As an investor would you buy in sydney at current valuations?

Thanks for taking the time to respond. I guess it comes down to whether you think the bank lending standards were actually adhered to. From what I've seen from the banking RC and heard from various sources (I highly recommend the Jolly Swagman podcast with John Hempton about his experiences in trying to get a loan in Western Sydney in 2016) it seems to me that loose lending and outright fraud was widespread around that time.

At the very least the transition of IO to PI that's occurring and continuing over the next few years will lead to belt tightening. Can the NSW economy withstand further reductions in consumer spending that's already leading to low GDP growth and low wages growth while the bottom is falling out of the construction industry? I think at best you're right about the stress tests and we see reductions in consumer spending as people's repayments increase which risks recession. I can see a plausible way we muddle through and get past that but in my opinion the risk/reward ratio is way out of whack for investing in Sydney at the moment. Unfortunately I think that risk means elsewhere in Australia isn't worthy of investment at the moment either (eg parts of Perth look really affordable but if Sydney crashes Perth will likely be swept up in that too).

That would certainly fix a lot of problems. We'll see.

 

I agree with a lot of this but I think there are a few important points to make.

1) We don't know how many people have chosen to sell because they couldn't afford PI repayments. There's simply no way of telling whether it's been 0.1% of the rollovers, 1% or 5%.
2) The fact (as you say) most people will do anything to avoid selling means it takes a long time for any forced sales to eventuate. Even somebody who rolled over a year ago and can't realistically afford the repayments may have eaten into savings, massively reduced spending or borrowed money from friends/family rather than sell. So it can take a year or two before any sales actually happen.
3) Massive reductions in spending have flow on effects economically and any rise in unemployment would have huge impacts on housing affordability.
4) The amount of arrears, defaults and forced selling required to trigger a housing crash is actually very low. By the time late stage arrears in Ireland hit 4% of the loan book house prices had dropped ~40%. Late stage arrears in Spain peaked at ~2.5% of the loan book but they had price drops of about 40%.

 

Hi Sackie
Industrial seems to offer good yields and high land value and I think there is a limited areas avail for future rezoning . Childcare and medical are overcooked. some nice suburban multi tenant retail with short wale but good yields where the tenants are in non discretionary industries and likely to
Holding up well in a recession. SA has no stamp duty and high yields

Not easy to find good commercial but no harder than finding a good resi dev site . And in the post Hayne world, so much easier to finance commercial (even if one is already highly levered in resi) on a stand alone basis backed by a strong lease without having ur every expense and income scrutinised.

 

Thanks @Bris developer
Are you still looking at all into residential developments? either resi finance or commercial.

 

Hey mate, I got stuck with unsold inventory in Brisbane and my servicing was too limited. Classic developer trap I thought.

I like a multi-tiered approach to wealth creation now - business income, commercial prop income, resi developments and some private lending .

Once the cashflow is back, should be able to refi some unencumbered sites and do the units/subdivision...

But my brokers and banking contacts tel me they are writing a LOT more commercial loans at the moment and the resi space is slow going

 

What was the target market and stock type that was slow to offload mate ? If you don't mind me asking.

I'm also hearing similar, alot of commerical underwriting going on.