Apra changes

I know, I dont think many investors here understand there are opportunities. I am taking advantage of this now

 

Hi hear you Sash, but I think your concerns are only true at the margins. I think for now I agree with Redom that this is fairly modest.

Lending in recent years has relied heavily on income tests, and even those who fibbed on their applications aren't necessarily resigned to a default especially if only assessment rates are increasing but not actual interest rates.

The market has not met any of the criterion yet for APRA intervention, and investors are almost non-existent in the market.

So for now at least, it's not going to have a big impact. And APRA (being once bitten and twice shy), will avoid yanking the handbrake on the property market as they did in 2018. This is largely for show.

 

Where will it all end????

 

I think this might be more an impact than rising interest rates over the next 4 years. It has got to a point if we move the current OO interest needle from 2% to 4% would be disaster.

As I have stated before I am deleveraging as net debt fast as possible....LVR is at 26% currently..expect to be at 20% end of next year...8% by 2023...and hopefully zero by 2024..but this is subject to market conditions.

 

This story hasn't played out yet. We have lots more to run.

I think we need to see $200 crude oil before central banks get serious about tightening. I know it seems tangential to talk about crude prices in a property forum, but all of these things are joined up.

These periods of great inflation run for years and years, like the late 60's and 70's. It hasn't even been 1 year yet.

 

The regulation will matter, but it will have less impact than rising interest rates.

Regulation can block new buyers, but it can't create new sellers. Higher interest rates on the other hand block new buyers, but also create pain for those trying to hold properties, and thereby creates some selling pressure. But we aren't close to that yet.

 

Let see...at 1.3m....median in Sydney...we are no at 15-16 times income. Melbourne is about 12-13 times. That is pretty high....APRA has stated they are not responsible for housing market...they are only interested in solvency of banks...but there is some relationship..but they will take further action..if it has no impact.

Over the years I have seen that they will slightly overshoot...rather than undershoot. What they did in 2016-2017 was not bad policy..it worked...

 

Yep, and there's nothing like supporting the banks like letting a housing bubble fly.

All good points Sash. Not so sure that x income is such a relevant measure these days with interest rates so low. But if APRA look at it, then it matters I suppose.

 

I mean, can they control it any MORE? 'Prudent' lending standards have already decimated borrowing capacity. If it keeps going, we'll have to rely on bartering goods and services for houses.

 

Ha true. It's funny how the most regulated part of the economy is the part of the economy that keeps booming and busting.

 

It won't end. People will be buying properties forever. It will just go up and down over time.

 

That's when I like to buy, but think I may be firmly retired by then.

 

This time it might stay down for a few more years..... see lots of people jumping into Sydney...taking out $1.5-2m mortgages.....in good areas...they have $1m deposits..but where will it end? Lets see...I am just working to my aquisition and exit plans....the goal is zero debt!

Who knows.....a $6m house today in Bondi could go on sale for 3.5-4m tomorrow.

 

I think so too. Also deleveraging.

 

Do you guys think this will have different effect on different ends of market tho?
5% of 1million is different to 5% of 5million.
Investors will face tighter lending restrictions than first home/second home buyers, as the buffer rate is required on all their loans.
Non-ADIs will be happy and make more profits as they are not part of the rules...
It will only cool the market from 20% annual growth to single digital growth IMHO. Not a game changer yet. A game changer would require a structural reform in our tax system and a big rise in interest rates globally, which will unlikely to happen in short term.

 

This won't do too much. The effects of inflation from widespread QE are only just being seen now. As long as interest rates remain low and government stimulus high, it will take a lot more to stop growing prices.

Unlike equities or other investments, money in property doesn't flow in or out of Australia that easily. If a person sells a house at a high price, they will almost certainly need to buy another.

The dominoes will keep ticking along, and there's a lot of cash which has only just been injected in the economy. Ultimately, as long as capital in property sector broadly remains the same/increasing, the current trajectory should continue. It will just mean purchasers will choose slightly lesser properties than they otherwise could have at their limits.

 

Not too sure about top end markets - I don't think the 5m market correlates with people maxing their capacities as much as the 2m market. Generally those buying in that market are setting their own budget, while those in the 1-2m range are just trying to buy a half decent family home that ticks some of their boxes in Sydney (rarely all at that price now).

 

I'm finding more and more I'm having conversations with clients about how much they want to spend i.e. too much, relative to where they're at personally and with respect to the market. More often than not I'm talking them off the ledge and trying to get them to spend less than they want to. I can't and don't give borrowing/lending advice but the amount of people wanting to really push their debt to income ratio is startling.

- Andrew

 

i am talking current covid boom driven by government printing money

 

FOMO…… nothing too logical