It's always a mistake to equate new business offers and discounts on variable to bank's views on rates. They're not the same thing.
RBA's Unofficial Briefings: Interest Rates Headed Down Soon
- Thread starter annie lumen
- Start date
It's always a mistake to equate new business offers and discounts on variable to bank's views on rates. They're not the same thing.
TF - agree - the guy doing the bank promos isnt the same guy who talks about the banks views.
Buzz - with variables theres way more flex in rates than was previously. This being said lenders are negotiating on existing business as well to retain it. Its just not advertised.
To be honest we dont fix a lot if any clients as we need the loans to be on variable for the debt recycling & varying limits.
Buzz - with variables theres way more flex in rates than was previously. This being said lenders are negotiating on existing business as well to retain it. Its just not advertised.
To be honest we dont fix a lot if any clients as we need the loans to be on variable for the debt recycling & varying limits.
Coupla bucks per week.
The amount rents rise with a rate increases is dwarfed in comparison to the amount property falls in price. It's only pocket change so i dont know why people go on about it.
Not necessarily a direct link here.
In Sydney:
As rates rise there is less demand from buyers so less stock gets built. Under-supply rents go up and then prices go up as the rent makes us the difference.
Peter 14.7
I don't get this, you say less demand from Buyers. Buyers have to live somewhere right? if they don't buy they would live at the same place so there wouldn't be extra demand anyway? even if the rents go up renters will still pay it until they think they are ready to buy.
So when you say under-supply where is that large amount of housing stock on Realestate.com coming from? couldn't there be an oversupply that the immigration is slowing down and some immigrants even leaving Australia because of high cost of living?
Even if rents go up it wouldn't catch up to the same level as a mortgage payment for rents to catch up to that level at current house prices it would take years.
RP Data on Supply
Not sure you guys read the news yet but RP data says
"Clearance rates are bouncing around the low 50% mark each week, the number of homes being advertised for sale is almost 30% higher than at the same time last year, and sellers are being forced to adjust down their price expectations."
""Before there is any real upwards pressure on home values there will need to be some absorption of effective supply and a return of sustained buyer confidence to the market.""
So does this mean there is an oversupply?
http://www.smartcompany.com.au/prop...march-but-rental-yields-starting-to-rise.html
Not sure you guys read the news yet but RP data says
"Clearance rates are bouncing around the low 50% mark each week, the number of homes being advertised for sale is almost 30% higher than at the same time last year, and sellers are being forced to adjust down their price expectations."
""Before there is any real upwards pressure on home values there will need to be some absorption of effective supply and a return of sustained buyer confidence to the market.""
So does this mean there is an oversupply?
http://www.smartcompany.com.au/prop...march-but-rental-yields-starting-to-rise.html
Ok, there are a number of factors here which is hard to explain.
Generally:
when rates go up buyers, be they FHO or investors, dont buy as much as the return on investment and potential for CG is less.
Thus developers cannot makes sales so banks don't lend and they don't develop, they land bank.
Rental demand in the city is mostly constant and rising.
Lack on rental stock pushes rents up.
Rental go up so return on investment go up.
Having said the above, other factors come into the purchase decision: births, deaths, marriages, divorces, job loss, job gain, lotto wins, business failures, bad neighbors move in, I could go on.
As investors we look purely on the investment factor. Return versus costs versus CG potential. We ignore the above.
So my point is rates going up does not drop prices. Supply versus demand sets price. Income is a factor in demand. Rates is factor of income.
Peter 14.7
Peter appreciate your explanation but its not what we hear from RP data? see below for their comments
"Clearance rates are bouncing around the low 50% mark each week, the number of homes being advertised for sale is almost 30% higher than at the same time last year, and sellers are being forced to adjust down their price expectations."
""Before there is any real upwards pressure on home values there will need to be some absorption of effective supply and a return of sustained buyer confidence to the market.""
So does this mean there is an oversupply?
http://www.smartcompany.com.au/prope...g-to-rise.html
Oversupply is a difficult one. There will always be places where there is more property than people who need it, and there will always be places where there are too many people for the available housing stock.
When we hear statistics about "X empty homes in Australia" it doesn't really mean much. How many people care if there are empty homes in Delegate NSW when they work in Sydney or Canberra. This issue is more one of availability in high demand areas.
Complicating this is that the demand in given areas is not static - it changes depending on a range of factors.
So to drill right down to the perspective of an individual investor, the real issue is simply whether there is sufficient demand for property like the investor holds in a given location, and whether that demand is changing. This is one of the reasons why investors bang on about location so much - get it right and you can often sail through difficult times, get it wrong and you could well be screwed.
If the investor chooses locations with strong (and ideally rising) demand for the property they hold, the asset is likely to do well (depending of course on purchase price), regardless of what the rest of the market is doing. As an example, I have friends who live in a medium town in Pennsylvania, US. During the GFC, their property hasn't dropped in value at all, and neither has the rest of the town (but nor has it risen). It's a university town with constant and known demand, with students from a clear demographic.
I guess my point is that although statistics tell us overall market direction, that isn't always as useful as it could be when you only buy 1 (or a few) very small parts of the overall market.
When we hear statistics about "X empty homes in Australia" it doesn't really mean much. How many people care if there are empty homes in Delegate NSW when they work in Sydney or Canberra. This issue is more one of availability in high demand areas.
Complicating this is that the demand in given areas is not static - it changes depending on a range of factors.
So to drill right down to the perspective of an individual investor, the real issue is simply whether there is sufficient demand for property like the investor holds in a given location, and whether that demand is changing. This is one of the reasons why investors bang on about location so much - get it right and you can often sail through difficult times, get it wrong and you could well be screwed.
If the investor chooses locations with strong (and ideally rising) demand for the property they hold, the asset is likely to do well (depending of course on purchase price), regardless of what the rest of the market is doing. As an example, I have friends who live in a medium town in Pennsylvania, US. During the GFC, their property hasn't dropped in value at all, and neither has the rest of the town (but nor has it risen). It's a university town with constant and known demand, with students from a clear demographic.
I guess my point is that although statistics tell us overall market direction, that isn't always as useful as it could be when you only buy 1 (or a few) very small parts of the overall market.
Sammy your quote is only relevant for the market of houses for sale - it speaks nothing for the rental market.
In an environment of increasing population and hardly anyone building houses anymore, the overall (rental and sale) supply / demand balance is being tightened.
The fact that a lot of houses are on the market for sale at the same time doesn't change the fact that houses aren't getting built and population is still growing. The impact of this will just be felt in the rental market instead of the selling market.
You can push down the bubble in one place but it will only reappear somewhere else. There is no magic pudding!
In an environment of increasing population and hardly anyone building houses anymore, the overall (rental and sale) supply / demand balance is being tightened.
The fact that a lot of houses are on the market for sale at the same time doesn't change the fact that houses aren't getting built and population is still growing. The impact of this will just be felt in the rental market instead of the selling market.
You can push down the bubble in one place but it will only reappear somewhere else. There is no magic pudding!
Thanks.
You are correct. Some areas do sometimes experience oversupply and lower rental demand. If so, then rents drop if there is over supply but each area is different.
Case in point
I have investments in Sydney City and rental demand is huge. Far Western Melb is steady: not high not low. West Melb was hard to find a tenant. Where I live rents are literally non existent. Why? Small town experiencing massive tree-changers relocating.
But from an investment point of view: what is your strategy? If it is to buy off the plan and flip then you are high risk strategy and more prone to price position. If long term hold then today price is irrelevant, the rental is what matters.
Again, what is your strategy?
Case in point: It is removal of new gearing is bad for IP investors. Well not for me as most if not all of my IP are neutral or positive geared. My competitors are not FHO but other IP investors. IF they don't get in then my rents will go up even more. What is bad for me is if it is easier for investors to get in as then I have to hold rents as is.
I respect RP data but the stats hve to be taken in perspective. We really have had boom for 2-3 years thanks to the GFC. It has to flatten as it did in 2003 till 2007.
Unless we have macroeconomic changes in housing, pop growth, income, taxation, transport and welfare. This country will not have a massive crash.
We may stay flat for the next 5 years but that is the game. If you want to sell out and cash up now for another investment, do so. But beware selling because someone says X + Y = Z as there is no equation to predict the future.
Again, consider this" Like Libya, China could implode and fracture like the Soviet Union leading to Civil War and China Economy stops. THEN our economy would crash and yes prices may slow but RBA would then drop rates so good. Our $ would drop and petrol would go uUPPPPP so bad. Who knows.
SUMMARY IP investing is long term a low rise, medium growth, high leverage investment. Slow and sure but not spectacular except in rare periods.
Peter
.....all the more reason to invest for yield primary and growth secondary.
I started this thread a few weeks ago and my opinion that rates will fall this year still stands. Unlike impotent panicmongers whose only power lies in ranting on forums and creating fear, i put my money where my mouth is. Anyone wanting to bet a few thousand need only PM me. Rates WILL fall this year.
I quite agree, rates could go either way, no one knows, but if you are so sure then you could make some very easy money taking a position on the futures market, there appear to be plenty of banks prepared to take you on.
Ironically, it would take the D & G merchants, or panic mechanics to be correct in their assessment of the property market collapsing to have your prediction of dropping rates to come true, careful of what you wish for.
Yes, it is possible to make money on futures or options on IR. But I'd rather mkae bets with the panicmongers because:
1. Most are too gutless to put their money where their mouths are
2. The financial pain of losing a bet may well put them in their place. Maybe they might learn to switch on their brains before mouthing off on topics they know little about. Losing a few thousand may make them more humble.
I used to be a trader, but I try not to gamble or trade these days.
Actually, you are slightly missing what I was trying to point out.
You are effectively offering a free punt to anyone wanting to take up your offer.
If they hedge the bet on the futures market,(or take out and option) and rates drop, they collect their margin and pay you, minimal cost.
If on the other hand rates go up, they win the bet, and you have no hedge.
I used to be a trader, but I try not to gamble or trade these days.
Actually, you are slightly missing what I was trying to point out.
You are effectively offering a free punt to anyone wanting to take up your offer.
If they hedge the bet on the futures market,(or take out and option) and rates drop, they collect their margin and pay you, minimal cost.
If on the other hand rates go up, they win the bet, and you have no hedge.
Thanks for bringing this to my attention. You are one of few SS contributers with erudition and an understanding of markets.
Annie, I'd rather be the D&G on the forum, and be correct, rather then the property spruiker who wishfully thinks that rates will fall and help property prices. There is absolutely NO way rates are heading down this year. Inflation globally is on the rise, and there is only one way for rates world wide, and that is up.
You'll be proved wrong in the next 3mths, and hopefully we will see no more annie on the forum ranting about economic rubbish.
My brain is fully switched on and functioning. Your's seems to be clouded by property spruiker bias. There are countless pointers as to why interest rates will only go up. The only thing that's saving the RBA from already having raised then further currently is the surging Aust dollar.
Hopefully you will be more humble and keep your mounth shut when your proved wrong in the near future.
If you care to put your money where your mouth is, feel free to PM me! But you won't. The Chicken-little scenario about the sky falling is way too much fun. Besides, it gives you something to live for, your life finally has some meaning when you attempt to "protect" us from ourselves. In your eyes, ALL property will fall, no exceptions allowed. Utter rubbish.
As Mcrumbpacker has pointed out they won't be pttung their money where thier mouth is it will be using a marekt position against your generous offer.
That is unless you are offering a bet at odds other than evens. i.e. Ill give 7 dollars back for every 5 dollars you bet that interest rates will go down this year.
And if you offer that you really don't sound like you have any conviction at all given you are admitting they are on the favourite and you the roughie outsider.
IU love it with the sports when people say to me I betcha $100.00 that parra will lose next week etc. Don't get me wrong I don't lay that kind of bet off that would be a bit of a dog act to do on a friend, but still it is good getting value where you can get it....
