Betting on the house

Anyone see this yet?
Betting on the House - Four Corners

 

Yeah it was on tonight.

 

The people in mortgage stress are in regional towns? I didn't see anybody being interviewed in major cities.

Still, there is no doubt that a recession is all we would need for some people in major cities to face financial distress.

 

This was the "average" couple that aspire to "own" 20 properties.

How Roy and Rowena bought 4 properties in just 6 months

For me the numbers seem eye wateringly marginal. These two appear to be at risk If they did not to have both incomes, or there was a rate rise, or a couple of their properties were vacant. Obviously don't have all the details though...

 

Mortgage stress hotspots revealed Mortgage stress hotspots. there is also a searchable map of postcodes with mortgage stress

Four Corners - Betting On The House : ABC iview iview session of last night's eipsode

Betting on the House - Four Corners transcript

 

1.2m borrowings on a combined income of about 135k, after tax 106k.
Those properties would be rented and probably taking care of themselves so no issue here that I see. I agree there is definitely a risk if job income is no longer but that would probably include most Australians. No jobs/income=big trouble/no more property chat.

 

Yes, we watched it on the tele last night. With the interest rates being so low for so long, it's true that any interest rate increases are going to hurt people, especially anybody mortgaged to the eyeballs and who has not experienced higher interest rates. My first property bought in 2005, owing 200k on a single income, repaying P+I, then having strata, council, water, electricity.... so much of my income was going out to cover all of it and hardly and principal was being paid off. And that was only borrowings of 200k, a low amount by today's standards.

Interest rates fell by 1% in Feb 2009 and it was a lot easier. (We bought a home in a good suburb by that time, and I kept the first property as an investment). Our interest rates started high, however as interest rates came down we kept the repayments high, well above the required, therefore big chunks of principal was being paid down. (We could have achieved the same outcome using the offset account btw).

Which led us to the position where we are today. It was definitely very hard in the beginning with higher rates. Only with the low interest rates could we pay down the debt so easily.

 

To me, it was "same old, same old ...".

People blaming the banks, people blaming mortgage brokers, people blaming developers, people NOT doing due diligence, ...

When are people going to take responsibility for their lives? IMHO this is one of the first signs of maturity.

Every day on PC, newbies are told to get educated/gain knowledge, seek out a mentor, build a good team of professional advisors, devevlop YOUR strategy, conduct risk analysis (including developing a risk management plan), execute YOUR strategy, monitor progress, take corrective action, ...

This is NOT new nor is it rocket science.

The ABC is supposed to be balanced. They should have shown the other side of the coin.

It is s pity they didn't show a couple of successful property owners and how they got to where they are. Any number of PC members would be candidates for this role.

In the way, the public would be better educated.

 

Very well said Kierank. Anyone taking on a mortgage over the phone like that lady in the program needs their head checked. I feel sorry for her but the banks/brokers/developers are not to blame, she is.
Also, anyone buying property thinking it's got no risks is kidding themselves. Just like any business, it can fall apart and hence why due diligence is so important before jumping into it.

Very disappointing doco from 4 corners

 

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The only city that seemed to be struggling was Perth, particularly the suburban fringes.

 

Thanks for sharing. Shocking details

 

Properties is about debt, serviceability and employment
if everyone got a job and income and can service it is not an issue

I will become an issue when those factors are not there as experience in Perth
Sydney or Melbourne or Brisbane or any other city in the world won't be any different if
those factors are not there.

this is where it becomes interesting if you own properties and has low debt and cash reserve
a downturn won't impact you.

but if you leverage up 80-90%, taking equity from one property to pay for another like that young couple mentioned in the program, they are gambling or speculating.
I wished they ask them a question, you been taking equity out to buy more of the same on hoping for more price rises.

consider a scenario where it drops 20% and one of you out of a job? I say they get wiped out and then holding a load of debt they probably spent the rest of their lives repaying.

Leverage is 2 edged sword, on the way up it magnified your gain on the way down it amplified your loss.

That why everyone face wiped out in that program when they use equity from one property to pay for another, obviously no one invests to lose but none caters for a downturn, and if you not preparing for a downturn, you are gambling not investing.

 

So the median 30+ Delinquency Rate in Australia has increased to 1.52%,
with WA around 2.8% and NSW 0.94%.

Two questions I couldn't find clear answers for:
1. what's the rate of mortgage defaults / repossessions in Australia?
2. how do above figures compare internationally?
I was under the impression that 1.52% is still quite low...

 

We shouldn't have any, we have rates at historic low, low unemployment and a 25 years boom and no recession and plenty of people are having mortgage stress.

I hate to see what happen when rate goes up 1%, we have a mini-recession and unemployment hits 7-8%

 

I

I think the show served its purpose as a warning.

Some people will always do stupid stuff in order to buy property....in the same way that lots of people on here have been very smart and done well.

After 25 years recession-free there are millions of people out there who are genuinely unaware of the risk or at the very least unaware of the potential consequences.

A scary show like this is not necessarily a bad thing...

 

Good point, it just like mum and dad telling you when you go a bit off the rail

 

Extract;
she bought her first property at age 24 in Sydney’s western suburbs. However, her initial inexperience in the property market caused Rowena to pay too much for a house which wasn’t primed for growth. She held onto the property for 7 years before eventually selling it for $30,000 less than she bought it for! What’s worse the property was negatively geared throughout the 7 years and the rent did not cover Rowena’s expenses.

24+7 = 31

She is now 35 imagine how much more money she/they would of made if she held onto it for another 3-4 years.

 

But isn't a certain percentage of the population always going to be careless with credit, no matter what the economic climate, interest rates etc?
Spending more than they earn, a bit like the 44% of lottery winners that go broke within 5 years?
Why Winning The Lottery Is The Quickest Way To Go Broke | HuffPost

So what are the figures in other economies comparable to ours, UK, USA, NZ etc? I do think this needs to be seen in context...is 1.5% high, low or average, who knows?

 

Anything that cautions people that prices are too high in Syd & Mel is ok by me.

If we're going to have a correction flatlining from now for a while will help prevent a bigger swing down

 

One of the couples(the wife was telling the story)
said they paid $240K for their house and then got into trouble and they had to get help from "family" to pay the bills .
I would love to ask them how much they are paying in rent now and compare it to the costs on a $240k house??(they maybe had a mortgage of $200K ish ??)