Guru area predictions

'tightening' is only due to regulations. Banks ALWAYS want to make money. They can do so only if transactions happen.

 

If the house prices fell by 30-70%, I reckon we won't be able to fund public universities and pseudo-economists like Steve Keen will be first ones to be shown the door. It's time someone told him that!!

 

Thats not quite true. They can make money from fewer transactions, by earning more money per transaction.

I give you NAB. Friend to the Investor until Nov 18,2016, when their advatageous servicing calc said goodbye. Foe to the Investor from Dec 12, 2016 when they raise all I/O rates by 0.15%.

I give you WBC. I give you STG. everyone got so excited when they re-entered the 90% space - I warned then that it would be a temporary market share grab. And voila! filled themselves up to their speed limits, and hit investors up for 0.08%, and SMSF investors for 0.43%.

Why? because in many cases, it is ibcreasingly difficult to refinance away to a more competitive rate due to servicing constraints.

One day, the penny is going to drop within the broader forum membership that these things happening around the lending market are not flukes. Not accidents. Not chance. These are strategic and deliberate. Investors are paying to subsidise P&I debt. Thats where the price war exists for new customers. The fact the changes are regulator driven and not market driven is the precise reason why they should be taken so seriously....

 

Bottom line is... It is everyone's interest to make money. Banks, State Gov, Federal Gov, brokers etc.
Less transactions = less money flowing.
Interested parties will find a way to keep it flowing.

 

That's one way to look at it... but ultimately the financial wants /needs of banks, state and federal Govt treasuries and any others with a vested interest in ever rising resi real estate prices, will be trumped (excuse the pun, given the new world order) by the regulators will to safeguard the banks against structural weaknesses. This is why regulators are established independent of Government. If this was a political decision made by elected officials we'd have 120% LVR's, 0.1% rates and actuals, and we'd all be worth $20 Million. It's because of the need for a political decision that we have had complete indecision on any neg gearing or CGT reform... but thats another thread....

All that's going to happen is that we are going to recalibrate. We went from low volume - extremely high margin mortgage lending in the late 80's, to deregulation. That meant we moved towards high volume low margin lending throughout the 90's and noughties and as the 21st century evolved then came the GFC... and now the global initiative to recalibrate and re-regulate is underway , to bring the excessively overdone pendulum back to a more even and measured centre. Too much bank leverage. Too little capital. Too much I/O. Too little liquidity.

It will take several years for this to play out, at the very least. Could quite conceivably take a decade or longer. There is 30+ years of systemic bias towards I/O that has built up. It will take some serious time and effort to unwind and recalibrate the banks books towards a P&I bias, recapitalise balance sheets in incremental steps, restructure the lengths and terms of the trillions in global RMBS in steps...etc.

But through it all, Australian banks will make the same or better margins. This is actually a huge win for them. They have less competition now. Less risk of losing business due to refinances. Everyone has the same crappy servicing calc rules. They will just make fatter margins off less I/O deals. They can lift rates 8 or 15 or 43 basis points and most people literally just have to cop it. Just like they did yesterday.

As stamp duty revenues slow in the coming years, states will eventually remove stamp duty and replace it with a consumption tax ( land tax) and they'll also magically end up with far more money.

as far as mortgages are concerned - P&I borrowers will get the best rates. I/O borrowers will continue to subsidise everyone else. It's been happening for over 12 months already. It's happening right now. It happened again yesterday. It will happen again and it will be what it will be....

 

thanks so SQM did OK

BIS woeful
Does anyway pay for property reports?

 

Hey did this happen? Even now, in 2022 I don't think property has dropped by 20% yet.
If you had listened to this in 2017 how much capital gains would you have missed out on?

 

Not that much in a lot of Sydney, you would be in front regarding many apartments.

I moved money elsewhere and it performed very well.

I do feel that it will come back from 17 prices, not S K style, but it is entirely possible to be negative 17.