Auction Clearance Rate have hit 89% in Sydney to start the year - thoughts?

Auction clearances have hit 89% for Sydney on )Saturday 06/02) to start off this year.

I don't recall clearance rates reaching this amount in Sydney the last couple of years and I track the clearances regularly.

Melbourne was 78%.

What are your thoughts for prices and market activity for the current year? I think Houses and Townhouses will do well, while apartments will generally remain flat except for selected high demand areas.

 

Yep, for Sydney, last weekend has the highest clearance rates since May 2015.

My personal view is that Sydney does 10% this year for median dwellings, however some categories will over perform (townhouses and houses) and others will underperform (apartments).

That said, the interesting thing in the weekend data, is that apartments are still doing well in their own right, though not as well as houses. And the reason is because even if units lack scarcity right now, buying is still cheaper than renting (though medians can be deceiving, and the devil is always in the detail)

My personal view is also that this boom will have legs, and run into mid decade.

 

• Interest rates have halved in a very short time period.
• Borrowing capacities are up 35% in absolute $ terms for majority of buyers inside 3 years on the back of assessment rate cuts, nominal net income rises (tax cuts) & lower interest rates

The above has been and will be an explosive formula for house activity. Supply simply cannot keep up with demand rises that result from the above credit formula.

Now that confidence is back, the demand has set in and prices are rising quite quickly at the moment for many markets across Australia.

 

Its crazy out there and not just in Sydney - Newcastle and Central Coast (Newy more so) are going nuts too.

Its also all sorts of budgets - higher end markets of $3.5mil plus are going strong. Houses and anything with good land content is going to get snapped up.

People aren't as reliant on being close to the city so some of the "outer" areas such as northern beaches and upper north shore are going gangbusters.

 

So you reckon we are just getting started with the circa 10% jump in house prices in the last few months ie much more to come in the next 2-3 years?

Based upon my observation, some of my props are up 10% since Oct '20 already, let alone taking the full calendar year of 2021 in account.

 

Well, I think we were getting started in 2012, and we have just come out of a mid cycle correction. The next five years will be the final leg up in the cycle that began in 2012.

For a proper explanation with charts and time points, type in bridgetobricks into Youtube, and there is a snippet of a webinar i did on 1st April 2020 explaining that Covid would lead to a boom in house prices.

 

I just don't know how much further/longer the market will run as (financial) fundamentals are pretty divergent to market values atm.

I mean could we see property values in Sydney go up another 20-30% and stay at those levels without any corresponding increases in rents??

Relevant to me particularly bc I'm in a position to sell a property right now but would royally p*** me off if the property went up another $100-200K (or more) in the next couple of years.

 

IMO if all else is equal to 2019 (economy, population, supply, etc), with the current rate environment, the absolute level of prices are off where they should be. Halving the price of credit will do that, the actual cost of a house has drastically fallen (the nominal price you pay is not the true financial cost of a home, which is tied to credit). The changes to financial settings are not small, they are massive.

 

Just watched it. Ballsy stuff to say during the height of a pandemic. You clearly have the ability to cut through the noise.

 

I agree with John and think Sydney will almost likely almost do 10% well before year's end, probably 15% the way things are going. There is too much stimulus, confidence returning, low stock and record low rates which the RBA have already stated won't rise until 2024 at the earliest. Plenty of people missing out on property already and they're not going back to where they were, the buyers are piling up.

This property sold in Oyster Bay over the weekend for 1.46...it would have been 1.1 a year ago.

Plenty more to come.

- Andrew

 

I can see my sydney property rose by around 15% since November last year ...if it is another healthy 10% that would be fantastic ...will make up in a way for the lack of pay rise thanks to covid

 

It's kind of ironic that wage is not increasing. If wage is more or lest pegged to true inflation(currency devalue) we really should get a big raise.
I guess much of that inflationary force was spent keep jobs from disappearing and maintaining wages for people who still have a job. The rest goes to pump up asset price.

 

I wonder if there are wage increases but not across the board. I work in the IT industry and the common salary here about 10-15 years ago was about 150k for contractors and more experienced professionals. But it seems like every second day I'm hearing of someone now getting 200-250k. I kept dismissing it saying they were outliers because of all the "no wage growth" I was hearing, but I'm starting to wonder if that's true across the board.

 

Show me the money! I am an experienced IT professional too, but I not getting that kind of money! I am in a good team with good work flexibility so kind don't want to change. The risk of work for a bad company or manager doesn't seem to worth the stress. For the next couple of years, I think I will let properties do the hard work of bring the bacon home.

 

Yep good point about apartments and fact buying is cheaper than renting given low interest rates.

 

Hi Shahin - what's the main reason you see that people aren't as reliant being close to the city? Mainly due to remote working options/flexibility?

 

Remember wage increases were (are) linked to property prices via the interest rates i.e. you need to earn a certain amount to make the monthly payment. If prices went up, you needed a pay rise to pay for that increase, or, if wages go up people were able to pay more per month so they're willing to pay more for property and it pushes prices up. Now that interest rates have come down the cost of holding a property has actually decreased relative to incomes.

For many people, the price of property is what they have to pay each month, not what they paid for it at the start. Of course, this is incredibly risky in the Australian rate environment given fixed rates don't really go beyond 5 years for anything realistic (although I know ING are considering it), but in the US you can fix your mortgage for 30 years/life of the loan. If you can make the payment then that's all that matters to some people to have the house of their dreams.

Each to their own.

- Andrew

 

My friend this is why reaching financial independence is so key. If you can create a healthy salary that is paid via (relatively) passive portfolio income, then you can afford to / be in the position of; taking a risk on leaving a great team for a role with much higher salary. You give the new role 6-12 months and if you don't like it, you can quit full stop, and take time finding something else/being unemployed; because you know your portfolio will continue to pay you passively as you sleep, month in; month out

 

what you are saying is absolutely true too, but what I mean it's more like the other way around, I think my investments are doing well enough that I don't really care about getting $10-20k extra after tax extra here and there as I am currently working on a great project and like the people I am dealing with. I have changed jobs for more than a handful of times in the past decade that I know there are reasonable chances to running d..heads although they might sound decent in the first place.
Btw, long time not see my friend, how you doing? is that Mini still your daily driver? must worth a little fortune now.

 

You need to force yourself out. In the late 2000's I was making the low 60k's for one of the big 4 consulting companies. All the contractors around me were making 150k doing the exact same work as me. I convinced myself for years the was something more to it that I didn't see. There wasn't. I made the jump and basically tripped my salary. Back then only contractors were really getting those rates but these days many more full timers are. I know for example if you are a regular run of the mill Angular dev (super high in demand right now) they can basically command 180k-200k and beyond. Stuff the team...go get what you're worth!