The IO property cliff disaster? Fact or fiction

I look at the whole IO thing and any other market factors as how would it affect my portfolio and moving forward. It's irrelevant to me if X number of people can't repay or X number of people have extra pressure from repayments. As an investor I only care to the extent of, how, if at all, will it impact my portfolio and wealth creation.

Now if suddenly Sydney or Melbourne ( bulk of my portfolio) magically have massively new supply of land in high demand areas which will affect supply and demand, that's something that would worry me etc.

Now I get different scenarios wil affect all investors differently, I get that. But really this needs to be looked at from an individual investor's perspective.

At the end of the day, somehow values keep rising more or less in our most popular cities and suburbs. I know nothing is guaranteed but I'm feeling pretty confident about our real estate markets overall because Australia is a dam good place to live. And All the immigrants coming here know it.

Anyway that's my take.

 

I think IO Cliff is not the issue now, we might be going into a recession cliff.

 

yes I get this but the topic is about the IO cliff whether its fact or fiction? Clearly its fact that needs to be considered

booms dont last forever, ride the good times and batten the helm when the markets turn and if you can make money in any market even better

 

Really why??? I dont see it

 

Actually it's about IO property cliff disaster. So while it may affect individuals, it clearly hasn't affected the broader markets, hence our recent booms and more wealth created.

I do agree booms don't last forever.

 

Don't see a recession any time soon.

 

Its interest rate drops that has revived these markets and who in the main are buying??? Fhb?? What i am also hearing from mb

Also Libs got back in, completely changed market sentiment....who would have thought.... yay
I think we would have seen some serious blood on the street if this was not in play

also its still fragmented is all of melb and syd booming? I dont think so
On a micro level I hear some markets have fallen back
In melb I think its a price point fhb territory

but perhaps others could pipe in

 

Depends on how the corona beer virus plays out eh.. Shanghai and Beijing just clocked their first deaths.. Tesla Foxconn factories have been shut down etc... Next week will be interesting. I do wonder how the auctions went in asian suburbs this weekend lol. Chinese busy buying facemasks now, not property.

 

Thank goodness for that.. Australians on both sides of politics saw through Bill and his socialist agenda and rightfully tossed him out.

 

Not sure about that. I know a lot of small business owners and they are all saying the same thing - people aren’t spending. A recession wouldn’t surprise me at all in the next 1-3yrs.

 

I guess when I think about this Perth has probably been in a recession since mining fell over

 

Time will tell, no crystal ball here. But if I was betting I'd bet against. Let's visit this in 2023 .

 

I must have been one of them, because i went from ful time to part time employment.
No way i could have got finance, unless i had very creative broker who could count all rental income as income

 

Exactly, i calculated a roughly 25% increase in repayments "cashflow" wise at the same rate of pi vs io

For me that was more than an average yearly salary post tax INCREASE, it would have wiped me out quick smart

 

100% agree.....a small recession is possible...but the real issue is wages are not growing ...they are actually going backwards...

 

And this is what i dont get
We all behave like the economy is pretty good and cruising along, but we here of multiple business closing, retail struggling, "figures show that bla bla is down compared to" type comments,

Figures to me show a gradual move towards a recession, whether we get there is another question

 

The biggest risk is probably coming from a significant slowdown in tourism, hospitality, retail etc. depending on how long the bushfire and corona virus stigma lasts, the issue is many people in small businesses are laying people off, closing shops and the proprietors themselves will be struggling to pay next month’s interest If they’re stretched with debt. I’d expect to see a few prominent Asian families in Aus collapse very soon if this drags on

 

..... I remain skeptical with all the changes that it would be very easy for most investors to refinance in current climate

I dont know how this works but I was trying to help my daughter and my MB told me that prior to APRA ....... you can borrow 11 x your salary, today its 6 x your salary

thats the simple numbers....I am not a MB

 

Yep...get past 2-3 properties and most people can't borrow if they have a family with the majors even on decent incomes....

 

If that's the new normal, then irrespective of equity levels and meeting LVR's, serviceability calculations would see most people not qualifying for the interest only loans at the level of their current P & I loans anyway.

Mine have all reverted to P & I now and the arbitrage (in after tax dollars) does sting the personal cashflow a little. I'm sitting tight for now and have every loan interest rate at a very competitive level for P & I.

@MTR was that six times borrowing multiple quoted on taxable income or gross income from all sources?