As much as they like Peter with no regard to their deposit base, Basel 3, APRA prudential supervision restrictions etc?
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
As much as they like Peter with no regard to their deposit base, Basel 3, APRA prudential supervision restrictions etc?
They have to hold the right amount of Tier reserves, but the deposits will adjust as the loan creates the deposit. If the bank wanted to expand substantially they would need greater shareholder equity. I don't see a problem with any of the major banks raising equity at the moment, but that could change if our dollar falls below $0.80 USD. Less international investors would be interested if they feel endangered by a falling $AUD.
Any expressed market opinion is my own and is not to be taken as financial advice
I'm curious as to where all this pent up FHB demand is located.
The pent up demand is especially concentrated in those cities where FHB numbers have been very low recently.
When FHB numbers are low, the potential FHBs don't just vanish from the face of the earth. They are still living in Australia, still waiting to buy.
Removal of grants combined with fear of a crash simply deferred their purchase to a later date, it didn't prevent them them from purchasing forever.
Now interest rates have fallen, rents keep on rising, prices are rising again, fear of a crash has subsided, and the potential FHBs have an extra few years of saving behind them.
That pent up demand is not going to stay pent up for long.
Pent up demand is used by economists to describe the general public's strong return to consumerism following a period of decreased spending.
Pent up demand is often seen immediately following a recession or depression, where consumers have built their savings or held off on purchases due an the uncertain economic climate. Quite often, pent up demand accelerates the economic recovery period immediately following an economic downturn thanks to a sudden increase in consumer confidence and spending.
They have to hold the right amount of Tier reserves, but the deposits will adjust as the loan creates the deposit. If the bank wanted to expand substantially they would need greater shareholder equity. I don't see a problem with any of the major banks raising equity at the moment, but that could change if our dollar falls below $0.80 USD. Less international investors would be interested if they feel endangered by a falling $AUD.
You would think the existence of (a) Treasury and Liquidity functions within banks and (b) you know, the fact that banks couldn't fund themselves during the GFC, would make this self-evident.
You would think the existence of (a) Treasury and Liquidity functions within banks and (b) you know, the fact that banks couldn't fund themselves during the GFC, would make this self-evident.
Apparently not.
They couldn't roll over their term loans during the GFC.
Any expressed market opinion is my own and is not to be taken as financial advice
The pent up demand is especially concentrated in those cities where FHB numbers have been very low recently.
When FHB numbers are low, the potential FHBs don't just vanish from the face of the earth. They are still living in Australia, still waiting to buy.
Removal of grants combined with fear of a crash simply deferred their purchase to a later date, it didn't prevent them them from purchasing forever.
Now interest rates have fallen, rents keep on rising, prices are rising again, fear of a crash has subsided, and the potential FHBs have an extra few years of saving behind them.
That pent up demand is not going to stay pent up for long.
I see it somewhat differently. In NSW and QLD the pending removal of the FHB grant on existing homes produced a large spike in FHB activity just prior to the removal. History tells us there is usually a significant delay before the pent up demand builds up again. Akin to the male orgasm it requires a recovery time between spurts. There is also no stimulus to aid the recovery since the FHB grant is now only on new homes.
They couldn't roll over their term loans during the GFC.
If loans create deposits you don't need term funding from anyone else, do you? You certainly don't need it from the global capital markets. If loans create deposits, you don't need money from anyone, in fact. You can just poof it into existence.
And yet, we don't don't have "Manager of Poofing Money into Existence" in the internal directory.
The problem is that not all of the money created by the Big 4 ends up back as deposits at the Big 4. I'm curious as to where it all is actually located.
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