Time for best bargains?

See I think there's still a bit of missing the point happening....

"Rate to borrower " - which is the actual rate you pay, is still super cheap. What you are actually paying today is far less than a couple of years ago. This is especially true for sub 80% Owner Occupiers right now, who are paying some of the lowest rates ever.

It's assessment rates that are biting - not the actual rate to borrower. Its important not to get these two confused... assessment rates may mean that we are going to see constrained growth, but they do not make existing debt less affordable. Only new debt is harder to secure and service.

As long as people can afford the repayments on their existing debts, there is no reasonable argument to support a view that Sydney will see fire sales galore in the coming months.. so in theory at least, we shouldn't see people dumping properties because they are over- leveraged - provided rates and unemployment don't spike.

And if the RBA cuts rates further in the coming months, rate to borrower will get a little more affordable... at least until the RBA cuts are eaten up by the 20-30bpts increases that I believe the banks will hit us all with sometime in late 16 /early 17 as they re-capitalise for Basel IV.... but all in all we are still sub 5% and it appears we are going to stay in a fairly low and stable rate environment for a while.... so affordability wont really change much.... only borrowing capacity will.

I agree with Steven that there will be some OTP crashes in 18-24 months from buyers who cant service post APRA, but that's really only a small percentage of the market and wont drag the whole market down... It may be a few thousand dwellings in a city of hundreds of thousands of dwellings...but yes it will be good buying for those who can pounce. But more broadly I agree with Sash. We are likely to see years and years of very little growth in Sydney....

For every $1million in I/O debt, you're effective income on a bank servicing calc is now 25-30K less than a few months ago. Old assessment rate 4 - 4.5% . New assessment rate 7 - 7.5%. 40-45K of "actuals" vs 70-75K assessed today. Big Big difference. That sort of money is going to take years ( perhaps as long as a decade ) for many people to "catch up" , particularly in a flat economy where they are only seeing 2-3% annual pay rises and rental increases..

It's why I have focused on generating exceptional cash flow with which to manufacture debt reduction ( which means equity and borrowing power in the end game )

 

My opinion is if you find a property in a capital city area and its a no brainier from "the numbers perspective" and there is zero competition....then that area has probably reached the bottom, and it is a good time to buy.