Sydney drops 4.7% over last six months - what do you think is happening?

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What to make of Sydney's biggest house price drop

The 1.5 per cent drop over the March quarter in the Domain House Price Report, released on Thursday, when coupled with the 3.2 per cent fall in the December quarter, means prices have now dropped 4.7 per cent over six months. It’s an even bigger drop than Sydney experienced over 2008 during the global financial crisis, when the median dropped 4.6 per cent over the full year.

 

This is only a start....whilst the medians in some suburbs may not move as much...others like Western Sydney, Hills, and Southwest will drop much more.

All part of the cycle.

At this point you should also see Brisbane got to the next point in the cycle...somewhere around 9pm.

 

And what's your reasoning behind those areas falling more than others?

 

People have over payed .....if you look at the longer term fundamentals of the areas....this does not stack up...lots were also people who wanted to get into the market. The market will go back to the norm.

Have a look at what is happening in the Hills and Southwest..these areas are falling fast. Blacktown is also dropping.

 

Lots of people on the train talking about how apartment prices are going to crash because there's just so many of them.

 

My broker told me last week that one of the H + L packaged in the N West (Sydney) was $979k in Jan and now valued $863K. Probably more elsewhere.

 

If prices are falling, why are they selling?

Are they rebuying & upgrading or moving back to the rental market.?

Have days on market increased? Discount to advertised price?

What other leading indicators have moved to heighten the changes ?

 

Yes...if I was to rate the drop...largest would occur in the NW, then SW, and then Western Sydney.

The lower socio economic areas targeted by investors would also feel the pain as rents head down with the supply on the market.

What happens is people start moving closer to the city and into better areas as rental affordabilty due to supply improves. Also some people who bought 2 years ago thinking they need to get into the market in the Outer suburbs will rethink their decisions..particularly if it taking them over 2 hrs to commute. That will then prove to be interesting as they sell and move closer in...happens every cycle.

 

Hope you are right about the Hills area Sash because would like to upgrade my PPOR from a shoebox to a place with a backyard. Would love to have a dog called Wilbur Smith.

 

No guarantees...but all I can say is patience...it will happen.....

You can call the RBA guv and ask him to put up rates....the sensivity to this in Sydney is incredible. Figures are showing that almost 40% of OO in Sydney are on IO only loans......

 

Holy moly... any further info on breakdown between those who are on I/O because they simply can't afford P&I and those who are investors?

 

Yep....now you get the picture...this is something which APRA is now focusing on....they are less worried about investors now than these people. Because if rates go up unlike in the past where they could go to IO for some relief....they have maximised borrowings to get in.

This is what separates the more sophisticated investors to the what I call the mom/pop investors who have bought quite a few properties and made millions...the issue is this:

1. How will they manage their interest rate liabilities...do they understand CF well. Sure you can take a 10 year IO only...but can they service the huge jump in repayment when that term expires

2. Do they understand the impact of them having to sell in a down market could be up to 200k in Sydney or even more

 

Good question...let me know if you have the answers...I would luv to know.

When that happens it becomes a self fulfulling prophecy.

And it will not only affect the Apartment market...it will affect the entire market!

Bear in mind this is normal for the Sydney market.

 

West -2.2%
Inner West -3.1%

Well the latest figures would suggest Blacktown is performing better than Newtown at the moment

 

I would not look at stats for a whole region. People here focus on stats too much ...get on the ground and have a look.

Bear in mind that that this could be including units also....if that is the case. Then I am not surprised. Newtown is Bluechip now...even it drops over the longer term the demand is there.

 

There is a rise in stock in the Hills and things are back to normal as in taking longer time to sell therefore you can see a discount in the price however I can still see a lot of people willing to pay $1.5 million for an old 70's/80's 4 bedder. The issues will be around the McMansions on big plots of land. They will always take longer to sell and will drop in price.

However around the new Metro train line out near the fringe of the Hills, Rouse Hill/Stanhope Gardens the stock is pretty low at the moment so prices seem to be holding firm. Cheaper more modern housing so I think people are finding more value in buying a million dollar property out there that spending more on an older house in the middle of the more established areas of the Hills.

 

The LGA breakdown we have at Domain shows Blacktown Council property prices up 0.5 per cent over the past three months. Marrickville Council area is down 2.6 per cent.
The Hills District is down 3.7 per cent.
Can't share them all as using them for a story, but thought you might appreciate this insight.

Region breakdown in the second graph in this story: What to make of Sydney's biggest house price drop

I'm told in the inner west it's a case of people now buying up the inferior properties as well - which could be skewing down the average?

 

Lets also not forget that stats are lagging indicators...the market has already moved down...what you are seeing stats on now was probably based on Data taken a couple of months ago.

In a year...the data will be clearer. From where I sit and what I am hearing...the Sydney market is in the midst of classic correction. The question is now by how much and which areas will take the battering if you will.

Me thinks it will be the areas which overshot the most - namely the West, The Hills, and the Southwest. 2018/2019...is tipping to be a good time to get in.

 

While losing 100k or more off the peak hurts, most people looking to sell now havent bought those properties in the past 1-2 years anyway.

The vast majority (for example, people looking to sell who held for 3-5-7 years or longer) are sitting on a lot of equity.

I would not like to be a forced seller in a weak market though. Overall, Sydney isnt weak, but in some areas stock on market has increased significantly.

 

Very good point. IMO the people who are selling end of last year to now are looking to cash in on some equity due to the boom. They are fishing for that high price but can't get as much as mid-2015.I don't think these sellers would be too concerned as long as they haven't bought a more expensive house and expecting a quick sale on there existing one so they can settle.

The bigger test will be when rates start to rise.