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Exclude homes as speculative assets.
Topic Started: 29 Aug 2015, 10:57 AM (3,225 Views)
stinkbug
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zaph
30 Aug 2015, 12:45 PM
Lenders look at the underlying security offered when determining IRs on loans (among other things). If business owners can offer housing as security then they will get the house rate, or close to it.

The ATO looks at the purpose of the loan. If a business borrowed to invest, or transact business, it's deductible regardless of the security offered.
This.

One thing that gets overlooked is that loan purpose and security are two completely different things.
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While it's true that those who win never quit, and those who quit never win, those who never win and never quit are idiots.

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Veritas
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peter fraser
30 Aug 2015, 08:11 AM
Look it's OK that you and Veritas don't understand, but you could both make an effort.
Its hard to understand when you keep offering non-responses to the data which shows that:

Almost 2/3rd of the book for Australian banks are loans against residential property.

You say some of this is, in fact, business lending.

The IMF says otherwise.

Credit Suisse says otherwise.

The RBA says otherwise

APRA says otherwise.

Why the lies?

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Strindberg
30 Aug 2015, 11:53 AM
Your lack of comprehension has once again led you misunderstand the discussion.

My post, and others, addressed the issue of the quantity of credit obtainable to banks for lending which I assert is not some fixed quantity as implied by Peter Martin's article. Credit worthiness of potential borrowers is a function of perceived risk associated with those borrowers (which can of course change) and not a function of the availability of money to banks for lending.

“All logical arguments can be defeated by the simple refusal to reason logically”

― Steven Weinberg
There are limits to what any bank anywhere can lend at any given time.

Edited by Veritas, 30 Aug 2015, 03:22 PM.
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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stinkbug
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In Australia the cheapest and easiest finance for small business is if the loan is secured by residential property.
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While it's true that those who win never quit, and those who quit never win, those who never win and never quit are idiots.

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Trollie
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Veritas
30 Aug 2015, 03:04 PM

There are limits to what any bank anywhere can lend at any given time.
Really, then you should be able to tell is what that is then.

I won't hold my breath.
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Loki
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peter fraser
30 Aug 2015, 08:11 AM
Look it's OK that you and Veritas don't understand, but you could both make an effort.
The company I work for has no debt. None. They are completely self-funded. How do they do business?

My cousin's small business was started with family money. No debt involved. How is that possible?

Let's see if you make an effort in your response.

I see that Trollie has passed on the opportunity to demonstrate the infinite availability of capital for lending.


“Talk sense to a fool and he calls you foolish.” - Euripides
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Car tart
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Trollie
30 Aug 2015, 04:01 PM
Really, then you should be able to tell is what that is then.

I won't hold my breath.
Does a bank simply make its own money and lend that out?

I always understood that roughly speaking for every dollar lent out, there must be a dollar lent to the bank (or deposited to the bank)

So the limit should be money available to the bank less statutory holdings and.

Please correct me if Im wrong.
Loki
30 Aug 2015, 05:04 PM
The company I work for has no debt. None. They are completely self-funded. How do they do business?

My cousin's small business was started with family money. No debt involved. How is that possible?

Let's see if you make an effort in your response.

I see that Trollie has passed on the opportunity to demonstrate the infinite availability of capital for lending.
My company has $3.6 million in debt which will increase to $4.7 million when my tax bill comes in.

And all of it is as a mortgage against residential real estate.

Other than Small businesses I would be surprised if the majority of companies did not have at least a line of credit to even out there income and expenditure.

This is much cheaper to do against your residential property than on the value of the business.

But how would staff know about the company's debt structure, even my inhouse accountant wouldn't know the extent of my debt.
Edited by Car tart, 30 Aug 2015, 05:13 PM.
You cant drive a house, BUT you can always sleep in a car!
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peter fraser
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Ex BP Golly
30 Aug 2015, 10:56 AM
That seems strange Peter.

Are businesses allowed a tax deduction on a residential home loan, or are most businesses forgoing a tax deduction they would otherwise receive if they had a business loan?
Yes they can claim full tax deductibility for any borrowing for business purposes. The security is not the defining factor, it's the purpose. Now don't get confused here, if you go to your bank and ask for a loan for home renovations, but instead invest the money into your business, it is fully deductible, and the money trail will confirm that for the ATO.
Veritas
30 Aug 2015, 03:04 PM
Its hard to understand when you keep offering non-responses to the data which shows that:

Almost 2/3rd of the book for Australian banks are loans against residential property.

You say some of this is, in fact, business lending.

The IMF says otherwise.

Credit Suisse says otherwise.

The RBA says otherwise

APRA says otherwise.

Why the lies?

They actually confirm what I am telling you, but you can't see it.

Not the IMF or the others contradict what I have told you. Their data only reflects loans against residential security, which is the dominant class of property held by small business owners and investors.

Banks are lenders who require bricks and mortar as security, and that has always been the case.
Loki
30 Aug 2015, 05:04 PM
The company I work for has no debt. None. They are completely self-funded. How do they do business?

My cousin's small business was started with family money. No debt involved. How is that possible?

In a discussion where the suggestion is that lending for housing is crowding out lending for business, you give me two examples where no lending was required for the business.

Truly that is an idiotic response.

I gave you information which challenged your beliefs, but instead of questioning your belief you chose to assume my information was a lie. that is intellectual laziness at it's worst.
Edited by peter fraser, 30 Aug 2015, 07:31 PM.
Any expressed market opinion is my own and is not to be taken as financial advice
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ThePauk
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peter fraser
30 Aug 2015, 07:20 PM

I gave you information which challenged your beliefs, but instead of questioning your belief you chose to assume my information was a lie. that is intellectual laziness at it's worst.
Peter, what $ value is as business loans in Australia, where property is used as collateral?
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peter fraser
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Car tart
30 Aug 2015, 05:06 PM
Does a bank simply make its own money and lend that out?

I always understood that roughly speaking for every dollar lent out, there must be a dollar lent to the bank (or deposited to the bank)

So the limit should be money available to the bank less statutory holdings and.

Please correct me if Im wrong.
Banks don't need deposits to lend, they need shareholder capital.

When the bank lends a dollar, they create a loan of one dollar, and that dollar is deposited into an account in the banking system, so the loan has created the deposit that the bank needs to comply with what we understand to be banking practice.
ThePauk
30 Aug 2015, 07:36 PM
Peter, what $ value is as business loans in Australia, where property is used as collateral?
There are almost no loans made by banks without property as security in the SME area, although there are variations such as guarantees given by people who own property or other substantial assets.

There is almost no unsecured lending in this space, although some banks will lend up to 50% against select business's such as well established franchises where special arrangements have been organised by the franchisor. Some of those are MacDonalds, Coffee Club, Pool Werx and several others. Banks may give some accommodation from time to time outside these guidelines, but proportionately it's not much.

I would say that at a guess about 95% of business lending the SME space is fully secured by property on normal bank margins (be that residential or commercial)

However in the corporate space, they often raise their funding on the stock market. Their shares are bought by institutions or by retail investors. Now guess where retail buyers borrow their money from and what security do they use?
Edited by peter fraser, 30 Aug 2015, 08:00 PM.
Any expressed market opinion is my own and is not to be taken as financial advice
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Loki
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Car tart
30 Aug 2015, 05:06 PM
My company has $3.6 million in debt which will increase to $4.7 million when my tax bill comes in.

And all of it is as a mortgage against residential real estate.

Other than Small businesses I would be surprised if the majority of companies did not have at least a line of credit to even out there income and expenditure.

This is much cheaper to do against your residential property than on the value of the business.

But how would staff know about the company's debt structure, even my inhouse accountant wouldn't know the extent of my debt.
Does your company produce financial reports? Balance sheet? Profit and loss?

Or are you using the term 'company' loosely?

I can see why a small proportion of people are terrified of a housing crash.

peter fraser
30 Aug 2015, 07:20 PM
In a discussion where the suggestion is that lending for housing is crowding out lending for business, you give me two examples where no lending was required for the business.

Truly that is an idiotic response.

In a discussion where the suggestion is that without banks, there would be a shortage of goods and services, to wit:
Quote:
 
Lets look at the facts. If banks weren't lending to business there would be a shortage of business's ready and willing to provide you with the goods and services that you need or desire

I gave you two counter examples. There are hundreds of thousands more, but I thought two would be enough to see if you could "make an effort" to defend your suggestion, or perhaps even moderate it slightly. But no, it appears that you either believe your own bullshit, or worse.

Quote:
 
I gave you information which challenged your beliefs, but instead of questioning your belief you chose to assume my information was a lie. that is intellectual laziness at it's worst.
No, you gave me your belief system, which conveniently fits the narrative of your business. It's the same narrative as the banking system spews out: "The banking system is systemically important to the economy." Puhleeese. Banking, at it's core, is borrowing money at one rate, and lending it at a higher rate. Even a child could do that. What banks are supposed to do is manage risk, but even that is too difficult. They take risks, and when they don't pan out, the taxpayer foots the bill.

Other than transaction systems like EFTPOS/Paypass, it's difficult to see what social utility the banks offer. Certainly without a government granted oligopoly they wouldn't be viable as businesses. They are really a giant leech, sucking the lifeblood out of the economy.
Edited by Loki, 30 Aug 2015, 10:59 PM.


“Talk sense to a fool and he calls you foolish.” - Euripides
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