NSW Sydney going OTT

the prices being thrown around makes me think that every 2nd joe on the street is a millionaire or multi-millionaire ... on paper

 

If you own a house in inner or middle ring or even in vast swathes of outer ring Sydney I suspect it's true. #niceboom #notcomplaining.

 

Things are still going crazy. I have to admit it does worry me a little.
I dont think it helps Australia to be too much in debt.

 

More Sydney suburbs have a median house value of $2 million than have a median value under $600,000

The proportion of suburbs with a median house value of less than $400,000 at the end of 2016 was recorded at: 0.1% in Sydney, 6.3% in Melbourne, 29.2% in Brisbane, 28.0% in Adelaide, 18.9% in Perth, 52.1% in Hobart and 0.0% in Darwin and Canberra.

It seems like in the future only wealthy people will be able to afford houses in capital cities. Sydney virtually has no suburbs now that have median house values <400k. I know 400k is chump change to a lot of people on here but for singles and people that are young/early stages of their careers it's pushing the edge of affordability.

 

I reckon my home is worth about 600k more than what I paid a year ago. Of course I'm not going to list it... #Nointentionofselling #Bhwahahahaa #Boughtwell #Sorrynotsorry

 

The way to afford Sydney property in the future is to get a job in brics...and play by their rules of GAAP (the brics version) ..which, ironically, gives you non GAAP earnings to offload into Sydney.

 

If you can afford $2M I guess the interest rates rises wont be a worry

This Syd boom is turning out to be a mother, perhaps even overtake the 6 year Perth property/mining boom.

Some will be laughing all the way to the bank...... access equity or sell now before its too late.

 

That "buyers guide" of 1.95Million means someone will pay 2.95 Million.... if you have 1.5 Million to spend on 3 bedrooms in Sydney, and if you dont want a rat infested, asbestos riddled dump needing 500K + in reno's, or an apartment , you will need to look waaaaaaay outside Glebe or Randwick Im afraid.

 

It's going to be spectacular when it all comes crashing down, just like the Sydney fireworks. (Katy Perry playing in the background)

 

The question is - what will cause a crash? Yes prices are stupidly high in Sydney - obnoxiously high. But volumes of sales are low... which is probably why auction clearance rates are so skewed. There just isnt much stock around - anywhere... so its not swathes of people buying in at these inflated prices.... its limited volumes of buyers. And the majority of buyers arent investors or non residents these days, based on what I'm seeing where I'm monitoring anyway. My wife and I are looking around at an upgrade in the 2.5 Mil - 3m Mil range and we are attending 6-8 opens each weekend across West Pennant Hills, Castle Hill etc... might not be the trend everywhere, but what we are seeing appears to be upgraders squirreling their $$$ into a non means tested, CGT free PPOR as they approach retirement and are considering their pension needs... we arent seeing many non anglo, sub 50 year olds at these opens is what Im saying. And prices have powered up from 1.4 -1.8 Million just 2-3 years ago, to 2.6 - 3.2 Million now.

Will a 1 % rate rise cause a correction? You would assume so, but its just so hard to call.

On the one hand- I/O loans reverting to P&I should be starting to cause problems in Sydney by now. So far, not happening. Will it turn the other way in 2017 as lending gets tighter? Possible..but jury's out. for the time being

Massive numbers of OTP apartments sales could crash in 2nd half 2017...and that could lead to a huge change in sentiment .... so far though- the apartment tsunami hasnt arrived so we dont know what will happen... it will be late 2017 /early 2018 before alot of projects reach practical completion and settlements are called....

On the other hand - what if the category of buyer ( upgrader, mainly) means that they are carrying little or no debt when they buy? Under those circumstances there wont be a crash...because rate rises wont bother them...

why do you believe there will be a crash @Kangabanga?

 

@euro73 : IMHO with bubbles in asset classes, there is always a cyclical pattern. These things just have a way of going up and down, just like there will be another financial crisis just when people are not expecting it.

But I do think its coming in the near future. Usually when the bubble is building there is a lot of buying and selling, then comes a phase of not much buying and selling (low volume), then when sentiment changes we get a lot of buying and selling again in the other direction.

Of course its impossible to say when it will happen, but it is highly possible that it will happen at some stage.

 

I'm one of those upgraders, (except 1. I'm not near 50 and 2. I'm not Anglo!) House is worth over $2mill yet the P+I repayment is only $1500 per month (I owe roughly 300k on it and have a lot of money just sitting in offset). I don't remember exactly but $1500 per month is similar to the repayment of what I used to pay on my first home back in 2005. (And I got that loan on a salary of about 46k).

 

That's a good position to be in. Sensible. There is some scary **** going on out there though. I was talking to a friend yesterday, first home buyer, he and his fiancé looking to buy a place that is going to auction, expecting to fetch 1.1 mill and it is an old run down dump. Needs another 100k spent on it. He told me their p&i payments monthly would be 5k! They are only in average jobs too, maybe earning 150-180k combined.

 

@euro73 those suburbs, castle hill, west penant hills, etc, would attract the older 'retiree' crowd. I guess a lot of boomers are equitied up and upgrading, others are downgrading, etc.

For an example of a different market: If you look at auctions in the west, there are a lot more ethnic (i.e. non anglo) families looking for homes, in a lot of cases the money is borrowed by putting 2 or more names on the purchase. It's a different type of buyer and a different market.

 

Thanks @Biz!
Yes, agree. FHB buying at those prices with huge mortgages... unfathomable.
If/when the s#it hits the fan....

 

Lots of young families in those areas as well.

Sure, but they arent attracting 2.5 Mil plus .

My point is...whats going to cause this crash? I personally believe we are more like to see years of plateau than a large enough correction for it to be called a crash. None of us know though. By late 2017 I think the picture will be much clearer. BASEL IV will likely have pushed rates up by 40-50bpts by then, so lets see if that , and lots of I/O investors being pushed across to P&I, becomes the start of a tipping point....

 

Kingsgrove is one area I've been looking at for a PPOR. Not my fist choice as I'm limited by $. Can think of worse places though. Have there been any ludicrous sold prices lately?

 

We pay 5K per month (into an offset), we only need to pay around $1.5K on mortgages or something. our combined Salary is not far above that amount (the 180, not the 150).

In my last job we were earning 150 combined and we paid 4K per month.

It's not that hard when you have no kids, no car loans and a fairly simple lifestyle .

We still go out and stuff but how much money does one need to waste? We have 500 bucks a month pocket money each to blow on whatever so we never feel restricted but if I want a big ticket item like a PSVR or something I would simply save for it over a number of months.

 

I'm just wondering with the current market and the reduced stock volumes. Does anyone recall whether the last Sydney boom had a similar pattern of lower stock around before the market corrected?

 

I think you're missing the vibe of this post