corners at all costs and upselling as much as they could.
 
Bit harsh on banks - save our suburbs mobs and moron anti-development greenies in inner suburbs as much a part of the problem.
 
igon value said:
2. No valuation on the house. We were asked how much we thought it was worth, and our figure was a ballpark of what we paid + the value of the renovations done. They accepted it. I was expecting someone to come out and look.
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I can't speak on the rest of your post but with regards to the quoted bit banks subscribe to an online database which uses stuff like 'suburb', 'number of bedrooms', 'recent sales price' and 'owners estimate of value', amongst many other things to give them a 'desktop valuation' of a property.

If the loan to value ratio is nowhere close to magic 80%, they'll take the desktop valuation as correct. If it starts nudging towards that 80% LVR they'll send someone out to do a proper valuation.
 

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Jimmy_the_Gent said:
I can't speak on the rest of your post but with regards to the quoted bit banks subscribe to an online database which uses stuff like 'suburb', 'number of bedrooms', 'recent sales price' and 'owners estimate of value', amongst many other things to give them a 'desktop valuation' of a property.

If the loan to value ratio is nowhere close to magic 80%, they'll take the desktop valuation as correct. If it starts nudging towards that 80% LVR they'll send someone out to do a proper valuation.
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Yeah I know the databases - RPData Corelogic and the other one I can't recall. RPData does the hedonic index based on quality of house as opposed to raw suburb median the other one does.

Funnily enough, we went to a broker before we bought our house and he showed us the RPData valuation. It was in a range and - at its minimum - $20k more than we wished to spend. We left that meeting pretty despondent. It went to auction and we ended up getting it $50k less than the price we were willing to spend.

So the data was pretty garbage IMO. In fact so many of the estimates I've seen look like they are overestimates.
 
igon value said:
Yeah I know the databases - RPData Corelogic and the other one I can't recall. RPData does the hedonic index based on quality of house as opposed to raw suburb median the other one does.

Funnily enough, we went to a broker before we bought our house and he showed us the RPData valuation. It was in a range and - at its minimum - $20k more than we wished to spend. We left that meeting pretty despondent. It went to auction and we ended up getting it $50k less than the price we were willing to spend.

So the data was pretty garbage IMO. In fact so many of the estimates I've seen look like they are overestimates.
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The banks are doing a lot better than looking on RP Data for home valuation.
 
Lach72 said:
Yeah that's right.
In the 80's the everage house might've cost 3 times the average wage but there was a LOT below that cost.

Now it's non existent.
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Never mind the 80s. When I was a student (early 2000s) I worked in a supermarket and used to occasionally chat to the butcher about his investment property. I can't imagine being a Coles butcher is a particularly high paying job yet old mate (who would've only been in his 30s) had two houses already.
 
igon value said:
Then why were they using it when I went to see them?
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Have you used RP data much? Maybe 40% of properties would have sales prices withheld with perhaps just the last few listing prices there.

I can't speak for 3 of the big 4 but the one I worked for wasnt trusting a public database with a monthly subscription for this information.

Anyway, I'll leave it here. People don't care about this.
 
igon value said:
Yep, not because of women. It's because of the banks.
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When I first started looking at houses seriously interest rates were about 5% for an introductory rate. I looking at units around the $300k mark hoping to borrow around 90%. Banks were willing to lend me double what I wanted. Or more. I worked it out once that at the salary I was earning when I applied for the loan, the maximum amount I could have borrowed and the peak interest rate (just since I got the loan, not all time) my interest repayments would've taken up 70% of my after-tax income. That's absurd. Particularly considering rates peaked just under 7% for me and were pushing 9% a year or two earlier let alone the bad old days of double figures.

The whole 'property always goes up' thing only works if there is turnover. It's all well and good having a 2 bed fibro shack worth $3m but if not one can afford to buy it then it has no liquid value. This century we've had economic prosperity leading to rising incomes, low borrowing rates and relaxed lending criteria. When prices keep going up equity is created out of nothing. LVR of 100%? No worries, the value will go up 10% in a few months and you'll be down to 91%. Investors like this, banks like this, governments like this. The only people that don't are the people saving and watching their deposits being eroded away by inflation.

The problem is, there is a practical limit to how high prices can rise and how much turnover there can be. Otherwise prices would still be rising, houses would be turning over like burger patties and the median income to median price ratio would be pushing 10, 15, 20 and beyond. The govt puppetmasters are almost of out tricks, too. Our wages are high globally, our prices are high globally, our rates are low. The last trick left is to just let more people in to put pressure on supply while not investing in necessary infrastructure. Ugh.

It was a different era but my old man bought a unit for $11k. He had to front up $2k as a deposit and even then he was seen as a risk and the bank wouldn't give him a loan so he had to go to a credit society. Could you imagine someone walking into a bank today with a 20% deposit and being turned away?
 
Scotland said:
Price to income normalising is good in the long term. The constantly rising gap between income and property prices was never going to be sustainable despite the spruiking of the 'property always goes up' brigade.

It should be noted that averages need to be read in context. Cannington with all due respect is a below average suburb which would have a below average, average wage. If 5 is the magic multiplier than somewhere like Cannington should really have average houses in the $250-300k bracket.
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On the east coast, where the prices are even higher, the prices are still going up. Sydney, according to some measures, is the second most expensive market in the world - behind Hong Kong.

Governments are scared of removing the policies which drive the artificial part of the problem, because the whole "growth" number in the economy is dependent on increasing housing prices. Instead, they are constantly looking for more and more ways to inflate prices while making it look like they are trying to improve affordability. The only winners out of higher prices and speculative investment are the real estate industry and the banks. And the Real estate Institutes are treated by media and government as though they were independent think tanks, not industry lobby groups.
 
igon value said:
Yep, not because of women. It's because of the banks.

Anyone gone and asked for a mortgage lately (or refinance, etc)? We bought a house at the start of the year, did some renovations with our remaining cash, and then around a month ago asked for a little more to build a deck. The bank (one of the big four) approved our money:

1. Without actually meeting anyone in person. It was negotiated with a woman who was working remotely via video link to do one of these every 20 minutes (and she was not the only one in her call centre). We went to the branch but no one in the branch was capable of approving the loan.
2. No valuation on the house. We were asked how much we thought it was worth, and our figure was a ballpark of what we paid + the value of the renovations done. They accepted it. I was expecting someone to come out and look.
3. They were willing to give us many multiples of what we borrowed on top of our existing mortgage based on my salary alone, and were effectively urging us to borrow far in excess of what we asked for.

Now, I'm a better than average earner, and we are 'good' borrowers (less than 80% LTV). The sum we asked for was tiny in comparison to our mortgage. But the entire experience left me feeling ill at ease - like I wasn't dealing with a reputable organisation, but flimflam operation that was cutting corners at all costs and upselling as much as they could.
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Sales staff gonna sale. You've seen the shopfront and drawn conclusions of the whole process from that. If you've bought the house at the start of the year, and they've done a physical valuation then, and your mortgage plus the top up is still under 80% of the emv from the physical valuation completed less than 12 months ago, it would be kind of a waste of resources to pay a valuer $200-$300 to come out an inspect your property again for a top up of what $10-$20k to build a deck. I mean you've just described yourself as a low risk customer.
 
Anyway IMO women working full time with families becoming double income drove the prices in the early 2000s. Recent prices driven from China. Now since early 2016 the banks won't lend to non residents the heat has gone out of the market, particularly inner city apartments where it was predominately driven by overseas investors.
 

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A tangent admittedly but i was watching an episode of Getaway yesterday which was a paid advert for one of those European river cruises. Anyway i digress .... Jamie Durie was riding on a path in bordeaux past beautiful old mansions on a river with fair acreage. Hos guide said they were worth about 700k euro which staggered me. At $AU equivalent youd be buying ok suburban in Melbourne and f all in sydney
 
FOREX used to be a safety net for Aussie real estate. A house being $200k was a lot to your average Aussie but with the dollar worth 0.40 GBP or less it was a pretty attractive proposition to migrating poms. Now we're expensive by global standards so our only play is to try and attract wealthy Chinese.
 
Gavin Excell said:
A tangent admittedly but i was watching an episode of Getaway yesterday which was a paid advert for one of those European river cruises. Anyway i digress .... Jamie Durie was riding on a path in bordeaux past beautiful old mansions on a river with fair acreage. Hos guide said they were worth about 700k euro which staggered me. At $AU equivalent youd be buying ok suburban in Melbourne and f all in sydney
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It woukd get you like a house in Box Hill or sonething. Maybe Camberwell.
 
Gavin Excell said:
You.wont be buying a house in camberwell for 1.1 million thats for sure. Entry level $1.5m+
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Yeah maybe a nice two bedroom unit. Lol.

Incredible.

Be interesting to see what happens if we lose our AAA credit rating and go into a technical recession.

Im tipping we avoid both btw. At least for now.
 
CakeEater said:
My only question as a homeowner, do you think the banks will reduce my mortgage by a proportionate amount to what the house declines in value?

I've got money on not a chance.
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Why should they?
 
igon value said:
Bit harsh on banks - save our suburbs mobs and moron anti-development greenies in inner suburbs as much a part of the problem.
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Save our Suburbs strikes me as one of the blue/green organisations that are environmentalists of convenience. Dick Smith was a major proponent and he's moved over to One Nation now.

The most active force in Green politics is local government sustainability. After being frustrated at the Federal level over climate change, the focus moved towards sustainability in local government planning and it's really local government that is driving action on climate change in Australia and around the world. There's a multitude of organisations that have sprung up, C40, Compact of Mayors, Resilient Cities, World Mayors Council on Climate Change, Climate Summit for Local Leaders etc.

Character and heritage evaluations frustrate people sometimes but it's there to stop lazy developers, of which the state of WA is overflowing with. However, I wouldn't say that the sustainable planning agenda at its core has much of an opinion on either character or old trees in inner city areas. It does have a strong focus on public transport orientated urban areas of medium density. Towers are generally out, mixed use suburbs with townhouses and 4-6 stories are in for a number of planning reasons. So generally speaking the community groups that oppose inner city urban infill are clashing with town planners trying to enforce a sustainable green agenda. Although I would add that not all community based density opposition is equal. Planners set the scheme but it's fairly easy for well connected vested interests to influence approval for inappropriate development. Town planning schemes are drawn up as a guide but are enforced differently between local governments for reasons to do with the quality of the organisation, decision making structure and sometimes outright corruption.
 
MaddAdam said:
Why should they?
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An argument could be made that the profits of the banks are heavily subsidised so they do have an obligation to society via the social contract.

They would ignore that argument of course, but it could be made.

That said a far more pratical approach is to simpky default on the loan and tell the bank to go * themselves if they try to repossess it. Its actually very difficult legally to repo a property that is a primary residence. And then theres the PR nightmare if you even pull it off.
 
Scotland said:
Zany socialists gonna zany socialist. Non recourse loans are not the answer.

I wonder how long it will take until a govt tries to inflate our way out of trouble.
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Its more a case of consumers being aware of their rights.

There's a reason its difficult for banks to seize the family home.

If banks want to take the good parts of socialism (i.e. the bank guarantees, four pillars etc) they will need to contribute if times get tough. Failing that, organised sit ins work.
 
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