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Agent nods said..
I often wonder when people quote the amount of money they "made" on a a house purchase/sale if they added the real costs of ownership.

I think that is one of the reasons the property market is/was so positive. People don't do the sums.

I have had two friends now that come up with something stupid like 'you are already rich', and ignore the fact that the mortgage payments are more than the rental returns. That certainly doesn't make anyone rich.

Then, after both of them bought investment properties, one said 'how much land tax do you pay, because I just got a big surprise', and the other said 'what's property tax?'. I think adding that into their sums suddenly makes the financials look a bit different.

There is also this curve-ball where if the ATO think you are investing in property as a business, they will tax you like that, and I think your principle place of residence exemption becomes an issue.

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FormulaNova said..

The only thing I could think of was that he was somehow laundering money. I.e. buying a house, pumping cash into it to improve its value and then renting it out for more than he could have previously, or selling it for a bumper profit.

I wonder. During a property boom, could a drug dealer that has bundles of cash do this, and then pop out the other side with windfall property values? Would anyone even look twice or just assume that it was a buoyant property market?

You'd be surprised how much of this goes on. I know a guy who provides a service to people that the banks won't lend money to. They find a house they want to buy, then he takes out the loan and buys the house, then passes the loan through to the person that really wants the house. He adds 2% to the loan interest rate, plus a hefty fee up front. They are happy to pay it as they have plenty of cash flow, but no documented income that they can prove to the bank to get a loan approved, nothing that shows on their tax returns.

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Harrow said..

FormulaNova said..

The only thing I could think of was that he was somehow laundering money. I.e. buying a house, pumping cash into it to improve its value and then renting it out for more than he could have previously, or selling it for a bumper profit.

I wonder. During a property boom, could a drug dealer that has bundles of cash do this, and then pop out the other side with windfall property values? Would anyone even look twice or just assume that it was a buoyant property market?

You'd be surprised how much of this goes on. I know a guy who provides a service to people that the banks won't lend money to. They find a house they want to buy, then he takes out the loan and buys the house, then passes the loan through to the person that really wants the house. He adds 2% to the loan interest rate, plus a hefty fee up front. They are happy to pay it as they have plenty of cash flow, but no documented income that they can prove to the bank to get a loan approved, nothing that shows on their tax returns.

I think this was sort of what they were doing a few years back. I suspect lending standards have tightened a lot since then.

I applied for a loan in 2000 and it was pretty onerous on the paperwork. Fast forward a few years later and banks seemed to be offering 'low-doc' loans that had no proof of income, but a larger deposit and higher interest rate. Another thing that probably pushed the property boom a little bit further along.

Very interesting discussion here

www.abc.net.au/radionational/programs/latenightlive/risking-together/9906688

An explanation of how modern capitalism has shifted risk onto employees and consumers by loading them up with housing debt while simultaneously moving them away from permanent employment

That sounds like a conspiracy theory.....oh wait....it's the reality.....

"The American Dream" is a creation of the post war capitalists to encourage further usury and tie workers to debt with jobs that don't really go anywhere and become more casualised over time. Make the most of that 1% pay rise!

Movement of risk doesn't really apply in America, they can just walk away from their debts. But yes, very interesting Mr Milk and certainly applicable to consumer credit (credit cards, utilities plans etc).

Ultimately the real risk lies with the government and that is the risk of civil unrest due to a lack of hope. Responsibility is placed by the government, on the banks to lend responsibly; which they seem to have trouble complying with; and then there's the responsibility of the borrower to make sure they can afford the loan. At the end of the day, if enough people go bankrupt and enough bad debt falls into the hands of the lenders, values of properties and bank shares fall and the bottom line is massively affected; and there's a greater population of bankrupts that become a liability on the economy. This is why this "concept of capitalism" isn't really in anyone's interest, it has a negative effect on the economy.

Banks starting to raise rates, could be a rough ride for those carrying high debt levels.
www.ratecity.com.au/home-loans/mortgage-news/banks-lift-interest-rates-even-rba-hold

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airsail said..
Banks starting to raise rates, could be a rough ride for those carrying high debt levels.
www.ratecity.com.au/home-loans/mortgage-news/banks-lift-interest-rates-even-rba-hold

I wonder how many people are foolish enough to borrow so much money that a 0.1% rise (or even 1% for that matter) is going to hurt them. Guess I think a bit differently having lived through 18% home loan rates.

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Harrow said..

airsail said..
Banks starting to raise rates, could be a rough ride for those carrying high debt levels.
www.ratecity.com.au/home-loans/mortgage-news/banks-lift-interest-rates-even-rba-hold

I wonder how many people are foolish enough to borrow so much money that a 0.1% rise (or even 1% for that matter) is going to hurt them. Guess I think a bit differently having lived through 18% home loan rates.

Yup.

I was also surprised to learn that nearly half the mortgages issued in Australia in the last 5 years or so have been interest only.

This is OK in a market where values are climbing steadily , but a recipe for disaster is you are losing equity.

At the moment , I am looking to buy in Sydney. There is not much stock around, but some houses are already being discounted by 10%+. Prices are definitely dropping - significantly.

Methinks I may wait a few months before purchasing....

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psychomub said..

Harrow said..

airsail said..
Banks starting to raise rates, could be a rough ride for those carrying high debt levels.
www.ratecity.com.au/home-loans/mortgage-news/banks-lift-interest-rates-even-rba-hold

I wonder how many people are foolish enough to borrow so much money that a 0.1% rise (or even 1% for that matter) is going to hurt them. Guess I think a bit differently having lived through 18% home loan rates.

Yup.

I was also surprised to learn that nearly half the mortgages issued in Australia in the last 5 years or so have been interest only.

This is OK in a market where values are climbing steadily , but a recipe for disaster is you are losing equity.

At the moment , I am looking to buy in Sydney. There is not much stock around, but some houses are already being discounted by 10%+. Prices are definitely dropping - significantly.

Methinks I may wait a few months before purchasing....

I would wait about 2 years actually . Just the beginning. Wait for the full impact of rising rates colliding with interest only honey moons ending.

I think most people will be able to absorb a small increase in interest rates.

The interest only loans are a much bigger issue.
Imagine you've borrowed 80% on a $500k place, so $400k.
Interest only period runs out so you find another bank to give you another interest only loan. Sounds easy!
Except the property market has now dropped 10% so your place is only worth $450.
80% is now $360 so the bank want another 40k out of you.

You now have a major problem. Do you drop another 40k (assuming you have it) into something that's going backwards or cut your losses and get out?

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stoff said..
I think most people will be able to absorb a small increase in interest rates.

The interest only loans are a much bigger issue.
Imagine you've borrowed 80% on a $500k place, so $400k.
Interest only period runs out so you find another bank to give you another interest only loan. Sounds easy!
Except the property market has now dropped 10% so your place is only worth $450.
80% is now $360 so the bank want another 40k out of you.

You now have a major problem. Do you drop another 40k (assuming you have it) into something that's going backwards or cut your losses and get out?

Correct.

The market has already dropped about 10% or more.

When it goes down 25%+ , these investors with interest only loans will be in deep poo poo.

The banks will demand that equity is topped up, as you have pointed out.

Just reading that on saturday the Goldie had it's lowest number of successful auctions in several years

has anyone else noticed the improvement in the traffic since the end of the commonwealth games? My drive to work has never been better

^ For f...

Man, the Goldy hasn't gone up in value since 2002.

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Haircut said..
495

17 Arlene Park terrace
Sold for $657,500. In Feb 2018

Back on the market for $645 and above. I wonder if his will be the first sold under last purchase price since 2014? Many near me being sold now already losing money when including taxes and agent fees, even without holding costs

Wowsers $615k, and its not like the vendors overpaid in february considering the price of others in the area.

www.domain.com.au/property-profile/17-arlene-park-terrace-helensvale-qld-4212

in the eighties my parents unit went from 130 k to 90 k in 6 months ..boom bust cycle . The developer went broke & rooms never got finished , it did bounce back but took about 6 years or so .

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evlPanda said..
^ For f...

Man, the Goldy hasn't gone up in value since 2002.

May be true for most apartments but not true for houses in sought after areas in GC. I have been speaking with REs, fellow windsurfers in the GC and also doing a lot of homework and leg work.

Houses are still selling well especially in sought after areas. They are asking about 100k+ (15% to 20%) on prices paid 12-15 months ago for houses.

Lots of old houses bought by developers are being demolished and turned into Duplexes, with a 30% to 45% markup on cost. The developers are now struggling to sell Duplexes as Banks tighten lending and I am watching 6 closely as thay are in the process of being completed. I think the interest rate they are being charged is something like 15% (can anyone confirm).
I am seeing the market for duplexes weakening and apartments sales stalling.

My agent did the 3 montly inspection on Tuesday (as we are renting atm), Talking about buying and she said that agents are overquoting on house in GC in order to get the listing. Told us to wait another 6 months. Then sent us a lease renual notice for a further 12 months. Hmmm.....

Overall, I think the choke is starting to tighten but houses in good areas are still selling atm.

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Haircut said..

Haircut said..
495

17 Arlene Park terrace
Sold for $657,500. In Feb 2018

Back on the market for $645 and above. I wonder if his will be the first sold under last purchase price since 2014? Many near me being sold now already losing money when including taxes and agent fees, even without holding costs

Wowsers $615k, and its not like the vendors overpaid in february considering the price of others in the area.

www.domain.com.au/property-profile/17-arlene-park-terrace-helensvale-qld-4212

nice area , most are large sections on that street lived there 10 odd years ago .

yeah, it appears that any heat left in the GC detached house market is in the southern half. Overall I don't think there's been house price growth near me since 2017. Houses sure went up in value during 2015 & 2016, probably by 100k on average

Existing duplexes and cheap apartments seem to be the only things selling up this end, and some 1mil and above properties. It seems people either have very little money , or lots of it. It'sprobably the remaining cashed-out-Sydney-ites still buying the expensive stuff.

I quite like the street too. It's unfortunate that it's close to the train line and it's noise, and the ever impending threat of the intra regional transport corridor. Will be a noisy place if that ever goes ahead. Poor Koalas

A study on housing tax reform

www.accountantsdaily.com.au/tax-compliance/11867-housing-tax-reform-debate-escalates-with-new-report-findings?utm_source=Accountants%20Daily&utm_campaign=06_07_18&utm_medium=email&utm_content=2

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Haircut said..

Haircut said..
495

17 Arlene Park terrace
Sold for $657,500. In Feb 2018

Back on the market for $645 and above. I wonder if his will be the first sold under last purchase price since 2014? Many near me being sold now already losing money when including taxes and agent fees, even without holding costs

Wowsers $615k, and its not like the vendors overpaid in february considering the price of others in the area.

www.domain.com.au/property-profile/17-arlene-park-terrace-helensvale-qld-4212

I think you've read that wrong as it was on the market for 147(!) days. First listed in December 2017 for $657K. Didn't sell until now.

Last sold for $445K in 2003. Currently rented at $600/wk.

It definitely sold in Feb 2018. I inspected it a few times during both sales. Agency did their best to keep it quiet.

https://www.realestate.com.au/sold/property-house-qld-helensvale-127179602

www.onthehouse.com.au/11459182/17_arlene_park_tce_helensvale_qld_4212

Theres another in old Helensvale that also looks like it's about to go for less than 2015 price. I'm a little keen on that one myself if it does get down that far.

2 properties sold in June for Coombabah. According to
re.com.au . Only 1 so far for July. Surely it can't be this low? Its like GFC v2 if it is

Hey Haircut, let's call it the AFC as we possibly aren't going to disrupt the world economy too much. But you're right, the recipe is about the same as the GFC; extremely high household debt, low interest rates that can only go up, over-inflated property values

Lower for longer could mean a snapback interest rate rise of 3% in Australia according BIS.

www.abc.net.au/news/2018-07-06/lower-for-longer-interest-rates-could-spark-nasty-snapback-bis/9947628?section=business

Pair of duplexes in labrador bought in 2001 for $215,000 sold in 2018 for $860,000.

The goldy has nothing when it comes to jobs and infrastructure and these prices are so out of whack

When the commonwealth bank was privatised the aussie dream of owning your own home became part of the big four cartels dream come true

I am not saying that it is wrong to make a quid over long term investments (done that a few times myself) but what is going on in GC atm is pure greed.

Here are a few examples:

Example 1. https://www.realestate.com.au/property-house-qld-biggera+waters-128703034
House sold for $560,000 in April 2017
Two duplexes are now built and it looks like the owner is living in one and has the other up for sale for $895,000.
I PM'd the agent and asked him how he got this valuation.

Example 2: www.realestate.com.au/property-house-qld-runaway+bay-128770478
House sold for $705,000 in April 2017
Two houses now built and one is up for sale for $1,075,000

Example 3:
www.realestate.com.au/property-duplex+semi-detached-qld-runaway+bay-128404270
www.realestate.com.au/property-duplex+semi-detached-qld-runaway+bay-128404282
Land sold for $570,000 in October 2017
Two duplexes now built and asking $819,000 and $799,000

Maybe they didn't get the memo

There are a couple of duplex / units near shearwater that must have been on the market for 2 years or more. If they aren't priced in the $400s or less, they seem to struggle to sell at the moment.

They sure are struggling to sell atm, until the receivers take possesion and then GC will make the news for all the wrong reasons.

You are correct about them not getting the memo. They seem to have blinkers on and spit out car salesman rubbish when the asking price is questioned.

Another thing is that if you look back at the property sales history for parts of GC, you will see that some buyers paid ridiculous prices that they will never recouperate. They take a big hit when they try to sell.

Btw, the auction results for GC on Saturday 7/7/18:
21 listed
3 sold
3 withdrawn
15 passed in.

It's a matter of time until they get that memo......