The other banks have a far lower capitalisation rate.. Various future modeling scenario's outlined in that report give you a good idea of the risks. Have another go at reading it would be my suggestion.
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The other banks have a far lower capitalisation rate.. Various future modeling scenario's outlined in that report give you a good idea of the risks. Have another go at reading it would be my suggestion.
I have been told there are two major reasons for the other players to leave the market.
1] They are not set up for a loan process that takes a month or more, and requires more than a few boxes to be ticked off.Consultations with family and their lawyer is too hard for them,and opens up too many opportunities for them to give poor advice.
2] They are scared of backlash from "the family", when they find out their legacy has diminished because of compound interest charges.
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Below was my answer to this question in the middle of 2018 Balance. Sorry I haven't adjusted the figures to reflect the last reported financial year. But the underlying argument is still valid.
The risk is the part of the quote that I have highlighted in bold. The good thing in this scenario is that there may not be a good correlation between house prices in Sydney and rural lending in New Zealand (for example). The less correlation there is between the different areas of Heartland's loan book, the greater the property downturn in Australia that can be managed.
SNOOPY
Thanks, Snoopy - easy to understand!
My take is that there could be a real risk that these reverse mortgages could be problematic in years to come - combination of property prices falling over the next 5 years even while HGH's loans levels keep increasing with the compounding interest payments.
* Property prices in Sydney & Melbourne have gone up 80% since 2011. The factors which led to the explosive price increases are either static (interest rates, wages growth) or declining (housing affordability, investors' appetite, banks' appetite to lend, speculative fund flows from Asia etc). I know of one recent sale in Sydney where the sale of a unit went through at 15.6% below CV - scary! In Auckland, I have been offered properties by desperate real estate agents at 15% below CV already in recent months.
Hold off Balance until properties in Sydney sell 60%below CV,then you may catch some HGH want to move.!!
Ring HGH today and tell them you are a BIG" buyer.They may take your number?
You will have to be a cash buyer as the Australian Banks will not be able to lend,as they have gone bust.
Remember Heartland Bank will be the last one standing.!!
Not necessarily - depends on where the properties mortgaged are situated?
Remember that the Aussie banks have the implicit guarantee of their government over there. NZ made the mistake of no implicit guarantee and we lost all our banks to them - BNZ, Trust Bank, ASB, Countrywide, NZI etc and some were allowed to go broke - DFC for eg. Pathetic really.
Bear in mind I am a holder, Percy so I am passing on my thoughts and feedbacks from what I gather. Put it this way - given market trend and China investors (speculators) offloading, I certainly WILL NOT be a residential property investor anytime soon!!!!
And given HGH sp trend, I will not be adding to my holding either!
i am adding. This is a sound company my reading of the RB policies are that they restore a balanced field in NZ for the local banks who are not saints. Looked at my credit card today 22% interest rates.??
Not arguing against a govt g/- for depositors but it's stretching things a bit to include the Development Finance Co as a "bank". It was intended to finance ventures that were too risky for the banks - rather a govt sponsored venture capitalist, as I recall.