Select to expand quoteKozzie said..Harrow said..
Here's an interesting little anecdote. A friend of ours was trying to buy into the area I live in. For the last 2 years they have been outbid at every auction by Asian investors. Last month they finally manage to win the auction of quite a nice house. How did they manage it??? The house street number was 44, (double death in Chinese culture), so there were no Asian bidders.
lets go to china and buy the 44th floor of all the highrises for peanuts
In some places, even here in Australia, there are buildings without apartment 4 and the like, similar in a way that some buildings have no 13th floor and/or use it for building services instead of apartments.
I think I read something recently where a lot of Chinese developed buildings (here) skip these almost unlucky numbers.
Select to expand quoteJupiter said..
Rental income for an investment property is a very big component in one's decision to invest. A rough guide is this...
If your property costs $500,000 to buy, you will need at least $550 to $600 weekly rent to even consider laying down a deposit. So by the same rule, if you paid $1,000,000, your rent needs to be at least $1,100/week or more. That is a big ask unless you have a good cash reserve.
.
Is this realistic for most investors? Its a genuine question. My bank made similar assumptions when I was looking at buying a property, and I think I would struggle to find anything that is that cheap that returns that rent without subdividing it or something similar.
I have a place I bought 9 years ago, at the prices from 9 years ago, that is still struggling to reach the rule of thumb you suggest.
Are apartments better at this than houses, or are some areas much better than others?
Select to expand quoteFormulaNova said..
Is this realistic for most investors? Its a genuine question. My bank made similar assumptions when I was looking at buying a property, and I think I would struggle to find anything that is that cheap that returns that rent without subdividing it or something similar.
I have a place I bought 9 years ago, at the prices from 9 years ago, that is still struggling to reach the rule of thumb you suggest.
Are apartments better at this than houses, or are some areas much better than others?
It is rather unrealistic to expect that rule of thumb to apply to properties at the current "super heated" prices. I believe unless you got onto the act some 15 or more so years ago, you will find your rental income is not able to meet that rule. Unless you buy in other places in SA or Tasmania.
In terms of picking the better locations to buy. I believe it is all about demand and supply. If there is a high population density, logically there will be more human activities. More human activities means more services are needed. Services like shopping centres, health centres, gyms, sport grounds, cinemas, education institutions, etc. These services also in turn make the places attractive to buyers and renters. So I believe the best rule of thumb to buy is to check out the kind of services available, and how close they are near your target purchase. By the way, I doubt I want to buy one near pubs though !
Don't look for quick returns and buy in those "boom and bust" regions like mining intensive towns.
Apartments are running hot at the moment. But there are other issues a stand-alone house does not have. On the investment aspect of it alone, I believe apartments is less attractive in terms of capital gains. The piece of land where your house stand actually worth more than the house itself. To give you an example, the land of one of my properties is now worth over 2.5 times the entire initial purchase cost. I believe it is still rising year by year, judging by the ever higher land tax I am paying ! In fact, my land tax copped a 75% rise, thanks to the superb financial management skills of the Barnett Liberal government in WA! On the plus side, you don't pay land tax on apartments.
If you can afford it, think of property purchase as an anchor, a financial anchor. Once you made that commitment, you really have to put your foot down on un-necessary spending. Less restaurants. May be less frequent windsurfing equipment upgrade. It is worth it if you take a long term, 25 - 30 years view of your financial future. Alternatively, spend it now and enjoy.
Select to expand quoteFormulaNova said..
I have a place I bought 9 years ago, at the prices from 9 years ago, that is still struggling to reach the rule of thumb you suggest.
Are apartments better at this than houses, or are some areas much better than others?
Smart money is not in residential rental property today. After rates, insurance, maintenance, vacancies and fees you are lucky to make a 2% nett return.
The old rule of thumb "Whatever the property will rent for in hundreds per week is what it is worth in thousands to buy. " does not really hold any more.
Your primary residence is one of the best real estate investments you can make. You get reduced stamp duty on the purchase. You can rent spare rooms out for a non declarable supplementary income and you do not pay capital gains tax upon sale.
A good direct property investment vehicle is an "Unlisted Property Trust". With these you are not capital or return guaranteed which is the risk you take but if you pick a reputable trust manager the risk is low. These funds are mostly in commercial property.
See something happen to the Chinese economy and you see something interesting happen to Sydney house prices
Scottish Bank: "Sell Everything"Washington Times January 11, 2016The Royal Bank of Scotland has warned clients to sell everything, anticipating a cataclysmic year for markets.
Sell everything except high quality bonds, the bank's credit chief, Andrew Roberts, said in a note to clients this week. This is about return of capital, not return on capital. In a crowded hall, exit doors are small.The note said the current situation was reminiscent of the 2008 collapse of Lehman Brothers, which led to the global financial crisis.
This time China could be the crisis point, The Guardian reported.China has set off a major correction and it is going to snowball. Equities and credit have become very dangerous, and we have hardly even begun to retrace the Goldilocks love-in of the last two years, Mr. Roberts said.He said European and U.S. markets could fall by 10 to 20 percent.Analysts at JP Morgan have also advised clients to sell stocks on any bounce, and Standard Chartered has predicted a slide in oil prices to as low as $10,
The Guardian reported.www.washingtontimes.com/news/2016/jan/12/royal-bank-of-scotland-warns-clients-to-sell-every/
I read that a couple of days ago. What is their motivation for saying this though? Make some quick money on the panic sale??
100 million Chinese don't even have to borrow money to buy top end Aussie properties. They have got cash. They are all welcome. 
Select to expand quoteMobydisc said..petermac33 said..
Scottish Bank: "Sell Everything"Washington Times January 11, 2016The Royal Bank of Scotland has warned clients to sell everything, anticipating a cataclysmic year for markets.
Sell everything except high quality bonds, the bank's credit chief, Andrew Roberts, said in a note to clients this week. This is about return of capital, not return on capital. In a crowded hall, exit doors are small.The note said the current situation was reminiscent of the 2008 collapse of Lehman Brothers, which led to the global financial crisis.
This is from a company that completely and utterly failed, needing billions of pounds of taxpayer money to bail them out.
Peter why do you quote this? The RBS is about as mainstream as you can get, a bank that is bailed out by a national government.
People have been talking down the Chinese economy tanking for years. The fact is there are hundreds of millions of Chinese who seek to improve their standard of living and are working hard, earning and saving money to do so. Until that desire for a better life is satisfied the Chinese economy as a whole will continue to grow. Of course the central banks of China pump crazy money into the economy resulting in inappropriate investment. This always happens with central planning. However there are hundreds of millions of Chinese who are making individual and usually rational decisions.
Perhaps the Scottish Bank is making an "pre-emptive strike", hoping that it won't make the same stuff up of the last? Like flipping a coin. It was a failed. It hopes it is a "success" this time round.
Optimisms and pessimism go hand-in-hand. Unfortunately, in the financial circle, I mean circus, schizophrenics are everywhere. One day they are on top of the world. The following day, they are at the bottom of a trough. Betting on peaks and troughs is what they do. Personally, I believe there is not much point in chasing the "ups" and the "downs". Take a long term view of your finances. Spread the risks. Don't put all your eggs in one basket.
To give you an example, I own CBA shares since the day they were first released. It went up to $62 just before the GFC. Then immediately sunk to about $30 ! Did I panic? Should I need to be panic? Why didn't I panic? Because I take a long term view. CBA went as high as nearly $100. Did I do a song and dance about it? No. It is only paper value. Then APRA introduced the lending restrictions. CBA went as low as $72. No panic for me. It is now about $81.
Make sure you have a roof over your head. Endeavour to keep your boss happy by doing a proper job. Have a bit of spare cash lying around for rainy days. Let those mad bastards to chase the meaningless profits and losses.
I believe the markets are totally rigged anyway and have thought that for years!
The PPT-- the plunge protection team will buy and sell stock to manipulate the market.
A large percentage of stocks bought and sold on Wall St are likely from the PPT. Why are they pulling the price of oil down?
Not sure but they will no doubt have their reasons.
I see them collapsing the markets very soon.
The single biggest factor driving house prices is immigration.
Yes low interest rates have helped too.
The federal governments policy of ,-invite the neighbors and make sure they bring their money-,will keep property prices high in the capital cities.
There will be relatively small corrections but as long as 250,000 new people arrive every year and have to put a roof over their heads I cant see too much of a bust.
Select to expand quoteHarrow said..
To the original OP, Sydney real estate began to cool from October onwards, and has now slowed a bit more. But I don't expect prices to suddenly drop dramatically, rather just sell a little more slowly.
Are the ridiculous prices sustainable? I'd say "Yes", and here's my reasoning. Plenty of people still want to live in Sydney, so it's just a matter of how much can they afford. Plenty of couples are having only 1 or 2 children, so the inheritance doesn't need to be diluted. The overall family wealth is therefore simply building up with each generation. Also, they are having kids later, so by the time the kids are buying their house, the parents are in the wealth accumulation phase of their life and are more able to assist their kids buying a house. Also because the kids are being born later, they will receive their inheritance earlier in life.
The result is going to be those who continue to have a 4 child family will have to watch their kids move to the far South West of Sydney, while the inner metropolitan area becomes a sea of 1 or 2 child families.
That is before we have even considered the overseas investors. In my street, house prices were about 300k 20 years ago. Now they start at $1.5M for a knock down. About 80% of houses sold in the last 5 years have gone to Chinese nationals or recently immigrated Chinese. (And I don't live in a 'Chinese hub' like Chatswood, etc.) With the Aussie dollar dropping around 1/3 compared to the Yuan over the last couple of years, (is it a coincidence that house prices have gone up by about the same amount on average?), houses in Sydney are a good investment for them.
Here's an interesting little anecdote. A friend of ours was trying to buy into the area I live in. For the last 2 years they have been outbid at every auction by Asian investors. Last month they finally manage to win the auction of quite a nice house. How did they manage it??? The house street number was 44, (double death in Chinese culture), so there were no Asian bidders. The only way you buy a house where I live now is to find one that has some irrevocable fault in it's feng shui. I've even heard of people going to open houses and saying things regarding death or illness in the current family so that the Asians will overhear them talking and not want to come back to the house.
I have nothing against Asians, half my friends are Asian, and they have as much right to be here as I do. I'm just outlining the realities of the supply and demand, and why I think the prices are sustainable. Actually a funny thing, you should hear my Asian friends bag out Asian investors and complain about what it is doing to housing prices.
I've read a lot about Australian real estate the past 3 years and your thoughts regarding the only child/wealth accumulation phase & helping said child and access to inheritance is really insightful and reflects a trend that has huge implications for Australian society.
I have a few concerns with the way things have gone with housing.
- There is no doubt there are way too many dwelling sold to foreign nationals.
If there is a reason for them to get out of the market it could be a whoops moment.
- Interest rate rises and the massive money owed by many housing loans.
Another potential whoops moment.
- How long before those on the basic wage can not live on Sydney.
Where are those workers going to come from?
Our railways have been left to run down for decades.
No plans to increase the speed of public transport.
The fact it only gets slower.
Roads bursting at the seams.
Road trip only get slower.
You can't expect people on low wages to spend more money and time on transport and then more on child care and still pay them less in real terms.
All while the rich get richer and pay less income taxes, while there is the big push for an increasing GST.
Never forget taxes provide the funds to do better things for us!
Too many that earn large sums of money pay way too little in tax.
It's like a game for some to reduce the amount pay to the tax office.
Instead they spend plenty on accountants who will find ways to reduce what they need to pay.
The cost of these accountants are also another tax deduction.
Nothing worthwhile is produced by this act.
As a retired school teacher there was very little I could claim.
The tax dept. knew every of cent I earnt and thus unlike some, I paid the full amount.
I never minded because I felt most were paying their fair share.
I now know this is not the case and loopholes and policy are created for the rich to use/ abuse.
In the old days if you earnt $200,000 you would pay way way more tax than you would today.
In those days most accepted that if you earnt plenty, then you should pay more.
Greed now has taken over by way too many.
Their thoughts are mostly about how they can pay less to their country.
Elections are won and lost on this matter alone.
Sad days really.
curious to see the effect. Hope it at least keeps things stagnant for a bit. https://au.news.yahoo.com/video/watch/30628522/sydney-housing-prices-to-drop-as-overseas-investors-clamp-down/#page1
Good post Jupiter.
If interest rates increase heaps--we shall see absolute calamity on an unprecedented scale.
Paying back a few hundred K with high interest rates is so,so different to paying back nearly a million with high interest rates. That's the difference!
Owners will not be able to come up with the cash for their monthly repayments. How high will interest go? As high as 'they' decide to put them.
If you have a large mortgage or are thinking about purchasing a property with a large loan----praying every night and morning seems your second best course of action 
One of the factors that contributed to the collapsed bubble in the US was the popularity of adjustable rate mortgages, ARM's or called variable rate in Australia. The thought at the time was you were not likely to keep your mortgage for very long as homes are usually sold or refinanced so try to keep the payment as low as possible but what actually happened nobody predicted.
Most ARM's were 5 or 7 years very low rate, interest only then after the 5 or 7 years you paid principal and interest at a current higher rate. It was assumed if you were still in the house after the 5 or 7 years you would just refinance into another ARM or perhaps even a conventional 30 year fixed rate loan.
But when the unthinkable happened and home values declined and the 5 or 7 years ended the mortgage holders could not refinance BECAUSE THE AMOUNT OF THE MORTGAGE OWED WAS HIGHER THAN THE VALUE OF THE PROPERTY.
Very quickly the monthly payments doubled or tripled and there was nothing the mortgage holders could do. Usually they paid for a while some even foolishly draining all their savings and retirement accounts to keep paying the inflated mortgages. And of course there were some people that greedily owned many properties. Boxed in at every angle with nothing else to do eventually they just stopped paying but the banks were so deluged with people that stopped paying they couldn't keep up with repossessing the homes, in fact it got to the point where they didn't want them back because there were too many and nobody was buying, empty homes were a burden, scavengers would go in and strip out all the copper plumbing and wires to sell for scrap and steal or vandalize anything of value. So people just stayed in their homes for years for free or rented them to someone and kept the rent money while not paying the mortgages. There were entire neighborhoods even entire towns full of vacant homes with weeds a meter high, neglected swimming pools became mosquito breeding grounds and local gov't had to use aerial photography to I.D. the pools to go dump chemicals in them.
People who lived in condominium or strata title faced another unforeseen disaster, the association fees to run the buildings were of course no longer being paid by the people no longer paying their mortgages so the burden was shifted upon the remaining responsible people who did pay.
Really the whole thing collapsed like a house of cards very quickly and once it had started to happen it could not be stopped. Looking back there were plenty of warning signs and many people that did get out in time but at the time few people wanted to believe it was happening. It's human nature, nobody wants to believe the party will end, everyone was so ignorant and happy with their newfound wealth. Money was being spread around to everyone, people would take cash out of the false inflated value of the homes in a loan and buy new cars, vacations, boats, jetskis, meals in fancy restaurants, private schools, even as a down payment on yet another home, you name it.
Select to expand quoteBeaglebuddy said..
One of the factors that contributed to the collapsed bubble in the US was the popularity of adjustable rate mortgages, ARM's or called variable rate in
That is very false to make such a claim, Beaglebuddy. The housing bubble in the USA was caused by the large financial institutions and greedy, clever and tricky lawyers, and real estate tricksters.
Loans were offered to folks who are not even remotely qualified because of their ability to pay them back. That wasn't a problem for the tricksters. They cooked the books by artificially jacking up the earning capacity of the borrowers. So just about anyone qualified. It was called the "Low Doc Loans". Basically little documented evidence were needed, with hardly any substance to back up the figures, ie. earnings and credit history. furthermore, you can borrow up to 100% of the total mortgage!
These mortgages were repackaged and sold to second, third, or even fourth parties. It is not unlike the Pyramid scam or the Ponzi scam. You sold off your liabilities to some other suckers and make a handsome profit along the way. It was all sweet when confidence was high. Fools' paradise is quite appropriate to describe it.
Then other factors of inconvenience began to mess up such a nice dream and turned it into a f-ing nightmare. These factors triggered the alarm, then panics, and subsequently the collapse of the housing market. So what are these factors of inconvenience?
(1). Credit
It is borrowed money. It is all sweet if everyone knows every other ones has the ability to pay it back. However, as soon as someone cried "WOLF", or that little notty boy in the crowd yelled out the bleeding obvious "The Emperor has no clothe !", a stamped took place. They want their money back, yesterday. When everyone and every other ones wanted their own money back, you have a crisis because it is impossible to get those phony monies back, as they were over-inflated !
So the banks panicked. The real estate mobs s**t themselves. Home owners didn't know which way to turn. Governments are in a bind because they have some very messy scenarios to deal with.
Banks stopped lending as they are unsure if that money will boomerang back later. Without credit, businesses are frozen as there was no liquidity to go around.
(2). Banks and financial institutions collapses
Because the banks were too keen to give money away to buy houses without adequate checks and bounds, they found themselves holding lots of junks credits in the form of mortgages with little values. When banks, especially very large ones went to meet Jesus, you know we have a big problem. Governments can't afford to see banks, large banks, to die, so they gave the banks life supporting drips in the form of taxpayers' money.
Capitalism went very wrong as the bank rescues was in fact, far from being capitalistic. It was a socialistic move.
Greed is good, especially if someone is there to catch you when you fall !
Select to expand quotepetermac33 said..
Good post Jupiter.
If interest rates increase heaps--we shall see absolute calamity on an unprecedented scale.
Paying back a few hundred K with high interest rates is so,so different to paying back nearly a million with high interest rates. That's the difference!
Owners will not be able to come up with the cash for their monthly repayments. How high will interest go? As high as 'they' decide to put them.
If you have a large mortgage or are thinking about purchasing a property with a large loan----praying every night and morning seems your second best course of action
Our neighbours place is owned by her mom who is a mortgage broker who's line is take the most your bank will give you on interest only repayments. Which is for the record is a horrible idea in my mind.
For those that haven't done this or don't have a mortgage. An interesting case study is to go to an online mortgage calculator and pick a figure based on your area of what you think the average home loan is and figure out what your repayment would be assuming your paying minimal principal and interest repayments you also need to account for what you think would be your average income or base your repayment off rents in the surrounding area. Subtract say 6 years of principal plus a little more for a savings injection from the original mortgage amount. Then insert that number into the calculator and jack up the interest rate to 8.5% or so and have a look at the costs. It's not perfect and a little crude but you get the general idea.
The issue with historically low interest rates is they can at some stage only go up. It was only 3 years ago that rates where around 8.5% and there where a lot of worried property owners according to a couple real estate agents I've meet. In the early 80's my parents sold their house for the final amount of their outstanding mortgage debt when their rates hit 20% and prices tanked.
It will be interesting to see if the current prices of Sydney housing is sustainable. As long as Sydney unemployment and rental vacancy is low and people can service their repayments or are willing to pay the purchase price then why not. But if they can't and people have to start selling we run the risk of prices being pushed down by people selling over the fear of not selling similar to the fear of people buying incase they miss out and that could be messy. I'm not sure there's a middle ground.
Edit - for the record I'm renting
In line with what Crazy Canuk was saying, I think back to around 2007 when I was paying 8 or more percent on an investment property, and with a relatively small rent, the loan was killing me. Now, it seems so easy, as the low rates are much more bearable, but I still remember back to 2007 when it was really bad.
I wonder if people think about the bad times, or if they think that it will always be good. I can't blame some for thinking that they will buy now and then if rates go up they will just scrimp more. For some, there may be no chance, and they have to sell up.
I think the first thing to go in Sydney will be the rental vacancy rates. They will increase as more new places become available, and this will impact the rents, which will impact the gap between what the repayments are.
Can anyone tell me what is happening with realestate in WA right now? Has demand eased? Has supply increased? Are prices still going up or are they steady?
our a friends couple trying to buy a small 1x3 unit in Melb. south east.
of course they can't afford the house with some backyard because they would've been outbided by the Chinese buyers.
but they can't buy 1X3 small unit either because they get otbided by downsizing happy loaded old folks who sold their houses with some backyard for $$millions to the happy Chinese buyers.
Oh.. and when they buy, they are gonna pay IO like many the others these days. Farken insane.
I think that unemployment is the key to this whole discussion. Every loan seems to be so heavily weighted towards a dual income that even if just one looses their job the game will be up. In the late eighties when rates went up to the high teens even a single income could still support a average home loan, and with a lot of effort you could convince a bank to see you through if you were on the dole, what are the odds of that now?
I know that people have been herded into this position but seems like the basket of eggs is very full and even a small trip or bump will cause many to break.
As for the chinese influence... Just look back to the Japanese a decade or so ago, they bought everything they could at any price.. It may be different this time? I don't know.
Select to expand quotedmitri said..
our a friends couple trying to buy a small 1x3 unit in Melb. south east.
of course they can't afford the house with some backyard because they would've been outbided by the Chinese buyers.
but they can't buy 1X3 small unit either because they get otbided by downsizing happy loaded old folks who sold their houses with some backyard for $$millions to the happy Chinese buyers.
Oh.. and when they buy, they are gonna pay IO like many the others these days. Farken insane.
In the Melbourne and Sydney premium housing and units sectors Chinese money is by far the biggest driver of price inflation. It's discussed in our industry all the time and is common knowledge. The media, estate agents and politicians speculate and obfuscate about other main causes but none come close at present. Worse, many Chinese buyers act through intermediaries to get around the ban on purchasing established properties and then demolish and rebuild with faux stylised monstrosities, further inflating the value of property.
Such activity trickles down the property price brackets as more owner occupiers and local investors and squeezed out of markets almost monopolised by asian investors and developers and their intermediaries.
In other cities and low-middle market brackets the situation is different.
Select to expand quoteJupiter said..Beaglebuddy said..
One of the factors that contributed to the collapsed bubble in the US was the popularity of adjustable rate mortgages, ARM's or called variable rate in
That is very false to make such a claim, Beaglebuddy. The housing bubble in the USA was caused by the large financial institutions and greedy, clever and tricky lawyers, and real estate tricksters.
Loans were offered to folks who are not even remotely qualified because of their ability to pay them back. That wasn't a problem for the tricksters. They cooked the books by artificially jacking up the earning capacity of the borrowers. So just about anyone qualified. It was called the "Low Doc Loans". Basically little documented evidence were needed, with hardly any substance to back up the figures, ie. earnings and credit history. furthermore, you can borrow up to 100% of the total mortgage!
These mortgages were repackaged and sold to second, third, or even fourth parties. It is not unlike the Pyramid scam or the Ponzi scam. You sold off your liabilities to some other suckers and make a handsome profit along the way. It was all sweet when confidence was high. Fools' paradise is quite appropriate to describe it.
Then other factors of inconvenience began to mess up such a nice dream and turned it into a f-ing nightmare. These factors triggered the alarm, then panics, and subsequently the collapse of the housing market. So what are these factors of inconvenience?
(1). Credit
It is borrowed money. It is all sweet if everyone knows every other ones has the ability to pay it back. However, as soon as someone cried "WOLF", or that little notty boy in the crowd yelled out the bleeding obvious "The Emperor has no clothe !", a stamped took place. They want their money back, yesterday. When everyone and every other ones wanted their own money back, you have a crisis because it is impossible to get those phony monies back, as they were over-inflated !
So the banks panicked. The real estate mobs s**t themselves. Home owners didn't know which way to turn. Governments are in a bind because they have some very messy scenarios to deal with.
Banks stopped lending as they are unsure if that money will boomerang back later. Without credit, businesses are frozen as there was no liquidity to go around.
(2). Banks and financial institutions collapses
Because the banks were too keen to give money away to buy houses without adequate checks and bounds, they found themselves holding lots of junks credits in the form of mortgages with little values. When banks, especially very large ones went to meet Jesus, you know we have a big problem. Governments can't afford to see banks, large banks, to die, so they gave the banks life supporting drips in the form of taxpayers' money.
Capitalism went very wrong as the bank rescues was in fact, far from being capitalistic. It was a socialistic move.
Greed is good, especially if someone is there to catch you when you fall !
You make some good points but basically you have it all backwards, homeowners don't care if a bank collapses, the note just gets passed onto the bank that takes over for the failed one, makes no difference to the homeowner. Credit? yes there was a credit crunch and banks stopped funding nearly all new mortgages but this was in the wake of the collapse, after it happened and it didn't matter that much anyways because hardly anyone was buying anyways.
The "liar loans" as we called the no doc loans were indeed a large part of the problem, however it was when these loans, typically ARM loans "reset" to include principal and a higher interest rate and the monthly mortgage payments increased dramatically that the people stopped paying thus starting the whole cycle of failing banks and resultant credit crunch.
It doesn't really matter to most homeowners that a housing market declines in prices as long as they have a job and can keep making the mortgage payments at the same monthly cost, when the cost doubles or triples this is when people stop paying simply because they cannot afford it.
If ordinary tradesmen in Australia are buying $million dollar homes on modest incomes either they are giving out "liar loans" or they have skewered the eligibility requirements so far that they might as well be "liar loans".
Select to expand quoteBeaglebuddy:
homeowners don't care if a bank collapses, the note just gets passed onto the bank that takes over for the failed one, makes no difference to the homeowner.
Took a friend of mine 2 years to figure out who owned his note after the GFC - was a big problem for a lot of people.
Was thinking last night----its not so much the people who have just secured a large loan-- if the SHTF-- that will lose.
They presumably can just walk away bankrupt-- albeit losing their deposit,fees etc.
Its more the people that have paid a large percentage of their large loan off-- and find their property worth much less than what they've paid for it!
It's the banks who benefit from these high house prices--- due to them receiving more money in interest payments.
And of course the sellers who bought the property cheap and made a killing.
Can see more potential here in Australia than in the U.S due to higher house prices-- that the owners just walk away from paying off their mortgage-- when the value of their property is less than their mortgage.
It will happen here too.
Becoming bankrupt--- not sure what the laws are.
