"YOU'RE CONDITIONALLY APPROVED FOR A PERSONAL LOAN^.
Dear GloomBoomDoom,
Are you thinking about some new wheels, sprucing up the home or taking that trip of a lifetime? A CommBank Personal Loan can give you the additional funds you need to turn your dreams into reality.
You've been conditionally approved for up to $26000.
Completing your application can take as little as five minutes *. We'll do some simple checks first and if you're approved before noon Monday to Friday, you can access funds the same day~.
You can take advantage of your conditional approval any time before 3rd September 2014, but why wait until then? Apply now and get what you want today.
To apply now, log into NetBank and check your inbox."
We're rich - what are we going to buy?
Como is beautiful at this time of the year. I've got my passport ready.
Any expressed market opinion is my own and is not to be taken as financial advice
"YOU'RE CONDITIONALLY APPROVED FOR A PERSONAL LOAN^.
Dear GloomBoomDoom,
Are you thinking about some new wheels, sprucing up the home or taking that trip of a lifetime? A CommBank Personal Loan can give you the additional funds you need to turn your dreams into reality.
You've been conditionally approved for up to $26000.
Completing your application can take as little as five minutes *. We'll do some simple checks first and if you're approved before noon Monday to Friday, you can access funds the same day~.
You can take advantage of your conditional approval any time before 3rd September 2014, but why wait until then? Apply now and get what you want today.
To apply now, log into NetBank and check your inbox."
Thank to our outstanding interest rate and credit rating, there are many overseas lender eager to hand out easy money to us. Our banks would like to make it happen.
Why is that? Unemployment just hit 7.1% in SA, worst since 2001. I would have thought the risk of being a reluctant landlord would only be higher in Tasmania.
Just look at where Adelaide is in the property cycle. I would not be expecting capital gains to be spectacular, but on the other hand Adelaide would be the least likely capital to see a drop in prices from here, which is the risk you are worried about. Adelaide's been in the bucket for ages and is just starting to follow the rest of oz.
The truth will set you free. But first, it will piss you off. --Gloria Steinem AREPS™
The banks are desperate at this point Graham, the grobal debt pyramid needs to inflate at all costs because if it begins to contract the entire system will collapse like back in the 1930's. What the bank did to your friends was to con them into taking on 2 loans instead of one, with the threadbare promise that property will always be a winner. A cursory look around the world's property markets easily dispels that myth yet people rarely take the time to fully investigate big investment decisions. The opposite of what you would think hey.
I can't say I mind personally. The more people jumping in to prop things up gives those of who are preparing for the ultimate downturn further opportunity to improve our contrarian positions. Fortunes are still made, even in the bad times.
Shadow was hopelessly wrong about the Gold Bull Market. What else is he wrong about?
Just look at where Adelaide is in the property cycle. I would not be expecting capital gains to be spectacular, but on the other hand Adelaide would be the least likely capital to see a drop in prices from here, which is the risk you are worried about. Adelaide's been in the bucket for ages and is just starting to follow the rest of oz.
I don't think capital gains, or losses, is the risk here. The risk is that if you cannot keep the house tenanted, you are now servicing two mortgages instead of one, on an income that the bank was initially reluctant to lend for the second mortgage. Generally, houses are more difficult to lease than apartments, and more so if unemployment is rising, which it appears to be in Adelaide/SA.
------------------------------ " ... which is that all-too-familiar dynamic in Irish life where people tell lies, cover them up and create all sorts of collateral damage, sometimes spread out over decades, and never take responsibility." - Alan Glynn
I don't think capital gains, or losses, is the risk here. The risk is that if you cannot keep the house tenanted, you are now servicing two mortgages instead of one, on an income that the bank was initially reluctant to lend for the second mortgage. Generally, houses are more difficult to lease than apartments, and more so if unemployment is rising, which it appears to be in Adelaide/SA.
Well, I'd say that if you are at all on the ball you can always get tenants but I do take your point. maybe if things get really bad rents might go down.
Interestingly, in bad economic times I have always had less trouble getting tenants, not more, and rents have gone up faster not slower because people who would otherwise be FTBs are renting for another year rather than buying and no new stock is coming on the market. Of course this is for places in decent areas, not ex-mining ghost towns. Even the unemployed have to have somewhere to live.
Personally I'd say that for highly levered investors (which these people seem to be!) capital loss is by far the biggest risk. If you have a house that should be renting for $500/week but you are only getting $450 that sucks, but if you have a house that was worth $500k, is now worth $450k and you owe $460k on it, that is worse. You are vulnerable if you lose your job.
Interestingly, in bad economic times I have always had less trouble getting tenants, not more, and rents have gone up faster not slower because people who would otherwise be FTBs are renting for another year rather than buying and no new stock is coming on the market. Of course this is for places in decent areas, not ex-mining ghost towns. Even the unemployed have to have somewhere to live.
I take your point on this, but I always thought this was an east coast phenomenon. SA,WA,NT seem to have a high level of internal migration. People arrive from Melbourne/Sydney/Brisbane when times are good, and leave when times are bad. Most of the small towns in SA built on the sheep's back are practically ghost towns, and Adelaide is not exactly the most interesting city to be unemployed in.
Quote:
Personally I'd say that for highly levered investors (which these people seem to be!) capital loss is by far the biggest risk. If you have a house that should be renting for $500/week but you are only getting $450 that sucks, but if you have a house that was worth $500k, is now worth $450k and you owe $460k on it, that is worse. You are vulnerable if you lose your job.
From the sound of the original story, these people seem to be f&cked in either case. The bank didn't seem to think they could afford to service the loan for the upgrade house without the rental income from the first house, so it could be marginal if the rent drops significantly, or the vacancy rate is 30%. I agree that they are also exposed to a capital loss. I don't see many Chinese kleptocrats buying bolt holes in Adelaide, but the credit boom might float Adelaide's boat for a little while.
------------------------------ " ... which is that all-too-familiar dynamic in Irish life where people tell lies, cover them up and create all sorts of collateral damage, sometimes spread out over decades, and never take responsibility." - Alan Glynn
I’d like to share a story with you that shows the system is broken.
I’ll divulge that I’m an abstainer, a lesser fool on the sidelines with a deckchair and a bowl of popcorn saving like a mad man. I want the dream but not at any cost.
My wife and I are friends with a lovely hardworking couple. He’s a slightly above average income earner, she would be slightly below. They bought a place in the southern suburbs of Adelaide 3 years ago for $340k. They had seen their value rise to $370k. Roughly 3 % per year. I haven’t looked at inflation but it would be very slightly above, not a great return compared to other choices but we knew that.
Recently, they wanted to buy a larger home with an extra bedroom, double not single garage, lower maintenance gardens, more modern etc. It was going to cost them $430k to buy it. Same suburb.
Here comes the insane part. When the bank examined their debt to equity on the old place, cost of stamp duty on the newer more expensive place, cost of agents fees to sell the old place and anything I’ve missed, they didn’t have enough equity to make it work. So it was suggested that, if they came up with some additional money (Borrowed $5k from their family) AND instead of selling their existing place, rented it out, avoiding the agents fees and retaining that $12k as equity, they could make it work.
They now have their new house and the old place as an investment property, worth $800k combined with what I estimate is around $765,000 worth of mortgage, a 5 per cent funny money deposit and complete equity reset.
So they couldn’t afford a new house, but they could afford two. Plus they get the “tax benefit” of negative gearing the rental, which we know is a crock, and they’re doubly leveraged.
He is already salary sacrificing a private use vehicle so I don’t know what “tax benefit” they are really getting or whether this was even considered in detail. Lucky the private use salary sacrificing crackdown was canned in the budget! Some greater fools can be fooled twice.
This is a dangerous development. How long must we wait? My popcorn is cold and I’m over it.
I think I should quit work, run up an amazing HECS debt and leave for the US. If only I didn’t love this sunburnt country, my family and my friends.
Hi Peter, I'm a reporter with News Corp. I'm looking at doing a story on this CBA offer. Keen to speak to you. My email address is john.rolfeATnews.com.au.
Australian Property Forum is an economics and finance forum dedicated to discussion of Australian and global real estate markets and macroeconomics, including house prices, housing affordability, and the likelihood of a property crash. Is there an Australian housing bubble? Will house prices crash, boom or stagnate? Is the Australian property market a pyramid scheme or Ponzi scheme? Can house prices really rise forever? These are the questions we address on Australian Property Forum, the premier real estate site for property bears, bulls, investors, and speculators. Members may also discuss matters related to finance, modern monetary theory (MMT), debt deflation, cryptocurrencies like Bitcoin Ethereum and Ripple, property investing, landlords, tenants, debt consolidation, reverse home equity loans, the housing shortage, negative gearing, capital gains tax, land tax and macro prudential regulation.
Forum Rules:
The main forum may be used to discuss property, politics, economics and finance, precious metals, crypto currency, debt management, generational divides, climate change, sustainability, alternative energy, environmental topics, human rights or social justice issues, and other topics on a case by case basis. Topics unsuitable for the main forum may be discussed in the lounge. You agree you won't use this forum to post material that is illegal, private, defamatory, pornographic, excessively abusive or profane, threatening, or invasive of another forum member's privacy. Don't post NSFW content. Racist or ethnic slurs and homophobic comments aren't tolerated. Accusing forum members of serious crimes is not permitted. Accusations, attacks, abuse or threats, litigious or otherwise, directed against the forum or forum administrators aren't tolerated and will result in immediate suspension of your account for a number of days depending on the severity of the attack. No spamming or advertising in the main forum. Spamming includes repeating the same message over and over again within a short period of time. Don't post ALL CAPS thread titles. The Advertising and Promotion Subforum may be used to promote your Australian property related business or service. Active members of the forum who contribute regularly to main forum discussions may also include a link to their product or service in their signature block. Members are limited to one actively posting account each. A secondary account may be used solely for the purpose of maintaining a blog as long as that account no longer posts in threads. Any member who believes another member has violated these rules may report the offending post using the report button.
Australian Property Forum complies with ASIC Regulatory Guide 162 regarding Internet Discussion Sites. Australian Property Forum is not a provider of financial advice. Australian Property Forum does not in any way endorse the views and opinions of its members, nor does it vouch for for the accuracy or authenticity of their posts. It is not permitted for any Australian Property Forum member to post in the role of a licensed financial advisor or to post as the representative of a financial advisor. It is not permitted for Australian Property Forum members to ask for or offer specific buy, sell or hold recommendations on particular stocks, as a response to a request of this nature may be considered the provision of financial advice.
Views expressed on this forum are not representative of the forum owners. The forum owners are not liable or responsible for comments posted. Information posted does not constitute financial or legal advice. The forum owners accept no liability for information posted, nor for consequences of actions taken on the basis of that information. By visiting or using this forum, members and guests agree to be bound by the Zetaboards Terms of Use.
This site may contain copyright material (i.e. attributed snippets from online news reports), the use of which has not always been specifically authorized by the copyright owner. Such content is posted to advance understanding of environmental, political, human rights, economic, democratic, scientific, and social justice issues. This constitutes 'fair use' of such copyright material as provided for in section 107 of US Copyright Law. In accordance with Title 17 U.S.C. Section 107, the material on this site is distributed for research and educational purposes only. If you wish to use this material for purposes that go beyond 'fair use', you must obtain permission from the copyright owner. Such material is credited to the true owner or licensee. We will remove from the forum any such material upon the request of the owners of the copyright of said material, as we claim no credit for such material.
Privacy Policy: Australian Property Forum uses third party advertising companies to serve ads when you visit our site. These third party advertising companies may collect and use information about your visits to Australian Property Forum as well as other web sites in order to provide advertisements about goods and services of interest to you. If you would like more information about this practice and to know your choices about not having this information used by these companies, click here: Google Advertising Privacy FAQ
Australian Property Forum is hosted by Zetaboards. Please refer also to the Zetaboards Privacy Policy