Panic Setting in Sydney

Commonwealth Bank increases interest rates for home owners and investors

That's a second rate bump within a month! CBA's investment book must have been getting out of control...

 

Seems oversimplifying the matter to me. Not sure who comes off worse if rates rises: the investor owning a $400k unit in Brisbane CBD struggling to find tenant or an investor with a tenanted $800k unit in Sydney returning 4% gross yield. Even in this example, it depends on other factors, lvr, other income, etc to know who is worse off.

Anyway, lived in Asia during Asian financial crisis back in 1997/98, certainly impacted everyone then.

 

100%. People who buy 250k homes as OO stretch themselves as much as those buying $1.2mil homes. Its all relative..

 

I'm in the NW of sydney tomorrow will go to some opens and check if theyre empty or not.. just so you know, I save all affordable properties in decent locations on my phone and just this week 8/10 of them sold within a week... there's no slowdown in Sydney in new home market. Just more availability of 250sqm blocks now allowing more affordable options

 

Yes it is oversimplifying, but I think as a generalisation it still holds up. I would argue that for example, Adelaide would have a much higher pain threshold to interest rate increases. Based on required % of household income to service OO, very low vacancy rates and high rental yield's. Again just a generalisation.

My personal opinion is if there was a large retraction in Sydney and it would have to be a large retraction, any flow on to other capitals would be sentiment rather than interest rate driven.

 

Not true.....places like Adealaide have salaries which are 65-80% of Sydneys. But there can still buy a house with 15 klms for 380k.

So for arguments sake lets take 2 professionals ...one is in Sydney earning 110k....the other in Adelaide earning 80k.

After tax Mr Sydney has 81k in the hand....Mr Adelaide has 63k.

The difference is with 15 klms with a 10% deposit...Mr Sydney would need 80k deposit plus stamps on a 800k property...and Mr Adelaide would need 40k and have 630k and 340k mortgages respectively.

Here is the kicker....Mr Sydney would 40k per year in repayments and would Mr Adelaide would need about 18k....leaving them with 41k and 45k disposable incomes.

The risk is more in Sydney as 40% of net income to service the loan where is 30% of net income is required in Adelaide. There in lies the issue...

 

Word around the traps is that they need to bring in their I/O book to about 30%...it is currently above 45%!

Hilarious indeed.....you should see a few people in Sydney...now starting to panic for sure! The rates will keep going...till they hit about 6.7% without discounts and 5.5% with discounts.

That would represent a 1.3% increase from 4.2% about 18 months ago....that represents a 40% increase in reapayment...people in Sydney and Inner Melbourne are the most at risk!

 

Yep, unless I'm mistaken where making the same argument?

 

This argument is spot on...except for one thing ....340k in adelaide gets you a house...800k in Sydney might....might get you a townhouse.

You really need to make the Sydney part of the equation 1.1 mill.....

 

Yes you are correct...even at 800k ...it is more unit terrritory 15 klms out.....but some 2 Brm T/H

 

Was talking to our dentist today...she and her husband will need to buy their first PPOR soon.

She is from Sydney and the difference in numbers is astronomical. It poses quite the conundrum.

They can stay here in Darwin, earn the same coin and buy a stunning house for 550k. Or go back home and spend 1.5+ mil for something average......

They are thinking of staying....

You could substitute Darwin with anywhere other than Sydney or Melbourne....

It's a helluva difference!

 

For sure. In Canberra (the next expensive city after Sydney and Melbourne), ~600k would get you something pretty nice. $1.5 million would get you a house in the very best suburbs

 

2 things..
1. I don't know a single person on 81k a year taking out a 630k mortgage for owner occ.. not saying it doesn't happen, but I don't see it often, and I don't think it would be easy to get that loan from a bank... maybe one of the brokers can tell us how much 81k can get someone while considering all living expenses..
2. You used interest only figures for Adelaide while using P&I for Sydney. Let's make them both interest only and people have the offset account. Numbers look more like this:
Sydney 31k repayments. Leaving them with 50k in their pocket
Adelaide 17k repayments. Leaving them with 46k..
Which does make Adelaide more affordable..but the numbers aren't as nice for Adelaide as you made it out to be

Now add to that another factor.. Sydney is an international city where demand for accomodation and jobs is huge plus plenty of jobs. you lose your job, you'll find one within a month easily..

Adelaide is a country town on steroids.. you lose your job, have fun finding one anytime soon.. I see it with mates even in the health field, where its usually very easy to pick up jobs elsewhere

Sydney will correct.. but really unsure what your agenda is here with all these threads Sash.. are you trying to push people into places you've bought interstate? Are you disappointed maybe you didn't buy enough in Sydney or have your properties in Sydney stopped growing now or..

Multiple threads, same topic over the last two years..its almost as if you want Sydney to crash without considering the consequences people around you will suffer

 

What good is making more money and staying in a city away from your family and friends? Who are you gonna spend that excess money with? Yourself?

Also I can find em stunning big new homes for less than 800k in areas where dentists are in huge demand.. it really all depends where ya wanna live and whether you care for living close to the city or not..

 

Theres a couple of "buying my home was the worst decision ive ever made" articles when this happens. The buyer realised all their income was going towards with mortgage with little buffer for related bills/repairs and maintaining the same level of social life and holidaying afforded from renting.

 

Just me thinking aloud here... for a high profile PC member scare mongrelling over and over and only in Sydney, we should at least disclosure of ownership of the properties in Sydney and what year were they purchased.

If it was a pure robust unbiased discussion, where was similar scare mongrelling post of Perth or Darwin prior it was tanking?

 

No..if you stay far away, you can always raise chooks in your yard. Don't laugh, they are more expensive than you think

 

And you can slowly build a relationship with them

 

this happens everywhere.. for all the investors here, did you find more mortgagee sales in blue chip suburbs or lower socioeconomic and cheaper suburbs? From what I see, I see more of that in cheaper suburbs..

 

Seeing a lot more mortgagee in possession sales/auctions this past 3 months. 3 purchases in last month for clients have been mortgagee sales. Lower to mid socio areas (Salisbury LGA)