Is It Time to be Cautious?

Interest rates raised by Westpac targetting interest only loans.

NAB also lifting investor rates.

 

Here are some trends to think about .... for 2017

by Simon Buckingham - Results Mentoring (Extracts from an email I received today)

For those interested
Slowdown in Real Estate Listings
CoreLogic data in November 2016 showed the number of properties listed for sale is noticeably down from a year ago in Sydney (down 9.4%) and Melbourne (down 2.9%) - but the median home values in both cities have risen by around 2% in 3 months.


Outside The East, The Picture Is Less Rosy
Meanwhile Perth is seeing price falls, and Adelaide, Darwin and Hobart witnessing some volatility, according to CoreLogic data.

As a result, some property investors are finding themselves under-water - with mortgages bigger than the value of their properties.

The danger for those holding property in a falling market is that this can cause a "race-to-the-bottom

Apartment Oversupply
In general, it seems apartments in capital city CBDs have been over-developed nation wide - but building approvals have slowed down from their ultra-high levels over the past 5 months


The Trump Effect

And Australia’s status, and agility, on the world stage should see some very advantageous bilateral trade deals struck with major European, Asian and American players over the coming months. Especially if the American-led Trans-Pacific Partnership trade deal is killed-off by President Trump.

Plus, even if you’re worried - the market isn’t. After losing $32.5 billion on the news of Trump’s election, the ASX made $50 billion the next day - the best session since 2011!

And today, there's news that the US Federal Reserve raised interest rates for only the second time in 8 years - and flagged three more potential rate rises in the coming year (bringing the total to four) to prevent the US economy from overheating! (This is a far cry from a picture of doom-and-gloom.)

The warning here is to not become a slave to fear or greed.

Fear of the market leads people to do some crazy things.

For the past 16 years, I’ve had countless "armchair pundits" smugly tell me how property is a bad investment - and how they’ve sold out of an "overheated" Australian property market - burying their money (and heads) in the sand ahead of the "big crash".

Looking back, I'm sure they realise they would have been better-off than if they had stayed in the property market. (Or, better yet, become more active, and invested more heavily.)

 

A RECESSION is on its way !!!

I really really hope its not as bad as the 91-95 recession.


"THE Australian economy is officially in the doldrums, with the latest data revealing its worst quarterly performance since the global financial crisis."

 

I hope not, I don't think so.

However, there is a thread Terryw, I believe now its not just interest only loans that are going up.

This can impact on property markets in 2017 and change market sentiment?

MTR

 

I just received a letter in the post yesterday informing me that the interest rates for the loans I have with Rams are all going up 0.15%. Investment loan and ppor loan.

 

bummer

 

My rams loans are all on 12 month fixed, i just review each renewal

 

I wouldn't worry too much about a few of the things listed above...eg apt oversupply, slowdown in RE listing's. Nor do I think the trump effect will hit us as hard in Australia.
Thr underlying cause of near recessionary conditions we will face is to do with Australian industrial uncompetitiveness in an increasingly globalised world.
That's the root cause.
It was masked in previous years with high prices of commodities. Not anymore. It's not new- everyone knew it but there was easier and quicker dollars yo be made by selling **** to China and other places, so these issues were not adequately addressed.

 

I am not worried about the effect of Trump on Australia.
My only concern would be interest rates rising?

 

Yes, already seen rising rates..and will likely continue to rise.
Costs of banks themselves borrowing in intl money markets is getting more expensive for them and they will simply pass it on..if not in full at least in part.

 

Couldn't agree more...

 

funny that there are snippets on here and in the media of a possible recession, but over the last 6 months, we've seen banks increase the rates for IO/Investment type home loans...

Regardless I have locked in all of my investment debt on fixed rates where they all mature in 2018/19. The only variable rate I have is on my OO/P&I loan allowing me offset+additional repayments over $10k etc

 

Another hike, another nail in the coffin
ANZ lifts interest-only home loan rates, but cuts principal and interest loans

 

no, no need, no bubble, keep investing in houses should be fine. interest rates will fall as well later in the next 2 years for sure to 3.9 maybe even 3.7%. don't invest in apartments.

 

Who is talking bubble?

We are talking typical boom/bust cycles

As I mentioned before booms dont last forever, history proves this

I interest rates are rising not falling, there is a recent thread on this.


ANZ now raised IR twice recently, others will follow

 

Do you include your PPOR in this calculation?

 

Me thinks it is TIME TO BE CAUTIOUS in markets that have been going hard.

Buying developing sites that make no sense today and relying on anticipated growth, think again? Prices may fall back and the 25% gains could be 25% loss

I could be wrong, but I pulled the pin perhaps a little too early out of Melb and Syd markets and I think I got Perth about right just prior to it tanking.

I am not saying all markets are bad, not at all, and not preaching doom and gloom.

However, time to look at yields, if you are only getting 2-3% returns and interest rates are on the rise not too smart jumping in.

Time to have a reality check and look at the end game, if you stall and can not continue to play because you no longer have equity, can not source loans then you in effect are losing valuable investing time, that wont come.

I think rationalising debt and strategizing is huge and make the difference from reaching the end goal in shorter time frame with less risk

Just my thoughts.

MTR

 

Why not? that does seem to be the new emerging fashion around here by some..

 

Yes, because market sentiment is changing.
The question to ask is why is it changing?

 

I agree in some places it's changing, especially in Sydney but there are buyers in other parts of Australia that are optimistic and bullish on other markets with realistic timeframes .Would I buy in many parts of Sydney atm? No chance. Would I buy in other parts of Australia? Without a doubt.