NSW Sydney 2020 "Megaboom"

'Strongest bidding since the peak of the boom'

Record low interest rates are setting the foundations for the biggest housing boom ever for Sydney.

Experts are predicting double digit growth by years end. Home prices in Sydney recorded a 1.3% surge in Sydney - Annualised, this is 15.6%

How big do you think this boom will be?

What will happen if rates are slashed to zero next year?

 

It won't be a boom. There's just a lack of supply at the moment so people with loans approved are suffering from FOMO.

 

Affordability will be the issue - what will structurally be required to make houses more affordable?

• Wages to rise substantially
• Productivity to rise
• Loan terms to be extended to 35 years
• Additional borrowers to be added to the loans (eg. parents)
• Multi-generational loans
• Banks taking on the role of equity partners eg. Bank takes a 20% stake on top of providing loans for 80% of the balance.

 

100% agree with both your comments.

If that booms does eventuate....the downside is going to get ugly.

Scott you raise some very valid points...people are not thinking through the impact of larger mortgages. Modelling is showing that some people in Sydney will not be able pay off their mortgages at retirement.

 

We've just gone through a RC for the banks, will responsible lending fall on deaf ears and are we going to have a new generation of asset rich/cash poor retirees who are trapped with $1.6m max super which won't touch the sides of a multi-million dollar mortgage?

 

Just business as usual....only 4% (4 in 100) of people know how to manage money...has always been the case...

 

What's that quote about "the only thing we learn from history, is that we don't learn from history!?"

 

The irony is that the construction industry is going to be the reason this "recovery" gets messy. Approvals in NSW have fallen 30% and still trending down. Construction work was the major driver behind the jobs growth, employment growth, wage growth and economic growth of NSW in the past 5 years.

Over the next 2 years that work is going to dry up and no amount of government spending can fill that multi billion dollar void. The biggest implication of this is that a state with no jobs growth does not have population growth. This will happen as supply hits record highs, which means rents are only going down. considering the case to invest sans capital gains doesn't even stack up now, I'd love to see the logic behind prices hitting double digit growth again.

 

It is getting tougher to obtain an owner occupied loan (or an increase) that stretches into retirement based on your super balance alone, although magic wands owned in branchland do contradict that.

 

Yep....I am hearing that also...they want to hear more details on how you will pay off debt and exit strategies ...once you are in your 50s.

I think the magic wands will stop working soon...due to increased scrutiny on lending practices. Though Westpac won the case against APRA....other banks will avoid getting into the cross hairs.

 

I hear you. But it isn't the investors that are foolish or irrational - it is the policy makers.

Zero % interest rates, and lots of unreported inflation? I would think real estate is an excellent way to play that.

And yes, megaboom from here to 2026!

 

I'm not sure if I missed your answer to this, but if inflation is being under reported and being represented more accurately in the asset class, doesn't that mean that discrepancy between true inflation and wage growth is also being under reported?

And if you agree that policy is foolish, doesn't that just add to the bubble theory further? Aren't you just gambling that that bigger fools will be there when you want to realise capital growth.

 

I am arguing that they are mis-defining inflation as relating only to consumer prices. The inflation is under-reporting, because they are ignoring the inflation going into asset prices all together.

So yes, I suppose, the discrepancy between inflation and wage growth is under reported as well.

And yes, this is what inflates bubbles. The important thing is that you want to be on the right side of the trade.

 

Do you believe we will see another boom in Sydney like the last and all suburbs boom?

 

I think so. Dangerous to crystall ball of course.

But I think the next 6 years will be significant for real estate (Sydney/Melbourne). Prices have to adjust up so that yields adjust down to meet the prevailing interest rate.

We are going into phase 2 of the bull market as described by the 18 year cycle hypothesis. And I know how nuts it sounds that we are going into another boom, but we can see it already can't we?

 

I follow the same stuff and based on history Brisbane & Perth will boom! In my mind for Sydney & Melbourne to boom yields will have to improve, as with all booms they are mainly driven by investors.

 

Can you further dive into how you see the current buying as evidence of this? Could just as easily be explained by FOMO/pent up energy?

Would you be standing by the 18 year cycle had labour got in?

 

The RBA were always going to cut. They just wanted to wait until after the election was over. They would have had to cut harder if the ALP won.

Regarding current buying: Sydney has had clearance rates of 80% for two weeks in a row. And it is not necessarily a lack of supply issue, as supply was 11% higher than the week before, and clearance rates were still 80%.

Rational investors are just thinking about where to park money with an inverted yield curve. You want rental properties with long leases .....

 

I hear you. I am less convinced about Perth, but it has been moving lower for 5 years, so buying now is not crazy. These are two markets I follow less closely.

Look, I think any major capital on the eastern seaboard is probably reasonable investing.

Regarding Brisbane in particular: when I run the Sydney to Brisbane ratio over the past 5 decades, Sydney is actually historically cheaper than Brisbane right now (ie Sydney prices are under the trend line).

 

So you think this upcoming Sydney boom will be funded by investors who earlier had their money in bank deposit? in pursuit of better relative yield?