plus deflation of the debt and the other real kicker... they compound in different directions
Westpac MD Gail Kelly says compound growth in house prices are over for good!
- Thread starter hobo-jo
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plus deflation of the debt and the other real kicker... they compound in different directions
They'll still lend; just the goal posts will move a bit more than they already do.
You may find they'll do stuff like lend only to say; 75%, only allow 70% of rent for serviceability, only allow 30% of all borrower's income towards total debt repayments and so on.
When we were in the throws of buying our workshop, the bank were going to lend us 70%, and we kick in 30%.
By the time the deal was done, the GFC had occurred somewhere in the middle and the ratios basically reversed.
Hi Bayview
Yes I've seen similar things happen as well around the same time. But apart from the "one industry" towns, have any brokers seen any evidence of Westpac doing this stuff recently? Genuinely interested to know... otherwise it's just jawboning IMO. But perhaps it's a sign they may need to start rationing credit further soon? Who knows?
Yes I've seen similar things happen as well around the same time. But apart from the "one industry" towns, have any brokers seen any evidence of Westpac doing this stuff recently? Genuinely interested to know... otherwise it's just jawboning IMO. But perhaps it's a sign they may need to start rationing credit further soon? Who knows?
oh my god - my life has changed!
Excellent. So i should see rents putting money in my pocket up to then and then a nice big boom well before i retire. happy days.
HiE, have been more plugged into Westpac recently, and more insight into what they are doing and there is no change in these areas for vanilla resi, capital city lending.
What is quite pertinent though, is the fact they are significantly worse than their competitors at funding their loan book, which is why they are targetting greater deposits and marginally, at least at the headline rates for resi loans, the highest.
What is quite pertinent though, is the fact they are significantly worse than their competitors at funding their loan book, which is why they are targetting greater deposits and marginally, at least at the headline rates for resi loans, the highest.
An environment where you can consistently achieve 4-5% CG and 5-6% yield is in fact ideal, I’m glad we’re heading in that direction. Return on equity remains in double digit especially with gearing.
Combined with low interest rates, you can even imagine a time when negative gearing is no longer required on most properties. The government can neatly terminate the scheme without even a whisper of opposition. Win-win for everyone.
Combined with low interest rates, you can even imagine a time when negative gearing is no longer required on most properties. The government can neatly terminate the scheme without even a whisper of opposition. Win-win for everyone.
But all this is based on AVERAGES.
Growth and yield will over and undershoot the long term averages and rarely ever be the same as the average.
Gail said the other day the bank had sat out of the home lending space intentionally at times over the last 3 years (by pulling the price lever).
It kinda doesn't wash for me though as their other brands have been heavily promoted i.e. RAMS (low docs in particular) and BoM.
All in all it seems a mixed up stratergy to me. It will be interesting to see her successors plan.
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A very good point, the government should take this opportunity to remove negative gearing at the time of least impact.
....at the same time removing it for all asset classes. It's only fair?
4-5% is current growth rate of both rent and disposable income. And we're not in a boom.
Yes, but now is not yet the time of least impact. The removal of NG right now is still hurting too many people.
I know NOTHING about negative gearing compared to most here, but thought I'd pipe up. Surely "removing" negative gearing requires removing tax deductibility of interest payments. So it would dramatically affect every one, not just those that are cash flow negative. just because you're cash flow positive doesn't meant you aren't paying thousands in interest and claiming the tax deduction involved.
Right? (check my signature)
Right? (check my signature)
Yes sure.
What I’m trying to say is that it’s better to have something good on a sustainable and consistent basis than something exceptional but unsustainable.
Property investing is longer term after all and I’d rather have a long smooth ride than a jolly ride that ends abruptly.
Maybe when they say remove negative gearing maybe they mean disallowing the ability to offset your losses against other income.
So those expenses could be carried forward as losses? Be used when or if a Capital Gains Tax event occurred?
You've missed my point.
Without property value growth, the amount banks lend doesn't increase, therefore the banks ultimately lend less money because people (PPOR buyers especially) ultimately pay down debt. As a result the banks don't grow their business, they just squable over a diminishing pool of debt appetite.
Ultimately it's banks that are the strongest single influence on property prices. If they won't lend money, most people won't buy property so there won't be growth. Conversely if other factors elminate growth, then banks can't increase their lending portfolios and they ultimately shrink in size.
I have no problem with this model.
Much the same a CGT. You make a CG, you pay tax in that year. You make a CL, it is carried forward to offset future CG.
Same for CF from investments. You are CF+, you pay tax. You are NGed it is carried forward to offset future CF+.
Appears to be rather neat in theory.
Reflecting on the views expressed by Glen Stevens and Gail Kelly, I think property investment in Australia has gone through 3 phases that mirror my own PI journey:
- the Age of Ignorance, pre 80’s
- the Age of Effervescence, 90’s and 00’s
- the Age of Wisdom that we are slowly entering now.
None of them were good or bad, right or wrong, they were just stages that we had to go through as a young nation of investors. Each of them have different sets of opportunites and risks that need to be actioned upon.
My own Age of Wisdom started in 2008 when I decided to focus on CF+ properties. Too bad I’m a bit too old now to participate further in it as a buyer.
- the Age of Ignorance, pre 80’s
- the Age of Effervescence, 90’s and 00’s
- the Age of Wisdom that we are slowly entering now.
None of them were good or bad, right or wrong, they were just stages that we had to go through as a young nation of investors. Each of them have different sets of opportunites and risks that need to be actioned upon.
My own Age of Wisdom started in 2008 when I decided to focus on CF+ properties. Too bad I’m a bit too old now to participate further in it as a buyer.
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