RiotACT's Federal Candidate Questionnaire

IrishPete said :

Negative equity can only really arise if house prices (property values) drop substantially, or if lenders are lending more than 100% of the value (yes, they have been known to do so, in the UK anyway). I don’t think house prices have dropped enough in Oz for it to be an issue, as lenders generally don’t go above 90% here I think.

And it’s only really a problem if you lose your ability to service the mortgage, or if the lender gets nervous and forecloses, claiming on the insurance that they made you take out, and which isn’t insurance as the “insurer” may pursue you for the payout. Banking really is the business to be in.

IP

The banks will lend up to 95%, non bank lenders (e.g. Aussie, Rams, etc) will still lend up to ~120% if you have a guarantor.

Woody Mann-Caruso said :

I don’t see why it is the role of the government to backstop poor investment decisions.

“The government shouldn’t have anything to do with helping your housing investment – unless it’s undermining it so I can have one too!”

*slow clap*

There’s a considerable difference between people buying housing as a speculative gamble, and those buying housing to satisfy what is a basic human need.

I’m very much opposed to the government spending billions of public money to benefit the former at the severe expense of the later, which is exactly what it has been doing for the last few decades.

I don’t see why it is the role of the government to backstop poor investment decisions.

“The government shouldn’t have anything to do with helping your housing investment – unless it’s undermining it so I can have one too!”

*slow clap*

arescarti42 said :

thebrownstreak69 said :

Got a source for the ‘1 in 5’ claim? That seems like a lot.

Yep, I do, but on closer inspection it was bad, so I withdraw that claim.

According to RPdata’s 2011 Equity Report, it’s more like 3-4%.

If Abbott sacks 20,000 public servants, with 10000 of them or more based in Canberra, I suggest the negative equity number will increase dramatically in the ACT.

Hearing the sound bites on his ‘Red Tape reduction’ program, yet adding a significant administrative burden to the APS rather than business, I am not quite sure how he intends to pull it off.

“poetix
7. What is your position on gay marriage?”

Probably not the missionary position.

harvyk1 said :

arescarti42 said :

harvyk1 said :

Those of us who did go without so we could own the roof over our heads may very well be screwed over by the gov’t artificially (eg through massive land releases) lowing the price of our homes. Whilst our valuation certainly puts us on the right side of the percentage borrowed equation, if the gov’t “does something” and it goes too far, I could easily see something becoming that we owe the bank more than our house is worth.

First of all, massive land release wont risk artificially lowering home values, what you’ve described is an ending of government policies that artificially increase prices.

Owing more than your home is worth is called being in negative equity, and about 1 in 5 mortgage holders were already in negative equity in the first quarter of 2013.

That said, if you bought your home because you wanted a place to live, then I can’t imagine why being in negative equity would be a problem, and if you bought it for speculative reasons, then I don’t see why it is the role of the government to backstop poor investment decisions.

I wouldn’t worry though, the politico housing complex is so rotten and corrupted by vested interests that I can’t see any elected official doing anything to fix it until it eventually collapses under its own weight.

Unless there is some special tax reason for it, I’d imagine been in negative equity is a bad thing and not something which should be considered the “norm”. (plus 1 in 5 seems pretty high).

I also don’t see it as the role of the gov’t to backstop poor investment decisions, but I do see it as the role of the gov’t not to do anything evil, which IMHO deliberately doing something with the express intention of negatively affect market prices counts as something evil.

What do you think about years of doing something with the express intention of positively affecting market prices then?
Land release policies, regulation, tax concessions and special home “sellers” grants have all had negative effects on housing affordability over many years. It’s funny when property investment being treated generously is seen as a given.

Negative equity can only really arise if house prices (property values) drop substantially, or if lenders are lending more than 100% of the value (yes, they have been known to do so, in the UK anyway). I don’t think house prices have dropped enough in Oz for it to be an issue, as lenders generally don’t go above 90% here I think.

And it’s only really a problem if you lose your ability to service the mortgage, or if the lender gets nervous and forecloses, claiming on the insurance that they made you take out, and which isn’t insurance as the “insurer” may pursue you for the payout. Banking really is the business to be in.

IP

thebrownstreak69 said :

OK, my research was around the standing of property loans, not negative equity. It seems the majority of home loan holders are ahead on their loan, and that average LVR around 50%.

This doesn’t really disprove or contradict your point, though. On this basis maybe 3-4% is correct, but I’m not sure. I guess being in negative equity is a bad thing, but if you are ahead on your home loan and have a stable job it’s very unlikely you’ll have a major problem.

Time fixes most equity issues anyway, because once you have an asset and a loan, inflation helps you (in that context).

The majority of loan holders should be way ahead by virtue of prices rising since they bought and time spent paying down the loan.

The ones at most risk of negative equity are the ones who bought in the last couple of years (particularly first home buyers), as they’ll have paid off virtually none of the loan principal, and are more likely to have taken out very high LVR loans.

On the 3-4% figure for people in negative equity, it seems plausible to me. When the RP Data study was done in 2011, prices in most Australian capitals had fallen by 4-10%, so people who had bought in the few years prior on high LVR loans would probably be in negative equity.

As you say, so long as you’re employed and you don’t plan on moving or defaulting on your loan, then it really doesn’t make much difference whether you’re in positive equity or not.

thebrownstreak69 said :

arescarti42 said :

thebrownstreak69 said :

Got a source for the ‘1 in 5’ claim? That seems like a lot.

Yep, I do, but on closer inspection it was bad, so I withdraw that claim.

According to RPdata’s 2011 Equity Report, it’s more like 3-4%.

No worries at all, thanks for clarifying. I’d say 3-4% seems high also, I’ll have a dig around and see if I can find an alternate source and post it up so we can compare/discuss.

OK, my research was around the standing of property loans, not negative equity. It seems the majority of home loan holders are ahead on their loan, and that average LVR around 50%.

This doesn’t really disprove or contradict your point, though. On this basis maybe 3-4% is correct, but I’m not sure. I guess being in negative equity is a bad thing, but if you are ahead on your home loan and have a stable job it’s very unlikely you’ll have a major problem.

Time fixes most equity issues anyway, because once you have an asset and a loan, inflation helps you (in that context).

Barcham said :

Holden Caulfield said :

I’m a bit embarrassed at Q6 as it was only ever intended as a RA in joke, but who knows it might bring about some interesting replies.

That was more or less my thought in including it.

Let’s hope your cunning plan comes to fruition!