How long can the banking community starve the business sector to feed the housing beast?; Australia’s obsession with mortgage lending isn’t an accident: Breaking the big four’s bad habits
Tweet Topic Started: 7 Oct 2014, 11:44 AM (1,798 Views)
The minimum home loan deposit is 5% not 3% but I do agree either way it's a small deposit (unless there is equity in another property that the borrower can use)
I can arrange 90% Low Doc loans for Commercial property through a bank. I have arranged loans that far exceeded any dollar for dollar security cover that the bank held - I can't do that for residential property. IE the loan was way above 100% - probably in the order of 125%
In the past decades that people point to as being somehow wonderful it was far harder to find business lenders who were willing to lend. In the Eighties and Nineties I was a business owner earning very good money, I had security, but it was impossible to get bank finance - and I knew the game and I had contacts. I would prefer to be in a business that needed finance now because funding is so much easier to find.
Callam bless his heart has written this article with this slant because he simply doesn't know - and nor do you Ted. He is just repeating the water cooler mantra that he has heard, as you are.
Anyone in business who has a good business or has good prospects with security will get a loan - that's a far cry from the good old days when it was damned hard to get business finance, and when you did the rates were so high they killed the deal.
Where do I even start Peter......
You say I have no idea, would seem you have no idea, just as you hard no idea on interest rates when clearly explained to you years ago, not a clue, you told people to lock in on good authority you said you had, when I explained very clearly why they will get cheaper and cheaper.
And then you say I am repeating a mantra. That's your go Peter, your debt spriuking mantra that is the very reason the whole western world is now fkkd.
I explained to you years ago about the diversion away from buisiness and what its effects would be, long before any of these so called expert wenkers that want to come out with it years after it was explained.
And as for your claim its not 3%/deposit for home loans but 5%, firstly I said st.Georgewas 3% last year and was not sure now. 5 aint much difference. The fact is we had 100% and 105 %/loans here , even though clowns on here deny we ever had crappy lending standards, seems they had no idea on that one either.
And finally buisiness loans, I have probably run my own buisiness longer than you, and have owned commercial property long before you ever did. And have had commercial loans long before you ever did or even knew about them.
The bottom line is you need more of a deposit for commercial property than residential. And acknowledged by my buddy stinky , and as to some reasons why. Iam talking about in ggeneralPeter, not your one off cherry picked examples
So you need more deposit in general than residential, and the loan terms are ggenerally much shorter .
And back on topic. This residential debt ponzi of housing is the guaranteed demise of our economy for a very very long time. Is that rocket science for you Peter, more money into housing and for longer periods means more money directed away from the economy and for longer periods. Class dismissed......
That's because the security for the housing loan is far more substantial and stable than the small business, which can burn money and be dead in a matter of weeks.
I would agree many businesses can be risky and many small business owners can fail in the first few years if not planned or worked correctly.
But you could say the same for recent property purchasers who have gone over the top with little job security being them or ahead of them.
Seems we have a lot of debt , with very little job security these days.
Dropped any rents lately stinky, or had tennants lose their job, be honest know, I know you usually are in this reguard.
Lost a tennant of over ten years last week. Had a new tennant sign a three year lease on friday. And the rent is less than I was getting before. But in saying that, it has risen every year since purchase at 3%, so I was probably getting a little more than it was worth, and had a good run with this guy.
The number one Australian economic blunder of recent times has been the failure to understand the real position of the economy post-GFC, largely by confusing structure and cycle.
The second coming of the mining boom from 2009 t0 2011 was interpreted by virtually all Australian authorities as a structural shift in the patterns of global demand. The rise of China made this partly true which is why Australia’s terms of trade will likely remain high relative to modern history.
But it was far less true than was assumed. The post-GFC China boom was in very large part just another business cycle, a boom and a bust. In retrospect the cycle will be seen as nothing more than a temporary uber-stimulus by China that actually marked the end not the beginning of its high-growth, high-commodity intensive period.
This fateful misinterpretation led Australia’s elite to embrace a high currency as the principle mechanism for management of the excesses of the mining boom. The refrains “making room for mining” and “sell them dirt” we all remember so well only made sense if the boom was permanent, which it is manifestly proving not to be.
As such, Australia’s macro-economic management post-GFC has not been the triumph of commodity economics so many in power describe it to be. Rather, it has been a garden variety dose of Dutch disease turned absolutely toxic by the failure to apply an appropriate treatment.
As the China investment bust gathers pace this will become more and more obvious. In the next half decade Chinese growth is headed for a sustained 4-5% as officials shift the economy away from credit drivers and back towards productivity drivers of growth. Iron ore is going to $65 forever, the two coals will not rise from today’s prices and probably bleed lower yet. LNG is going to fall by a third or more from its highs as well. Yet Australia has hollowed out huge swathes of its non-resources tradable sectors on the assumption that commodities would carry us forward indefinitely.
It was a boom and bust cycle, not a structural change, yet nobody in power has yet identified it as such (except Kevin Rudd briefly in his chaotic swan song) and so policy continues to roll out as if all we need to do is fire up our own counter-cyclical stimulus as we wait for the Chinese cycle to turn up again.
This is the crucial blunder. The treatment for a structural malady like Dutch disease is very different to the treatment for a cyclical slowdown. In the latter, one only needs to undertake a Keynsian re-inflation of assets prices, wages, demand and investment. In the former, the remedy is the opposite, deflate the currency, asset prices and wages (in real terms) to improve competitiveness and restore investment.
You say I have no idea, would seem you have no idea, just as you hard no idea on interest rates when clearly explained to you years ago, not a clue, you told people to lock in on good authority you said you had, when I explained very clearly why they will get cheaper and cheaper.
And then you say I am repeating a mantra. That's your go Peter, your debt spriuking mantra that is the very reason the whole western world is now fkkd.
I explained to you years ago about the diversion away from buisiness and what its effects would be, long before any of these so called expert wenkers that want to come out with it years after it was explained.
And as for your claim its not 3%/deposit for home loans but 5%, firstly I said st.Georgewas 3% last year and was not sure now. 5 aint much difference. The fact is we had 100% and 105 %/loans here , even though clowns on here deny we ever had crappy lending standards, seems they had no idea on that one either.
And finally buisiness loans, I have probably run my own buisiness longer than you, and have owned commercial property long before you ever did. And have had commercial loans long before you ever did or even knew about them.
The bottom line is you need more of a deposit for commercial property than residential. And acknowledged by my buddy stinky , and as to some reasons why. Iam talking about in ggeneralPeter, not your one off cherry picked examples
So you need more deposit in general than residential, and the loan terms are ggenerally much shorter .
And back on topic. This residential debt ponzi of housing is the guaranteed demise of our economy for a very very long time. Is that rocket science for you Peter, more money into housing and for longer periods means more money directed away from the economy and for longer periods. Class dismissed......
Ted St George haven't had 3% deposit loans since about 2010 when the NCCP regulations came into play. If they did have them I would know. They certainly didn't have a 3% deposit product in 2013.
Using normal commercial loans yes borrowers need about 30% to 35% deposit but there are other lenders including banks who will lend outside those LVR's.
I don't care if you are 200 years old Ted - you are still wrong.
Any expressed market opinion is my own and is not to be taken as financial advice
No it's not. Housing has always been more stable than small business. That's just how it is. Yes, some businesses generate profit, but houses provide a place of residence. If we don't need to live somewhere we could do away with housing all together, but until then, it will be treated as an asset against which money can be lent.
Ted St George haven't had 3% deposit loans since about 2010 when the NCCP regulations came into play. If they did have them I would know. They certainly didn't have a 3% deposit product in 2013.
Using normal commercial loans yes borrowers need about 30% to 35% deposit but there are other lenders including banks who will lend outside those LVR's.
I don't care if you are 200 years old Ted - you are still wrong.
200 years old Peter, I'm 44. Don't ever remember you telling us your age Peter, and you are ?????
Wrong about what, the st.George rate being 97% instead of the 95% you say. To be honest, its what I remember it being when stopping at a central coast st.George branch in about september last year. It was a big sign on the floor promoting it. I am not 100% percent sure it was 97% and not the 95% you say, but I have a photographic memory, and this what I am 90+% sure I remeber seeing, I also pretty sure when I saw it , I remember thinking so much for the bulls strong lending standards. But again Im not 100% , its not a big deal on the scope of the topic here, maybe I was wrong on that, who cares then, 3% depsit 5% deposit, not much dirrence on that one.
I dont care if you dont respond to anything else, just respond to this part Peter. Do you think I am wrong when I say that too much money or debt flowing into housing for longer periods with longer mortgage periods means that more money is flowing away from the overall economy and for much longer periods ?
I think this whole madness can go on for a lot longer yet.
With virtually unlimited Chinese funds being directed at Aussie property, and with no checks and balances, foreign buyers alone can keep the bubble humming along. But of course the bubble is built on a multitude of factors.
So many people have managed to accumulate multiple properties, many of them at a fraction of the cost. They are the ones who can easily help their kids onto the property ladder, and this practice is now encouraged. The fact that most people with large property portfolios (and other wealth) would never be able to duplicate their efforts if they had started in today’s market doesn’t matter – the fact is that they are rich beyond their wildest dreams.
And those who have bought property in more recent years and taken on gigantic mortgages on both their PPORs and investment properties have only seen their equity grow, and have become rich too. There are so many suburbs in Australia where the average house price is over $1 million, yet most of the people living in these suburbs paid a relative pittance for their properties. They are rich by default.
And we know that the government, real estate industry and all others with a vested interest will do anything to keep the bubble alive. Fundamentals don’t matter, first home buyers don’t matter – the only thing that matters is that people can buy at ever-increasing prices. And they ARE buying at ever-increasing prices.
I predicted the bubble would pop years ago, when the fundamentals just didn’t stack up. But my opinion was of no consequence when there have been so many willing volunteers to bid up prices.
I dont care if you dont respond to anything else, just respond to this part Peter. Do you think I am wrong when I say that too much money or debt flowing into housing for longer periods with longer mortgage periods means that more money is flowing away from the overall economy and for much longer periods ?
I partly agree - I don't believe that our economy is as well balanced as it could be, but I don't blame the banks for that, nor do I blame the RBA. It's up to government to set policies that encourage enterprise and job creation. All other players including us just have to make the most of the opportunities presented to us.
To put it in a sporting analogy, it's pointless blaming the players and the referee if the rules of the game have been badly written.
We used to have commonwealth and state development banks who lent to fledgling industries, we used to have a CSIRO who pioneered new crop varieties, livestock management techniques and breeding programs, and technological advances, we used to have policies that protected local industries and jobs against foreign competition. Successive governments have taken those and other measures away from our industries and maybe that's a good thing globally, but what have they replaced them with?
If we don't protect our industries then we should be investing more into education and the latest technology to give us an edge in efficiency and innovation, but we don't seem to do that either.
I'm a big believer in investment. Any business or country that doesn't invest in its future will eventually encounter problems even though for a time it seems like they are saving money.
I think this whole madness can go on for a lot longer yet.
With virtually unlimited Chinese funds being directed at Aussie property, and with no checks and balances, foreign buyers alone can keep the bubble humming along. But of course the bubble is built on a multitude of factors.
So many people have managed to accumulate multiple properties, many of them at a fraction of the cost. They are the ones who can easily help their kids onto the property ladder, and this practice is now encouraged. The fact that most people with large property portfolios (and other wealth) would never be able to duplicate their efforts if they had started in today’s market doesn’t matter – the fact is that they are rich beyond their wildest dreams.
And those who have bought property in more recent years and taken on gigantic mortgages on both their PPORs and investment properties have only seen their equity grow, and have become rich too. There are so many suburbs in Australia where the average house price is over $1 million, yet most of the people living in these suburbs paid a relative pittance for their properties. They are rich by default.
And we know that the government, real estate industry and all others with a vested interest will do anything to keep the bubble alive. Fundamentals don’t matter, first home buyers don’t matter – the only thing that matters is that people can buy at ever-increasing prices. And they ARE buying at ever-increasing prices.
I predicted the bubble would pop years ago, when the fundamentals just didn’t stack up. But my opinion was of no consequence when there have been so many willing volunteers to bid up prices.
Let's hope so, fingers crossed they keep this ponzi going as long as they can.
This building is what is crazy. A friend in Sydney commented on it after returning from the city only the other day.
Is there any capitals without all this building going on ?
How is your capital looking right now on the building front ?
I partly agree - I don't believe that our economy is as well balanced as it could be, but I don't blame the banks for that, nor do I blame the RBA. It's up to government to set policies that encourage enterprise and job creation. All other players including us just have to make the most of the opportunities presented to us.
To put it in a sporting analogy, it's pointless blaming the players and the referee if the rules of the game have been badly written.
We used to have commonwealth and state development banks who lent to fledgling industries, we used to have a CSIRO who pioneered new crop varieties, livestock management techniques and breeding programs, and technological advances, we used to have policies that protected local industries and jobs against foreign competition. Successive governments have taken those and other measures away from our industries and maybe that's a good thing globally, but what have they replaced them with?
If we don't protect our industries then we should be investing more into education and the latest technology to give us an edge in efficiency and innovation, but we don't seem to do that either.
I'm a big believer in investment. Any business or country that doesn't invest in its future will eventually encounter problems even though for a time it seems like they are saving money.
I was rather impressed by your post Peter, and would agree its the fault of our useless government, here and in most western economies. They have copied stupid policies from one another over the years, and we can see where we all are now.
I believe in investment too Peter, but in the right investment. Encouraging all this money and debt into housing it not a good INVESTMENT, for now or the future, its robbing from economy both now and later.
Yes some debt is good when worked well and managed well, but the focus here is ' Way to much debt into one area', detracting from the most important area, which is after all our economy, which is what is actually supposed to support housing. It would seem we all lost the plot and decided that housing is now the economy as we have no answer to the jobs losses, and that houze prices will somehow support jobs. They may support building jobs and the like over the short term, but then what ? We wont have enough jobs to pay the debt in future as the government have nothing at all on the jobs front, while many indistries are collapsing or dying. Look at youth unemployment, its off the richter yet never even mentioned. Who do all these investors think they will be able to rent to in future when the youth of today have little future or job prospects.
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