ANZ says Australia's housing slowdown is almost over with prices set to rise again

Hi Euro73,

I think you will find in all loan agreements, the bank has the right to re-evaluate the LVR and if it is falls below their standards can ask the borrow to top up the equity, while this is in extreme situation, it is still a situation which can arise.

However, falling pricing would significantly impact future borrowing capacity, which in turn would have a negative feedback on property prices, that is all I was trying to point out.

There are many variables that can effect borrowing capacity, both internal and external.

Interesting times

 

Can you quote this happening in Australia for residential real estate?

 

That wont work well if there are umpteen thousand or hundreds of in that situation......if you pay your loan, they will not ask you much at all.

 

in residential no but commercial and stuff yes, the bank can recall loan any time to reduce their risk, if you got XC commercial and residential then you are CRAZY because they recall the commercial loan and down comes your Residential as well

 

Radon, read your own contract, but do you think the bank wants to hold a position where you owe more than the assets worth, think about. Has it happened in the past, yes, has it happened much in the last 10 years, no, we have been in a bull market, but all markets change.

Dabbler, your assumptions are quite correct, however I wasn't discussing what would happen if your equity < debt, simply adding to the discussion, if your current asset base valuation < than 2017 then you might find it hard to borrow in 2018, 2019, 2020 as you did in 2017.

 

Just reading a report from SQM research on Domain and they have downgraded their house price forecast for all Australian capital cities with the exception of Perth ,Hobart and Adelaide.

House price forecast slashed in five Australian capitals

 

Or you could have used ORIC as your handle, and confused everyone with references to obscure eighties home computers.



I missed out on the first two series of Blake's 7, I probably should dig them up sometime, although last time I saw an episode it looked a lot more wobbly than it did when I was a small child.

I did used to like Avon, though.

 

Pretty sure banks that lent to property owners buying in mining towns experienced loans that far exceed the value at some point. Dont recall seeing any banks making a fuss, only the owners sharing their stories of paying repayments that are brutally high compared to the property's lower values.

 

They'll hold because its not costing investors anything to hold for the next cycle.

Eg we have 4 IP's in Sydney.

Our total additional costs are $2k in total per month.

Yes we could take the equity out in cash now and pay off our PPOR mortgage which would give us an additional $5k in free cash flow to invest each month on top of the $10k we are currently directing into various investments......but as PPOR is fully deductible here in the USA no real advantage of doing that (though there is in Australia).

So if we aren't going to pay off PPOR....then what do we do with the cash....invest in USA equities?? Nope we already have $1m invested there and im more worried about a USA equity crash before we retire than I am about an Australian property crash which I think is pretty stable and over the long run is delivering 7%pa instead of the 8% In usa equities.

So I ask you the question again.....why would I cash out? what am I going to do with the cash that's going to make me more money?

 

The difference between a loan amount being repaid at IO and P&I, at the same rate - after 5 years of IO - is over 50%.

I dont think you could argue that 24K per annum ( 2K per month) equates to "not costing investors anything to hold"

That amount of money would see many see many investors have trouble making the repayments

If you can afford to hold without any issues thats great. I can too. But you must be on above average $$$ or your portfolio must be yielding pretty well. Many dont have either luxury

 

That’s not the case, there are numerous markets around the country where assets have significantly decreased in value. Providing the repayments are made and the owners aren’t trying to refinance it isn’t unusual.
There has been no booming market outside of a few cities.

 

The banks do not always advertise that a house is on the market by them. So they do not make a fuss but they do repossess property. A serious buyer will likely find out that the sale is by a bank.

 

So umm, thats a no. It hasnt happened.

 

A simple way is just ask for a look at the contract that they will use,and who's name is on the contract..

 

I bought an apartment in the docklands as the owner/investor had a 90 day request by the banks to reduce loan as the loan was greater than the value of the property, the owner did not have the funds, I purchased the property at a reduced rate.
This was 10 years ago, so yes it can happen, maybe not for PPOR but of residential property investments it can.

But as the last poster mentioned, it is all in the contracts with the banks.

 

OTP before or after settlement?

 

Well after settlement, the owner had been in possession for 2.5years.

 

I'm talking prior to the contractual stage. Depends how desperate things are for an agent. And there's no point them lying if you have money to pay.

 

That's for all 4 properties Euro eg only $500 shortfall per property.

If an investor cant come up with $500 a month.....then what the heck were they doing investing in property in the first place???

This isn't equities that can be sold for $6.95 per trade folks, there are massive entry and exit fees for buying property. Any investor selling in the next year or two because they decide they cant "carry the expenses" is a fool.

And they are going to be worse off once they pay the "exit fees" to sell their investment and then property comes on strong again in 2-5 years for another growth spurt.

 

To be honest, we've had interest rate going to record low over the past decades. Other than migration, I dont think what can cause the next growth spurt. And when an asset class performs so well over a period. It's likely to not do so well in the future.

Especially in Sydney, who can borrow more other than first home buyers. And who will be the next fool. The next fool won't even make enough and be able to borrow enough. I think the stabilisation in house prices maybe for much longer this time