House prices
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Just reading comments posted by THEHEATH and a couple of others, the concept of interest rate rises driving those who cant afford property (and therefore shouldnt have bought it) out of the market (and therefore prices down) is very neat and digestible but I just dont think that thats what happens in reality.
I dont have a lot of experience, so am just supposing for the moment, but i dont know anyone, nor have ever heard of anyone, anywhere, at work, through friends, in Aus or the UK, now or over the last 10 years who ever sold their place purely because their interest rates went up a bit.
Has anyone else?
I genuinely dont know and it would be interesting to find out.
Like a previous poster said, it would be the descretionary spends that would be first to get shelved... cutting out a few lunches, buying cheaper stuff, going out less... selling the house is a bit dramatic.
I dont have a lot of experience, so am just supposing for the moment, but i dont know anyone, nor have ever heard of anyone, anywhere, at work, through friends, in Aus or the UK, now or over the last 10 years who ever sold their place purely because their interest rates went up a bit.
Has anyone else?
I genuinely dont know and it would be interesting to find out.
Like a previous poster said, it would be the descretionary spends that would be first to get shelved... cutting out a few lunches, buying cheaper stuff, going out less... selling the house is a bit dramatic.
It's real simple ... population growth + lack of housing + increasing rental returns + low vacancy = Massive demand for rental properties = prices rising.
Many investors are still paying 8%+ because as I read on this forum 18 months ago they would lock in ... that seemed like a good idea at the time
People don't sell the family home if rates increase 1-2% ... they tighten their belts ... "Aussie Dream" and all that
I have noticed in the new homes arena ... in Melb where I play, the investors are taking over from FHB's so demand is still high ... again = high prices
Many investors are still paying 8%+ because as I read on this forum 18 months ago they would lock in ... that seemed like a good idea at the time
People don't sell the family home if rates increase 1-2% ... they tighten their belts ... "Aussie Dream" and all that
I have noticed in the new homes arena ... in Melb where I play, the investors are taking over from FHB's so demand is still high ... again = high prices
I think that the factors that have helped support house prices in Australia are:
A recession will have an impact on immigration: Migrants may go home (Eastern European workers have left the UK due to a lack of jobs and a weak currency); fewer will look at moving in the first place; and the government will slow the rate.
The last point has already happened to a degree. If they're not sponsored by a state or company, or have an occupation on the Critical Skills List then a migrant is likely to have to wait until 2012 to receive a visa.
There has also been a general tightening of the rules pertaining to staying on after study.
The FHB is believed to have pulled demand forward from first time buyers. I'd expect fewer to enter the market next year
Rising interest rates will reduce affordability, and the RBA is concerned about house prices getting out of control. So there could be policy intervention to prevent this.
- Avoiding the recession.
- High rates of immigration.
- The FHB and low interest rates.
- Demand for IPs and PPORs.
A recession will have an impact on immigration: Migrants may go home (Eastern European workers have left the UK due to a lack of jobs and a weak currency); fewer will look at moving in the first place; and the government will slow the rate.
The last point has already happened to a degree. If they're not sponsored by a state or company, or have an occupation on the Critical Skills List then a migrant is likely to have to wait until 2012 to receive a visa.
There has also been a general tightening of the rules pertaining to staying on after study.
The FHB is believed to have pulled demand forward from first time buyers. I'd expect fewer to enter the market next year
Rising interest rates will reduce affordability, and the RBA is concerned about house prices getting out of control. So there could be policy intervention to prevent this.
You need only cast your mind back to after the election before last when interest rates went up and the papers started running front page stories on rising repossesions and people were crying blue murder because John Howard said "rates wouldn't go up under a Liberal government", yet here were all these families struggling to cope with the rises. It did happen, and things weren't even that bad. The point is that was happening when prices were lower than they are now (ie. Smaller loans) and when there was LESS stimulation and artificial inflation(ie. FHB grant was smaller) .
That aside, the other point was that as interest rates rise servicability falls so you don't even need a whole heap of repossesions for prices to stagnate or drop. People just don't have the ability to borrow what they could.
And of course we all know there is a shortage of housing, because they keep telling us so!
And of course we all know there is a shortage of housing, because they keep telling us so!
I don't believe there is a shortage of housing. Only that every Tom, Dick and Harry (and throw in Wong and Mohammad) wants to live inner city and in Toorak. I am sure there are plenty of places they can buy and rent out there in places which I won't mention in case I offend anyone, haha
In other words:
- No shortage of housing, so don't invest in 'housing'.
- Shortage of quality housing, so invest in quality housing.
If you can afford it which is the whole point why demand might be staved off...
IMHO
I prefer variable...as more flexible. When you have fixed rates the BREAK FEE is the most important consideration. Read somewhere the average loan is only 5 years!
I consider neutral IR as 6%
If you can get below 6% = good
When we pay over 6% on IP then rent should cover and rent increases each year.
IMHO you only need to survive one 'IR cycle' to get ahead as cost of purchase of IP stays the same.
People with multiple properties prefer 'fixed rates' as a way of managing their risk.
Kind Regards
Sheryn
Fujitsu/JP Morgan's latest review of the mortgage market might be worth a look (will find the link shortly).
True, very true...
Combine this with a strengthening economy and imroving sentiment...well I cant see inner city getting any weaker put it that way. Australia is a power house-exiting times ahead...
Laughable and dumb. Its not in their interest to promote property, so they bash the whole sector. What would a fund manager or broker say or know about property - its not their area of interest. I have never ever seen a +ve report from such groups about property.
But then again, Token Funder never has anything nice to say about property. Its a wonder he frequents this site. Care to tell us what you have been buying mate? Please share.
1 year window - stagnate with a slight rise as usual.
10 year window - house prices double as usual.
How about this "summary" Token Funder..
http://www.theage.com.au/business/house-prices-hotting-up-20091010-grnf.html
Regardless of your fringe commentary sources, there is almost a unanimous consensus for where the values are heading - most of your mates have thrown the towel in and either vanished from the forum or have bought properties...!
If anything it will be a GHPR (Global House Price Recovery
) phase moving forward... There will be some though who will find solace in some remote and sidelined source of info like "Rinnai Hot Water Property Commentary Report" with perhaps a relo of Preofessor Keen preaching doom and gloom in the best of times for property investing.For the rest of us, Buy and Hold has worked and we are on the verge of seeing another boom .
There cannot be 2 opinions about where the values are heading - with the incredible growth in population combined with growth in economy and the massive shortage of dwellings.
Even with 200 basis point rise, we will still be sitting at interest rates of low 6's, which were the rates when we experienced the previous booms.
Harris
Defensive much?
Fujitsu/JP Morgan don't have an agenda. Martin North has been consulting to the mortgage industry for years (I know because I've used him) and he and the boys make their money by being accurate and relevant rather than having a vested interest in a given outcome.
I put this stuff up for the same reason I put up the mortgage insurers gear...it passes across my desk and not in front of most members of this forum
And, BTW, I own property (freehold..even though I know that's unfashionable), manage billions in mortgages for a living and am obliged to have an idea what's going on as distinct from what makes me feel all warm and fuzzy.
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How about this "summary" Token Funder..
http://www.theage.com.au/business/house-prices-hotting-up-20091010-grnf.html
Regardless of your fringe commentary sources, there is almost a unanimous consensus for where the values are heading - most of your mates have thrown the towel in and either vanished from the forum or have bought properties...!
If anything it will be a GHPR (Global House Price Recovery
For the rest of us, Buy and Hold has worked and we are on the verge of seeing another boom .
There cannot be 2 opinions about where the values are heading - with the incredible growth in population combined with growth in economy and the massive shortage of dwellings.
Even with 200 basis point rise, we will still be sitting at interest rates of low 6's, which were the rates when we experienced the previous booms.
Harris
Ibid................
