Sydney Bottoming out

Hard to see it properly bottoming in the near term without intervention, imo.
Only now starting too see the second order effects coming through which will carry prices lower.

Without intervention I expect you might see a short stall, before further price drops. I expect that to mark the half way mark.

Too many other weak stats to take into account.

 

You are correct.. but many cannot either. The point I was making is that we cant say for certain that 100% of borrowers who borrowed right up to the peak in 2015 and into 2016 using IO, have had to face that issue yet. Remember that over 50% of all lending was IO by the time APRA stepped in in 2015. Most of that acceleration in volume happened in 2014 and 2015 - so we are only now seeing those people rolling towards the end of the IO periods.... The saving grace for them is that the IO quota has been removed.... that will save plenty of them. But there will still be servicing calc challenges for some as well, even with the IO quota removed. Im simply sugegsting that it will be 2020/21 before thats confidently in the rearviewmirror... and because of that, it's hard to ignore the possibility that there is at least some potential mortgage stress coming the way of some of those borrowers, which could potentially result in some people having to let go of some stock .... and that can place further downward pressure on things

Im not saying any of that WILL happen. Im saying it CAN happen and we shouldnt get too confident the bottom is here while that issue is still hanging around...

 

Can't disagree with this

 

Exactly.

A rush to negatively gear now is like running to the top deck of a sinking ship.
If negative gearing is removed it might increase demand for high yielding cashflow neutral / positive property instead? That's certainly the way I'm thinking.

Willy

 

Let’s throw a hypothetical out, I understand it’s near impossible to catch a falling knife but if you were a cash buyer would you invest within this market (Sydney) or sit it out and see what happens?

 

Property doesnt make sense without gearing. If you were a cash buyer you might as well get share funds. Dollar for ungeared dollar they will perform better.

 

Even over the last 48 odd months within this market?

 

Good thinking. Even with NG in place, CF+ are already a superior asset from a servicing calcs perspective ( for those wanting to buy and hold large portfolios anyway) as they facilitate debt reduction and allow for P&I repayments to be far more manageable. Of course, you have to actually deploy the CF towards debt reduction to realise a benefit...

Vanilla yielding property may not make sense without gearing , but CF+ property will make good sense with gearing. Already does. See above

But if people buy low yield chasing growth - has the potential to end up ugly when the P&I monster comes a calling .....

#cashcowsrule

#that'sapennyyoucanheardropping

 

All very interesting stuff. I remember back in the GFC people were calling the bottom of the Major indices because of a mini upswing that yes, could have looked like a possible recovery at the time, however the trend indicators were still down. Many people traded against the trend and were burnt beyond belief in what turned out to be only about a quarter of the overall fall.

I think the moral of the story is that no one knows where the bottom is or if we’re at it until we’ve definitely passed it. Better to lose a little on the upside during the recovery by being absolutely sure than taking a gamble by trying to pick the bottom.

At this point, I don’t think there is anywhere near enough certainty in any number areas to confidently say we’re at or have passed the bottom so for my money, although we very well could be, there’s no rush to buy yet.

- Andrew