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Bursting the mums and dads infestor myth!; Negative Gearing firmly in crosshairs and rightfully so
Topic Started: 25 Sep 2014, 06:40 PM (639 Views)
Timo
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http://www.abc.net.au/news/2014-09-24/janda-the-myth-of-mum-and-dad-negative-gearers/5766724?section=business
After a bubble has burst, no one denies that it existed. But before it does, the popular refrain is that though bubbles existed elsewhere in the world, “there’s no bubble here”. So housing bubbles are admitted to have existed in Japan, the USA, Spain and Ireland – because they’ve already burst.
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ThePauk
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Amazing amount of comments and now closed. Mmmmm.....
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peter fraser
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Timo
25 Sep 2014, 06:40 PM
Quote:
 
In its latest Financial Stability Report, the RBA's analysis of HILDA also shows that a whopping 60 per cent of investment housing debt is held by the top fifth of income earners.


I agree, the major portion of the debt on IP's is held by a very strong financial group.
Any expressed market opinion is my own and is not to be taken as financial advice
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goldbug
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High income does not imply strong financials peter, you should know that fom your work dealings. People on higher incomes just spend more on their lifestyles and often invest in stocks and houses, both high risk investments now days.
Shadow was hopelessly wrong about the Gold Bull Market.
What else is he wrong about?
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herbie
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Either way, lies/misrepresentations from lobbyists of ALL persuasions piss me RIGHT off.
A Professional Demographer to an amateur demographer: "negative natural increase will never outweigh the positive net migration"
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peter fraser
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goldbug
25 Sep 2014, 07:51 PM
High income does not imply strong financials peter, you should know that fom your work dealings. People on higher incomes just spend more on their lifestyles and often invest in stocks and houses, both high risk investments now days.
Yes mate actually it does. When you analyse someone's financial position the two things you look at closely are their asset position and their income - so income strength is very important. Sure people who earn a lot spend a lot, but they still have a lot more disposable income.

In fact I'll let you into the insight of old lenders. When I started as a junior loans assistant (shit kicker) it was drummed into me that they want clients who fit the three "S" profile and they wanted it in this order:-

Selectivity - that is good people who can be trusted with money.
Servicing - people with a good income who can make the payments
Security - people who have assets to secure a loan.

In the USA when the SHTF it was clear that they ignored the first two parts of the rule completely and probably most of the third part as well. They lent to anyone against a self assessed income which really was just made up - the GFC then became inevitable.

The reality is that if you lend to good people who have the ability to repay then the security cover will never be needed. If you get those first two rules wrong then you really really need the third rule to avoid losses. That's why high LVR lending to FHB's buying low cost homes are very safe as long as you get those first two rules right - and I know that is counter intuitive for many people, but the data is overwhelming.

That's why there is a push for macroprudential tools which frankly already exist.

What the old lenders did by using their experience and gut feeling has now been replaced with credit scores.



Any expressed market opinion is my own and is not to be taken as financial advice
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