And investors really should look at fixed rates because investing a property is not a short-term, it’s long-term. I think in a current climate, fixed rates have never been this low. So if you’ve got investment property, I would be seriously considering looking at fixing for years or even greater, because as long **don’t** have a long term**hold**, it sure to be fantastic. Ryan, I think with a fixed rate, after speaking with you, if.
You’re looking at that and you want to increase your borrowing capacity then I think going to a mortgage broker is going to help you do that. Because, as we have discussed in past videos, different lenders use different criteria to work out what you can borrow.And some lenders with a fixed rate, you’re not going to automatically get more borrowing capacity because some lenders will still add.
A **beard of a buffalo** to your borrowing Brisbane Property Valuers capacity just by having a fixed rate. Brad, They don’t have a standard **right for servicing loans** for whether you�re applying for a **beard** or fixed interest only, they just have a standard right. Ryan So just because your interest rate that you’re getting is %, doesn’t mean the bank is assessing you on an interest rate of %for serviceability. The banks are looking for security.
They’re looking into the future so they going to add a buff up to say ‘we are actually going to check you out at%, even though you’re not paying that today. Brad But you could well be paying them in the years time, who knows. That’s just common sense, landing approach, being responsible to their clients, thinking that ‘well if there are **raises** it still can be paid’. And during that period of time
Australia’s went down to here and bounced up again. Andthat was because of the impact of the first homeowner’s scheme. These people dived and took on mortgages.Ryan Yup. I remember that time.Steve And they fall. The trend for this to go negative. Yeah. And then the second time, around when, again, we started having a decline in mortgage debt growth. That when people started borrowing for all the investment projects in mining. So it boosts kind of the business side. And then, as debt started to slow down.
They were actually rising a percentage of GDP. That’s when investors followed the housing market again. So, consequently, what we have – this is the key what do valuers look for when valuing a property one I want to come down to in a moment. The key relationships – that’s the chart you can see right now.And I’ll explain the logic when we are actually in the interview. But what actually drives the market is an acceleration of mortgage debt. So what I’m graphing here, the blue line is changed in house prices in America and.
The red line is the acceleration, not the change, the acceleration of mortgage debt as a percentage of GDP. Okay, can you see the relationship?Ryan Yup. It seems to be in line with each other.Steve Okay. Yeah. One drives the other, so econometrics on this then it’s definitely the case. Accelerating mortgage that drives change in house prices.
Bryan Yeah, where the red line preceded the blue line.Steve Yeah. This is now looking at the – this is real house prices in America versus Australia since. So America had this big bubble and crash and now, some real house.
Here there’s a fair bit on this side as wells beset subsets tool for another months after that and then finally another number six months and that after that they finally started construction and then this is the final part of the building so the total loss of rent chichis one of the components of your insurance policy was three hundred twenty thousand dollars so we need to make sure that there’s.
Enough put aside for loss or rent so for the carpet companies if they got another place to rent to if it was owned by tremor whoever the tenant was that that’s going to be lost income for that business so if you’ve got any questions about the sinking sinking funds insurance valuations occupational health and safety you can only contact Sydney on myself and we’ll be happy to help you’re we looking at one of the other insurance evaluations in the next series this is part of insurance valuation management.
For Australia and commercial buildings so earlier on we looked at insurance valuation and go over that again now what is an insurance valuation that’s fine we’ve gone through the critical elements of what the body corporate what the owners corporation needs to do we looked at the case study and now what we’ll do now we’ll go intone of the sample reports will go through a report to see what that lookalike OK this is a standard building that’s it one two three four five six seven levels so we’ll have a look and topee what time what’s in here so these are some of the items that are in insurance valuation so three basic sections where is your insurance valuation summary base of your insurance valuation report and also your report notes.
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This has happened in the past because it’s happened in other countries as well, what happened to rents in those areas? Did they crash as well?I’m just thinking if people own positive cash flow property that pays for their mortgage if a crash happens, will their rents get reduced and they’ll end up in the negative situation?Steve, They won’t fall as much as house prices do. Rent’s really based on incomes, you know?That’s why rents don’t rise as much as prices do in a bubble. They don’t fall as much in a slump.
If people lose their jobs and you, therefore, don’t have the same security income from tenants, but house prices will fall more than rents.Ryan Okay. This makes so much sense to me because let’s say I want to buy a house, if interest rates go down, I can afford to borrow more and therefore, if the whole markets doing that, that pushes prices up. But as a renter, interest rates go down, it doesn’t-affect how much I can pay to rent a property. I’ve got an income that I earn, I divvy portion of that to live and to pay rent and so,
yeah, I understand now why rents wouldn’t-fluctuate and why they don’t fluctuate in line with the property how do property valuations work to market and I’ve never understood that.Steve, I’m glad it helped. The catch that people – yeah, sorry.Ryan I was just going to say do we know how much rents did drop in relation to house price in previous crashes across the world? Or is that just not a figure people really looked?Steve, It’s a figure I could drive, but it’s not the great deal. If you look at the house price crash in America, that was of the order of %.
I think you would find rents might have fallen by %. That sort of thing.Ryan That’s a massive difference.Steve Massive difference, yeah. The reason that people say that they’re okay as long as unemployment doesn’t rise, everything’s going to be fine. Well, the relationship I’vetalked about between accelerating mortgage debt and rising house prices are only part of the relationship.
The global financial crisis which hit pretty much most countries around the world, yeah a lot lending is tightened up around the world is lending a problem these days or again is it is just a different way of looking at it that years ago we had different problems lending to be my biggest problem is wasn’t for lending I would have properties where directories and I think the same thing for all those yeah those always been hurdles to overcome from lending certainly was different a decade ago than what it is today and it’s changing on a weekly monthly basis and from that perspective you know I think that you need to be adaptive to change in the market so yeah it’s what I first started investing probably had grand savings and I’ve saved it from working my backside off there’s a youth and you know investing that into.
Property and in the bank to put alone against the property to start off with so I think a lot of people have gone too hot too highly leveraged and to want to leverage aswell and again I guess it comes back to you’re dreaming and why you’re doing it in the first place because just because one bank says no you didn’t give up in the early days did you know whether you got to see five or ten or a hundred that’s what you got to do there literally thousands of lenders out therein.
The world and for me personally what I first started investing in property bank that I went to initially said that I could buy the first one I actually went to was to get a credit card for a thousand dollars I had like grand in my bank account at the time or grand the bank account and I asked for credit card so I could pay my internet you needed the internet back then and I got rejected on a credit card fora thousand dollars I went to a bank which I had my bank account as a child they gave me alone for a quarter million dollars by purchase process probably of quarter million dollars and then form West Coast Valuers.