Supply of credit

[Sharpstone888]

I have read in another thread on this forum about how the fundamentals in the market are great low interest rates, low unemployment, money moving from stock market to property) and we should be seeing double digit growth but we aren't, some say that the stagnation/falling is due to the supply of credit being squeezed.

Now if this is true and that the supply of credit is holding the market back then i'd like an insight to how our supply of credit will move, mainly through such things as a recession, does it dry up (property drops), what happens??

Cheers,
Chris

 

[NedKelly]

I think it has more to do with Sentiment.

 

[Sharpstone888]

How do you judge sentiment???? Look at the papers, it they are talking boom, then prices up, D&G prices down????

Chris

 

[Aaron Sice]

credit is available to anyone at a lower LVR with a steady, proven, income stream.

it hasnt changed that much, it's just the banks' risk profile has changed to exclude possibly 40-50% of the available market.

unfortunately, most "investors" fall into the "risky" category because we dont like x-col loans, we reduce our interest component with offset accounts, we rely on yield to prop up our portfolio and we structure our tax payments through trusts and companies and individuals to try and make our declared income as close to "zero" as possible.

 

[warmed_cockles]

There is some anecdotal evidence of credit being squeezed, but I think they will still offer 100% loans to anyone who has a secure job and good history.

 

[FHB]

Yep, I just bought, and the bank was willing to lend me more than I could repay, so I think credit is still out there for home buyers. But I'm not sure the same can be said for developers, small business, etc. My father inlaw does building work for a few developers up here, and most of them are getting knocked back on funding. A lot of the splitter blocks that were getting $800k, are now sitting on the market in the $600ks. The developers who used to buy them aren't anymore.

I think there has also been a real effect from super/share market losses, particularly on boomers who like to upgrade to bigger and better houses. The rest could be attributed to fear, some buyers are worried about losing their jobs as conditions worsen, some are probably already losing overtime and bonuses.

Also, during the boom there was an expectation of ever rising prices, which motivated more buyers to pay more then, before they 'missed out'. That expectation seems to have evaporated now.

But on balance, I don't think it is all down to sentiment, or credit directly. There are some real impacts on household wealth and incomes, and these are probably going to get worse over the year.

 

[ffc1883_1996]

...A lot of the splitter blocks that were getting $800k, are now sitting on the market in the $600ks. The developers who used to buy them aren't anymore...

I’ve noticed this too. Subdividable property in Boronia VIC 3155 may have fetched over $400k in late 2007 when developers were finding finance much easier. Now, I suspect such properties are being purchased by FHBs at a 20% discount.

Consequently…
a) No foreseeable easing to Australia’s housing supply problems.
b) Those FHB’s that are prepared to live in an old house in the burbs on big land will benefit greatly when development finance starts to roll again.