Government's plan: Banks to co-own homes

[mitch]

Gday All,

you must be talking about a new different type of bank to the ones lve had dealings with over the years.

Ive heard and read many stories ( as well as my own difficulties ) over the years how thinking people with equity,plans,other forms of income etc have been made to jump through hoops for finance by the all mighty banks.

Now these same (?) banks are going to go 50/50 with people who
cant afford/dont have/cant get access to a 10% or so deposit ?

Would you be a silent partner for the type of buyer that may wish to use this service,and some people ( politicians ) think banks will?

MITCH

 

[Jas]

One problem I see is that the bank will start to buy and sell the mortgages, meaning that house prices will move faster and act more like listed trusts.

Not an idea I like...

Jas

 

[CAD Guy]

and in the meantime, what happens to your increased equity as time goes on? You buy a house for $500K and the bank has a $250K share. X years on the house is worth $1m. Who owns the $500k increase?

 

[plainsong]

I wonder who pays for upkeep of the dwelling-will the bank pay for half a tap and half a shower screen? half the rates-or will the tenant pay for all that and the bank pocket their half of the profit without any of the expenses? I guess it will all come out in the fine print, eventually.

 

[see_change]

The one thing I can see this proposal doing is pushing up prices further , so it will maintain the property market , and all of the building industry with it.

This will keep theAustralian economy moving , and will help Liberal win the next election....

Maybe it's that simple

see change

 

[michaelg]

Hi,

It's like watching somebuilt a house of cards.

Opps, 4% building write off

Opps, 2.5% building write off but steady

Opps, HomeFund, CRASH!, start again

Opps, FHOG @ $7k

Opps, FHOG @ $14k

Opps, FHOG back to $7k (pulled a card from the bottom, put it on top JENGA!)

Opps, consider $10k fund for debt relief, wobbly now

Opps, lender equity share proposal, now don't breathe!

I wonder what the next Ace up the sleve they will pull out to place on top?

Just a thought
Michael G

 

[see_change]

Michael

Don't give them ideas or they may start wrapping ....

see change

 

[strangep]

Effect on wrapping industry

Hi guys

Just a thought (as he pulls another gem from his hatfull of stupid questions ).....

What effect would a proposal like this, if implemented, have on the wrapping industry??

Cheers

Paul

 

[coffee]

http://www.apr.com.au/publish/article_163.shtml

Just came across this jun 6th

Geoff

 

[Savanna100]

Like Tibor, i read the whole document on this when It first came out.

I feel it would damage our interests as investors and therefore do not support it. As for who owns the increased equity...the answer is both you and the lender own the increase in proportion to the amount originally decided...eg you and lender own 50% each then 50% of the increase goes to each.

Savanna

 

[Les]

G'day all,

One point that struck me about this "scheme" is - "How does it work if you want to spend a bit on your property? Does your 50% partner kick in half?" (I'm thinking here of adding value to the property - add a DLUG, landscaping, extra room, new kitchen, etc.)

And if they DON'T kick in half the cost, then does YOUR investment then alter the ratio to (say) 60:40 rather than 50:50 ?

It wouldn't be fair for them to gain 50% of added value if only YOU were putting up the cash to do, would it???

Thoughts? Or does someone actually KNOW the answer? (I don't - it's just a thought ....)

Regards,

 

[bundy1964]

Originally posted by Les
It wouldn't be fair for them to gain 50% of added value if only YOU were putting up the cash to do, would it???

Hi Les

I think you get those joys for not paying rent on the banks 50%

My ? is how will the banks fund all this untill the properties have sold?

Isn't the average length of time in a home 7 years?

bundy

 

[Will1]

Unlike many, I see this as positive. To respond to a few issues;


Short term this adds buyers to a market and increases prices. LT yields drop, renters buy equity, investors feel some pain.

(compare FHOG...what a system, a country where we give welfare to people who can afford to buy real property!)


Why would institutions do it? A new asset class! Securitised residential real estate in the super funds of Australia with investment bankers clipping the ticket on the way through. Portfolio theory suggests that this will reduce volatility in portfolios as resi RE moves differently to other asset classes.

Will1

 

[Tibor]

In today's SMH (and the website) the following article appeared


Costello snubs Howard-sponsored home plan
By Cosima Marriner
June 7 2003





The federal Treasurer, Peter Costello, will not recommend a plan for cheaper housing drawn up by the Prime Minister's Home Ownership Taskforce.

The plan, which was presented to to the Liberal Party's national convention in Adelaide yesterday, would allow Australians to sell equity in their homes to the bank, helping them own their own homes sooner.

A spokesman for John Howard said yesterday that the Government welcomed the report and would study the findings. However, Mr Costello said he thought most Australians would prefer to own their home outright, rather than sell a portion to a bank.

"For most Australians I don't think they would find it attractive," he said.

"I wouldn't promote it."


The taskforce was commissioned by Mr Howard last September to report on the burgeoning problem of housing affordability.

Mr Costello said that despite his misgivings, he would not oppose the introduction of such a scheme.

"If an individual wants to sell 50 per cent of their property off to a bank, I suppose they should be entitled to do so," he said.

"I am not recommending this as a type of investment, but if there are people who think it is a kind of investment that would suit them - provided that they don't get into trouble maintaining their payments - that is a matter for them to decide."

The Liberal Party think tank the Menzies Research Centre, which supervised the taskforce, estimates the cost of owning a home might be cut by 30 per cent if the plan was adopted.

The plan's co-author, Cambridge University economist Christopher Joye, said there was a "very, very significant number of Australians" willing to sell equity in their homes to the banks.

Tibor

 

[foxysilvers]

Will1.....absolutely agree with you!

A new asset class added to a very dull equity market.

Reverse mortgages and annuities for RE rich cash poor oldies.

A bigger and more stable RE market with an influx of OS money and migrants.

If this idea gets up it will be bigger than Kim Beazleys gut or Simon Creans whining.

It could be the winning goal from the Man of Steel.

Cheers

 

[mort the frog]

I bet my bottom dollar that if you were in co ownership witnh the bank at say 50/50 and the house dropped in value that the bank would have some tiny print in the contract that made the person liable for any loss in the transaction. I can not see any bank going halves in a loss. Can you.

 

[foxysilvers]

Mort........Banks write off losses from mortgage loans quite often and Im sure they hate it even if it has been factored.

If this scheme gets off the ground it will be interesting just what lending criteria the banks put in place. Surely it would have to be flexible and maybe similar to current LVR ratios.

It would be hard to see the same deal done for prime Melb/Syd residential against investment grade hirise or small rural towns.

I think you are correct about the banks attitude but they are more likely to victimise the property than the punter......the results the same but the PR is better.

Cheers