but you went and locked in your loans at 6% because you did not have a clue what was going on
Nothing locked at 6%. I'm mostly still on variable, but I did lock in two loans at 5.59% and 5.29% over two years ago, and in both cases that was below the variable rate at the time, and remained below the variable for about a year and a half afterwards, so it worked out pretty well. Both those loans will be back to variable within a year but I'll probably just re-lock them again at <4.99% for the next five years. It basically locks them in to a cashflow positive position for a long period or time, so it's pretty much a guaranteed income stream. Although, if I do decide to sell one or two properties next year then obviously I wouldn't fix those loans.
Ted, most of what you wrote there is either wrong, or outdated - interest rates are not at "record" lows - they are low, especially relative to recent times, but they were this low for decades prior to the 70s. Most states dropped the FHB grants for established property 1-2 years ago now (eg NSW) and yet those markets have boomed since. Same for stamp duty exemption for established. So from your list that only really leaves some limited relaxation of foreign ownership rules (when most comparable countries have NO restrictions), and the super funds, which only represent a very small segment of purchasers (less than 2% of self managed super funds have borrowed to directly invest in residential property).
And then, I don't know why you mix-up building grants with the above measures - building grants stimulate the purchase / construction of new dwellings, which places DOWNWARD pressure on prices via increased supply - so as a housing bear you should be happy about such measures? New building also creates signifcant jobs, generates economic activity and adds to GDP both directly and indirectly.
So over-all, the market is performing well and probably about in line with what the RBA was hoping to see in response to their monetary policy settings - especially with the supply response now kicking in and adding to GDP as well.
Most of your list is just made up crap, and often contradictory, or irrelevant, or just the reality of the market suggesting ongoing price rises: Eg, re investor activity - both foreign and local/super funds etc, negative gearers and so on - any "record" levels in those are a bullish indicator, not bearish.
And you have all this other stuff just plain wrong:
* How can we have record (high?) vacancy rates yet also have climbing rents and you claiming people can't find somewhere to rent? We don't anyway - vacancy rates are at historically low-ish levels almost everywhere. * We do NOT have record job losses, or record business closures, not even close - you are old enough I believe to remember the early 90s as a comparison??? * We do not have record "LVRs" * We do not have record low interest rates, and besides, rates arelikely to stay low for some time now, so it's moot whether they are "record" or not!
And as for "bulls turning bears" - in your dreams.
You showed us just how little you knew only the other week when both bulls and bears pointed out just how wrong you were, and then you still carried on.
And just look here above, Don't even know where to start. Interest rates are at record lows, written in every article and mainstream but we have to put up with this type of crap from you as usual, vacancy rates highest on record , jobs losses to as well as business closures amungst everything else mentions.
And rlrents are dropping like they never have before yet you claim they are rising
Sorry mate I don't have anymore time for your constant crap, you wasted our time in that thread the other week claiming to know things you knew nought about only to be shown the door then also.
It will depend on what the fundamentals look like next year, especially supply and interest rates. If the construction boom creates a big oversupply, and interest rates look like heading back up, then it will probably be a good time to get out.
Right, because property is so liquid when everyone starts heading for the exits.
Right, because property is so liquid when everyone starts heading for the exits.
Property is always liquid - it's just a matter of setting the right price.
I would have no issues selling for 5-10% below market price in order to make a quick sale right at the beginning of a downturn. It makes more sense to do it that way, rather than trying to preempt the downturn, in which case you risk losing out on a lot more profit if the up-cycle keeps running. Best to wait until the up-cycle is definitely over, and then price for a quick sale without getting emotionally attached to what it was worth at the peak.
Problems occur when people try to sell for what it was worth at the peak, and then end up chasing the market down and never being able to sell it.
Nothing locked at 6%. I'm mostly still on variable, but I did lock in two loans at 5.59% and 5.29% over two years ago, and in both cases that was below the variable rate at the time, and remained below the variable for about a year and a half afterwards, so it worked out pretty well. Both those loans will be back to variable within a year but I'll probably just re-lock them again at <4.99% for the next five years. It basically locks them in to a cashflow positive position for a long period or time, so it's pretty much a guaranteed income stream. Although, if I do decide to sell one or two properties next year then obviously I wouldn't fix those loans.
Rates will only be cheaper by the time yr others expire.
The fact the banks are willing to lock in these new lows for five years, means they know rates are going lower, just like I have explained last te they did this and told you it was no rocket science.
If you were a bank manager would you be encouraging people to lock in record low loans if you thought interest rates were going to rise in the next few years.
This is almost affirmation we are headed to zirp or very close like the others.
Peter Fraser is the expert on this now, he was taught by the master
Property is always liquid - it's just a matter of setting the right price.
I would have no issues selling for 5-10% below market price in order to make a quick sale right at the beginning of a downturn. It makes more sense to do it that way, rather than trying to preempt the downturn, in which case you risk losing out on a lot more profit if the up-cycle keeps running. Best to wait until the up-cycle is definitely over, and then price for a quick sale without getting emotionally attached to what it was worth at the peak.
Problems occur when people try to sell for what it was worth at the peak, and then end up chasing the market down and never being able to sell it.
Anything will sell if you price it right.
Property is liquid? Are you fucking crazy?
Its the quintessential illiquid asset.
Can you flash trade a house?
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
I would have no issues selling for 5-10% below market price in order to make a quick sale right at the beginning of a downturn
and there you have it - how crashes start... panicked sellers willing to drop up to 10% below market rate just to get a sale when feel the top has been hit / breached...
not saying it will occur... interesting your chosen investment strategy is to try preempt ( and undercut ) the falling knife.
sheep on the way up, lemmings on the way down
edit: im not implying boom/bubble or bursting... but that invesment strategy on a macro scale is what causes those type of market movements..
The fact the banks are willing to lock in these new lows for five years, means they know rates are going lower
I know mortgage rates are going lower, and staying low for a long time, but still sub 5% fixed for 5 years is tempting.
Aside from the security of knowing you're protected from rate rises, another benefit is that when you're on a variable rate, then the banks add 2% when assessing servicability, as a kind of risk protection in case rates go up. But if you're fixed they don't do this. Being fixed last year actually allowed me to borrower significantly more than I could have done if I had been on a slightly lower variable rate, because the bank didn't add the 2% buffer when calculating serviceability.
Veritas
24 Jul 2014, 07:04 PM
Property is liquid? Are you fucking crazy?
Its the quintessential illiquid asset.
Can you flash trade a house?
In the context of the discussion, yes it is liquid enough to sell, even in a downturn, as long as it is priced correctly.
Massive
24 Jul 2014, 07:07 PM
and there you have it - how crashes start... panicked sellers willing to drop up to 10% below market rate just to get a sale when feel the top has been hit / breached
No panic, just cool headed strategy. Ride the bubble to the top and then get out before the herd. Much easier to do with houses than shares, since house prices don't crash overnight and there are always plenty of warning signs in advance - i.e. drop in clearance rates, unsold stock levels rising, rental vacancy rates rising etc.
I know mortgage rates are going lower, and staying low for a long time, but still sub 5% fixed for 5 years is tempting.
Aside from the security of knowing you're protected from rate rises, another benefit is that when you're on a variable rate, then the banks add 2% when assessing servicability, as a kind of risk protection in case rates go up. But if you're fixed they don't do this. Being fixed last year actually allowed me to borrower significantly more than I could have done if I had been on a slightly lower variable rate, because the bank didn't add the 2% buffer when calculating serviceability. In the context of the discussion, yes it is liquid enough to sell, even in a downturn, as long as it is priced correctly.
You know now, but you did not before.
I would agree with your other comments. And this is why I have said for some time that the time to lock in your rates will probably be by the end of 2014. I told zaph this in 2011 or 2012 from memory. Its like, how much lower will they go and how much will the banks pass on. I think there is a chance bank rates may go to 3.5% eventually but doubt they will go lower.
So its like you said, lock it in now and now you are safe. Hopefully you can get through this and lock it again while its still cheap, who knows by then.
The threat is this. That interest rates could be forced up at one stage for one reason or another. We can all argue about inflation, and whats its really doing, but discsrding the argument on that for now, if inflation does start to surface, interest rates may be forced up.
It could come from the US end, it could come from another US stock market collapse. If our dollar was forced down to 50 something cents like in 2008, then inflation may surface here and not so much in the US .This could force our interest rates up independantly of the US or others.
So its a matter of being safe as well. And while I think the rba may drop rates as soon as september and for some time yet, I have no idea if or when interest rates could be forced up for one reason or another.
In this economic climate , and knowing interest rates will come down further, I would still advise people start thinking about locking in some of these rates as a safety measure more than anything. Perhaps lock part in and leave part variable, that way you can still pay down as much as you like on the variable side but have some level of safety on the other half.
And while I think the rba may drop rates as soon as september
I'm thinking November. They need to prep the market first to make it look like a well considered decision. I think they would lose too much face going in September, given that the last three or four sets of minutes have said rates will be on hold for an extended period. I think they may use the next couple of months to gradually change the tone of the minutes to prepare us.
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