Category Archives: Uncategorized

Onward and downward it goes

It seems at last my “Sky Is Falling” predictions are coming home to roost.  The Brisbane market is still flooded with apartments with 8,000 coming on stream before the end of 2018 and another 5,000 or so due in 2019.  The important part to note is what the Registered Valuers and Banks are doing to the asking prices…  The Valuations are coming in at 15 to 30 percent below the asking price. This will cause a few undesirable effects.  Existing owners may panic and put their apartments on the market, causing the glut to only increase and put further downward pressure on prices.  Brokers and Banks with no morals will continue to stitch people up into loans for these overpriced properties by lending against another property to make up for the shortfall in “real value”.

I’ve been following “Nappy Land” north of the Gold Coast in real time.  There are already a startling number of mortgagee in possession sales going on with the Banks putting pressure or caveats on Agents to NOT USE the term Mortgagee in Possession on any form of advertising lest it create a panic in the marketplace.  Interest rates look set to rise in 2019.  A One Percent rise in Nappy Land, where most of the people have no in depth knowledge about what kind of loan they signed up for,  will cause terminal failure mortgage stress.  The median repayment will jump from their INTEREST ONLY LOAN to PRINCIPAL AND INTEREST LOAN, some $800.00 a month in the majority of cases.  These people have NO IDEA what is about to hit them.  No idea!

Locally, I am sick of reading about people buying 3 years ago for $600,000 and selling at auction for $720,000.  Marvellous I hear you say.  In one recent instance I took a trip to the house itself and spoke to the neighbours.  This house had a half floor second story added, another garage, a wall on the street frontage, electric gate, carport and the double garage converted to a rumpus room.  Honestly, after that expenditure do you think they made any profit at all?  I don’t think so.  It is just this kind of bullshit journalism that continues to feed the Fairy Tale that even in these times, buying a house is a great idea.

The Sydney market is toast!  I have many friends who live in Sydney and report real time sales in their area to me.  Same story.  Big falls off highs and auction clearance rates that say that Buyers are now in “Bargain Hunting Mode” at Auctions and are not being as caught up in the fever as they were a year ago.

 

If you have a property and especially if you are relying on its sale to fund your retirement, sell it NOW, realise any gains, go rent for a while and then buy your old place back at $200,000, $300,000 or even $400,000 less than you sold it for.

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It’s on track in Brisbane – for a massive correction

Speaking with friends in Brisbane. Massive deals on Apartments and an increasing number of horror stories.

How about large 3 bedroom plus study apartments with 2 car spaces at exactly the same price as they were in 2008? Great investment huh?

How about apartment developers giving back “cash in hand”  up to 10% of the purchase price so that transfer duty is paid at full price to effectively disguise what is really going on in the over supplied market?  Dodgy huh?

Agents actively encouraging buyers to submit “low ball” offers to get a sale and commission quickly!  Nice one people.

One yet to be completed project has lowered its official asking price for 2 bedroom apartments by $90,000 in 6 months.  No takers.  No offers. No sales. Savvy apartment buyers in Brisbane are inspecting displays in ever increasing numbers but both hands are shoved deep in their pockets!

It’s the start of an avalanche.

Mortgage Stress is real – coming to many suburbs near you – soon !

Just here in Queensland, many analysts say near 200,000 mortgages were super sensitive to ANY mortgage rate rise.

The near defaults right now range from 10,000 to 20,000.  Banks won’t reveal how many households are currently in negotiations to try and save themselves from repossession action.

The huge number of loans, especially in “Nappy land” about to reset from Interest Only Honeymoon rate to Principal and Interest Penalty rate will ensure blood in the streets and a domino effect on the market.

I keep saying it.  Wait til rates rise 1 full percent and see what happens!

Media makes me laugh – always- so pathetic

Spouting yet another “record price” for a piece of minor CBD commercial property, the writer revealed the purchase price, date of purchase and the recent sale price.

You don’t have to be Einstein to put the raw purchase price into the Reserve Bank’s inflation calculator and see the sale price is actually a 10 percent LOSS over the holding period.  My raw calculations do not take into account purchase and sale costs.  I did a quick add and subtract, and the loss crystallized at near 20%.

I know the building concerned.  Sellers have had their long time vacant strata titles on the market for up to 3 years.

Hot market?   Records?

Rubbish!

 

 

Sydney, Sydney, Sydney

The leader of the real estate market is suffering a serious case of….

Auction Numbers, prices and clearance rates are very low and yet it is not hitting the mainstream news as it should. I wonder why.

We all know WHY. The Media is this so-called free country is as badly manipulated and manipulative as in any communist regime.

Combine the big banks lack of appetite for any bad real estate news and the Government’s equal distaste for any hint of a “crash” and all this suddenly becomes “no news at all”.

Sounds a bit conspiracy I know however I have first hand experience of this country’s media as I was a Public Relations Officer in Headquarters Operational Command Air Force for a while as part of my “career development”. “Liar Liar Pants on Fire” was a common catch cry.

Watch this space!

Reserve Bank of Australia now concerned

I don’t have to write anything except Google RBA concerned about Mortgage Stress, interest only loans and top down stress testing of the Banks.

Sydney Siders’ Sliding

It’s being widely reported and my friends in Sydney who “know the market” attest to a slide in Sydney’s astronomical property prices.  People are getting the jitters.  The smart money has already “left town” and has found a home in the stock market, gold and other hidey-holes.

I was chatting recently with a couple in their early thirties – we started a conversation at a local coffee shop.  They were wondering what to make of rumours of interest rates about to go up.

They confided that they had a $400,000  “VIP” type loan through a Broking House on their principal place of residence.  They had an electronic copy of their contract so I took a peek.  Just as I thought – another “Interest rate holiday” that will be clawed back by the Lender in Years 4 and 5.  Poor people had no clue.  They hardly understood what I was telling them.

Their repayments NOW are $1,833.00 per calendar month, interest only.  By the time Year 4 comes around, very conservatively, interest rates will be at least 1 percent higher than they are today.  Years 4 and 5 come with an extra sting in the tail.  Their repayments will revert to Principal and Interest at “1 percent above market rate”.

I got into a Mortgage Calculator.  Their repayments will jump $642.00 per month or by 35 PERCENT.  I thought the poor dears were going to faint.  “But, but, but…..”  they stammered.

They bought me a coffee, said “thanks” in a wheezy, incoherent sort of way, and walked, leaning on each other, toward the beach.

The rot is starting to set in

As soon as I saw the huge number of Apartment starts planned for South East Queensland I knew there’d be trouble.

I watched the advertised “starting from” prices for 3 nearby developments go from $399,000  to  $389,000  to  $349,000 and $309,000  over 12 months until now where there are no prices listed, just FOR SALE signs.

Chinese who bought off the plan face capital export bans and are unable to complete their purchases. No solution here either as local banks will not finance them. The fallover rate for offshore Contracts is running at 50 to 70%.  Buyers are walking away from their 10% deposit and Developers are unable to force completion.  Try suing an individual in China…  good luck.

Panic re-sales are resulting in spectacular losses. One large high floor apartment sold at a 42% loss before completion with the average loss now creeping  into the 35%+ range.

This in the start of a pandemic.  You cannot have such a large sector suffer huge monetray losses and loss of confidence without the effect spilling over into the rest of the market.  Banks will pull tighter on lending criteria  – there are many calls for Royal Commissions into Broker and Bank predatory lending practices – nothing will come of it of course, the blame being put on “market conditions” or some other such nonsense.

With interest rates on the rise, Banks under pressure and “the market” suffering a serious case of “the wobbles”, it won’t be long…

 

More experts weighing in

From Robert Gottleibsen at The Australian today…

Understand the new dynamic of Australia. Businesses that don’t could face a tough time.

The latest ABS household income and wealth survey raises all sorts of alarms about the rising debt of certain sectors of the population, particularly younger people buying homes and those punting the property market with negatively geared loans.

The Australian Bureau of Statistics is putting numbers to forces we have observed in our neighbourhoods, particularly those who live in Sydney.

However what we are seeing in those debt levels is a surface manifestation of much deeper trends in the society.

Hey how about this for good news! Back 13 years ago the average Australian had net worth of just over $600,000 and that’s risen to just over $900,000 — that’s a 50 per cent rise.

The ABS has done some calculations that makes the improvement in “my wealth” in recent times even better.

They take the 2015—16 average Australian household wealth (net worth) of $929,400 and then adjust it for inflation and discover that, average wealth has increased by 11 per cent since 2013—14.

That’s a lot better than money in the bank at today’s interest rates.

And the share market, on a risk for reward basis, is also well behind.

Better still, the average Australian is not borrowed to the hilt —-the mean value of household assets was $1.1 million while the mean level of household debt was only $168,600, or 15 per cent.

Taking averages or mean levels can, of course, be misleading because it conceals a lot of households that are over-borrowed. But there are a lot of Australians who are feeling very comfortable, thank you. The fact that they are usually older Australians is a problem.

But it’s one thing to have assets and another to have the money coming into the till to spend on necessities and the luxuries you think you deserve given the rise in your wealth.

When we look at the income graph we see a totally different picture:

According to the ABS, in 2007-08, or eight years ago, the average Australian’s mean weekly income was just under $1000 and it had been rising very well in the three years previously.

Then came the global financial crash and their income stopped rising. Looking back over those long eight years from 2007-08 what little gains were achieved were wiped out by a fall in 2015-16.

During those eight years the cost of services where people are paid at government rates (teachers, health workers, government employees and council workers etc) has continued to rise.

Still, as the average Australian, while my income has not risen my assets have gone up so I don’t feel too bad. That is unless I have a huge mortgage that was agreed to when the bank manager did a sum that assumed my income would rise with inflation.

But there is a sting in the wealth tale.

It’s true that the average Australian has assets of $1.1 million but more than 60 per cent of those assets are in property, if you include the fact that industry superannuation funds have a major stake in the unlisted property market.

And property values have often been driven by the decisions of state government and local councils to restrict supply.

So Australians have backed one sector of the investment area and it has delivered.

If ever property falls in Australia the affects will not just be directed to the over-borrowed parts of the society (and the bankers who loaned based on blatant lies by those applying for loans), but it will spread through the wealth of the community.

And not only are we looking at personal balance sheets.

A vast number of Australians are employed in the industry which is feeding this allocation of savings — the building industry.

We have to understand that as a nation we have made a huge play on one investment class.

Because this investment class is also our residences it has created deep social problems as well as the indebtedness that goes with booms that deliver 11 per cent a year.

We are watching Sydney apartment prices fall 10 per cent and the building rate fall.

In the overall scheme of the nation that is not a big deal.

But if it were to spread, watch out.

EVERYTHING HE HAS SAID ECHOES MY SENTIMENTS OF THE LAST FEW YEARS.

Now the News is catching up with Reality!

Interesting to read some “non-fake” news today where the truth is slowly being leaked out by major media outlets.

One of the largest builders and holders of apartments in Australia is now saying people will be wiped out in the (just starting) (watch out for that cliff!) current downturn, sighting Government activity both within and external to Australia as being at fault.

Settlements are failing at 50% as buyers walk away from their deposits due to buyer’s remorse and being scared by what they’ve actually bought into.

New South Wales Government has an application fee of $10,000 to buy if you are not an Aussie.  Stamp duty on foreign buyers has been raised from four to eight per cent and a land tax of 0.75 per cent will commence in 2017. Local councils are also chipping in with extra charges.

Wow!  What I’ve been saying for years is suddenly BIG NEWS.  Aussie Banks are sitting on $500 BILLION of what they call “Liar Loans”.  Borrowers lie on their applications for finance, however, Brokers and settlement agents within the Banks do not and have not properly checked and validated applicant’s claims as to income and expenditure.  Watch out Bank Shareholders is all I can say.  Profit?  What profit when this House of Cards tumbles!

Economies are “recovering”.  Crazed Central Bankers decide to act in advance and put the brakes on early by increasing interest rates.

The Liar Loan Borrowers have no spare capacity in their budget (what’s a budget?) so there WILL be huge numbers of defaults and the market will be flooded with Mortgagee In Possession sales.  Watch prices dive with no over eager international buyers, wary investors and savvy folk like us, sitting on our hands waiting for the inevitable blood bath.

“Safe As Houses”   Bullshit

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