So what?
You could say the same thing about the USA. Still plenty of people unaffected. There are still lots of Americans going on holidays, shopping, playing bingo.
Doesn't mean a recession is not happening.
We will have a property crash, but this isn’t it! (M. Yardney)
- Thread starter Shadow
- Start date
So what?
You could say the same thing about the USA. Still plenty of people unaffected. There are still lots of Americans going on holidays, shopping, playing bingo.
Doesn't mean a recession is not happening.
You can't judge affordability by how many loans ARE NOT in arrears.
lol anyone here who does'nt think prices will rise and RE never goes down is doom & gloomer.
I'll let the oracle speak for me, and imo this applies to the EU and Australia as well.:
"Americans came to believe that house prices would forever rise. That conviction made a borrower’s income and cash equity seem unimportant to lenders, who shoveled out money, confident that HPA – house price appreciation – would cure all problems. Today, our country is experiencing widespread pain because of that erroneous belief.
As house prices fall, a huge amount of financial folly is being exposed. You only learn who has been swimming naked when the tide goes out – and what we are witnessing at some of our largest financial institutions is an ugly sight."
And just because I dont think the market is going to boom next week, does not mean I aint in the market, or that I'm not having a great year.
It's the best year ever.
I agree that a lot of the real investors who used to post more frequently on SS are skipping it. Its not just due to the crap and riducle they put up with but cuz they're out on the ground doing research - why sit and argue with someone who you're never going to agree with (often with no practical experience and only info from debate club and the net) when you could go inspect property - or they post on the private members website so they dont have to put up with it.
I figure they're going to come back with a bucket of property under their arm and tell a few tales (some I know already are).
I've seen good investors and the worst investors all make mistakes, some dust themselves off and stand up and keep going, others fall over and get eaten up.
It doesnt matter if its a downturn year or a boom year or inbetween. Its every day.
And... you get that.
Suppose my point is that you've gotta be in it to win it. And in 20 years even if you did pay too much today you're still going to come out ahead.
I figure they're going to come back with a bucket of property under their arm and tell a few tales (some I know already are).
I've seen good investors and the worst investors all make mistakes, some dust themselves off and stand up and keep going, others fall over and get eaten up.
It doesnt matter if its a downturn year or a boom year or inbetween. Its every day.
And... you get that.
Suppose my point is that you've gotta be in it to win it. And in 20 years even if you did pay too much today you're still going to come out ahead.
Very interesting post! Thanks for that. It shows how many different answers there are to the same question.
News flash, there have ALWAYS been boom n bust periods. . .
30 years ago people were saying the same old thing, Im a bit sick of hearing it actually but at the end of the day, I'll come out on top, I mean c'mon. . My first property has juped 40% in rents in 15 months, its paying for itself, how can I loose money on that!? with a rental boom predicted over the next 12-24 months and a big shortage in new dwellings, so much so that we cant keep up and thats set to remain the same for at least 5 years here in Australia, where am I going wrong? Im not. another property I just purchased has a rental yield of 7% and should be +C-flow within a year or two, it rents very well, vacancy rates at 1% and set to lower. Even if I saw no growth for 5 years (which certainly hasnt been the case) I wouldnt really care because I know the market will boom again, Id be making money off it short term and buying more bargains, now is a good time to buy in my local economy and thats what Im doing, Ive done the research and I know where I sit and whats happening in the future,
30 years ago people were saying the same old thing, Im a bit sick of hearing it actually but at the end of the day, I'll come out on top, I mean c'mon. . My first property has juped 40% in rents in 15 months, its paying for itself, how can I loose money on that!? with a rental boom predicted over the next 12-24 months and a big shortage in new dwellings, so much so that we cant keep up and thats set to remain the same for at least 5 years here in Australia, where am I going wrong? Im not. another property I just purchased has a rental yield of 7% and should be +C-flow within a year or two, it rents very well, vacancy rates at 1% and set to lower. Even if I saw no growth for 5 years (which certainly hasnt been the case) I wouldnt really care because I know the market will boom again, Id be making money off it short term and buying more bargains, now is a good time to buy in my local economy and thats what Im doing, Ive done the research and I know where I sit and whats happening in the future,
Exactly. Arrears in Oz are at record highs and that's not counting the various tricks available to handle stressed borrowers in a way that avoids them showing up in arrears rates and scaring the analysts.
The key issue that young Shadow fails to address that the cost and availability of funds is now different and will be for a time.
How long, who knows, but the credit appetite of the major banks (who now control the game) and the margins they are looking to re-establish creates a different borrowing environment than that which undepinned prices the last 15 years or thereabouts.
It is and will make a difference to the capacity of people to borrow and less cash chasing the same assets impacts on prices.
It doesn't matter how much demand there is amongst the homeless if they can't stump up the coin.
TF, where is the data for arrears being at record highs?
Interested in learning, is this just for Western Sydney? I have heard Matusik laughing at this suggestion for QLD as he said the rate is still very low (he mentioned a figure that was indeed low), but haven't checked any reliable data sources myself.
Interested in learning, is this just for Western Sydney? I have heard Matusik laughing at this suggestion for QLD as he said the rate is still very low (he mentioned a figure that was indeed low), but haven't checked any reliable data sources myself.
Holding no property in your portfolio is a speculative position imo!
Westpac updated the market today - see p17 here.
Nowhere near record highs as a %age of assets for Westpac.
Edit:Added Impaired housing. Housing arrears at highest since (at least) 1999, credit card arrears about average. It would be nice to see data from early 90s.
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Kieth,
Thanks for linking. A couple of other points in WBC's update I would note are:
p.19:
Active management of credit portfolio:
• Westpac’s underlying exposures through
CDSs, CDOs and CLOs are either:
- Global and Australian corporate risk
- Australian AA or AAA rated RMBS
- UK AAA Prime RMBS ($61m)
- No direct exposure to US mortgages or
other US ABS product
CDSs
• Around 60 counterparties – no US monolines
• Netting and collateral agreements in place
CDOs and CLOs
• Portfolio of AAA rated assets with underlying
corporate risk
p.27:
Response to current environment:
• Remain “open for business”
• No distraction from portfolio issues
• Maintaining risk disciplines
• Active management of transaction flow and pricing
• Reviewed and acted on key portfolios:
- Finance sector – impact of both offshore credit crunch and the flight to quality
- Property sector – asset valuation issues coupled with significant cost of debt
- Retail sector – softening consumer demand
- Margin lending
• Refinance risk generally – particularly for higher geared companies
• Seeking opportunities to enhance competitive position
p.31:
Funding Composition to the end June 08:
• 52% Customer Deposits
• A$32bn raised in term funding to date –
keeping ahead of plans
• 2008 term issuance average duration 2.9
years
• Strong liquidity position around $30bn
• FY09 term funding expected to be lower:
- ~A$20bn to $25bn (pre SGB merger)
- Expect merger to add around $10bn in
term funding
- No reliance on securitisation
p.36:
Mortgages:
• Continuing low unemployment supporting customers’ ability to repay
• 73% of amortising borrowers repay in excess of required minimum
• Strong security – 46% average LVR based on current balance and value at origination;<10% of mortgages written above 90% LVR.
Very interesting reading indeed. Days like today I'm glad to be a WBC pro pack customer on 80bp discount 100% variable. They've got a very strong balance sheet and are actively seeking opportunities to enhance their competitive position...
Bring on the RBA rate cuts I say!
Cheers,
Michael
Thanks for linking. A couple of other points in WBC's update I would note are:
p.19:
Active management of credit portfolio:
• Westpac’s underlying exposures through
CDSs, CDOs and CLOs are either:
- Global and Australian corporate risk
- Australian AA or AAA rated RMBS
- UK AAA Prime RMBS ($61m)
- No direct exposure to US mortgages or
other US ABS product
CDSs
• Around 60 counterparties – no US monolines
• Netting and collateral agreements in place
CDOs and CLOs
• Portfolio of AAA rated assets with underlying
corporate risk
p.27:
Response to current environment:
• Remain “open for business”
• No distraction from portfolio issues
• Maintaining risk disciplines
• Active management of transaction flow and pricing
• Reviewed and acted on key portfolios:
- Finance sector – impact of both offshore credit crunch and the flight to quality
- Property sector – asset valuation issues coupled with significant cost of debt
- Retail sector – softening consumer demand
- Margin lending
• Refinance risk generally – particularly for higher geared companies
• Seeking opportunities to enhance competitive position
p.31:
Funding Composition to the end June 08:
• 52% Customer Deposits
• A$32bn raised in term funding to date –
keeping ahead of plans
• 2008 term issuance average duration 2.9
years
• Strong liquidity position around $30bn
• FY09 term funding expected to be lower:
- ~A$20bn to $25bn (pre SGB merger)
- Expect merger to add around $10bn in
term funding
- No reliance on securitisation
p.36:
Mortgages:
• Continuing low unemployment supporting customers’ ability to repay
• 73% of amortising borrowers repay in excess of required minimum
• Strong security – 46% average LVR based on current balance and value at origination;<10% of mortgages written above 90% LVR.
Very interesting reading indeed. Days like today I'm glad to be a WBC pro pack customer on 80bp discount 100% variable. They've got a very strong balance sheet and are actively seeking opportunities to enhance their competitive position...
Bring on the RBA rate cuts I say! Cheers,
Michael
Young? Is mid-thirties considered young these days? Perhaps so...
I am well aware of credit market conditions. I am also aware that interest rates are coming down in the next month or two, and that the banks are all still offering 100% loans. So yes, there has been some tightening, but not that much really.
ANZ slashed their fixed rates today...
http://business.smh.com.au/business/anz-cuts-fixed-mortgage-rates-20080808-3s4w.html
And from the same article...
When the RBA cuts rates, I think the banks will follow. Perhaps not by the full amount, but we could see the RBA cut by 50 basis points next month, and the banks following with 30 basis points.
Shadow.
My feeling is similar, they might even do within a couple of weeks of the RBA cut
Back in early 90s they didn't drop as far as the RBA - graph below is from p32 of this ANZ doc (the whole doc is well worth a quick browse).
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Thank you for posting Keith... As always, impressed by your well researched, logical, and incredibly valuable contributions.
Again - I think this shows (i) the relative strength of Westpac to the other big 4, but more importantly (ii) the strength of the big 4 in the Australian oligopoly - once the write downs on the other 2 / 3 roll over in the next 12 - 18 months I can see the big 4 doing very well indeed. Operational earnings (i.e. excluding one-off writedowns) are increasing, and more importantly market share of new loans is very, very high (the minors are really suffering).
Again - I think this shows (i) the relative strength of Westpac to the other big 4, but more importantly (ii) the strength of the big 4 in the Australian oligopoly - once the write downs on the other 2 / 3 roll over in the next 12 - 18 months I can see the big 4 doing very well indeed. Operational earnings (i.e. excluding one-off writedowns) are increasing, and more importantly market share of new loans is very, very high (the minors are really suffering).
