Rates up .25%
- Thread starter ani
- Start date
Keen said:Richard C,
I agree. I am in the Perth IP market and am getting myself ready to sell one of my IP's. I'm running the before and after figures on the cashflow flow of my IP portfolio and on my LVR. All looks very good.
I'm watching the market extremely closely - looking for cracks in the market and educating myself on the property cycle.
I am looking to get the IP valued shortly and am starting to takes steps in cosmetically renovating it for anticipated sale within the next 12 mths.
I estimate at sale I would have made $80 k net (after CGT etc) and will plough that into my PPOR loan making it a measly $40k.
Essentially I am preparing to reduce my overall risk and preparing to set myself up when the market gets ready to take off next time.
When its time to start investing again I should be left with no PPOR debit, one positive cash flow property and one negatively geared (long term good CG) property.
The attached may amuse and will at sometime become relevant.
Regards
Keen
Yep, we're in exactly the same situation with one of our Mandurah IP's. We've had massive CG's (55%) on this property since offer date Jul05 although we didn't settle until Sept. We thought it would be a 3-5 year buy and hold proposition but now think we'd be better off to take the money and run (read: pay down our PPOR). Trick is to pick the top of the market as we are reluctant to sell on the up. Will reassess in Sept and if we decide to wait a bit longer we'll give the tennant a short term extension. Then a cosmetic reno and we should be able to knock around $100K off our PPOR mortgage. That will improve our servicibility nicely and put us in prime position to pounce on some more IP's.
flatout
To be honest with you, I think it is premature to be saying that this interest rate rise will spell doom and gloom (and opportunity for some) for the residential property market.
The real mortgage rate is at the same level as it was in early 2004.
And that is with me making the following assumptions:
1. That CPI for the y/e 30 June 2006 is 3%,
2. There is another 25 basis points rise in the cash rate in June, and
3. Banks pass those rate rises onto customers immediately and directly in proportion (a 25 basis points rise in the cash rate > a 25 basis points rise in the variable lending rate).
See attached.
Mark
btw. I have used 2 period moving averages for the CPI and Real Mortgage Rates because CPI data (unlike the other data) is only issued quarterly. Using a 2 period moving average gives me a line instead of a series of un-connected dots.
btw.2. The heavy dashed lines that run horizontal on the graph represent the RBA's 2-3% CPI band. The graph starts in 1993, the same year that the CPI objective was first expressely stated and targeted.
The real mortgage rate is at the same level as it was in early 2004.
And that is with me making the following assumptions:
1. That CPI for the y/e 30 June 2006 is 3%,
2. There is another 25 basis points rise in the cash rate in June, and
3. Banks pass those rate rises onto customers immediately and directly in proportion (a 25 basis points rise in the cash rate > a 25 basis points rise in the variable lending rate).
See attached.
Mark
btw. I have used 2 period moving averages for the CPI and Real Mortgage Rates because CPI data (unlike the other data) is only issued quarterly. Using a 2 period moving average gives me a line instead of a series of un-connected dots.
btw.2. The heavy dashed lines that run horizontal on the graph represent the RBA's 2-3% CPI band. The graph starts in 1993, the same year that the CPI objective was first expressely stated and targeted.
**********************************************alexlee said:
Dear Alex,
1. I must admit that that RBA Australia was brave and prudent to introduce this rate increase in May 2006, to proactively arrest the emerging inflationary trends at this early stage even before Peter Costello makes his budget speech on 10th May 2006.
2. It was further said that the Australian financial market has also unanmiously agreed another 0.25% rate increase can also be expected in late 2006.
3. If the Australian public again fails to rein their consumer spending, the RBA will be forced to act further in the near future, given its increasing record level of trade deficit. In this sense, I agree with your post.
4. I personally think it will further take another 0.5% interest rate to effectively trigger off the "recession" in Australia which you are referring to, with the present weak NSW State economy and its housing market failing to recover in the near future, given its present market resilence.
5. However, to me, the real risk is not within Australia itself as I am personally confident of its prudent, pragmatic, capable Govt/management under the present John Howard-Peter Costella joint team leadership.
6. My immediate concerns is actually at the global macro picture of a possible/"likely" global financial crisis ( next world Depression?) eventuating in the near future within the next few years (as early as 2007 and as late as 2009), as a result of the American weakening economy and falling US$ currency value, a economic depression/"implosion" within China, continuing crude oil price increases/"oil embargo" type of scenario or/and major nuclear conflict arising from the present standoff confrontation between America and Iran/Middle East "Arab-Jews" related politicking or/and unforseen major natural disasters to come, as was separately discussed in another thread in this forum.
7. I think that you may get more than a "recession" if we further monitor the events to further unfold themselves in the near future.
8. For your kind update, please.
9. Thank you.
regards,
Kenneth KOH
*************************************************flatout said:
Dear Flatout,
1. I was down in Mandurah twice last week to feel the actual market fever. I think that it has already reached the "mania" stage where housing prices are "unrealistically" high and people are "madly" snapping up new land release/property release before their official release and then re-selling them the next day/ immediately for $20,000-$30,000 quick profit gain. I have no doubt that Mandurah is a highly speculative market now and its high housing prices is clearly "non-sustainable" in the immediate short-medium term.
2. I think you have done well to date and it might be more prudent to lock in your profits and exit the market safely before time runs out fast in the near future.
3. Even the more conservative Herron Todd White(HTW) Property Valuers Group, has reported the Perth property market to have "peaked" in its latest monthly review.
4. For your kind update, please.
5. Thank you.
Cheers,
Kenneth KOH
Pitt St said:
You are right to be concerned.Kennethkohsg said:
Most economic debate extrepolates current trends (the known knowns) and modifies it with their predictions of what might happen (the known un-knows) while ignoring other factors (the un-known knowns) such as population explosion, peak oil and global warming.
I concede that we can't plan for the un-known un-knowns beyond buying a little insurance. Depending on your philosophy that can range from a large wine cellar, bullion coins, an AK47 and 10,000 rounds or a piece of dirt in the Daintree where you have all of the previous mentioned item plus a few Mary J Wana plants. Ya pays ya money and ya takes ya chances. LOL
If you think I made that up, go to the peakoil.com forum and read what they think.
ps Apologies to Mr Rumsfeld
