My gamble on the Sydney property market

Similar financial situation assets/income. No IPs but could have kept our PPOR as an IP if we didnt mind the size of loans (i did).

We sold our PPOR and upgraded end of last year before recent jump, neighbours similar house sold ~15% more than ours a few weeks ago
Our borrowing cap was ~70% more than yours even keeping the IP (though doing it through a major bank).

I had waited for a correction for years and had been looking seriously since start 2019 which would have been best time in a while but thought election and labour would drop prices further. Was wrong. Then pandemic came and we waited but not even that has stopped house prices...

You can buy and sell in same market, sell the IPs, since you're not negative gearing if theyre offset and stop paying non tax deductble rent and ride the tax free CGTs on a PPOR. Or maybe you get lucky by waiting.

 

Did you choose a pre-approval of $1.1m or is that what you broker gave you?

You could afford the monthly mortgage repayment of a $1.1m loan in just one of your post-tax weekly salary payments. No brainer for me.

 

IMO based on the two choices you’ve provided, I’d say buy now if it suits your personal circumstances.

On the numbers alone, Sydney is very cheap at the moment, a few hundred K increase may seem like a lot, but affordability is still very good and at levels we haven’t seen in a long long time.

I’d be surprised if Sydney isn’t materially higher in a few years and anyone buying today isn’t well ahead in terms of ‘nominal values’. The yield spreads on offer in the premium markets, doesn’t make logical sense to me to buy up beautiful premium land locked land with significant positive yield spreads. Perhaps rentals will go down, but they’d really need to halve to make the numbers make sense.

When rates are slashed, assets reprice. Property is slow, so the ‘inflated asset prices’ has barely begun relative to the monetary settings that’s been put in place by the over recent years.

It won’t be long before all economic commentary about this economic cycle will be about how Team Australia ‘over stimulated’ given how well things have actually panned out (at the time of decision making, it was expected to be a lot lot worse).

 

Honestly just leave Sydney and live the dream. You won’t look back! How many people do you know that leave Sydney and come back because they miss it? Very very rare. How many people leave Sydney and say it was the best thing they ever did? Very very common.

 

I think you’ve answered your own question. You have a very high paying career that you love. That is something over 90% of us will never have. In my eyes, you’ve already won the game. Money will never be a problem for you in the future. I’m not sure why you are so concerned about paying a few hundred grand extra?

 

Unsure if you heard of this guy, Chris Gray. His mentality on his life, living and investing is quite opposite to many. I found the presentation very interesting indeed! Old presentation but still valid, IMHO.

I think his dad was a doctor or some specialist too?

 

Thanks it is very tempting. But I will probably only do it when I'm forced to. I moved to Sydney for university, and have now lived more than half of my life here. I feel I know and understand this city after 20 years, having lived in or worked in just about every pocket of it. What keeps me here is probably what keeps people in most other big cities with high property prices.

 

Thanks, lots of posters have replied saying why not just buy now, and don't worry about paying 200-300K extra as I have good income. But it's not just about not wanting to pay more than they would have cost 6 months ago. Currently the houses we like are selling for 2.2-2.25M, which is 10% over our absolute maximum we can afford which is 2M (our deposit + pre-approval + stamp duty).

We could buy for 1.8M-1.9M but those houses will need 100K+ in reno, and even then they won't match for 2.2M houses, and hence our plan to save up for another few years. And this is where the 'gamble' comes in - will we find ourselves with 300K more in savings in a few years but having to pay 500K more by then? If property prices growths outpaces the rate at which we can save, we might be forced to make the big move after all.

 

my parents and 1 sister both moved out of Sydney . Parents went to central coast and moved back after a few years , able to move back but house they bought wasn’t as nice as the one they sold..

sister to Canberra and thought of moving back but couldn’t afford to . House they sold in Lindfield is worth dramatically more than what they bought in Canberra .

my other sister bought a weekender on the mid north coast which they’ve just put on the market .as it’s too far away

2 of our three neighbours at our weekender on north arm cove wanted to move back . One could afford two and one couldn’t . Both moves were driven by a desire to be close to better medical facilities .

As a GP I’ve lost count of the number I’ve met over the years who made the move and regretted it . It is VERY common .

people make a big fan fare when they move away from Sydney , but they’re much less likely to make an announcement when they realise they’ve made a mistake , but they do talk to their GP about all the problems they’re having as a result of the move .....

cliff

 

What's good for a weekend trip often don't translate well for the long term. I've also seen many who have moved out and move back to Sydney. On the other side, people who moved from one capital city to another like Brisbane have a lot more success.

 

Palm cove and Canberra there’s your problem!

 

But once things on the Health front are better and people start travelling and moving back won't migration start back here? So any loss from expats moving back would be more than compensated by rich and/or skilled migrants (who usually are also highly paid) migrating here?

What Australia has to offer cannot be bought with money anywhere else and therefore we would always be able to attract the best of the best.

Cheers,
Oracle.

 

I would strongly advise to get a second opinion from one of the brokers on this forum about your borrowing capacity and not just rely on one from your bank.

I vaguely remember reading in one of Jan Somer's books where she said every bank has a different risk appetite and the borrower they are suitable for. Just because one lender has declined or offered less doesn't mean other lenders would be the same.

Finally, and the most importantly how much monthly mortgage payments are you comfortable to service?

Cheers,
Oracle.

 

Would have thought with your 1m deposit and high income you should be able to borrow more than what you have said, given the current very low interest rates.

 

Agreed.

From smh - not sure it has already been posted here but ANZ has revised its forecast (fourth time now) given the trailing data keeps pointing to a very large lift in values. ANZ tipping 19% increase for syd values this year and similar for bri and per with mel to get 16% growth - I expect at this 5%-6% quarterly run-rate of growth, this forecast will be updated again in a month to 2 months time rising to 25%+ Prop prices in Syd will be 'materially' higher in 12 months - let alone 2/3 years.

https://www.smh.com.au/politics/fed...up-17-per-cent-this-year-20210324-p57dn5.html

"ANZ economists on Wednesday sharply lifted their forecasts for house prices, tipping a nationwide increase of 17 per cent through 2021.

Sydney, which already has a median house price of almost $1.1 million, is tipped to experience its largest one-year jump in prices since 2015.


Melbourne house prices are expected to lift by 16 per cent this year, its largest single-year increase since 2010. Brisbane is forecast to have a similar increase while Perth house prices are forecast to lift by 19 per cent.

The last time house prices nationally lifted so much was in the late 1980s in a property boom that was ended by double-digit interest rates and the 1990-91 recession."

 

It is very likely the case.

Although i have purchased proeprry on average once every 2 years over the last 13 or so

I have mistimed the market at times and it took 3/4 years to get abck to 0 .
Others were amazing as they were in the midst of the GFC in great suburbs.

The ones where i mistimed the market in most cases had a i waited 1/2 years i would be ahead.


NO one can time the market.

NO one.

I know this.


The market is hot NOW.


All you have to do is get a show of hands on this forum. From the investors with portfolios who si selling IPs and who is buying ips.

Most here are current IP holders or sellers.

Not many buyers.

 

Definitely agree with the general principles. I went on his FB page and he seems to be focusing on buying eastern suburbs apartments lately for clients - but in this climate, would that mean having to wait a while for the capital growth?

 

If I had the spare capacity (up to my eye balls currently in my dev projects), I would be buying apartments right now with long settlements. My view is that they are currently highly unloved and if house prices rise another 25% in 12 months (very likely), you will have such a massive gap b/w houses & apartments that by the end of settlement period (12 months) that a lot of people will be creating massive equity even before they settle and with migration and o/s students arriving in droves by this time next year! Add in significantly higher yield and the fact one could buy them now at their 2015/2016 prices just makes it a no brainer..

We would then look back and wonder why on earth did we not buy these at the 'bottom' of the cycle! This is the bottom for that sector..

 

I don't use his services or his advice but I am always open to find out different ways how people can invest. I like his different strategy as you can invest into RE in many ways, that's all.
Just pointed out you can rent and live in most desirable areas and make more money on your IPs, but you need to redirect all that money into investment instead of buying your dream PPOR.
Many ways to skin a cat...

 

His mathematics are pretty terrible, though. If property prices in the UK had risen at 7% per annum since the Norman conquest in 1066, they would be about 10^28 (or a 1 followed by 28 zeros) times what they were then.

Given the smallest coin in medieval England was the farthing, which was a quarter of a penny, even the meanest house in Britain would be worth more than all the wealth in the world given that sort of increase.