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Discussion in 'General Property Chat' started by Dean Collins, 20th Aug, 2016.

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  1. Dean Collins

    Dean Collins Well-Known Member

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    To people in sydney thinking of purchasing property......reading yesterdays results.....you guys need to lay off the crack pipe.

    WTF?? There are some seriously overblown numbers being reported yesterday. You do know that interest rates will go back up again right?
     
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  2. hash_investor

    hash_investor Well-Known Member

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    they think not for the next 10 years... I don't agree though
     
  3. Obsidian

    Obsidian Active Member

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    Hey, New Yorker Dean!. You guys need to lay off the crack pipe, and stop voting for Trump. :rolleyes:

    Yeah, Sydney is just going stupidly crazy now, especially with the latest interest rate drop in early Aug. Anyone with half a brain stopped buying a while back, and is selling their lesser quality property to the mugs still purchasing at the peak, and either using the money in different markets or banking it in, waiting for the eventual cycle downturn and good buying opportunities in a buyers market in maybe 3-4yrs (~2019).
    Normal cycles. The market tends to overshoot on the upside (as it did in 2003), and then comes back a little in following years.
    I just wish the damn interest rates would actually rise!. All I see as this stage is potentially another rate drop to 1.25% cash rate late 2016/early 2017. Damn you! Rise!. Rise!.
     
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  4. Gockie

    Gockie I'm an ISTP-A female, so I might be a bit quirky! Premium Member

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    Agree. This is how I read it.

    People are still looking to buy homes to live in though. I know 2 lots of first home buyers looking to buy. 1 just had a baby and the other has a son going into high school next year and they want to live in a good school area. Perhaps I should suggest they all should rent... but then again, if it does continue to rise for the next 2 years then its my fault. And they'd still be spending ~$700 a week on rent anyway for where they want to be. So i'd better not advise them what to do. I thought my cousin completely overpaid with a 1.3mill house in Oatley ~2.5 years ago... now that's not considered super expensive. Interest rates are not going anywhere though, except maybe another cut...
    Not sure which investors are still buying Sydney but the local ones have pretty much all stopped as far as I know.
     
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  5. Dean Collins

    Dean Collins Well-Known Member

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    Very few new yorkers are actually going to vote fro trump....but they are out there. a friend of mine the other day dropped it in a conversation and I looked at him like....but you seem so normal :)

    I agree about rates rising, its ridiculous that the RBA doesn't see the need to take away the punch bowl but I think their main reason was to help the $A drop (you beauty....) to help exports etc-hopefully the fed will raise rates in December and alleviate some of the pressure.
     
  6. MsAli

    MsAli Well-Known Member Premium Member

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    Last edited: 22nd Aug, 2016
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  7. Obsidian

    Obsidian Active Member

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    I'm sure the strength of this particular boom has surprised most, including those that have seen previous booms before. I thought it would slow maybe around early 2015. 30day Cash rate futures were then potentially showing 2 interest rate rises! to come in 2016. Instead we got more interest rate falls.
    ASX Cash Rate Yield futures - http://www.asx.com.au/data/trt/ib_expectation_curve_graph.pdf
    A lot of this crazy growth I think is purely low interest rate driven. People can borrow more. I think we'll see a world of hurt when interest rates start rising. The supply and demand argument I don't buy as much. Really, only Sydney and Melbourne have gone the most stupid in Australian markets, and that is where your likely to see the most buyer activity, including investors.
     
  8. Leo2413

    Leo2413 Well-Known Member Premium Member

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    I don't know too many people who are spending big bucks in Sydney now but they sure are going all out in other markets where deals can be made.
     
  9. RetireRich101

    RetireRich101 Well-Known Member

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  10. MsAli

    MsAli Well-Known Member Premium Member

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    Yeh...was stressful :D in hindsight ....action was/is important!
     
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  11. Propertunity

    Propertunity Exclusive Real Estate Buyers Agent Business Member

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    Interest rates are not going anywhere but down for the foreseeable future. They will go up at some point though.
    Bear in mind that banks are calculating serviceability on new loans written, on current IRs+ 2% or so. So technically, new borrowers should be able to tolerate several IR rises before being too stressed about it.
     
  12. Obsidian

    Obsidian Active Member

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    2-2.5% serviceability on interest rates as historic lows does not give much breathing room should interest rates come back to even slightly below long term average. Cash rate 5%. Bank rates 7-8%. A 2% serviceability effectively puts the GFC emergency rates as "the norm" by banks.
    When we are at rates 1.5% below the GFC emergency rates, you know that despite all the talk, the economy is headed for trouble.
    Personally I recon with rates so low, the serviceability should have been bumped up to 3-4%. A lot of those outer Sydney areas will hurt hard.
     
  13. Propertunity

    Propertunity Exclusive Real Estate Buyers Agent Business Member

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    When IRs do eventually return to "normal" levels, there is plenty of time to lock in fixed rates if you think you are going to be better off than staying on variable.
     
  14. Obsidian

    Obsidian Active Member

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    By the time people realise the interest rates will be going back to normal levels, it will be too late to fix. The banks aren't stupid and will be ahead of the game.
    I just think people are taking on too much debt at these low rates and in a few years will will bite.
     
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  15. Propertunity

    Propertunity Exclusive Real Estate Buyers Agent Business Member

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    I disagree. IRs go up generally by 25 basis points at a time and not more than once per month at that. There's plenty of time to take action to fix if you keep your finger on the pulse.......and do the opposite of what the banks or the RBA suggest.
     
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  16. Perthguy

    Perthguy Well-Known Member

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    Many may be taking on too much debt. Others are using the low rates as an opportunity to deleverage.
     
  17. timetoact

    timetoact Well-Known Member

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    Do a bit of research, low interest rates really are here to stay for the foreseeable future.
    Maybe a couple of rises, but to get back to mortgage rates in the 8-9% that we had pre GFC is at least a decade away IMO.
    Growth is strangled in developed countries, emerging economies growth is slowing. The trigger for rising rates is hard to see.
    Didn't an american poster say they could get a 30 year fixed loan at 1.5% recently?
     
  18. Obsidian

    Obsidian Active Member

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    I do my research thanks!. Rates will be low for the near future, but will rise eventually.
    It won't take interest rates to go back to 8-9% to cause problems at the debt levels now. Even 6-7% would cause a lot of pain for a lot of mortgage holders. Even at the very low interest rates we have now, mortgage delinquency rates have risen (just a bit, but risen). So what will happen when rates rise even 1.5-2%. (to "GFC Emergency levels"!).
     
  19. Brady

    Brady Well-Known Member

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    Banks haven't been using actual IR+% since APRA. Most banks are now on a floor assessment rate of 7-8% so even with the decrease in rates it has zero effect on borrowing capacity. It actually reduces the capacity on most investors due to NG calculations being done on actuals instead of asssessments rates.

    So borrowers buying now should technically be able to afford 3-4% rate increases.
    Along with monthly living expenses also set a floor amounts (in many cases above actual costs)
     
  20. timetoact

    timetoact Well-Known Member

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    Yes, "eventually" but that gives borrowers a lot of time to pay down debt.
    I think 1.5% - 2% rise is a long way away and even then barely takes us back to 7% which is what most banks are using for serviceability.