Monthly Archives: March 2013


When you absolutely “know” your job or business is safe and stable, then and only then do you stick your neck out, borrow against future income or profits and maybe splurge some.  This is sentiment and you can throw as many figures around, bend and twist them as much as you like, put spin here and there but deep down, if the people ain’t happy it just doesn’t stack up.

The Spin Gurus would have us all believe that things are “just dandy” sometimes by jamming it down our throats that we are far better off than say….mmmm…Cypress!  But, you numpties, we aren’t Cypress, or Greece, or Spain, we’re ORSTRAYLIAH!

The sentiment out there is very, very conservative and in many areas, frightened and afraid would be a better descriptor.

Why would I say that you ask?  Well, it’s borne out by new figures (again, if you can believe “figures” but in this case it’s fairly bloody obvious) that show that mortgage holders are building in bigger and bigger “buffers” in case they lose their job, have reduced hours of work or their business fall on (even more) hard times. We are collectively AUD$160 BILLION ahead on our mortgages apparently. And some AUD$30 BILLION of that stuffing has come post GFC.

People are pulling their heads in like a bunch of turtles.  Still going to coffee shops in droves to spend $5.00 and chat about their woes, but try being a mid-range luxury goods seller, or any kind of retailer nowadays – it’s nasty out there.

The Reserve Bank has come out and added to the statistics by saying that borrowers are more than 20 MONTHS ahead in principal and interest repayments, and that our previous dangerously high level of personal debt had come down sharply.

However, there is the other end of the market where folks are struggling to meet repayments.  I chatted with some people in the money world before Easter and was interesting to hear their real life, real time stories.  Lenders are bending over backwards to ensure the least number of people get into a default situation.  And they’re not doing it out of the kindness of their heart either.

We discussed the local area and narrowed our focus to a few streets that I’m really familiar with. This area was targeted by certain people and was heavily promoted and sold in the lead up to the GFC.  People who bought for investment purposes are keeping their heads above water as interest rates have dropped and rents have skyrocketed. Cash flow is manageable.  Poor buggers who bought to live in are screwed.  Why?  Dodgy loan applications, low start subsidised, interest only loans that have suddenly reverted to principal and interest at  a rate quite a bit higher than market… real life scenarios quoted to me saw young couples’ repayments jump by $1,200 a month.  That takes a lot of food off the table, and if you earn between $40,000.00 and $80,000.00 a year, could knock $22,000.00 a year off your gross pay!

No wonder this group are hurting and scared. And to make it worse, they’re trapped.

House bought in lead up to GFC for $495,000.00.  Loan $450,000.00.  Amount paid off loan – pennies!  Last sale in the street of identical house and land – $430,000.00 less Agents and lawyer’s fees and charges leaves say $415,000.00 means you still owe the Bank $35,000.00 and nothing to show for it…

I’ll keep running around like Chicken Little and I’ll keep saying that Aussie house prices are STILL way too high and a correction to “affordable levels” is still well overdue.

More next time…


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Hilton Hotel SplurgeArticle by "Leading Light" 27 Mar 2013Job Loss and Your Mortgage

Hi – I’ve just banged in 3 articles from today’s press (wide acknowledgement of printed paper)…please, have a quick read, if you haven’t already, take your rose tinted glasses off and face the reality.

As I’ve said in past articles, “any fool can sell a dollar for sixty cents” and that’s exactly what’s happened with the Hilton Residences, and is happening everywhere else especially here on the Gold Coast.  I’m told, first hand or if second hand, easily checkable, of disaster after nightmare after “Oh My God, you lost how much?”

I’m sticking pins in myself trying to figure out why anyone in their right mind would buy ten x 2 bedroom apartments in that building.  Is real estate not all about Location, Location and dare I repeat myself for emphasis, Location?  The horror stories from guests and owners who sadly bought off the plan of the noise, the constant noise, drunks and other malcontents in the elevators, the shenanigans in the pool not to forget walking out into pools of vomit and girls pulling each other’s hair out in the middle of our so-called Night Club District.  You’ve got to be kidding me?  A wise investment at $700,000.00 each for a 2 bedroom apartment.  Must have been a very glossy brochure!

Anyway, read the article and come to your own conclusion – mine is, of course, the contrarian view, and those apartments will be like a slum and un-saleable in a few years…you read it here first and I stand by that.  Its just not a nice place to have an apartment.

Then there’s Andrew Bell – now I haven’t gone head-to-head with anyone on this blog before but I really have to question what he is on about.  He, and others like him, keep banging on about high clearance rates at auctions.  Sure, there are, or may be high clearance rates but at what cost to the Sellers – Ray White naturally get their commission no matter the sale price but many, many sellers are heart broken.  There’s the odd ‘miracle’ but I wonder just what the Hell has gone on with some of those sales…as soon as I can dig up more information of some ‘miracles’ I’ve seen I’ll let you know.

There was one example I was involved in years ago that skewed the sale price.  The Buyer was from overseas.  I let buyer and seller negotiate the inclusion of all the furniture, fixtures and fittings, a boat, two cars (expensive) and other ‘toys’.  I told the Buyer that if he put all of that on the Contract there would be stamp duty implications and I made sure he consulted his lawyer, which he assured me he did.  The subsequently reported sale price skewed the market in that small area and had tongues wagging – made my job when listing new places a nightmare as I couldn’t tell people intimate details of the deal and that 30-35% of the reported sale had nothing to do with the house.

I have no idea where he gets a trebling of sales over the same period last year.  Where? Show me!  Please.

Commercial leasing the strongest in 6 years!  Fairyland – I’ve direct contacts in Commercial and its a basket case in most areas – I attend Commercial Auctions, many of which are conducted by his Offices – NO RESULT, the Auction Signs taken down and replaced with FOR SALE signs, which, like so many on the Coast, will weather to a dull grey over time…

“A resurging stock market” – I’ve been a day trader and this market is so dangerous one would be well advised to “stand aside” as it could go anywhere…just look at Commonwealth Bank at near (and wobbling) $70.00 for goodness sake – 40% rise since May last year – that’s just crazy stuff.

He goes on to talk about Sanctuary Cove, Hope Island and Coomera.  My goodness gracious – 3 areas designed to lose money – ask me and I’ll tell you!  I guess I’ll give you one to chew on – a certain type of waterfront land at Sanctuary Cove used to sell for $1m more than 20 years ago… Its price today – $1m.  STAR Performer!

The last article tells us what we already know – that mortgage stress is rising, NOT FALLING… people are really scared.  Another article from a reliable source told me that people are, on average with many of the Banks, up to 20 months AHEAD with their Mortgage payments as a hedge against job loss or a reduction in hours worked.

Anyway – enough doom, gloom and ripping those rose-tinted glasses off yer face!

Pray for the best, prepare for the worst!

til next time…

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Statistics.  Love them or hate them, some are just IN YER FACE.

Take Sales Volumes for a normally very active beach-side suburb near where I live.

2004 – nearly 700

2005 – about 530

2006 – nearly 650

2007 – 725+

2008 – 420 or so

2009 – just over 500

2010 – like 2008 about 420

2011 – a smidgen over 300

2012 – (recovery? – NO – Fire sales actually) about 420

2013 – year to date – about 2 months worth of settlements – wait for it…scroll down









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Quite apart from being my Birthday, the piece of news that hit me right between the eyes was Westpac’s decision to LIFT its 2 year fixed loan rate from 4.99 percent to 5.19 percent.

If you have a mortgage, maybe its time to speak to your Bank.  And while you’re there, ask to see copies of your loan documentation, to see if it matches the ones you signed!

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Its my birthday in a  couple of days – but I digress!  I’ve had a chance, since moving in the last few weeks, to drive, walk and cycle around some areas I haven’t been to in a while.

During these little journeys I talk to new locals, old locals, agents, shopkeepers and business owners.  I don’t care what the Government and the spin artists are putting out – there ain’t much good news out there. Large and small local shopping centres have increasing numbers of vacant shops, with many of the spaces being vacant for quite a while now.  When I asked adjacent business owners what the story was, I inevitably got the news that they too, were considering shutting up shop as soon as they could get out of their leases. Continue reading

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I still shake my head when I read and hear Real Estate Agents and Auctioneers spruiking their fabulous clearance rates and climbing median prices. As I’ve said many times, you have to take all of this spin, and that’s all it is, with a grain of salt.  Do your research, find out what really went on behind the scenes of every single sale, but I digress…

Even with very low interest rates, levels of mortgage stress are slowly rising and there is one big reason for a few hundred thousand of these distressed folk – LIES!

This is not a Mortgage Broker bashing exercise – remember why I write this blog please.  It’s to open your eyes to the many and varied sharp practices out there and urge you to be constantly on your guard.  It doesn’t mean everyone is out to get you, but it pays to put your big girl panties on when you start the process of buying (or selling) property.  This bit is about buying and again, for the umpteenth time, why would you unless it’s the bargain of the century.

Back to (some) brokers then who are so hungry for a deal that they’ve been and continue to prostitute themselves and commit gross acts of fraud upon their clients and the Bank to get their commission.  Noticed I said ‘get’ and not ‘earn’.

In the normally pretty swanky Broker’s Office applicants put down that they are a factory worker and administration assistant. Earnings are $30,000 and $26,000 a year respectively.  They sign and shake hands with their friendly, smiling Broker, and leave.  The greedy Broker then ‘doctors’ the documents and the applicants magically become a teacher and professor on many times the income formerly stated and the application is (naturally) approved by the Bank (that pays the Broker maximum up front omission and trail).  This would be dangerous enough in and of itself but it gets worse.  Because the income and expenses have been fudged so much, the hapless couple are told, when they return to the Broker’s lair, that they’ve qualified for an additional $100,000.00 and can afford to go upmarket and buy the home of their dreams.

Of course the couple are not financially savvy and rely on the Broker to tell the truth – sorry that went through the shredder along with their original application.  The broker has also arranged for the Loan to be low start and interest only for the first 2 years.  The couple don’t have a clue what he’s talking about and only look at the LOW weekly payment they have to come up with to buy the House of Their Dreams.

Many people who bought like this have been “rescued” so-to-speak if they bought pre 2001 and their property values have skyrocketed and interest rates have fallen significantly – in many cases a ‘rescue” refinance kept them afloat.  Exploding rents also helped.

However, since about 2003 – 2004 this has been and will continue to be an unmitigated disaster for those trapped by dodgy Brokers.

Estimates as to the number of LIE LOANS, as I call them, vary wildly because the brokers aren’t saying and the Banks… well they’d be stupid to say, anything, unless forced to by a Royal Commission or the like.  We are seeing some action against Brokers and Banks in Court but that is expensive, time consuming and from my checking around, is producing varied results.

Moral?  As always, do your homework.  educate yourself.  And do NOT listen to workmates, family or friends unless they have bought and sold a dozen or more properties and have great accountancy and tax skills.  Advice from them is akin to talking to your chickens.

Still determined to buy – talk to me first – my fees are reasonable and I will tell you the truth.

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