and therein lies the behind the scenes issue.
15%, in the good old accounting world: the issue of materiality is 10%
Negative equity on the rise
- Thread starter hobo-jo
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and therein lies the behind the scenes issue.
15%, in the good old accounting world: the issue of materiality is 10%
Sorry rolf, but that can't be right, such occurrence is not possible according to Propertunity
I think your comment that is just silly. The definition of "market value" is fully covered by a price being paid at auction, under the hammer, after a 4-6 week public auction campaign.
Sorry rolf, but that can't be right, such occurrence is not possible according to Propertunity
of course human misjudgements are possible, valuers are only human, And they can get a wrong BOTH ways.
In the valuation in question, I have just received a full copy of that report, and have run some independent numbers from some other sources using four other methods of simplistic valuation.
it would appear that the valuer suspects a form of contract stacking or rebate scheme going on..................... interesting call to make, without any evidence to back same.
In any case, over the last 12 years of doing this type of work, this type of occurrence in percentage terms is 0.0015 % of all purchases, and well under 1% for auction sales.
A statistical outlier, caused by an intellectual "decision" of one valuer, which will be fixed by another valuer today.
I'm not into gross macroeconomics, I work on everyday stuff, with real people, with real money and real emotions, on the ground, everyday.
thanks
Rolf
We've pretty much seen houses rising across the board for the last 12 years with no serious property down turns (except perhaps for 2008 at which point the government started artificially buoying prices through stimulus and bailouts) and we've had no recessions.
It's my suspicion that a medium term property down turn would increase the frequency of this type of occurence, but guess we'll have to wait and see.
As opposed to many doom and gloomers who typically haven't invested in anything and are praying for a downturn so they can purchase something on the harbour at "fair market value".
I call ********
Genworth just did
Still negative equity in Perth depending on when and where you brought. Getting mixed messages on whether dead cats are bouncing but I think on the balance of probabilities Perth has at the very least stablised.
On the other hand, I'm still seeing high end stuff in the GC, Sunshine Coast and FNQ selling at 30-50% discounts to 2006 val/purchase price.
none of this is news though (can't comment on QLD) - it started years ago and the worst is well and truly behind us. with rents going as ballistic as they are they will provide the impetus for a decent recovery. huge underinvestment will see supply constraints (tempered by ongoing finance issues nationally)
and at least three years of flat, for Brisbane at least. in fact i think Brisbane, this year, will be similar to last year and then three years of flat.
i don;t expect any boom in the next few years.
Banks devaluing to offset risk
I know several property valuators in Brisbane and they have told me they been instructed by the banks to devalue each property if they can on average by around $50,000. The reasoning for doing this is to offset their risk levels by under pinning lower risk loans or balancing their books to try to reduce the cost of insurance towards borrowing money from the market, as is based on their holding of loans.
So atm there the banks are looking after themselves by raising rates and deleveraging the market for there own needs. Those that are paying cash for properties in Brisbane you really need to negotiate hard, as there is no bottom at the moment and the market is very confused. So anyone who has bought in 2009-11 you may have little to no CG or equity by end of the year. Some properties are already back to 2004-05 prices already and will be interesting if they go to 2002-03 levels.
I know several property valuators in Brisbane and they have told me they been instructed by the banks to devalue each property if they can on average by around $50,000. The reasoning for doing this is to offset their risk levels by under pinning lower risk loans or balancing their books to try to reduce the cost of insurance towards borrowing money from the market, as is based on their holding of loans.
So atm there the banks are looking after themselves by raising rates and deleveraging the market for there own needs. Those that are paying cash for properties in Brisbane you really need to negotiate hard, as there is no bottom at the moment and the market is very confused. So anyone who has bought in 2009-11 you may have little to no CG or equity by end of the year. Some properties are already back to 2004-05 prices already and will be interesting if they go to 2002-03 levels.
I know several property valuators in Brisbane and they have told me they been instructed by the banks to devalue each property if they can on average by around $50,000. The reasoning for doing this is to offset their risk levels by under pinning lower risk loans or balancing their books to try to reduce the cost of insurance towards borrowing money from the market, as is based on their holding of loans.
So atm there the banks are looking after themselves by raising rates and deleveraging the market for there own needs. Those that are paying cash for properties in Brisbane you really need to negotiate hard, as there is no bottom at the moment and the market is very confused. So anyone who has bought in 2009-11 you may have little to no CG by end of the year. Some properties are already back to 2004-05 prices already and will be interesting if they go to 2002-03 levels.
how would lowering property values help banks? if anything it would cause them to collapse if it goes too far. "The reasoning for doing this is to offset their risk levels by under pinning lower risk loans " doesnt make sense - the risk is your LVR against val, not what you secretly beloeve theval to be. and once all vals come in $50k then there is no secret val - the val is the market
That's not true. If someone purchased a property for $500,000, an 80% lend is a $400,000 loan. If the bank's valuer values it at $450,000, that means that for the $400,000 to come through, mortgage insurance would need to be paid. Otherwise, an 80% lend would now only be a loan of $360,000, which means the purchaser has to cough up $140,000 in his own cash rather than $100,000. This does lower the bank's risk because there is far more equity to play with and/or coverage by mortgage insurance.
The underlying asset is the same no matter what valuation is written on paper.
Therefore on lower valuations they can charge a range of fees. Also it forces the credit teams to tighten lending going forward and on comm properties it forces repayments of some debt.
But the underlying asset is the same.
no because they are lending less. Valuations set the market just as much as the market sets the valuations. just as credit fuels property prices
that's great except they have a portfolio of loans that is suddenly exposed at higher LVR.
equity if the property was worth $500k = $100k
equity if the property was worth $450k = $90k
now if the property was secretly worth $500k then yes they have squeezed some wriggle room - but that lasts for all of... oh, one or two deals
Yes but the lower equity is insured by the LMI...which is paid for by the borrower. So the bank is covered regardless of the LVR being 80% or 90%.
there's too much assumption to draw that conclusion. the buyer may say stuff it if it doesn't stack to val and we can't get the finance we want we are walking. many will walk before paying mortgage insurance.
