All Topics / General Property / Fate of housing bubble is out of our hands

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  • Profile photo of crjcrj
    Join Date: 2004
    Post Count: 618

    There’s been some comment on Kohler’s article in the “WA Land of Opportunity” thread

    The issue Kohler is raising is that no matter how competent the Reserve Bank/government is in managing the local economy ultimately the influence of global factors is going to have an impact. The Reserve Bank might ‘smooth’ some of the trend, but it cannot prevent the trend.

    If Kohler’s figures are correct 20% of the finance for housing has come from international money through banks selling part of their loan portfolio in the form of bonds. Because the interest rate has been higher than the international lenders could obtain elsewhere thyese bonds have been an attractive investment. If interest rates rise overseas and Australian rates do not change, it becomes less attractive for international investors to invest in Australia. Consequently one scenario is that the banks will not be able to sell bonds as easily which will mean that the funds available for lending will be based on the bank’s balance sheets rather than being able to increase lending by selling some of the mortgage portfolio overseas.

    Kohler quotes Xie as considering the probability of Us interest rtaes as 1/3 to rise 0.25% per quarter, 1/3 to rise 0.5% per quarter and 1/3 to rise 1% per quarter

    As investors surely this is relevant to our risk management strategies eg are we in a position to cope with higher interest rates; if we have a property on a longterm settlement should we lock in finance now.

    It is also relevant to our strategy if good buying opportunities come up.

    Profile photo of Steve McKnightSteve McKnight
    Join Date: 2001
    Post Count: 1,763


    A few comments.

    First, this is a very interesting article, however it remains one man’s opinion. I’m sure the RBA would have a different view on some of the topics raised.

    Second, if you have a long-term settlement then it would be wise to compare that with your position of the market going forward. For example, if you thought prices would drop, why would you hold the investment?

    Finally, if you could settle early top secure finance you’d have to weigh up the cost:benefit of this and whether you have the available funds to settle now.


    Steve McKnight

    Remember that success comes from doing things differently.

    Steve McKnight | Pty Ltd | CEO

    Success comes from doing things differently

    Profile photo of Nat RNat R
    Join Date: 2004
    Post Count: 224

    Ignore Alan Kohler’s article…it is completely wrong in both the logic it applies and the conclusions he draws….any trainee money market dealer who has just graduatued from getting the coffees and collecting the dry cleaning for his boss could shoot holes in Alans explanation of how the market fits together.

    Likewise Mortgage Adcvisor there are many mistakes in your post …but you are streets ahead of Alans take on the situatiion.

    Profile photo of Nat RNat R
    Join Date: 2004
    Post Count: 224

    Quote: “In relation to the ‘on book’ issue, he fails to address a fastly growing sector in the investment world which easily provides sufficient funds for Australia’s investment needs going forward. I am referring to securitisation”

    Mortgage Advisor…for your guide…Kohler is actually referring to securitisation in the article when he talking about the banks selling bonds into the US…unforturantley he doesn’t really know much about the topic so his explanation makes no sense at all.

    Profile photo of pelicanpelican
    Join Date: 2003
    Post Count: 454

    Frankly speaking, I no longer bother trusting most things I read in the paper nowadays…..

    I have had first hand experience several years ago of fabricated stories……

    How can a guy who sits in an office all day, probably surfing the net, truely comment and/or predict what is happening to the real estate market…… They never seem to get it right… and…

    It’s US, the investors, who, in conjunction with on the ground info, and, local economic factors that can advise what is happening in the markets…..

    Price drops in inner cities…. cmon.. no surprises there folks… we all saw that one coming….. it

    It’s the greedy that have been caught off guard…..

    As mentioned in other threads, the amatuers are now being shaken from the tree… the more committed, are assessing risk, have exit plans already…. and are seeing lots of buying opportunities…..

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