Will the government do anything to destroy current boom trajectories?

No idea about SA but I think suburbs in Qld over the last few years did better than Perth, but nothing fantastic obviously, generally speaking. I agree, if any measures put in were to slow all cities, Perth investors would be livid is my guess.

One of the reasons I prefer to invest in the 3 major (multiple) cities. Usually they won't grow at the same time. So you can capture growth at different times. Also all eggs in 1 city never appealed to me personally .

 

Ditto

 

Is that similar to gasosene?

 

Macro-prudential policies a matter of when, not if

 

Government probably won’t do anything - this Government doesn’t “do” things as a general rule - it talks about things and announces things - quite a lot - but rarely does them.

But regulators such as APRA may actually do something . If they do , you would imagine it would probably be around limits on high LVR lending or DTI ratios . For example , they may cap DTI at 5 for loans above 80% . Or they may cap lenders to writing no more than 30% of new loan volume above 80% ... or they may do nothing for a while ... until the situation becomes more risky... or until the wind comes out of the sails . But if they do decide they need to act , which ( if the increasing media coverage is to be believed) appears more and more likely, I would imagine these types of things would be where discussions would be happening .

I have said previously that the RBA and APRA face a real conundrum; they have to walk a fine line between stimulus and froth ( especially for high lvr first home buyers borrowing to their absolute limits ) while allowing the cash rate to stay low ...

There appears to be a real blind spot in our regulators ability to achieve these things gently rather than abruptly , if we consider previous instances of intervention . Blind Freddy knows that the regulators have previously waited for things get a little too far off the leash before responding , requiring stricter regulatory responses than might otherwise have been required if they had been a little bit more proactive than reactive . The extreme intervention against IO lending could have been avoided if incremental IO restrictions had occurred when the rate cutting cycle commenced in 2013,14 and 15 .... now, history appears to be repeating . They dont appear to comprehend that when you cut rates aggressively, and don't simultaneously place some finely tuned restrictions around lending rules, you get fireworks. They had already walked back assessment rates a touch... and allowed banks to set their own floor rates.... this plus rates of sub 2% as always going to result in kaboom! So you would think that someone at APRA and the RBA would have had realised this, had a discussion about recent history and decided to introduce some modest caps for FHB's when they dropped the cash rate to 0.10% and the RBA became the buyer of all fixed rate bonds at 0.25%. It would have allowed stimulus to take effect, but it would have been less frothy and avoided the need for what is shaping up as requiring more extreme intervention later ... . But we shall see.

I think there's still a small possibility that intervention can be avoided , IF over the next few months we see some wind come out of the sails naturally , which may occur IF the removal of JK and JS does lead to higher unemployment. Too early to call just yet ... but can't be dismissed as a possibility. But if the wind doesn't come out of the sails, I think APRA will have to make some form of intervention...

 

What sort of LVR can a first home buyer buy with now?

I though 80% was pretty standard.

 

95%

 

NO FHB is buying with 80% unless there parents are helping them with a deposit or security guarantee I’m afraid.

TBH the barefoot investors of the world actually have a lot to answer for. They make the uneducated think they need a 20% deposit to not pay LMI which ends up costing them about 20-30 times that cost in the long run.

 

Oh is he one of those "LMI is bad" people?? Very dangerous advice (for many).

 

To be honest, I don't think I've never paid LMI.

 

Absolute horrendous advice!
Some very basic maths can see why.
Assume a 500k house.

100k deposit needed to avoid LMI.
FHB couple can let’s say after tax put away 30k.
That’s call it 3 years of saving.

Now let’s say that instead save 10% and do it in 1.5 years and pay 10k LMI.

Now let’s use a very conservative 5% annual growth. In saving 1.5 years of time they save 37.5k minus 10K in LMI or 27.5k.

These are very conservative numbers.

LMI should be sold as the savior! Not the Devil!

 

Also LMI can be capitalised. For most people that amounts to no more than a cup of coffee a day.

I routinely pay LMI even if I have the cash just to hold onto the cash.

 

On the median $1 million purchase price Lmi insurance is about $48,000 if you believe the calculators that I provided.

If you consider that compounded over a period of 30 years and capitalised into the loan arm it be interesting to work out the number I’m driving now so I don’t have time or when I come home give me a nice to work it out to give a true perspective of what the cost of LMI.

You’re absolutely opens the door for couples that otherwise would not be able to obtain a loan

 

I have not either. I guess I would of if I needed to but have not been in that situation.

 

48k over 30 years on 5% is 93k total payments.
So on a 1mil purchase you need to see growth of 10% to cover the cost.

So we are comparing 150k additional deposit needed for no LMI. I would hate to think how long even a high income earning couple would take to save 150k net. Let’s be generous and say it’s 2 years as they live with mum and dad and eat 2 minute noodles for every meal.

To be “Better” off than LMI the market could not have grown more than let’s call it 10% in 2 years. Sydney grew 3% in month.

Then there is the fact LMI can be releveraged for a small cost. Again something barefoot fails to mention.

TBH I’m not advocating 95% loans. The LMI saving is considerable at that price point for a small additional cost. But once you start playing in sub 90s I dint know why anyone e wouldn’t pay LMI.

 

I recall previous broker advice that LMI sweetspot was arround 88%, seems to be backed up by the calculator, so maybe the trick for first home-buyers is to save a little bit more deposit:

 

Correct and capitalized to <=90%
The next is base 90% with LMI capped
After that point it gets pretty ugly.

 

First home bought with 10% deposit. All others, the deposit came from equity. If I couldn't put up 20% deposit, I didn't buy.

 

I was in a very similar position.

It also take some risk of the table.

A young couple earning $64,000 each

Should be able to put away $35-40,000 per year.

3 years will net $100-120,000 deposit

That should be a reasonable deposit in Most cities of Australia

Syd and Mel would mean a compromise in Liverpool to Campbelltown areas if looking at a house.

 

Those areas would be luxury, compared to our first home.