Anyone bought IPs in Sydney in 2016?

With auction clearance rates dropping to just over 50% at the end of 2015, comments were made that Sydney was done for this cycle. However, it kept going strong in 2016 and some experts are even forecasting another 8-10% in 2017.

Clearly, most posters here were looking anywhere else but Sydney for IPs over the last two years.
Just curious, has anyone bought any IPs in Sydney this year? If so, why Sydney? What yields are you getting and what is your strategy (long term hold, develop etc) and capital growth expectations over the next two years?

 

Recent report highlight items below posted on another thread


So this is what he is stating I think in a nutshell

For me Sydney is a no go at this stage of the cycle, but what do I know? your risk your money

• Sydney inner city to outperform outer suburbs in Sydney
• 2017 - will still be a strong year for Sydney and Melbourne, however if there were a variable interest rate increase this market will soften in 2017
• Sydney and Melbourne is 40% overpriced including global markets, any triggers could cause falls.
• Potential we could still see Syd and Melb market slow down last quarter of 2017.
• Perth is a no go zone in 2017 as expecting prices to continue to fall. 2018 Perth market will hit bottom
• Brisbane will have only single figure growth in 2017 because there is too much oversupply of apartments which is impacting on the market as a whole.
• Tasmania and Gold Coast have seen some growth and this should continue in 2017 and the markets which provide better opportunities.
• So Adelaide did not even get a mention? So I guess they don't see much happening in 2017, don't know?

 

No it didn't. Not unless you believe CoreLogic's highly questionable data.

Sydney's year-on-year growth was just over 2% according to the ABS (which came out with very similar results to Residex, APM etc). That's down from 19%. In its results Domain had the similar year-on-year result of 2.1% for houses, 0.9% for units. Inflation is just under 2%. (Nationally annual rolling growth was 3.5%, which is down from 10.7%).

CoreLogic's RP data has shown extremely strong growth, but they use a hedonic index, having switched - unannounced - to that methodology in Apr/May. It's pretty dodgy. Even the RBA dumped them as a data provider and said they had overstated growth. Basically, a hedonic index allows you to use a complex and largely subjective formula (which you can change/tweak at any time without anyone realising) to assume values for all houses in a suburb. The advantage is that unlike a stratified median or a repeat sales method (like Residex), you can calculate it daily, even in the absence of sales. The disadvantage is it's at risk of very serious methodological flaws - with a median you can't meddle, it just is what it is, the numbers can't lie. It's a similar story with repeat sales - for the number to rise, sales have to rise.

However, CoreLogic's hedonic index assumes a price for all homes in a suburb regardless of whether few or many or even any homes have sold. If a particular house hasn't sold for decades, but a neighbouring house CoreLogic deems "similar" has sold, the unsold house is assigned a potentially inflated value. One example of a serious side effect of doing that is that it inadequately deals with renovated homes. If a recently renovated home is sold in an old run down suburb (very popular nowadays), CoreLogic's index inflates the value for all homes in that suburb based on the renovated sale - it may even assume all similar houses are "worth" that much. Bit of a worry given the recent rise in renovations and new development. When homes aren't selling there may be also be a reason - people in the suburb may not wish to move, may not be able to sell, sales volumes may be low etc.

So, while all other data providers have shown a sharp slowdown in price growth (and note that CoreLogic's RP data was also flat as a tack before their methodological change - in fact if you look at their back series you can see the huge spike at the time they switched) CoreLogic has been moving in the opposite direction.

 

so what do yo ureckon MTR,

if your not quite ready for development in Q1/Q2 2017, or even all of 2017, to start looking for the screaming bargains at the bottom in 2017 to 2018???

we all know that getting a good overall development profit is harder i na rising or peaking market

 

Personally I would be very wary if anyone is developing it takes probably close to 18 months from start to completion, who knows what may happen... God forbid, variable interest rates start rising? is it possible? who knows, not taking any chances.

My strategy is possibly different to most I dont buy in flat markets I don't consider these bargains because if the market is soft who is going to buy, though I know some will make money doing this, perhaps it works for others all to their own. I prefer to jump into another rising market and make my money work harder today.

I am developing in Atlanta because it's rising and we are looking at around 40% returns, won't crack the champers until we have completed the development

 

Near every day I get letter/s of rate rises, not fixed, but variable.

 

Awesome
Very good points

I was referring to Perth in the previous post.

I love your us purchases but obviously you have to consider currency fluctuations so it's another layer of consideration

Good on you! Supa respect

 

Louis is spot on - there were some massive spikes in the inner ring, seemingly almost overnight

 

Thank you all.

Now, anyone bought in Sydney in 2016?

 

We've had a few people purchase in Greater Western Sydney. Their main goals aren't so much looking for cash flow or huge capital growth just a property they want to develop or move into as a PPOR in the near future.

Not sure about the predictions of 8-10% a lot of open homes in the west at least are starting to thin out.

 

I didn't buy in Sydney in 2016 but I sold 2 properties, with 1 of them still pending settlement.

Second half of next year I may sell 1 more, it's had its growth and the yield isn't strong enough. I'd like to take that money and redeploy into another investment that's higher yielding.

 

I was wary of purchasing this year.

A mentor taught me an important lesson from a purchase early-mid 2016.

Purchased 2 lots in south west Sydney for $950k.

$20k reno on houses which now rent for $1,400/week.

He asked me to assist with some engineering work. I thought maybe split 2 blocks into 3 with duplexes on each block. 6 in total.

He consulted his mates and managed to get a DA for 10 houses.

Put an option on neighbours backyard and waiting on a DA for an additional 4 houses.

Peak market. Positive geared. Around $1M reval just with the DA.

Sometimes it's not the market, but our skill levels. I never would have seen that potential on the block. I saw 6 houses max, he saw 10, and maybe 2 to the average joe.

 

Awesome stuff NHG, the older the wiser.

 

Absolutely.....Now that is a good story

 

Me too

 

Not for me in 2016. My last Sydney acquisitions were in 2013.

 

@NHG how big are the two blocks combined?

 

I just had a property settle yesterday and tbh maybe it wasn't the best deal in comparison to previous properties but still think it'll be a solid acqusition for the future due to the potential.

 

Now that is pearler.....of a deal....

Couple of questions:

1. How big are the blocks...I am presuming they are side by side..and what size were they DA for 10 houses...and are titles given on completing a 10 house developeme
2. The DA for the 10 houses....how might are the houses?
3. $1m reval seems quite low given that even a basic land comes in at 350k plus in Campbelltown...I need to get into this action...

 

Congrats @jins13, potential for developing or something else? Are you happy to share purchase price and yield?