VIC Melbourne price correction - post examples

Tell me about it.
The numner of people who chose a suburb with the toss of a coin, and have done well.

Many of them think they are gun investors.

Lets see them rinse and repeat

I know of one who bought timing well and then got cocky and bought a few mining town properties

 

my impression, from many posts I read on PC(from well know industry experts), was that most non leveraged OOs don't use their max borrowing capacity so would hardly be affected by current credit tightening.
but who knows, like the impact and extent of using actual expense is just coming to front,
we may be surprised at the extent of how close OOs are to their borrowing capacity.

The one I am watching very closely is the impact of IO2PI rollover in next three years
There have been few articles exaggerating the preemptive IO rollovers but when we collate banks data from recent results there is still close to 380bn (excluding the preemptive loans) to be expired in next three years. I think many who could have.. would have already switch due to penalising IO rates. High chances of significant number of of those who are left to rollover would find themselves in high-risk category resulting in number of forced sale in coming years,

Sellers don't drop prices just for fun they have an option to not sell unless they have to for whatever reason.
2018 was the first years of full 120bn IO2PI expiry, would be interesting to see how much of it was forced sale due to IO2PI rollover (if at all) and how much FONGO apart from regular divorce etc sales.

 

One of the big illusions on here is the use of “most” or “the majority” of people. Eg. most don’t borrow that much. The majority have good cash buffers. Most won’t be impacted but P+I.

We underestimate the impact of the 10% who do stupid stuff on the market. A person over leveraged drives the more conservative people higher. A fire sale drives a street down, then it spreads to a pocket and a suburb.

 

The Box Hill/Blackburn/Doncaster area is a good example. This has been mostly caused by the lack of foreign investment when compared to previous years.

 

So Apra had no affect?? Please ....

 

Based on what you actually spend?? I don't spend what the living expenses say I can tell you that much!
According to the lenders, I can't service my existing debt ..... but in fact I do quite comfortably.
I've been in this game for 20+ years

 

Why is APRA doing, what its doing?

Systemic risk posed to financial systems by 'ever growing credit froth' has to be tackled else it risks bringing down the entire house of cards.

Its a new game for banks as well as they realise that they can't push 'ever growing credit can' further down the lane anymore.
In the pursuit of frothy deleverage there will be overshoots and that's collateral damage. The process to assess risk will evolve and will get more efficient in removing overshoots over time, but the credit tightened environment will be the new-normal, and not likely going anywhere for some years to come.

 

Of course APRA's Credit tightening has an effect but the degree varies, It gets exponentially worse the more leveraged your are to an extent of being capped and its intentional.

For non leverage OOs/FHBs who are not pushing to the max, and have their expense and deposits in order APRAs intervention has minimal impact. Falling prices are bonus and its will get bigger till the headwinds in next two three years are cleared.

I think APRAs is a smart policy, very targeted, not blunt like IR raises which punishes all not just the problem area.

 

I agree that we couldn’t cut interest rates enough from this point to counteract APRA. APRA targeting is a good thing too.

 

I realise around 30% of OOs are not leveraged but that would be very rare for a FHB.

 

The point I was trying to make if there is a loan on a property there is leverage, it is the level of leverage that APRA is interested in.

The poster seems to not understand the meaning of leverage.

 

maybe he is implying retail impact due to reversal of wealth effect(feeling rich) due to falling prices?

Can it be countered by rising left over disposable income due to smaller loans on back of falling prices?

 

APRAs policy is a very blunt instrument. As you can see by teh affect. Yes targeted but very blunt.

It has most definitely affected FHOM. Thats is in Sydney and Melbourne. Couple trying to buy a house in 30min commute to the City are priced out of alot of housing stock (house) and now have to look at apartments.

APARs policy may within 24 months result in a recession. We will see.

I ahve a large client base of builders in Sydney who are starting to feel the policy shift. Construction is one of r Sydney's largest employers.

Time will tell.

 

They don't have to jump now, have patience, and the way things are falling this couple might get what they were after at a much lower price.

Sydney/Melb and Risk of recession?

I have lost count, how many times I have read here "how gung-ho Sydney's economy is"
and how it can bear the brunt of any downfall with flying colours,
or its just a matter of time before Sydney snaps back all the losses and continues its journey to infinity and beyond.

Are you suggesting RE boom was keeping Sydney/Melb economy going strong and in absence of ever growing credit we risk a recession?

 

Are you suggesting RE boom was keeping Sydney/Melb economy afloat and in absence of ever growing credit we risk a recession?

Did i say afloat? let me check may be I made I did......nope, no I didnt ...

But as one of the largest employers of Sydney and Melbourne 5/8% of the workforce looking for work has the potential to do this.

 

from economy going strong / gung-ho to potential recession is quite a change don't you think?

But I have changed the usage of "Afloat' to "going strong",
instead of picking on choice of word or semantics and derail, lets focus on broader point.