All is well until tommorows online article

[tom32]

Its not to say keeping your money in a savings account isn't a sound decision... I would recommend to retires who are thinking of investing to consider such an option given their risk is magnified should they loose any part of their investment.

It is for most a means to an end. I do not put money in a deposit thinking that is where it is going to stay forever and start mapping my retirement out using a bank deposit as the way to get there. However it is a sure way of saving for the house you want with no risk.

The way ther transfer of ownership is taxed in this country I am not so sure the property laddeer is as easy to ascend as it was once. I have saved and the goal is to buy the house I want to stay in for the next 15 to 20 years and putting this money at risk in shares or more risky investments does not make sense when all I am really after is preserving the capital and somewhere to store it while it grows to a size that allows the buying of a house or whatever it is you are saving for.

 

[HomeBuyerStrike]

should I use $50k to buy a new car or buy a property for $250k (requiring $50k deposit and $12k s/d and legals)?

After the GFC there were some good deals around on used sports cars. Picked one up myself, it's a complete waste of money but you have to enjoy your cash sometime.

But if I went to a financial planner and he considered keeping money in a savings account as "an option" I kid you not I would fire him on the spot.

You wouldn't expect your financial planner to put your money at risk without objectively looking at the likely scenarios for upside/downside. It's an interesting point because the financial planners who did point out that the risk/reward ratio (stress tests) did not add up for property investments in failed economies were sacked. Using a demand deposit as an example did not mean they were advocating that strategy.

Businesses in certain EU economies were starved of investment for years because all eyes were on property. Those economies are suffering now because the non-property sector was eroded. In Australia the same is happening now, as you will see from the NAB television ads they are attempting to capitalise on this. Maybe they will do better than the other banks because they are not following the herd.

I have saved and the goal is to buy the house I want to stay in for the next 15 to 20 years and putting this money at risk in shares or more risky investments does not make sense when all I am really after is preserving the capital and somewhere to store it while it grows to a size that allows the buying of a house or whatever it is you are saving for.

What's your target equity level btw? If you don't mind me asking.

 

[tom32]

What's your target equity level btw? If you don't mind me asking.

Originally it was at least 20% equity to avoid Mortgage insurance once I discovered it does nothing at all to protect the individual paying for it!

We got to that about 6 months before the FHSA's were brought in and we were in the thick of the GFC so I thought waiting it out for 4 financial years (really 2 years plus 2 days would not be such a bad idea.

I feared perhaps apart from the FHOGB bringing demand forward this may have pushed some back but apparently only 15,000 people have taken them on. Odd when it equates to approx 2k per couple per finanancial year, i.e. we will milk 8k of the government in a bit over 2 years between the tax saving on interest in the latter part and the $850.00 each co contribution.

I just wish it had a higher cap on it so I did not have to leave the rest in U bank. I am only putting in the 5k each year in each account so as if I don't buy a house in 6 months I can keep sponging the $850.00 every year for about 10 years in both mine and my wifes account. If it had a higher cap I would drop the lot in and just add 10k per annum between the two accounts.

Be the first to admit I was wrong about waiting at this point but then again there are 6 months to go yet. Looking outside of Perth in the south around Rockingham in some of the nicer new build areas like Secret Harbour or if Kennedy Bay gets a wiggle on possibly there I just cannot get much info on Kennedy bay I expect it to have both small blocks and they will be pricey but if you are allowed to build 4 bed townhouses or if they are doing a build devel with 4br joints then this becomes an option. At the moment I would expect to pay mid 3s for block and mid 2s for house in Secret Harbour no idea in Kennedy Bay as yet.

 

[tom32]

Something I should add about the various capital cities I have lived; at least in Perth a family can buy a house somewhere if they are a middle but single income family. Places like Port Kennedy near the water, have fast rail access and you can get a 10y.o. 4br family home for 350k possibly a bit shabby at that price but still this is affordable.

Personally I dont give a toss what happens in the inner city to house prices the governments role at various levels i.e. state and local, is to release enough land and put in the global infrastructure to enable developers to make a quid on releasing blocks on the fringe.

If like port kennedy you then have fast train access into the city well what is the problem?

I think Perth is going to come good for buying in the next 6 months anyway due to the more liberal policies adopted on land release and the lack of state gov monster levies especially by the state government but as far as Sydney goes the state government should literally be taken out and shot. On liberal policies I should add I have no idea what is happening in melb because they are pretty liberal too, and yet prices are through the roof. I suspect that melbourne is going to come good also. Unfortunately the places I like there like Aspendale and Mordialloc are so much dearer than when I left I do wish I had bought at the time.

The state gov here does actually build some stuff too! Unlike NSW where Sydney is a basket case. I don't have a clue why people who do not own their homes live there. The wages are better in Perth, the beaches, parks etc are all better and you can buy a house rather than a unit for similar money with fast train access that would probably get you in in a similar time than the west bus from baulko.

 

[HomeBuyerStrike]

Sounds like you'll have a big chunk of equity from the start. Should save you a lot of money. What's the issue with the market information in Kennedy Bay? Is it just low transaction volumes?

The state gov here does actually build some stuff too! Unlike NSW where Sydney is a basket case. I don't have a clue why people who do not own their homes live there.

I lived in Sydney for a while, it's great as a playground for the young free and single if you can get good money. I enjoyed it when I lived there but I would have different requirements now.

 

[tom32]

Sounds like you'll have a big chunk of equity from the start. Should save you a lot of money. What's the issue with the market information in Kennedy Bay? Is it just low transaction volumes?

Their is very few homes their now there is however a large devel going on in the background. I imagine it is going to be pretty flash however and longpoint that whole area used to be my favorite fishing spot early morning and twilight so pretty handy place to live.


I lived in Sydney for a while, it's great as a playground for the young free and single if you can get good money. I enjoyed it when I lived there but I would have different requirements now.[/QUOTE]

Yeh I lived there too when single but it does not work for family homes unless you own one and got in some time ago.

 

[Aaron Sice]

this thread is the equivelant to "how 2 put a tin on my rolla yewww" on rollaboyz.

 

[Humphrey]

I still don't understand what the debate was about. Seemed like a case of moving goalposts to me.

 

[Ms Jade]

Well I hope the bank boffins doing the risk assessment modelling are reading these threads with interest. It seems something must have gone awry for them to have recently re-rated risk on resi by increasing LVRs to 95% & above...

 

[Humphrey]

I think that the decision making process that leads them to drop LVR's would be fascinating to understand - the trade-offs between all the different factors such as loan risk, present and future funding costs, the economic models they use, what the competition are doing, and so on.

 

[HomeBuyerStrike]

Well I hope the bank boffins doing the risk assessment modelling are reading these threads with interest. It seems something must have gone awry for them to have recently re-rated risk on resi by increasing LVRs to 95% & above...

You make a valid point, is this from a mainstream lender? What's the potential downside for these lenders offering 95% loans? Don't they fob off part of the risk too?

You can find car insurance companies that will insure you for half the price of the mainstream insurers but good luck claiming from them. I can't find the link now but there's a small UK company offering too good to be true car insurance premiums in Australia.

 

[tom32]

From what I am hearing their cost of funding is increasing not decreasing so the market is certainly repricing the risk.

Perhaps this is in response to banks going back to 95% mortgages. If it is not in response to it then I don't know how the international bond funds after already raising eyebrows on CBA's balance sheet v loan assets will take it if say CBA said blow it we are going back to 95% LVR loans.

Maybe this is what Ralph Norris means when he says funding costs are going to increase? Because they are going to invest in riskier loan assets so the CBA expect to have to pay more for it?

 

[Aaron Sice]

I still don't understand what the debate was about. Seemed like a case of moving goalposts to me.

that's 3 people thinking the same thing....

 

[Aaron Sice]

Maybe this is what Ralph Norris means when he says funding costs are going to increase? Because they are going to invest in riskier loan assets so the CBA expect to have to pay more for it?

why would that NOT surprise me?

 

[HomeBuyerStrike]

that's 3 people thinking the same thing....

Maybe you could start a support group. You're trolling now, move on.

 

[tom32]

Aaron; Clearly it is selfish on my part to say this but I would rather them offer bullet proof loans only at say LVR 70 or better and reduce the interest rate on them the big 4 at any rate. Let the more exotic lenders do the 95% LVR loans and charge accordingly.

Surely the big 4 would have less difficulty sourcing funding with such a loan book and interest rates could be kept lower?

 

[HomeBuyerStrike]

Surely the big 4 would have less difficulty sourcing funding with such a loan book and interest rates could be kept lower?

Absolutely, lenders in failed economies are actively lending to the right people in this fashion to dilute the toxic sludge on their books. Right people being low LVR, low loan to income ratio and 'secure' employment. I use the term active because there are very few people who meet those criteria and getting them to catch a falling knife is half the battle.

 

[Aaron Sice]

Aaron; Clearly it is selfish on my part to say this but I would rather them offer bullet proof loans only at say LVR 70 or better and reduce the interest rate on them the big 4 at any rate. Let the more exotic lenders do the 95% LVR loans and charge accordingly.

Surely the big 4 would have less difficulty sourcing funding with such a loan book and interest rates could be kept lower?

i don't think you're alone there.

it's better for the books, it's better for credit rating and it's a sensible lending practise.

let those who want a 105% pay thru the nose for it - for the averager punter though, why should they absorb the cost?

trouble is, the CBA are too big - nearly 30% of the market share in OZ with CBA alone, + BankWest and all their other subsidiary lenders. the've saturated the market with their own product.

we're going to see with banking over the next 25 years what's happened to farmers over the past 25 years - get bigger or get eaten. in OZ, with such a pitiful population for the product required, offshore mergers/acquisitions will be required for lender to mitigate their risk.

imagine if they can't - you think getting that third or fourth IP loan is hard. in 20 years' time you try to get an standard home loan - CBA say "sorry, we're over exposed in that suburb/region/state, we already have 40% of the mortgages"....?

ASIC got it wrong with NAB. NAB SHOULD be allowed to network with other banks. it's not like they've got a huge foothold here anymore, anyway.

 

[Aaron Sice]

their books. Right people being low LVR, low loan to income ratio and 'secure' employment. I use the term active because there are very few people who meet those criteria and getting them to catch a falling knife is half the battle.

please explain how ANYONE'S job is "secure" if banks won't lend to their bosses?

 

[HomeBuyerStrike]

please explain how ANYONE'S job is "secure" if banks won't lend to their bosses?

Traditionally was government. Now includes professionals involved in asset recovery and insolvency. Secure is a relative term obviously. Even government jobs are not now ~100% secure because of cuts.