Property cycles and the merits

Discussion in 'Property Market Economics' started by dabear, 7th Nov, 2015.

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  1. timetoact

    timetoact Well-Known Member

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    This is another good point, as I said before credit will find a way.
    If the banks continue to be hamstrung then the smaller lenders will plug the hole.

    Alternatively if each bank is capped at 10% loan growth what is to stop the banks buying or setting up a new lender to allow them another loan book to grow... This is a simplistic way of looking at it but I think the point is valid.

    Markets will find a way to supply the demand, they always do.

    Is the 10% growth limited to the big banks? If so, CBA owns Aussie anyway so should we expect more aggressive investor lending?
     
  2. Perthguy

    Perthguy Well-Known Member

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    If the banks are actually hamstrung in lending more and more funds, the uber of lending could fill a gap in the market: Peer to Peer Lending
     
  3. Guest

    Guest Guest

    P2P lending can't create credit in the same way as a bank which can create both a new deposit and the loan.
     
  4. timetoact

    timetoact Well-Known Member

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    I am probably wrong about this, but I just cannot see peer to peer lending contributing a meaningful amount of credit for residential property.
     
  5. Perthguy

    Perthguy Well-Known Member

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    True.

    Probably not. It's still an interesting concept though.
     
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  6. BuyersAgent

    BuyersAgent Well-Known Member Business Member

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    Aren't the current models for personal loans only? I am yet to hear about p2p willing to lend hundreds of k? But perhaps it exists I might have missed it.
     
  7. Perthguy

    Perthguy Well-Known Member

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    Yes, I think you are right. At this stage they are for personal loans only. At least in Australia. Overseas, these companies are moving into the mortgage space. Whether this happens in Australia will depend on credit availability. If there really is credit crunch, as predicted earlier in the thread, expect the market to find a way to fund the gap. In the UK and US,

    More peer to peer lending platforms are being created to deal specifically with mortgages and real estate, including LendInvest and Money360.​

    Can you use peer to peer lending for your mortgage?

    Money360 is for commercial at this stage but something interesting about this is that a recent $6.75 million commercial real estate loan in Chicago was funded by an institutional investor.

    A huge barrier to entry is that p2p lending can't create credit as pointed out by 2340.

    However, the entry of institutional investors into this space raises an interesting prospect. According to asfa, superannuation assets in Australia totalled $2.02 trillion at the end of the June 2015 quarter. If consistent returns from p2p lending could be demonstrated, particularly in the commercial space, I could see institutional investors in Australia jumping in. I mean, how much did Australian super funds lose in sub-prime? It's not like they haven't taken stupid risks before. It wouldn't take too much of that $2.02 trillion to make some impact in the market.
     
    Last edited by a moderator: 10th Oct, 2021
  8. mcarthur

    mcarthur Well-Known Member

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    Really really interesting - I'm loving the great discussion!

    People mentioned "Uber" and p2p.
    What about the brick-by-brick model - I can't loan enough money for a big house in Vaucluse, but I'll go into partnership with another 100 people on it and share the hopefully large ROI. The technology to find people, manage the relationships, and buy and sell the shares is of-age. JV's already do this, but for far smaller numbers of people so the actual relationships are important. In the new model, the relationships don't matter at all - it's a combination of share market and residential property, but especially good when you haven't the serviceabilty for a full-price loan.
     
  9. euro73

    euro73 Well-Known Member Business Member

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    So now we need 100 buyers to fund 1 purchase? thats novel but it isnt going to drive a market unless we have 1 house per 100 head of population :)
     
  10. See Change

    See Change Well-Known Member

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    Problem there is you are forming a syndicate of more than 20 investors who are not sophisticated investors and you'd have some lovely regulations to comply with , possibly akin to floating a company on the stock market ....

    Cliff
     
  11. Perthguy

    Perthguy Well-Known Member

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    This already exists in Australia - Australian real estate investment trusts (A-REITs). Traditionally, they don't have much exposure to residential property because of traditionally low returns. However, multi family REITs, as they are known in the US are very popular. So it is a possiblity in Australia. More likely is A-REITs moving into the residential development space. Think Lend Lease, Mirvac and Stockland.

    And no, I don't think they will drive a market. They will only be one small part of a very big market. It all adds up though doesn't it? After all, SMSFs have been blamed for driving up residential property prices when in reality, SMSFs do not drive a market.
     
  12. Bran

    Bran Well-Known Member

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    This is already happening in the UK.

    The houses are listed, and you just put your money in for your share.


    Dammit perthguy - beat me by 0.5s
     
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  13. euro73

    euro73 Well-Known Member Business Member

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    I was being facetious :) And no, SMSF's arent even a blip. More properties get bought and sold in a day than SMSF's buy in a year.
     
  14. BuyersAgent

    BuyersAgent Well-Known Member Business Member

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    You are right it is a tiny percentage at present.

    I read the other day that total Au resi property is 6 trillion, and smsf assets are 2 Trillion, and resi property at this point is only 5% of smsf, so a tiny fraction. Surprising thing was total debt on the 6 trillion was around 1.5 trillion meaning around 25% lvr on the total market I think.
     
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  15. Perthguy

    Perthguy Well-Known Member

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    It's interesting with the doom and gloomers whinging about the property bubble and us being overleveraged and all that and predicting catastrophe that really, the value of loans vs the value of the underlying assets is not dire at all. Of course that 6 trillion will slide in the correction phase we are entering but it won't affect the total market LVR too much. We have to remember in this time of low interest rates that people are paying down debt.

    @Barny, you will be interested in these numbers.
     
  16. Taku Ekanayake

    Taku Ekanayake Well-Known Member

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    Great stats. Thanks for the insight.
    This has been a very interesting thread btw.
     
  17. Barny

    Barny Well-Known Member

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    Haha, I guess I'm labeled a doom and gloomer?

    Sorry as you know by now, I'm a bit slow with things. So from those figures stated by buyers agent, 1.5 trillion of debt on a total of 6trillion in property capital? 25%? That right?
     
  18. Perthguy

    Perthguy Well-Known Member

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    Not who I was thinking of when I wrote that post. You know who I mean ;)

    Yes, that is right. Across the entire "portfolio", the LVR is 25%. Within that there will be people who owe nothing and there will be people who are over-leveraged. One interest rate rise and they will lose the lot. And lots of people in between. It just makes that prediction that the whole thing is a deck of cards waiting to collapse seem dumb.
     
  19. dabbler

    dabbler Well-Known Member

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    Nothing demonstrates that better than the lack of business taking up credit and spending, which is the whole reason the interest rate is where it is now.

    Did not work though, blind freddy should have seen that.
     
  20. Kangaroo

    Kangaroo Well-Known Member

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    To me credit relaxing or squeezing are just accelerating or de-accelerating agents. It speeds thing up or slow it down at the mercy of government/RBA to keep the economy to grow smoothly.

    Economy+job+population growth are the real drivers. Among them, Economy and jobs are top priorities. Population follows jobs. Population movement is either for new jobs or future jobs( ie studying/people smuggling).

    No jobs--->leaving( not only one, whole family of 5)--->stop buying( do not care how low interest rate is)-->stop spending ( which is someone else's income).
     
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