Post Royal Commission Property Prices

Bought for 287.5k in year 2000. Sold 18 years later for 3.3 times after an epic boom, not a great outcome. In this instance, the seller had to let go a bit of paper profit but this will have an effect on people who bought at the peak and have to sell with real loss.

 

@JohnPropChat

I would say that in the real world its fantastic rate of return for a low risk asset.
Lets break it down.


The gross Capital yield is = 6.85% pa
Add on top about $450,000 in Rent


This will take total Gross yeild to approximately 9%

So 9% Gross yeild AT the lower end of the market Cycle. for a relatively low risk asset. If one was to sell this at the top of the cycle it would have had a Gross yield of + 10%

Lets Remember @ 10% you double your money every 7.2 years.

 

I don’t know where they got the $1.2 million figure from but it’s 2 bedroom torrents title really, smaller block than suburb average and no street front. Not to mention it’s meters from busy road. Even in peak times, this property would have struggled to fetch over a million.

It would probably only rent out for $500pw and wouldn’t appeal to typical owner occupier demographic of this suburb.

 

Not comparing with other asset classes, just this one in specific. Even in a flat-as market like Perth, I can find examples of 4x+ the purchase price over 18 to 20 years with similar rental yields. In current Sydney market, one can find stock that performed much better than 3.3x over a similar time period. 5x is not that hard to find since it is still early stages of correction.

So I thought this was a bit disappointing but in the grand scheme of things the owner only had to let go a little bit of paper profit.

 

I know the owner, she bought an apartment in Dee Why for change of lifestyle. Single lady, hardly any debts. She wanted 1.2m probably was never going to get that even at the peak.

 

That was on back of mother of all global credit expansion along with a epic mining boom.

The real question is going forward can it be repeated in next two decade?
given that we are starting in sydney with

• All time high D2I
• All time low IRs,
  we are probably at the end of long term credit expansion cycle?
• P2I is higher then previous peaks even after the recent fall.
  
  gig economy and rising automation headwind will continue to maintain a lid on wage expansion in decade to come
  Curious what levers are left to fuel future credit expansion? assuming wage rise just match inflation.

 

I have a number of FHB friends who have been sitting on the sidelines the past 6 months. Interestingly all of them are now back to attending opens.

I think it’s a few factors but mostly when prices were declining and Christmas approaching, a lot of people took the opportunity to just wait it out.
I believe improved sentiment and the fact we are all back to the grind will see increased activity.
I’m not saying this will result in increased prices but usually activity and prices go together.

 

I got a call from a friend who has been unsuccessfully trying to buy a house in Cherrybrook for last 4 years. Every time market drops a bit, he waits for it to drop a bit more and then when it starts going up, he is no longer able to afford/justify the prices.

He started with a budget of 1.3m in 2015 and could have bought something decent sub 1.5m in last six months but was uncertain about the purchase given passimism around Royal Commission. This weekend he inspected 3 properties and there were 20-30 groups per property.

 

Agreed. Things won't be the same going forward but investors will find creative ways.

 

He should have acted 4 years ago but I highly doubt he is missing anything by NOT acting now. Correction is in full swing and regular folk are trying to catch falling knives, easy to get burned. When the trend is downwards followed by sideways - what are they missing out on?

 

Sydney had a long and sustained boom with so much built up inertia, things may appear picking-up but the overall trend is clearly downwards for the time being. I suspect it'll be 2020-21 before the dust settles and the next trend becomes apparent (be it sideways or upwards).

 

Established suburbs are a bit different. Yes, prices went down in Cherrybrook but only on low grade stock (mainly under wires, near major roads and smaller blocks) and now better stock apparently has even more demand.

 

I was able to buy my first property in 2006. After a year of waiting for market to collapse 60-70% as predicted by many on the popular media, I ended up buying and I would be ahead if market one day crashed 60-70%.

 

You could be right but is it worth the risk for someone jumping in now instead of waiting for the dust to settle? Probably not.

 

Probably should have jumped 6 months ago. A Sydney PPOR purchase shouldn’t be dictated by cycle. Waiting on the side will only push you further out .. I know so many examples of friends waiting on Carlingford to drop a bit and then buying their first PPOR in Riverstone or Maraden Park.

 

I agree with you there. When emotions are involved, it is no longer about sound investment decisions anyway.

 

Buying a family house is NOT an investment strategy.

If you have kids and a.wife and want to spend 10+ years.

 

No one has any idea not the dust.

Will you reimburse some one if APRA changes the rules and their is a rush?

How about if Negative gearing rules change with 24 months window. What if their is a rush prices platue or go up slightly?


Being overly confident of an outcome that is beyond your control is the same as arrogance.

Most of Sydney's downturns non the last 30 years have not been years of spiral down of prices. Rather 1/2 years than flat.


And if the market now flat for the next few years why would you want your family going through renting multiple houses when you can just buy and settle family , wife , kids , school and start Home.