I would have thought that wouldn't be as easy with falling unemployment. When you have strong GDP growth, immigration can be dialed up effortlessly, but in a recession?
Immigration was ramped up by the Rudd Government during the GFC downturn under the guise of 'stimulus measures'. Yes, I know, that wasn't technically a recession (although it was in per-capita terms). Australians are asleep on this issue. Maybe when the roads finally grind to a halt and the trains have no standing room remaining they might see the light.
Quote:
No, but it might cause a political problem in a time of 'budget emergencies'.
I doubt it. It can be wrapped up in an altruistic veneer of 'Helping our kids buy their own home' and the general public will fall for it hook, line and sinker. I doubt the grant will be $200,000 anytime soon and I think both of said policies are contrary to the interests of the majority of Australians, but politicians will be politicians, and you always need to be prepared for their latest trick. They really are a misanthropic bunch who care nothing for the people they govern unless it helps them retain power.
1. LVR's increasing through the introduction of LMI. In the late 80's, LVR's were at 80%. So if you had a 50K deposit, that represented 20% - meaning the bank would give you 200K. That = 250K budget. When 90% + LMI deals started in the early 90's , your 50K = 10% deposit, which = 500K budget. When 95% + LMI deals became commonplace by mid-late 90's your 50K = 5% deposit, which = $1 Mil budget.
This whole post/point is undermined by the this false underlying assumption.
Banks do NOT lend based on the size of your deposit, they lend based on your income and capacity to repay your loan. If you only have income that makes you credit-worthy for a $300k loan, then you will only get a $300k loan, no matter what your deposit, (as long as you at least have the minimum deposit the bank requires + LMI costs etc).
This is the old "easy credit makes asset prices rise" myth, that I was told the other day is never actually said by anyone! Even Steve Keen fell for this one and propogated this myth for a while in some of his more outrageous claims about the impact of FHB grants and so on. The reality is that credit is only an enabler, which may add to demand (if the underlying demand exists in the first place).
Utlimately people can only borrow based on their credit-worthiness and capacity to repay, not based on some simple multiple of their deposit as this poster is arguing. And prices will only rise if demand in the market significantly outstrips supply, regardless of credit conditions.
This whole post/point is undermined by the this false underlying assumption.
Banks do NOT lend based on the size of your deposit, they lend based on your income and capacity to repay your loan. If you only have income that makes you credit-worthy for a $300k loan, then you will only get a $300k loan, no matter what your deposit, (as long as you at least have the minimum deposit the bank requires + LMI costs etc).
This is the old "easy credit makes asset prices rise" myth, that I was told the other day is never actually said by anyone! Even Steve Keen fell for this one and propogated this myth for a while in some of his more outrageous claims about the impact of FHB grants and so on. The reality is that credit is only an enabler, which may add to demand (if the underlying demand exists in the first place).
Utlimately people can only borrow based on their credit-worthiness and capacity to repay, not based on some simple multiple of their deposit as this poster is arguing. And prices will only rise of demand in the market significantly outstrips supply, regardless of credit conditions.
That's a bit harsh. You totally dismiss deposit requirements for whether/what banks will lend. It's a combination. It doesn't matter how high your salary if you have no deposit you get no loan.
This whole post/point is undermined by the this false underlying assumption.
Banks do NOT lend based on the size of your deposit, they lend based on your income and capacity to repay your loan. If you only have income that makes you credit-worthy for a $300k loan, then you will only get a $300k loan, no matter what your deposit, (as long as you at least have the minimum deposit the bank requires + LMI costs etc).
This is the old "easy credit makes asset prices rise" myth, that I was told the other day is never actually said by anyone! Even Steve Keen fell for this one and propogated this myth for a while in some of his more outrageous claims about the impact of FHB grants and so on. The reality is that credit is only an enabler, which may add to demand (if the underlying demand exists in the first place).
Utlimately people can only borrow based on their credit-worthiness and capacity to repay, not based on some simple multiple of their deposit as this poster is arguing. And prices will only rise of demand in the market significantly outstrips supply, regardless of credit conditions.
That's a bit harsh. You totally dismiss deposit requirements for whether/what banks will lend. It's a combination. It doesn't matter how high your salary if you have no deposit you get no loan.
Thats why I said this: "(as long as you at least have the minimum deposit the bank requires + LMI costs etc)".
For Aussie property bears, "denial", is not just a long river in North Africa.....
This whole post/point is undermined by the this false underlying assumption.
Banks do NOT lend based on the size of your deposit, they lend based on your income and capacity to repay your loan. If you only have income that makes you credit-worthy for a $300k loan, then you will only get a $300k loan, no matter what your deposit, (as long as you at least have the minimum deposit the bank requires + LMI costs etc).
This is the old "easy credit makes asset prices rise" myth, that I was told the other day is never actually said by anyone! Even Steve Keen fell for this one and propogated this myth for a while in some of his more outrageous claims about the impact of FHB grants and so on. The reality is that credit is only an enabler, which may add to demand (if the underlying demand exists in the first place).
Utlimately people can only borrow based on their credit-worthiness and capacity to repay, not based on some simple multiple of their deposit as this poster is arguing. And prices will only rise of demand in the market significantly outstrips supply, regardless of credit conditions.
So, let's say your gross household income was $100K, and the bank determines that, based on your current liabilities and living expenses, you can comfortably afford repayments of $2000 per month.
At 10% interest, that is a loan of around $230K that you could comfortably service on your current income
At 5% interest, that is a loan of around $375K that you could comfortably service on your current income.
So it would seem that falling interest rates do indeed increase the capacity for borrowing.
Now, what about deposit.
Let's say interest rates are 10%, and using the above hypothetical person, the bank is willing to buy a $230K mortgage from you.
If you have $100K as a deposit, that would mean that you could purchase a $330K property.
If you have $200K as a deposit, that would mean that you could purchase a $530K property.
Loan size stays the same, but purchasing power increases.
If you have positive population growth, demand is always rising. If you have falling interest rates, prices will rise until you reach debt saturation.
Surplus isn't required for stimulus. Most countries just borrow, and Australia's government debt is very low by global standards.
And I know I'm not.
If you think I'm wrong then perhaps you can attempt to prove that there was no stimulus during the growth phase.
Evidence? You are the one who waves away the 1990s boom as a structural shift.
Your cycle begins in 2004. House price tracking incomes for a decade. Remember? Its your mantra?
Property acquisition as a topic was almost a national obsession. You couldn't even call it speculation as the buyers all presumed the price of property could only go up. That’s why we use the word obsession. Ordinary people were buying properties for their young children who had not even left school assuming they would not be able to afford property of their own when they left college- Klaus Regling on Ireland. Sound familiar?
The evidence of nearly 40 cycles in house prices for 17 OECD economies since 1970 shows that real house prices typically give up about 70 per cent of their rise in the subsequent fall, and that these falls occur slowly. Morgan Kelly:On the Likely Extent of Falls in Irish House Prices, 2007
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