Average mortgage rates and percentage of IP ownership

What ... HNIs paying no income tax thanks to NG?
NG reform must be in order then ,

I understand NG is the holy cow and can't be touched, but its reform is coming whether we like it or not.

Instead of all have it or none have it,
or some have and some can't,
they should rather restrict claimable NG by total capped amount per tax payer, this will be least disruptive of other options being floated.

 

These people are not normal.

 

HNI usually have their assets structured and have minimal personal income. They would still have plenty of company taxes to pay. This group of people are more likely to have a negative affect on the rest of the population if one of their companies collapses and affects creditors, contractors and employment.

 

With a large sample size the standard deviations can be estimated with a high degree of confidence

 

No It does not effect equally as every seller is not equally desperate.

but trend matters, trend exaggerates the fear factor.
for eg. Continued downtrend makes sellers increasingly fearful and buyers increasingly reluctant to jump in.

 

It's either a correction or a crash. What's in a term is being accurate. Whereas calling it a crash is misleading.

 

I don't disagree on that point. But we were talking about bottoming markets. The point I was making is that not all suburbs will be affected equally and bottom at the same time. Yes, negative sentiment and increased fear will affect all markets to some degree, but not all will drop 20% plus.

As I've said before, bring on a 30% crash! I would be jumping in head first.

 

People mock us when we talk about markets within markets but you are spot on. In Perth now there are some markets still dropping and some where prices are increasing. I don't understand how anyone can claim these are the same. It is clear to any property investor that a falling market and a rising market are not the same.

It seems that those posters only ever post about property investors being wrong and never post about property investing. I wonder why that is?

 

Fast forward 2020, your home/IP is now worth 15-20% less but markets have found a floor. Your cost to hold the asset has increased as your now paying principal. There has been no global downturn, and RB has lifted cash rate to 2-2.25% and banks add on another .5 to .75 out of cycle. Wage growth continues to trend lower, or stagnate.

Under this hypothetical but not unrealistic scenario. How does this play out in regard to sentiment for both housing? and more importantly consumer? The flow on impact would be considerable to the broader economy.

I wouldnt call this a "crash" scenario, but the potential is there for sentiment and growth to stagnate for a lot longer than some might think, or like.

 

To be honest, you won't get many experienced investors who have built a substantial amount of wealth mock these notions.

 

When prices dropped 20 to 25% from their peak just before the GFC until 2012 , no one was screaming "crash". In some states it went broadly unnoticed. When Perth prices dropped 25% once the mining boom cooled, the east coast media didn't mention it.

 

In Perth we knew prices were correcting but no one called it a crash. Prices are down 30% from peak in some areas. Still wasn't called a crash.

 

Perth was a slow moving train wreck , but you have to put things into perspective .
We paid 85K for our PPOR in 1997 and 110k for an IP in 2002, by late 2006 they were both worth around 350-400K ???, and thinking the market might collapse sold the IP,
To this date neither have got back up to that price.

 

Good move

 

Thanks all for the great replies. Lots of food for thought and seems like much more data is needed(some of which may not be available...) to be able to make an informed conclusion.

 

Interesting, but it's not so much your total property investor numbers that cause problems. It's your recent, especially very recent, ones. In a bubble a lot of inexperienced investors enter the market very late, right around the peak, often with no idea what they're doing. They tend to be the ones who take huge losses. Established investors by contrast often have a much better position, especially if the've been buying for years.

 

In previous corrections, I found that the majority of distress sales were not IPs but FHB. The ones that got help from mum and dad loans, low startfinance, developer bonuses, FHB grants. IE the ones that the government tries to help.

 

Unfortunately, I'm not sure any of the above is going to help the market.

1. Yes a lot of people own their own home, but prices don't get driven down by homeowners. Almost all won't sell. Foreclosures, even at the worst, stay pretty low. In Ireland at the worst they only jumped a few percent. What drove down prices wasn't selling, it was a lack of buying. People couldn't borrow enough, or wouldn't pay enough, and there was just too much supply to choose from. Remember the prices you hear quoted are an average sales price. Based on what's actually selling.

2. The generational change is another problem on that list. Some Boomers can help their kids buy, sure. But a bigger problem is Boomers themselves (a bigger generational slice) aren't buying. And are now retiring, cashing out of properties, downsizing. These are all downward pressures and house prices will follow.

3. I solidly agree with 3, but that isn't going to prevent a housing market crash. It didn't in Ireland. We were the miracle economy, too.

4. Australia absolutely does not have a unique population concentration. Lots of countries are mostly urban. There is also not an undersupply in Sydney or Melbourne and hasn't been for many years. According to the direction of rents, among other things, there is actually a glut.

5. Can it though? APRA can't generate demand. And it's not just APRA, it's global rates. Australia can't move in the opposite direction to global monetary policy. We can't fight the Fed. Rates and the cost of borrowing are going up all over the world, like they did in the mid-2000s.

6. Even the RBA has said this isn't true. It has a lot less wiggle room than people think, and any wiggle room is likely to be saved for an emergency. It has already said its next move is probably up. And that it wants house prices to slowly deflate. Housing is not the whole economy.

7. If we see a drop of 30-40% (which has happened in every single housing bubble on record for hundreds of years) it's only going to return us to the normality of 5 years ago, when house prices and fundamentals were aligned. And the world economy doesn't have to tank first. Just fyi by the time the GFC hit the last major house price crash was practically over. Most of America's crash was done by late 2008. The GFC was a consequence not the cause.

 

Why so much so fast? I suppose the higher prices the properties fetch over time represent higher drops too. When median was $18,700 in 1970 10% may not seem to us that much as opposed from $1.1M?
See the chart: