Housing market 2021

[Engimal v3]

Put an offer in for my first home yesterday. Fingers crossed!

Vendor likes our offer now it's been formally submitted. Everyone else gets 24 hours to respond (EOI) - but looking good!

 

[Sqotty from office works]

Vendor likes our offer now it's been formally submitted. Everyone else gets 24 hours to respond (EOI) - but looking good!

Your buying at the right time as you know it's gonna get worse and it's what you're prepared for.
If you survive the next 3 years you can survive anything.
People that bought a zero interest are the ones that are in trouble.
Good luck to you

 

[rfctigerarmy]

Trying to get into this game.

Not a huge amount around, but looking all the freakin' time.

 

[Sqotty from office works]

Trying to get into this game.

Not a huge amount around, but looking all the freakin' time.

What sort of money are you looking at.
Geelong west has one of the best market/coffee/restaurant streets in Victoria.
5 minute walk to train.
Absolutely unbelievable schools
Easy driving.
25 minutes to bass Strait Beach
5 minutes to Bay Beach and pretty good fishing
Access roads to Ballarat, Melbourne,airports,great ocean road.
Ferry to Mornington peninsula.
Easy traffic.
All ice addicts confined to corio and Nth Geelong.
550.00 will get you in.

 

[rfctigerarmy]

What sort of money are you looking at.
Geelong west has one of the best market/coffee/restaurant streets in Victoria.
5 minute walk to train.
Absolutely unbelievable schools
Easy driving.
25 minutes to bass Strait Beach
5 minutes to Bay Beach and pretty good fishing
Access roads to Ballarat, Melbourne,airports,great ocean road.
Ferry to Mornington peninsula.
Easy traffic.
All ice addicts confined to corio and Nth Geelong.
550.00 will get you in.

No thanks.

 

[Hamingja]

IMO it'll be unemployment that busts before housing, I think its happening right in front of us however once again data is lagging. Yes, in many ways they're interlinked however the government has vested interests and won't allow housing to completely collapse. Plenty of QE available to prop up housing with unemployment rising.

• I think interest only loans, even for those who's servicing traditionally wouldn't allow it will be one of the first
• Reducing the rate serviceability buffer from 3% back to 2% or 2.5%. APRA will be more confident doing this when we have a bit more certainty with rates
• repayment holidays during periods of unemployment

etc

Government will let the banks run with 40 year mortgages. That will be the lever. Banks still win long term.

 

[Engimal v3]

Vendor likes our offer now it's been formally submitted. Everyone else gets 24 hours to respond (EOI) - but looking good!

Got it!

 

[Kanga Commando]

Get ready for another rise...



"All the mortgage brokers get out and take the valuers on the pi55'

 

[Sphynx]

Trying to get into this game.

Not a huge amount around, but looking all the freakin' time.

For god sakes wait.......

There's going to be at least another 12 months of rate rises.

If this is your first home, you will have negative equity in anything you buy now in 12 months.

You have the largest unions in Australia's 3 year EBA's currently up for negotiation at the moment, record labour shortages, inflation steaming ahead and wage increases keeping pace with it so people are still spending.

25-40 year olds are still spending like no tomorrow, wage increases are further feeding inflation as people haven't been put back in the shell yet, only really the low income earners.

The cash rate is going to go well past 4%, which could be another 3-4 rate rises at least.

 

[rfctigerarmy]

For god sakes wait.......

There's going to be at least another 12 months of rate rises.

If this is your first home, you will have negative equity in anything you buy now in 12 months.

You have the largest unions in Australia's 3 year EBA's currently up for negotiation at the moment, record labour shortages, inflation steaming ahead and wage increases keeping pace with it so people are still spending.

25-40 years are still spending like no tomorrow, wage increases are further feeding inflation as people haven't been put back in the shell yet, only really the low income earners.

The cash rate is going to go well past 4%, which could be another 3-4 rate rises at least.

So do what, enter the rental market where 50% less properties are now below $400 / week in Melbourne?

 

[Sphynx]

So do what, enter the rental market where 50% less properties are now below $400 / week in Melbourne?

Would you rather pay 20% more rent for 9-12 months?

Or lose 15-20% of the value a 9 x leveraged asset AND pay the increased holding costs for that period?

Will you have have the cash reserves to secure the difference if the bank calls in your loan in 12 months if the reduction in your property price exceeds your initial deposit/equity?

If you are a prospective first home owner, you are in the best position most have been in 15 years in terms of buying property, you are unimpacted by the property market other than rent increases atm, don't be silly and jump on the sinking ship before it's sunk.

 

[Kanga Commando]

Would you rather pay 20% more rent for 9-12 months?

Or lose 15-20% of the value a 9 x leveraged asset AND pay the increased holding costs for that period?

Will you have have the cash reserves to secure the difference if the bank calls in your loan in 12 months if the reduction in your property price exceeds your initial deposit/equity?

If you are a prospective first home owner, you are in the best position most have been in 15 years in terms of buying property, you are unimpacted by the property market other than rent increases atm, don't be silly and jump on the sinking ship before it's sunk.

yep, although you may have even undersold it somewhat. Rates are going skywards.

I think i posted a chart on the link between CB liquidity and equity markets. Financial conditions will tighten for longer, and asset markets in the EU, US and AUS will head in the other direction.

Every time US inflation breaks 5%, the Fed has had to lift the EFF to surpass the inflation rate. That suggests US rates going to around 6.5%-7% or more. Don't forget also, large inflation spikes have generally come in waves. We are only in the first wave. The second wave is usually higher.


rfctigerarmy - I hope you are not being compelled to buy through a life situation. Patience is your friend now. Good luck. When this is over, a lot of us will be unemployed and homeless.

 

[HirdyLannister]

rfctigerarmy - I hope you are not being compelled to buy through a life situation. Patience is your friend now. Good luck. When this is over, a lot of us will be unemployed and homeless.

Hyperbole much...

Inflation isn't this big scary monster...
Prices and growth go up and down, this expectation that people and especially large corporations expect everything should grow linear or exponentially is ludicrous.

 

[Kanga Commando]

Hyperbole much...

Inflation isn't this big scary monster...
Prices and growth go up and down, this expectation that people and especially large corporations expect everything should grow linear or exponentially is ludicrous.

Hyperbole ?

No

I have posted a lot of charts based on empirical data in this thread. They stand as fact.

 

[rfctigerarmy]

For god sakes wait.......

There's going to be at least another 12 months of rate rises.

If this is your first home, you will have negative equity in anything you buy now in 12 months.

You have the largest unions in Australia's 3 year EBA's currently up for negotiation at the moment, record labour shortages, inflation steaming ahead and wage increases keeping pace with it so people are still spending.

25-40 year olds are still spending like no tomorrow, wage increases are further feeding inflation as people haven't been put back in the shell yet, only really the low income earners.

The cash rate is going to go well past 4%, which could be another 3-4 rate rises at least.

Do you think if I wait with everyone else, that I'll just be paying more for a place when everyone else who is waiting is also ready to fire?

 

[Sphynx]

Do you think if I wait with everyone else, that I'll just be paying more for a place when everyone else who is waiting is also ready to fire?

What do you mean pay more?

The market might be competitive, but it will be at a completely lower price point that it is now.

My only suggestion might be to find something that may have been passed in at Auction, currently for private sale and try and engineer the 10-20% reduction into it, but good luck...

 

[Kanga Commando]

Hyperbole much...

Inflation isn't this big scary monster...
Prices and growth go up and down, this expectation that people and especially large corporations expect everything should grow linear or exponentially is ludicrous.

Sen Warren and J Powell both talking about this very issue overnight.

Warren and Powell both know where this is going. Could not be any more clear. Australia is no different.

 

[ash_1050]

For god sakes wait.......

There's going to be at least another 12 months of rate rises.

If this is your first home, you will have negative equity in anything you buy now in 12 months.

You have the largest unions in Australia's 3 year EBA's currently up for negotiation at the moment, record labour shortages, inflation steaming ahead and wage increases keeping pace with it so people are still spending.

25-40 year olds are still spending like no tomorrow, wage increases are further feeding inflation as people haven't been put back in the shell yet, only really the low income earners.

The cash rate is going to go well past 4%, which could be another 3-4 rate rises at least.

Spoken with a whole lot of confidence, are you an economist by chance or it it just an uneducated opinion?
An increase in rates equals a lowering of borrowing capacity.
Everyone predicting further doom and gloom is a good time to buy, no one accurately states 'this is the bottom of the market' as by its nature you don't know the bottom of the market occurred until after it's passed.

I'm looking to buy in the next month or two, as it's a case of being ready. The market does what the market does, if I missed out on an ideal place because I sat around waiting for property to drop another 10% (and my borrowing capacity decreased by 100k) due to further rate rises there's a fair chance I'd never end up buying.

Negative equity is a nil concern for a PPOR.

 

[rfctigerarmy]

Similar situation to ash_1050 I'm guessing, where I feel like I've been waiting for these interest rate rises / uncertainty because I feel like it gives me an advantage against others. Yeah, I feel like in my life it's a good opportunity to buy if I can. I'm after a unit / villa by the way, rather than a full blown house.

It also really depends what area you're trying to buy in. I'm trying to be in an area which is (and feels like will always be) desirable. I'm not looking at a place 50km away from the CBD.

 

[Sphynx]

Spoken with a whole lot of confidence, are you an economist by chance or it it just an uneducated opinion?
An increase in rates equals a lowering of borrowing capacity.
Everyone predicting further doom and gloom is a good time to buy, no one accurately states 'this is the bottom of the market' as by its nature you don't know the bottom of the market occurred until after it's passed.

I'm looking to buy in the next month or two, as it's a case of being ready. The market does what the market does, if I missed out on an ideal place because I sat around waiting for property to drop another 10% (and my borrowing capacity decreased by 100k) due to further rate rises there's a fair chance I'd never end up buying.

Nope, just have a decent amount of experience in it and plenty of skin in the game.

It depends on your personal circumstances obviously, the by product of higher interest rates is certainly a reduction in borrowing power, but it's also offset by lower property prices.

This is very much not a case of trying to predict the bottom, this is a case of trying to avoid jumping on at 2am.

Negative equity is a nil concern for a PPOR.

What a ridiculous comment. PPOR has nothing to do with it.

It's certainly a problem when the bank comes for further security against the property because yours has evaporated and you don't have said cash to provide bank for security.

If you are in negative equity as a result of manufactured property price reductions, invariably you are paying much more in interest than what you were first approved for based on your assessed disposable income.

Corelogic already believes around 120,000 homes bought since April 2022 on low deposit loans have entered negative equity.

 

[ash_1050]

It's certainly a problem when the bank comes for further security against the property because yours has evaporated and you don't have said cash to provide bank for security.

Can you provide any source to substantiate the bank coming knocking on a PPOR owner's door and saying 'hey the property is worth less than what you paid for it, you owe us additional security'?

Also I feel like your vision may be clouded if you've already 'got plenty of skin in the game' for property. Having a PPOR means a lot of security, not having to deal with the current rental crisis, and having a place to call your own. Why bump that out longer than you'd need to hoping that the cards fall your way.

 

[Sphynx]

Also I feel like your vision may be clouded if you've already 'got plenty of skin in the game' for property. Having a PPOR means a lot of security, not having to deal with the current rental crisis, and having a place to call your own. Why bump that out longer than you'd need to hoping that the cards fall your way.

I'm not clouded at all, I sold my main PPOR 14 months ago in preparation for the current market.

You can do what you want with your own money.

Why does a PPOR give you a lot of security? That's a social perspective, not a financial one. As is the comment on a "place to call home"

If I could get market value for all of my properties, I'd sell them all right now, as the price reductions will definitely outstrip the stamp duty costs of rebuying.

In terms of the rental crisis, it pales in comparison to the interest rate risk exposure at the moment.

A 0.25% interest rate rise on an average Australian mortgage is probably the equivalent to a 7-10% average weekly rental cost increase. Not even factoring in the negative capital gain impact of that rate rise, which is larger than both combined probably.

 

[ash_1050]

Why does a PPOR give you a lot of security? That's a social perspective, not a financial one. As is the comment on a "place to call home"

If I could get market value for all of my properties, I'd sell them all right now, as the price reductions will definitely outstrip the stamp duty costs of rebuying.

In terms of the rental crisis, it pales in comparison to the interest rate risk exposure at the moment.

A 0.25% interest rate rise on an average Australian mortgage is probably the equivalent to a 7-10% average weekly rental cost increase. Not even factoring in the negative capital gain impact of that rate rise, which is larger than both combined probably.

Financial decisions can be driven by social perspective, we're not robots who only do things optimally otherwise pubs and restaurants wouldn't exist.

I've lived in 20+ houses over the course of my life, it would be nice to have a place that's mine, that means I don't have to update all my contact details.
To have a place that I can get a dog, set up a home office, put up some art and otherwise make the place my own. You can't do that in a rental.

I'd be much happier with a mortgage and having rates jump a couple of percent more than having a rental where any price increase is effectively set by the landlord and if you don't like it there's plenty of other people willing to take your spot.

A 0.25% interest rate rise on an average Australian mortgage is probably the equivalent to a 7-10% average weekly rental cost increase. Not even factoring in the negative capital gain impact of that rate rise, which is larger than both combined probably.

A 0.5% rate rise on a $550k mortgage is an additional $171/month. For comparison my landlord recently increased my rent by $216/month, and I've got nothing to show for it. And that's before the upcoming lease end in July in which the rent will unquestionably jump again.

 

[Hamingja]

Can you provide any source to substantiate the bank coming knocking on a PPOR owner's door and saying 'hey the property is worth less than what you paid for it, you owe us additional security'?

In the T&Cs of your mortgage the bank can sell your property if there is a negative price movement.

Whether they would enforce that or not, who knows, property hasn't dropped significantly in my lifetime so we don't really have anything to go off.

 

[Sphynx]

Financial decisions can be driven by social perspective, we're not robots who only do things optimally otherwise pubs and restaurants wouldn't exist.

I've lived in 20+ houses over the course of my life, it would be nice to have a place that's mine, that means I don't have to update all my contact details.
To have a place that I can get a dog, set up a home office, put up some art and otherwise make the place my own. You can't do that in a rental.

I'd be much happier with a mortgage and having rates jump a couple of percent more than having a rental where any price increase is effectively set by the landlord and if you don't like it there's plenty of other people willing to take your spot.



A 0.5% rate rise on a $550k mortgage is an additional $171/month. For comparison my landlord recently increased my rent by $216/month, and I've got nothing to show for it. And that's before the upcoming lease end in July in which the rent will unquestionably jump again.

Are you comparing apples with apples here?

A $216 rent rise seems to probably apply to something above the average rental cost when comparing it to increases on a $550k mortgage. (The average rent in Melbourne was $440/week fwiw)

Whilst you had nothing to show for it, what if by contrast he asked for a $216 rent increase and $40k was wiped from your savings?

0.5% rate increase on $550k is actually an average increase of $229 per month FWIW, though they will vary depending on the calendar month as interest is calculated per day.