Forum Replies Created
Hello,
I am currently living overseas and looking to buy a property with saved funds.
I am not planning on returning to Australia for a couple of years.
Is it possible to use funds from a SMSF to renovate the property I have purchased outright ? (Funds not associated with my SMSF)
For example completely update an apartment. (Kitchen. Bathrooms, flooring etc….)
Thank You
ajago5 wrote:Thanks guys you've been a great help .. I had a look at the links, very interesting stuff and Im in the process of setting up a spreadsheet to help me with risk analysis and other issues. It is a bit tricky though but Ill keep at it. Thank again adamYou might want to take a look at @RISK — Risk analysis software.
A great free resource to learn algebra, probability, statistics http://www.khanacademy.org/
Are Low Doc / No Doc loans still available?
What are the requirements?
Minimum deposit / Maximum deposit?
Would someone qualify $650 K deposit, ($50K to be set-aside for mortgage payments) borrowing $400k.
The Economist has just published an article 1st March 2011 on Australia's housing.
http://www.economist.com/blogs/freeexchange/2011/03/australias_house_prices
"This week in The Economist we will publish our quarterly index of house prices around the world. Australia's homes are the most overvalued in the index. The ratio of prices to rents in the country is fully 56% above its long-run average"
Not saying I agree with everything in this article, it is interesting what this widely read publication is saying about Australian housing.
toe wrote:white_goodman wrote:your first sentence makes zero sense.I can only assume you've misunderstood my point, because it makes perfect sense.
Quote:From SMH
About a quarter of Australians rent their homes through the private rental market — and nearly half of these (45%) are helped to make the rent through subsidies from Commonwealth Rent Assistance (CRA) program.
Most of these people are never going to buy homes, so how does it make sense to consider their earnings in affordability calculations?It's important to use the correct statistics also. This thread is clearly about risk to housing and economy, largely due to the broad risk of defaults. While inaffordability may coincide with risk of default, there are circumstances where it may not may not. Just because people cannot afford to buy, does not mean that those who are currently owners cannot afford to hold.
Thats why banks do not use affordability to assess your risk of default, they use your Debt Service Ratio.
I am not saying that Australian property is expensive, there is a bubble and it's going to pop. I do not know.
Let's just look at property investors.
Toe, these quotes are from this article from morgan stanley
"Australia has become a nation of landlords: in 1988-89, 608,000 taxpayers reported rental income; by 2007-08 1,765,000 taxpayers did – 13.5% of the total."
"Over the past decade property has been an excellent investment. But it is, in my view, extremely unwise to expect such gains to continue, given current valuations. The investment fundamentals of housing have sharply deteriorated."
"Australian Tax Office data confirm that residential investment is a poor investment: total rent has not covered total costs since FY2000"
"The percentage of landlords claiming a rental loss (that is, rent not covering interest and other costs) has increased from 50% to 70% over the past decade. It's not just that there are more landlords, there are more loss-making landlords. This matters a lot. Much of the discussion on the residential market concentrates on owner-occupiers. But arguably property investors represent a significantly larger risk if they became widespread sellers of their loss-making investments. "
"it is simply wrong to assert that rental properties are largely owned by high-income households: losing on residential property investment is largely a middle-class affair. Only 3% of all loss-making properties are owned by taxpayers with a taxable income of over $200,000. Taxpayers who earn $80,000 or less own 80% of all loss-making properties."
So what do you think the average property investor, who is on an average income $80k is going to do if we see property prices fall or move sideways.
That's ~1.4 million investment properties owned by average income earners ($80K), negatively geared, negative cash flow.
Will 10%,20%, 30% or 40% decide to sell if there are no further "house price" increases? Your guess is as good as mine.
fWord wrote:Yes, prices have crashed in these countries. Why is it so? Are there an overwhelming number of similarities we can draw between Australia's property market and those of which have crashed? And believe me, I'm not touting that the Australian property market cannot falter. In life, we can only expect to be surprised. What I am interested to know is: what is it that caused other markets to go from gangbusters to disaster and what conclusions can we draw from them?
Everything boils down to MARKET SENTIMENT.
mattnz wrote:Just looking at Genworth's financial position and exposure. In 2008 their share price dropped from ~$35 to $1.12 due to their exposure to the US housing market. The scary thing is their exposure to the Australian market is far larger and any significant drop here would almost certainly cause insolvency. Of their 3.8 million LMI policies internationally, 1.4 million are in Australia compared with 1 million in USA. Given the much higher house prices in Australia, the dollar value exposure would have to be at least twice that of USA.I can see there Office Building (Nth Syd) from my balcony. I can assure you since the QLD floods their lights (around the top floors) have been on till the wee hours of the morning.
nicolas_b wrote:Here is another article from Seeking Alpha.http://seekingalpha.com/article/227083-the-great-australian-housing-bubble
Most of the people I know have been off-loading their property portfolios. (All based in Sydney).
You never want to put all your eggs in one basket, especially if the egg is leveraged.
What worries me about Australian property,
1: Australia's dependence on overseas funding,
2: Baby boomers retiring, my Mum is retired, she has sold all her unencumbered investment properties.
Why did she sell up? "I do not need the hassle of dealing with real-estate agents, property managers etc… I want to enjoy my retirement". With an estimated 4.5 million baby boomers approaching retirement age what will they do? In my experience retirees that have money are generally risk averse.3: Generation Y embracing the Aussie Property dream. The Australian property market needs FHBs to continue buying properties. This has significantly dropped off. They need to be willing to take on ever increasing amounts of debt.
4: Australia dose not have a transparent credit market (securitization – RMBS and covered bonds) with primary and secondary markets. We need this to mitigate the future funding risks that expose Australian mortgage holders to the whims of international investors. We need interest rates to be pegged as a margin over an identifiable base eg, bank bills
5: Our dependence on China. Our terms of trade are commodity based, China catches a cold I fear we will be hospitalized with pneumonia.6: Food, energy and commodity based inflation, which is seeing the everyday cost of living increasing dramatically.
7: Australia's private sector debt. (Private debt to GDP). Australian's are amongst the most heavily indebted people on the planet.
8: We need to change the Australian mortgage system, currently the major 4 Australian banks can charge the borrower any interest rate they want at any time plus increase fees and charges at any time.
The Australian banks can call for repayment of a mortgage any time but especially under situations where collateral values have decreased.
The Australian banks have to stop using whatever equity a borrower has in their house as a tool to prop up their capital bases, This is all at the risk of the Aussie encumbered home owner, investor.Here are just some of my thoughts, I am no expert, and I have absolutely no idea what is going to happen, however i fear the property game is in overtime.
Note: Disclaimer, I am 33 years old single male who owns an unencumbered property in Neutral Bay, Sydney.
Wynyard wrote:"prices in Singapore are highway robbery"Why are we in this position?
Indeed, that is all news to me, thank you for lifting the wool from my eyes. In someways I'm glad to know we're not alone, it strengthens my feeling that we are all screwed – and that perhaps there could still be a revolution (several, a la Egypt). Maybe there is a latent communist in me yet.
I doubt there will be a revolution in Singapore, considering 85% of Singaporeans live in public housing.
I should probably inform you that the majority of the residential housing developments in Singapore are publicly governed and developed and about 85% of Singaporeans live in such houses. Public housing in Singapore is currently managed by the Housing and Development Board (HBD). http://www.hdb.gov.sg/
More than 80% of Singapore's population live in HDB flats, with 95% of them owning their HDB flat. The remainder are rental flats reserved for those who are unable to afford to purchase the cheapest forms of public housing despite financial support.
Pricing of public housing flats are meant to be affordable, and are typically substantially cheaper than privately-built developments. For example, an HDB 4-room flat depending on age, environment and surrounding amenities can have a sale value of between S$200,000 to above S$300,000 and an HUDC Executive maisonette above S$500,000.
However, in contrast a privately developed condominium type housing can cost as much as S$1,000,000 and above.
Here is another article from Seeking Alpha.
http://seekingalpha.com/article/227083-the-great-australian-housing-bubble
Most of the people I know have been off-loading their property portfolios. (All based in Sydney).
You never want to put all your eggs in one basket, especially if the egg is leveraged.
What worries me about Australian property,
1: Australia's dependence on overseas funding,
2: Baby boomers retiring, my Mum is retired, she has sold all her unencumbered investment properties.
Why did she sell up? "I do not need the hassle of dealing with real-estate agents, property managers etc… I want to enjoy my retirement". With an estimated 4.5 million baby boomers approaching retirement age what will they do? In my experience retirees that have money are generally risk averse.3: Generation Y embracing the Aussie Property dream. The Australian property market needs FHBs to continue buying properties. This has significantly dropped off. They need to be willing to take on ever increasing amounts of debt.
4: Australia dose not have a transparent credit market (securitization – RMBS and covered bonds) with primary and secondary markets. We need this to mitigate the future funding risks that expose Australian mortgage holders to the whims of international investors. We need interest rates to be pegged as a margin over an identifiable base eg, bank bills
5: Our dependence on China. Our terms of trade are commodity based, China catches a cold I fear we will be hospitalized with pneumonia.6: Food, energy and commodity based inflation, which is seeing the everyday cost of living increasing dramatically.
7: Australia's private sector debt. (Private debt to GDP). Australian's are amongst the most heavily indebted people on the planet.
8: We need to change the Australian mortgage system, currently the major 4 Australian banks can charge the borrower any interest rate they want at any time plus increase fees and charges at any time.
The Australian banks can call for repayment of a mortgage any time but especially under situations where collateral values have decreased.
The Australian banks have to stop using whatever equity a borrower has in their house as a tool to prop up their capital bases, This is all at the risk of the Aussie encumbered home owner, investor.Here are just some of my thoughts, I am no expert, and I have absolutely no idea what is going to happen, however i fear the property game is in overtime.
keiko wrote:I would like to know what the renting people are planning on doing, move to a new town suburb or clean up there rented house and stay put.
I believe it is the responsibility of the landlord to repair, clean the property. Correct me if I am wrong, I believe Flood damage is classified as an emergency repair.
The best indication of what is going to happen to house prices is to find out (google etc…)
What happened to property prices after the 1974 Brisbane flood?
What happened to property prices after the Christchurch earthquake?
What happened to property prices after Hurricane Katrina? Etc…
I think you should educate yourself to the actual facts.
The Labor Govt’ (admittedly never voted for them, never will, it’s just not what I have been brought up to do.) actually saved the Australian property market through the Govt’ Guarantee. The Banks’ crawled on their hands and knees when the overseas debt markets dried up during the height of the GFC. Our banks get the majority of their money form overseas investors. The Banks’ borrow this money on the short term money market. Without the Govt’ Guarantee (which is like parents guaranteeing their kids mortgage) the funding costs (i.e your mortgage) would of increased conservatively 200 basis points over night. This would have happened irrespective of the RBA cash rate.Do you honestly believe that Glen Stevens sets the price of your mortgage?
I think you should look at the senate inquiry into banking competition; you should look at the Australian Office of Financial Management (AOFM) what dose the AOFM actually do? You should look at the Australian Prudential Regulation Authority (APRA) and actually read the RBA statements. You should also look at the transformation of Australian Banking regulation.
You should look at the motivation behind the historic changes we are seeing in the Australian financial and banking sectors.
You should ask yourself why have the RBA and APRA put in place an emergency loan system? You might want to read about Basel III and what is called the liquidity coverage ratio. You should read about the emergency facilities set up during the GFC when The Banks' self-securitised $43 billion in assets and handed them to the RBA for cash.
The Govt' is bending over backwards to stop the Australian Property market from ending up like our northern hemisphere cousins. They Govt', AOFM, APRA, The Banks' and the RBA are trying to use all the tools in the basket to keep the Aussie dream from becoming a nightmare.I am ashamed to say that the real damage was done during the Howard, Macfarlane years.
You should never forget that It is all about indebtedness, and liquidity and what is known as the Fallacy of Composition."is there a difference between rich and super rich … is our rich middle class as we know them and supper rich another level we never talk about? … super rich pay 20 million for a penthouse and don't care if it value drops here and there ??? … who are poor people and what level is poor?"
The "super rich" people I know do not invest in property, they invest in people and businesses.
Everything is Relative. If you spend $20m from your savings on an apartment, then yes you do not really care what happens to the price of the property. Remember you do not spend $20m on an apartment thinking you will make money. It is an 'emotional' decision, a lifestyle choice, a decision to make your wife happy. Think about it.
Remember most "super rich" people are not "super rich" from property investing, granted there are some developers and one possibly two real estate agents, they are "super rich" from having successful businesses.
You have to take into account the level of indebtedness someone carries to work out if someone is poor. How long could you survive at your accustomed standard of living if you lost your job? If you could sick? If your partner got sick? You lost your business etc… If you answer less than 6 months, then I think you are poor.
It all depends on how much money you have.
You could possibly get a E2 visa so long as you meet and continue to meet the requirements you can stay indefinitely.
Check out http://www.globalvisas.com/ and or US Visa Wizard http://canberra.usembassy.gov/niv_wizard.html
I personally would not be putting every spare cent I have in Gold. Gold is an investment in Govt default. I do not believe there is any empirical evidence of Gold being a hedge against inflation.
One suggestion I would put out there is Education.
"If a man empties his purse into his head, no man can take it away from him. An investment in knowledge always pays the best interest."
Benjamin FranklinNon schola sed vita decimos!
"Only the educated are free."
EpictetusOur banks have mark to market RMBS debt held on their books. The only way property can continue to rise is IF international investors continue to rollover the banks finance at affordable levels.
The banks and LMIs have been reducing capital requirements by continually updating valuations and doing capital calculations on the updates.
Which explains the residential development finance requirements.
I fear the Game is over.50mil,
I good study of Australian house prices is from "Long term housing prices in Australia and some economic perspectives" by Stapledon, Nigel David, Economics, Australian School of Business, UNSW.
You can find his thesis here http://unsworks.unsw.edu.au/vital/access/manager/Repository/unsworks:1435
Essentially here is the graph.
Nothing is set in stone. I would budget for 200 basis points.
"Within 24 hours of being appointed by HSBC as chief economist for Australia and New Zealand, former senior Reserve Bank economist Paul Bloxham has dropped a bombshell, predicting the RBA will raise official interest rates by 125 basis points by the end of next year"
If you look at the RBA Bank Income Profitability http://www.rba.gov.au/chart-pack/bank-income-profitability.pdf
You can see recent changes in their return on equity This is based on past events. Also their non-interest income is falling putting pressure on the banks to pass on falling future returns.
The Aussie banks obtain about 26 per cent of their funding from overseas, mainly to boost housing credit supply, That means that about 26% of their loans are financed through offshore bonds.
This is exactly the danger for the Australian economy. What happens if foreign investors start to worry about their investments? If they start to pull out of Australia, what happens to the currency and the banking sector?
