Panic Setting in Sydney

Sure here is what I see happening.

1. They (majors) need to get I/O only loans to say about 30%...currently they are at 45-53% (WBC is at the top end).
2. They will do this by increasing I/O loans both IP and PPOR till people go to P&I or refinance so they reduce the percentage of I/O loans on their books.
3. Eventually I feel that the old differential of about 0.7% between IP and PPOR loans will be in place.
5. I don't think you will be able to go renew to 5yrs I/O only loans after initial 5 years.

In two months we will know.

But it looks like the RBA, APRA, and ASIC are driving things to bring the exhuberant lending under control.

 

In other words, one way or another , just about every investor with existing I/O lending ( whether 5 years or 10 years) is going to pretty well be forced to P&I when those I/O terms mature.

The 30% I/O quota banks have to work with will pretty much all be set aside for new customers to the bank...who in turn, will be forced to P&I after 5 years as well.

The difference between I/O and P&I is going to be over 40% higher repayments per month. Worse if you are coming off 10 years I/O. Much worse.

If you dont have sufficient income or cash flow to repay debt at mid 5% rates and on a P&I basis, you need to get something in place so that you can. Now, given the extremely low wage growth happening now, and forecast to continue , the majority of investors just arent going to be seeing payrises of any significance for the next few years at least. That leaves rental increases...which will do nothing remotely near what is required to close the 40% repayment gap. That leaves lump sums from a windfall or inheritence or lottery win... probability pretty low , which leaves deal with it or sell up.

Oh, one other solution - use whatever remaining equity and capacity you have now to get some form of cash cow or 2 or 3 , which will each generate the 8,9,10K of surplus funds required to pay down a bit of debt , and make it much much easier to hold on to your existing portfolio when P&I kicks in.

 

or drive an uber

 

Good idea!!!

Where would we find such deals????.?.?!!!,

 

Or lets all pass on the increased cost of doing business to tenants, free market like; no collusion at all.

 

I have one with Westpac. Called up a few weeks back an extended the IO for another 5 years, still had 3 years to run, so I'm ok now for another 8 years or so.

The lady I spoke to was perplexed as to why I would be doing such a thing, was trying to fob me off and to call back in a couple of years but I put my foot down and got what I wanted.

 

What's the rush? Why not sit tight and grow some savings and knowledge for when a good opportunity presents itself?

 

I think I have very limited time to buy. If I don't buy in the next few months, I most likely won't qualify for a loan as banks will tighten their serviceability calculators.

 

Mine are all 15 years I/O...... I think they only do 10 I/O upfront now.

The plan as I am hearing is not to renew after one 5 years I/O stint as policy.

For people who already have it ...it will be expensive.

Only matter of months now...before all is revealed....

 

or sell more droogs.....err,if you're a pharmacist that is.

 

CBA is also over the 30% threshold, but only just.

 

Perhaps that's a good thing? You're rentvesting from what I recall? Given anymore thought to that Perth PPOR unit? Might be a good idea before the door shuts.

 

I definitely gave up on perth, i don't think it's the market to invest in now. Things may change though in a year or two, but I think waiting for it to happen and not investing elsewhere would probably not be the smartest thing to do.

 

Hey coming from one dead market to another....it can kinda depend.

I wouldn't totally diss the idea.

There's no way anyone would buy an IP there but a PPOR can work, especially if you ride in like a knight in shining armour and help relieve some poor soul of their blue chip property at a hefty discount.

 

And you call this trolling? You asked where I was (despite you know exactly I don't like you, no offence)so I replied a tongue and cheek comment.

You keep accusing me of selling out of Sydney and continue to hype Sydney until I sold out or to that extent anyway. None of your accusation are true. As I said I sold a property in Penrith last year. Held it for 3 years in 2013-2016 and made over 60% profit. Taking profit off the table and probably as you said rebalance my portfolio as I have higher % of property in Sydney could be the reason for selling? Would I sell another Sydney property in this current cycle? Perhaps, if it continues further increase. But at this stage I have not listed any Sydney properties for sale and have no plans this year.

Did you see me hyping Sydney 12-18months? Sydney has caught everyone off guard, thinking the peak was some 12-24mo ago. I know a number of pc members here have taking some profits off table.... what's wrong with this approach? Not all investors are like you buy and pray/hold forever...

No doubt PC members will each have their own agenda. There is no control and authority of this on PC and this shouldnt present an issue if the argument is sound..However your negative view, motive and agenda of Sydney property, in my view, is loud and clear. Often your negativity on Sydney clouds your judgement such as the example ej89 pointed out on the Adelaide/Sydney income example (whether this was accidental or deliberate calculation is questionable)

Despite you live and breath in Sydney, you did not purchased a single property in your own backyard in the last 10 years. You have purchased elsewhere during this timeframe including Perth and Brisbane.

Despite 7 years ago you had a post predicting mother of all booms in Sydney in 2010, you missed out in buying Sydney this current cycle. Now you are back with aggression and thirst for Sydney when it tanks, whenever this maybe..
There is nothing wrong with this approach Sash, me thinks but I am just stating the obvious in your agenda.

It doesn't take a rocket scientist to know Sydney will cool. In what form it cools, and how % it falls over how many years, is everyone's guess

 

But did he replace the unit in same year?

 

ole right guv please tell us what you have know what i mean......details please.

 

So far l've seen apartment price reductions in lidcombe, carlingford and parramatta.

 

can you give some examples? how much reduction have you seen?

 

UBS is 'calling the top' of the property boom