My gamble on the Sydney property market

Tight-arse

I share the same sentiment on apartments.

 

I know yeh tight-arses

 

Yes I could get a larger pre-approval from a broker. Then I could stretch my budget to 2.3M. That would see me end up with 1.35M in loans (including stamp duty) for my PPOR + 900K in two IP loans combined, for a total of 2.25M loan.

It's doable, but not one I've considered seriously. My approach was that if a major bank capped my borrowing limit to 1.1M, that's probably a good guide as to how much I should borrow.

But I didn't know Suncorp was known to be more conservative, so thanks for the tip.

 

The lender I'm using for my client is also a major. Lending is definitely not comparing apples with apples.

 

At the end of the day, you are in a good position and have a high capacity to add to your savings at a fast rate.

So if that means waiting a bit longer so you don't settle, then so be it.

If you had to buy within the next 2 years, I think odds aren't neccesarily in the favour of waiting.

That said it's easy to get carried away and overpay now.

It's worth remembering how quick sentiment can change, last year prices went down & open homes weren't as busy. Suddenly it's white hot. Like equities everyone likes jumping on when the market is rallying.

If you had a longer timeframe, say 5 years I think it's a bit more interesting.

There have been 2 major catalysts from rates falling so low:
1) Improvement in affordability/borrowing capacity (even if only temporary).
2) A lot of properties crossed the threshold where interest payments are now lower than rental payments.
Strong financial tailwinds, and strong physiological tailwinds.

Number 2) Will change as prices rally at a faster rate than rents, hitting/passing equilibrium. Both will be strong headwinds if rates go up.

The longer the timeframe the higher the probability of a rate rise.

Highest probability imo is a strong 12-18 month rally. Whether they trend sideways or come down again after that is pretty uncertain.

I think next 12 months is a great time to rotate out of less desirable properties, a lot of things are being overlooked.

 

I caveat this by saying everyone has a different risk threshold... but 470k gross income repaying 1.35m in loans + 900k IP with rental income seems relatively comfortable to me.

 

You must have some serious outgoings to be capped at $1.1m on those salaries.

 

It's hard to believe he's just gone to one bank, got a quote, then called it a day.

I bet if he engaged any half decent broker he would get a ton more.

 

Hi all, updating this thread as I felt obliged to due to the large number of posters who contributed and gave advice.

In short my 'gamble' fizzed out - I said I was planning to continue to rent where it's convenient to me, and save for the next 2-3 years for my PPOR, but I ended up buying.

Through pure happenstance we drove past a 4 sale sign outside a townhouse complex in the upper north shore within easy walk to trains and good schools nearby. We looked up the listings, contacted the agent, inspected a 3 bedroom townhouse and made an offer all within 3 days. We are currently awaiting settlement.

I didn't need to borrow 1M or anywhere close, in fact we're only borrowing around 40%.

I'm glad it turned out this way because my purchase price was unaffected by the recent boom, and by purchasing a townhouse I'm able to buy a PPOR as well as add an IP to my portfolio without delay. In fact we plan to start the search for our next IP as soon as settlement is completed.

With an IP currently in Sydney and Melbourne we're looking to Brisbane, to fulfill my aspirations of an IP in each capital city, in the order of population size. I know Brisbane is booming at the moment, and no doubt I'll ask for some guidance from the helpful seasoned investors on this forum.

Thanks all for the kind words and helpful tips!

 

Sounds good!

 

Which suburb did you buy in ?

 

So with all the high combined income, high cash levels, ambitions of having IPs around the country.

Ending up having strata townhouse as a PPOR...
- no development opportunity
- non deductible strata fees in perpetuality... Try to run DCF on that, conservative $2,400 p.a. on rate of 0.1% p.a. = 2.4 million
- living standards depends on the quality of your fellow townhousemen.
- no pool, no spa, no boat storage, no smoking on balcony....
- friends fighting for parking spaces when visiting...

 

To be fair that townhouse is now probably worth several hundred thousand dollars more tax free... not bad!

 

COVID has increase prices of properties with land values in all major cities....

However, PPOR is all about ME !

 

Still better than not buying.

 

of course.

 

Glass half full? Empty? No, there is no glass.

 

Original poster’s original hunch was correct. Hindsight is a wonderful thing.

 

Ditto. ... @poby was correct. Reading through the posts so many people recommended jumping in.

Though he bought....a PPOR sub $2m is now more attainable. More decreases to come this year.

 

For FHBs, though.....
How much have prices fallen by?
How much has borrowing capacity fallen by?
Good chance the property a FHB could buy 12 months ago, and now have to pay higher rates on, they can't buy now because they can't borrow enough.
Is it better to own, but pay higher rates, or not own at all? Depends on what the future does, and whether you can handle the cashflow.
Is 'cheaper' really better if you still can't buy it and can't short it?
Is 'cheaper' a problem if you can hold through the period and it recovers?

100 years from now, will it be better that you bought, or not?