Dunno what drugs i was on when I originally signed up for the seminar but i forgot who was presenting, so it was all a bit of a surprise. The day included:
John Mc Something (Sorry to be rude, I just didn't quite catch his name & it wasn't written anywhere) from Residex, Rick Otton (v. interesting for me, having heard about him for so many yrs but never seen him), Catherine from Decor In Style, which seems like a good interior design / renovation company and Rob Farmer, CEO of property managers Run Property.
Bill did the last 2.5hrs of the day and here's some of his thoughts. I stress that he wasn't saying that any of these "predictions" will be right. In fact, he hopes many of them are not. It's just an opinion. Here are some points from the presentation:
- 70% of overseas finance goes to residential property. let's hope those banks don't recall their $
- Australia is #7 country on the list of large negative current account balances with ($44 billion).
- Order of collapse in US = Housing, Finance, Business, Employment.
- Order of collapse in Oz = Finance, Business, Employment, Housing
- Should be 6-12mths before Housing here is seriously impacted. It all depends how Finance holds up. If serious falls don't happen, we'll probably get quite a few yrs of 2-3% growth (i.e. basically sideways).
- First half of 2009 still an OK time to sell (don't wait).
- "Entitlement Era" (boom) is started by loose credit and credit tightening is a sign of "production era" (that we are now entering). The production eras of 1890 - 1919 (29yrs) and 1929 - 1945 (16yrs) were ended by wars. Hopefully this one will not be(!) and hopefully won't be as long..
- Lenders offering >60% LVR on low-docs will not be doing it for long. Low-Docs will potentially disappear altogether by end of yr if prices fall or low-docs start to show quality problems
- refi lowdocs into full docs if you can
- Restrictions coming in on amount of redraw allowed on new loans. may be restricted to, say 20% of value. LOCs can be frozen (they are doing it to business first) so change yr LOC to an offset account.
- Full doc loans may be limited to 70% and rate premiums could potentially be introduced on investment loans (has come back in US).
- Bigger loans (>500k) may be difficult to finance, so safer not to look for higher value investment prop's.
- Non standard resi will get more difficult to fund (eg serviced apartments).
- Loans probably won't be recalled just due to decline in asset value but can be if you don't make a payment.
- You are in danger if you haven't separated yr investment & business risk. Property loans shouldn't be with same bank as yr business!
- Limit exposure to each lender
- Even if you have 85% LVR, if you have 4million + with a lender your file will probably be reviewed if equity drops.
- Keep your LOC facility at a separate bank
- = Not the time to Go Big!
- Review your finance position now! What's difficult to finance now may be impossible in 6 mths
- In times of deflation, you need to become a net lender by paying down mortgages. In times of inflation it's better to be a borrower.
- Keep your LVR to 60% if possible
When to Buy, Sell or Hold:
- HOLD if you would still hold if the property drops 50% & you can keep paying
- BUY if are paying down mortgages; if you can make $ with a clear & safe exit strategy
- SELL If you are using equity, are too highly geared on marginal income/cashflow, or if you are having some trouble now getting finance.
Obviously this doesn't make up for 2.5 hrs of stuff so it's always better going to the seminars if you can!
