someone's got his panties in a bunch 
heh
this thread is getting so exciting!
hehthis thread is getting so exciting!
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Changes / tightening on servicing for investors
- Thread starter Marty McDonald
- Start date
Is this the Beginning of Da End?
Will property prices collapse soon?
Will property prices collapse soon?
someone's got his panties in a bunch
What are you trying to say ?
That's if investors starts selling off their properties like wildfire which is unlikely for now.
I'm not an expert but my personal thoughts are these changes only impact on investor's behaviour to continue acquiring more IPs. It would not affect their current serviceability of their existing loans.
Unless there is change to servicing load (eg: rate hike, changes to NG or anything that affects cashflow) such that investors are going to find it difficult to hold on to their properties, then we may start seeing price drops due to sell offs.
Have a backup plan if it looks like financing's going to be an issue. Perhaps sell off one of them for a bit of quick cash? Great sellers market at the moment. Do it before the masses react to the changes in lending regulation
With likely limited CG in Sydney (in apartments anyway) in the next few years and talk of the interest rate cycle at its bottom that's what I'd do.
Thanks... I checked with my broker... Seems to have no issue...
Prices has gone up since i bought them in 2013... at least 150k
Thanks, that's a fair whack!
Market prices are not set by those investors happy to hold their properties, but by the current buyers and sellers in the market of which there is a constant flow.
If these changes are enough to impact (in a meaningful way) the price that buyers can pay or even reduce the number who are now in a position to buy, then it has the potential to affect prices even without a panic.
Broadly agree - although there will be some that have I/O periods expire with more troubles renewing them. That may increase the supply a little.
Just to point out the obvious - in any market there are always sellers for all sorts of reasons. Like others I don't see the number of sellers changing much as a result of this.
I do see the number of buyers dropping as a result of this though - with investors buying 50% of properties now and a reasonable chunk of them going to run into troubles here, we could easily see (say) a circa 10%? drop in the number of buyers overall?
IMO that's not enough to cause big shocks but it probably is enough to moderate for example the Sydney boom and keep somewhere like Perth in the doldrums for longer. But for a "price crash" scenario to eventuate there have to be a large number of owners who have to sell - the Banks (and APRA) will be sure to stay away from anything that does that - they just want to moderate behaviour on the buying side...
Record low interest rates for longer also mean there is no reason to see an increase in the number of people who have to sell.
Not good for real estate agents though as we could see a meaningful (further) reduction in the number of transactions across Australia as a result of this. So I expect a slow market with fewer sales but values largely holding.
I do see the number of buyers dropping as a result of this though - with investors buying 50% of properties now and a reasonable chunk of them going to run into troubles here, we could easily see (say) a circa 10%? drop in the number of buyers overall?
IMO that's not enough to cause big shocks but it probably is enough to moderate for example the Sydney boom and keep somewhere like Perth in the doldrums for longer. But for a "price crash" scenario to eventuate there have to be a large number of owners who have to sell - the Banks (and APRA) will be sure to stay away from anything that does that - they just want to moderate behaviour on the buying side...
Record low interest rates for longer also mean there is no reason to see an increase in the number of people who have to sell.
Not good for real estate agents though as we could see a meaningful (further) reduction in the number of transactions across Australia as a result of this. So I expect a slow market with fewer sales but values largely holding.
Can I still buy more
Hi Guys,
I currently have my PPOR with LVR of 70% , 2 IP's with 90% LVR. Spoke to my broker and she said that I am safe, and I still have 80K available to redraw on my PPOR, and She can still get me a pre-approval for 10% Deposit.
I am thinking to buy another one and wait for a while, am i safe to do so, or wait and see.
My situation is pretty stable, and I have enough cash to cover me for 1 year paying all rates and loan repayments.
Thanks
Ram
Hi Guys,
I currently have my PPOR with LVR of 70% , 2 IP's with 90% LVR. Spoke to my broker and she said that I am safe, and I still have 80K available to redraw on my PPOR, and She can still get me a pre-approval for 10% Deposit.
I am thinking to buy another one and wait for a while, am i safe to do so, or wait and see.
My situation is pretty stable, and I have enough cash to cover me for 1 year paying all rates and loan repayments.
Thanks
Ram
Based on that, who are the "current buyers"?
Seeing from a Sydney-sider's perspective, I maybe wrong but I think there's a good chance that most of these "current buyers" are likely to be investors prior to the APRA changes.
PPOR buyers, not that many I'll say since every open houses I've been to almost everyone is an investor. There maybe the odd young couples who are genuinely buying a place to live but hard to come by.
But of course investors are not the sole group of people that have an influence in price but they have been playing a major role in it for past years and could also be the case for the years to come.
If you buy, ensure offer is subject to finance
I have posted about this many times over recent years ; about credit availability being the single most critical driver of growth.
I argued many times that too many investors failed to acknowledge the role of credit. I argued that their successes were achieved in large part due to the greatest credit boom in history, and that it made them complacent and expectant that prices would just always keep growing because credit would always be available.
I argued that the portfolio building successes of that earlier generation of investors could not be replicated again by the vast majority of newer entrants, because of the lack of expansionary capability within the credit side of the equation.
I argued that any future growth would likely be very limited for long period, followed by short period of boom... because the credit expansion cycle had topped out, but I conceded that big rate cuts would create big short term increases to capacity, but that it would only last a while, as the rate cuts would eventually lead to a property bubble forming, and then the music would have to be stopped by some form of prudential intervention. What most surprises me now is not these changes- blind freddy knew something had to give- but how long they left the intervention. It is @ 18 months too late, as Sydney has reached stupid and dangerous levels in some parts. The RBA and APRA and the banks had better pray rates dont need to be increased for several years yet, because rate increases of 1.5 or 2% right now would be enough to collapse some parts of the Sydney market where crazy..literally crazy amounts have been paid by people speculating, and where rents are yielding barely 3% because of the crazy prices paid. That means large parts of the Inner West and Lower North Shore in particular.
And I argued that for all of these reasons, NRAS and it's massive tax free surpluses, redirected towards aggressive debt reduction, would be the smartest and best way to invest over the next decade, offering the best and safest way to replicate the portfolio building achievements previous generations enjoyed, by redeploying the massive surplus tax free monies towards aggressively paying down debt , to create both the equity and the additional borrowing capacity to continue to invest in years to come.
Now, I was rubbished and refuted, but now you have seen why I made those arguments. This is what happens when the availability of credit is curtailed. The past 2-3 years have been almost a fools gold, but were really just the last hurrah for banks trying to use every possible last trick in the credit and servicing calculator playbook, to squeeze out every last dollar. A kicking of the can down the road so to speak , towards the always inevitable end game - prudential intervention to stop the RBA rate cuts flowing into a housing bubble. These new regulations will only be lifted when rates top 6-7%, which wont happen for a long time , or at least until the Euro and Greenback recover strongly enough that the RBA can go to a 5% cash rate and not drive the Aussie to $1.10 US...
So, accepting now that borrowing capacity for most investors is set to be heavily constrained across all lenders for at least the medium term, where will growth be manufactured from now? I suspect we will now enter a prolonged period of blah, basically. There will be the usual suspects arguing that they aren't affected by this. They are equity and cash flow rich enough to borrow at 10% rates, so these changes will have no material impact. But the vast majority wont enjoy that luxury, so growth will slow... I don't expect this to collapse the property market, unless a big surge in unemployment rolls along at the same time as investors are forced to slow down...but I do expect it to stop the majority of investors from reinvesting as often and as quickly...
NRAS investors will use the next several years to aggressively reduce debt, creating equity even where there is limited or blah capital growth... and that creation of equity through the aggressive reduction in debt will position them to continue borrowing in years to come.
I argued many times that too many investors failed to acknowledge the role of credit. I argued that their successes were achieved in large part due to the greatest credit boom in history, and that it made them complacent and expectant that prices would just always keep growing because credit would always be available.
I argued that the portfolio building successes of that earlier generation of investors could not be replicated again by the vast majority of newer entrants, because of the lack of expansionary capability within the credit side of the equation.
I argued that any future growth would likely be very limited for long period, followed by short period of boom... because the credit expansion cycle had topped out, but I conceded that big rate cuts would create big short term increases to capacity, but that it would only last a while, as the rate cuts would eventually lead to a property bubble forming, and then the music would have to be stopped by some form of prudential intervention. What most surprises me now is not these changes- blind freddy knew something had to give- but how long they left the intervention. It is @ 18 months too late, as Sydney has reached stupid and dangerous levels in some parts. The RBA and APRA and the banks had better pray rates dont need to be increased for several years yet, because rate increases of 1.5 or 2% right now would be enough to collapse some parts of the Sydney market where crazy..literally crazy amounts have been paid by people speculating, and where rents are yielding barely 3% because of the crazy prices paid. That means large parts of the Inner West and Lower North Shore in particular.
And I argued that for all of these reasons, NRAS and it's massive tax free surpluses, redirected towards aggressive debt reduction, would be the smartest and best way to invest over the next decade, offering the best and safest way to replicate the portfolio building achievements previous generations enjoyed, by redeploying the massive surplus tax free monies towards aggressively paying down debt , to create both the equity and the additional borrowing capacity to continue to invest in years to come.
Now, I was rubbished and refuted, but now you have seen why I made those arguments. This is what happens when the availability of credit is curtailed. The past 2-3 years have been almost a fools gold, but were really just the last hurrah for banks trying to use every possible last trick in the credit and servicing calculator playbook, to squeeze out every last dollar. A kicking of the can down the road so to speak , towards the always inevitable end game - prudential intervention to stop the RBA rate cuts flowing into a housing bubble. These new regulations will only be lifted when rates top 6-7%, which wont happen for a long time , or at least until the Euro and Greenback recover strongly enough that the RBA can go to a 5% cash rate and not drive the Aussie to $1.10 US...
So, accepting now that borrowing capacity for most investors is set to be heavily constrained across all lenders for at least the medium term, where will growth be manufactured from now? I suspect we will now enter a prolonged period of blah, basically. There will be the usual suspects arguing that they aren't affected by this. They are equity and cash flow rich enough to borrow at 10% rates, so these changes will have no material impact. But the vast majority wont enjoy that luxury, so growth will slow... I don't expect this to collapse the property market, unless a big surge in unemployment rolls along at the same time as investors are forced to slow down...but I do expect it to stop the majority of investors from reinvesting as often and as quickly...
NRAS investors will use the next several years to aggressively reduce debt, creating equity even where there is limited or blah capital growth... and that creation of equity through the aggressive reduction in debt will position them to continue borrowing in years to come.
Euro that's is a bit negative I feel. For the vast majority of borrowers this wont be an issue at all. For the accumulators with multiple properties it may be a stall period until things change / their servicing increases.
Its not the end of the world yet.
Its not the end of the world yet.
Are they X-coll?
BW don't tend to be anyone's favourite for investors so you most likely would have had to move away from them at some stage anyways.
Euro - the same can be said for CIPs, regionals, flocks of bats, development or any other "higher yielding, perception of higher risk" property investment out there.
Just quietly, there is a lot more to profitable property investing than just NRAS... and I'm yet to be convinced that paying down debt per se makes a heap of financial sense when money has never been cheaper vs redeploying it in profitable investments. Of course it still obviously beats spending it on doodads.
Paying down debt makes sense when debt is expensive. When money is cheap, borrowing more of it for profitable purposes makes sense. I know you already do this for NRAS purposes but it's a wide world out there and exposing yourself completely to government schemes isn't always the best idea. I should know in my industry... diverse sources of income is the name of the game unless you are going for entrepreneur of the year.
Just quietly, there is a lot more to profitable property investing than just NRAS... and I'm yet to be convinced that paying down debt per se makes a heap of financial sense when money has never been cheaper vs redeploying it in profitable investments. Of course it still obviously beats spending it on doodads.
Paying down debt makes sense when debt is expensive. When money is cheap, borrowing more of it for profitable purposes makes sense. I know you already do this for NRAS purposes but it's a wide world out there and exposing yourself completely to government schemes isn't always the best idea. I should know in my industry... diverse sources of income is the name of the game unless you are going for entrepreneur of the year.
Thats not the case... the removal of debt will increase capacity.
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