Market Changes Happening Now (Sydney)

Was having a discussion with an agent, some interesting bullet points from them, based on what’s actually happening now:

• Mid range houses in approx the 1-1.5m range will suffer only slightly when rates rise
• More expensive 1.5m+ homes will continue to perform, due to visible demand right now, as attitudes shift away from well located apartment stock that have the compromise of smaller and crowded spaces (due to effects of endemic)
• Entry level homes that don’t include apartments should continue to do well, demand is significantly stronger than supply as it is, and once immigration is in full swing this will continue stronger
• Brand new apartment builds need a few years to recover, even with the supply shortage, and even factoring in increased immigration. A lot of people are put off by them, and regulation needs to change around them.
• A lot more regional interest from people from other parts of the world, especially in residential property
• In short, the gap between houses and apartments will become bigger. This includes the differences in value, and the differences in yield.

What are your thoughts on these comments?

Personally I think with the government and regulators inputting new practices into apartment builds, it might build confidence pretty fast back into new apartments, as people will always gravitate towards affordability.

 

Pretty much agree with all six dots. At some point I do think the 1.5mill home sector will slow too, just don’t know when it will happen. There’s no way it can continue as it has been. Of course, if it continues, great, cause that will be “good” for my own on paper wealth…

 

The general ideas haven't changed.
Prefer houses to apartments.
Prefer old houses on more land than new houses on smaller land.
Prefer old apartments to new apartments.

 

What regulation change are you referring to

 

• relevant to the endemic right now, improved ventilation in all apartment complexes to reduce the impact of viruses spreading from common areas.
• Relevant to the crises recently with opal tower, and the one in Florida scaring people, more transparent and stringent regulatory actions to ensure buildings are constructed to the standard they’re supposed to

 

For individuals, just avoid high rises (or anything with an elevator). And avoid new suburb house and land. Done.

 

Design is an issue too. Like bathrooms with no windows and bedrooms borrowing light from the lounge

 

im more concerned about r4 land value in my personal case, previously the gap was much larger between an r4 site and a regular house on r2 in the same suburb.

currently an r4 plot is essentially the same price as r2 land

that gap has been closing! Is there scope for r4 values to bounce back to 2016/2017 pricing?

Well designed apartments would actually be a massive appeal to users! I’ve always says it boils down mostly to the natural light.

 

Golden rule for property investment! May I add, Sydney and Melbourne, full stop!

 

Yes, not to say that units or h and l or other cities might not outperform syd and mel, but with a limited number of bullets, you choose the likeliest targets.

 

Yeah agree. The days of massive portfolios is over for the average bear IMHO...just glad I got to ride the wave of cheap and easy credit. Starting today, I reckon my portfolio would be 1/3 of the size max.

So bottomline is choose wisely bc at some point you're gonna run out of ammo.

 

this will be interesting to see.. people starting today will have a much harder time. Tho I’m sure buying opportunities will continue to come!

what’s the best choice for ammo now? Feels like everyone and their dog is looking for townhouse sites... thinking if it’s worth exiting an r4 position and chasing the momentum with lower density sites. They’re priced proportionate to the demand tho

on the other hand, zig when the market zags? Might be an overreaction against apartments?

 

I tend to think maybe people will only compromise so far on location and so start to look at Townhouses, Apartments, etc. closing that gap again.

High end apartment market seems to do ok, so I think the issue is with trash/small/not well located apartments and not apartments per se.

I think if current growth rates continue, affordability gets stretched/starts hitting a wall. Then adding increasing rates? This would be a problem for anywhere depending on first home buyer's, it could then feed into a slowdown in the next level of upgraders.

Depending on the trajectory of rates people might then look to trickle into other asset classes again.

Most all residential property is giving a positive yield, which is pretty attractive, negative yield gets less attractive as you get older and looking to retire.

 

How long has this agent been selling? What areas does he service?