Forum Replies Created
- blogs wrote:Scamp wrote:The truth about the australian housing market :
The risks are huge, and will soon become more than clear to a lot of households when their
lowest-ever 5-year-fixed mortgages will go up from 6% to 10% interest rates this september 2008.
This huge increase results in average monthly mortgage repayments increasing from 850$ to 2650$.In september 2008 : 1.000.000 households will be in severe trouble. And this is just the start.
Be prepared and be afraid , this crash will dwarf the 1929 crash.
Agree 100000% mate!!! This post is going into the 'I told you so' file to be brought out in a year or two. Funny how greed and ignorance can blind people to the real story. Your point about people coming out of fixed rate mortgages is what Ive been saying ofr ages-no body listens. Thats o.k, the less they listen the more it will crash and the better value I will be able to buy:)
Bump.
What has happened to these 'experts' – such as scamp and blogs. Where are they now?
LOL – seems to me they were completely wrong in their predictions regarding the property market.
ummester wrote:superhoops wrote:Historically there has been a correlation between a recession, lower interest rates and lower inflation. No country with an entrenched inflation problem has significantly reduced inflation without it occurring in the context of a recession. Therefore whilst lower interest rates do not decrease inflation directly, in times of a recession or potential recession we see inflation decrease.Yes, but we are not in a recession and still have increasing inflation. Therefore, even historically, it is not yet time to lower rates. We may end up with an inflatory recession and I have no idea exactly what that will do…
No we are not nor were we in a recession in early 1990 yet the RBA lowered interest rates from 17.5% to 14% prior to the recession actually taking affect in September 1990. Therefore historically the RBA is following a similar pattern to the early 90's after the financial excesses of the late '80's.
Look I am not saying that this is 100% guaranteed to work, however history shows that lowering interest rates has previously worked in the long run.
ummester wrote:superhoops wrote:The RBA did the same thing in the early 1990's when inflation was around the 7% mark – they lowered interest rates by 5% in the space of 12 months and furthermore they dropped the rate by a further 4% over the next twelve months. During this period inflation fell to around 1 -1.5% by early 1992.Thus historically the RBA has made the right decision to lower interest rates.
How does lowerring rates decrease inflation and why has the RBA been saying that it has been increasing them to do exactly that? I think you are confusing the effects of the recession itself with the effects of RBA rate changes.
Historically there has been a correlation between a recession, lower interest rates and lower inflation. No country with an entrenched inflation problem has significantly reduced inflation without it occurring in the context of a recession. Therefore whilst lower interest rates do not decrease inflation directly, in times of a recession or potential recession we see inflation decrease.
ummester wrote:superhoops wrote:Whilst Australia's economy is strong it certainly is not immune from world factors, therefore anyone predicting that Australia's interest rates would continue to rise whilst other countries interest rates remained stagnant or even fell has little insight into economic theory. Therefore any advice that they provide should really be taken with a grain of salt.I'm not trying to defend Scamp here but if the RBA wanted to keep Australia financially strong it would have left IRs, or even put them up a bit. We are doing exaclty what the US did in reponse to the subprime and how well did it work out for them? Bugger the theory, sometimes one needs to think outside the box for the best result.
The RBA has lowered rates in the midst of food,fuel and house price inflationary pressure, to an extent that is usually reserved for the second quater of a recession. Why? Just because it's what other countries did?
The RBA did the same thing in the early 1990's when inflation was around the 7% mark – they lowered interest rates by 5% in the space of 12 months and furthermore they dropped the rate by a further 4% over the next twelve months. During this period inflation fell to around 1 -1.5% by early 1992.
Thus historically the RBA has made the right decision to lower interest rates.
Scamp wrote:attrill wrote:I have 2 loans fixed at 6.65% until 2009 when they will revert to the prevailing rate. In the last few years the rents have risen to a point where these properties will still be cash neutral. This is more a case of luck than astute financial planning.Many are in your situation Attrill. Buyers know this, and are now waiting for people like you to tumble over, and foreclosures some on the market for 50% of today's price. It's what is happening in USA now, it will happen in Australia too. January 2009 will give more insight in the real trouble people are in. But if your bank devaluates your house by 20%, and you are negatively geared, then you will have to borrow at the variable interest rates of 10% to 11% ( if not higher by that time, there's already talks about raising interest again this month ).
Why don't you fix your interest now for 5 years ? At least you won't be one of the foreclosed ones.
Closing your eyes or putting your head in the sand won't let the problem go away : act now, fix your interest at 8.75% ( yes , you can still do this with your bank ) before you HAVE to do anything.
Interest at this moment will only go up , because Rudd wants to fight off inflation at all costs ( that's what he says anyway ) Just read the news, and make up your mind. I would not be surprised to see another 0.25 interest increase in June and one more in September.
Remember the 17% interest rates ?… they're coming back.
Glad I didn't take this persons advice about fixing interest rates at 8.75%.
It is obvious that he/ she has little economic knowledge as it was quite evident that the world economy had been heading for a recession over the last 18 months which means central banks will reduce interest rates, rather than raise them. Even the RBA was too rash in its decisions to increase interest rates early this year as the impact of last years rises were not given the time to try and curb inflation.
Whilst Australia's economy is strong it certainly is not immune from world factors, therefore anyone predicting that Australia's interest rates would continue to rise whilst other countries interest rates remained stagnant or even fell has little insight into economic theory. Therefore any advice that they provide should really be taken with a grain of salt.
blogs wrote:Mister there are so many things wrog with what you have said I dont know where to start. Not very bright are you….
Rather patronising comment don't you think.
Zoe,
I live in Leichhardt and we are paying $500 pw rent on a property (2 bedroom) that is worth around $800K not sure what the land would be valued at. I would assume not much more. We are currently renting our two bedroom apartment in Stanmore for $420 per week. I think you said you were on the north shore – those rents are cheap for quite large properties – maybe I had better move up there as it seems to be more value for money.Your friend with the unit – her Gross Land Value surely must be under the $359K threshold then? Surely a unit can't be valued that highly unless it is in a complex of 6 overlooking Manly beach or Bondi and the land is valued at $3 Million.
Superhoops
Zoe,
Based on your figures your unit has a Gross Land Value of $250K. Therefore if you had this as your only IP then you would not be up for any land tax as it is below the $359K threshold. However, I am assuming that you have at least a couple of IP's that push your combined land values above the $359K threshold. I am just trying to get around the Land Tax issue so forgive me if I am wrong – thus back on Peachy's OP there probably isn't any land tax per se on the unit that Peachy is renting, however as their landlord may have more than one IP it is the combined total "that has increased that landlords land tax" – whilst rental increases are not unreasonable, it is deceptive conduct in a way for the landlord to suggest that the increase in rent is due to land tax on that unit.Superhoops
Zoe,
How many units are in the complex of you IP?I own an IP apartment in Stanmore and the Gross Land value is $50,140. There are 24 units in the complex, therefore I am assuming that the overall land value is $50,140 x 24 units which totals approx $1,203,000. Not sure if this is correct as each of the apartments may have a different overall land value.
cheers
SuperhoopsZoe,
I find it quite remarkable that a $1.7million property returns only $26K per annum ($500per week) in rental income – that is a 2% yield.
Are you sure those figures are correct?Superhoops
Good post neilvs. I have read articles by "economic experts" eg. Robert Shiller who steer away from property and look at other investments such as the stock market etc. that provide better returns. The suggestion is that property only provides a return of 1.8% pa, which is obviously lower than the rate of inflation. They don't suggest that you can't make money out of property just that there are better options. These maybe all relevant to the US but how relevant are they to the Australian property market.
You make some valid points about how high can prices go? Will property in Australia outstrip inflation? Will there be a significant downturn? All good questions. Yet very hard to determine.
Hi Michael,
Mosman is an extremely nice area on the lower north shore with good public transport (buses and ferries). As far as property prices are concerned, not sure how much you are paying, but Mosman is an area that will always be in demand and will generally always go up in value as it is so close to the CBD and the harbour.
cheers
SuperhoopsThanks for your advice. Sorry Elka, I should have mentioned that I pay off our credit cards each month so no interest is accrued on these. This $3300 also includes buyers edge interest free period at the moment which will run out by June – by then it will be paid off.
Terry would you suggest using the $40K equity plus $20K (of the $30K) in the bank to use as a deposit for another property or would we be better off paying some of the loan on the Stanmore property off further – this is currently an off-set account which holds the $30K.
I was maybe looking at purchasing a unit in a capital city (close to the city) for around $250K (a house would be better but can't see much being available in this price range) using the equity and our $20K as a deposit – more than the $50K required for a 20% deposit. This would leave a loan of around $190 to $200K plus stamp duty etc thus repayments around $360 per week at current rates. I would assume rent could be around the $220 to $250 mark per week thus leaving a shortfall of around $150 per week – which we could manage. However my issue would then be the capital growth in the property – would there be much in a unit say in Adelaide or Hobart – I wouldn't think so. I could be wrong. Therefore it would be better off being a house on some land even if it was just a tad further out in the burbs (again will need to do research to see what is available).
Again thanks for the advice – any more is more than welcome. It is interesting and fun discussing these topics.
cheers
Superhoops.
