NSW Sydney Market..where is it heading..a personal view..

Hi All

http://news.domain.com.au/domain/re...apitals-underperform-abs-20150623-ghv7qa.html

It seems that there will be more articles like this...along with bank policy changes.

I believe that Sydney has reached its growth peak...things will now head down...not sure how fast this will happen. Why?

1. The jaw boning from APRA, RBA, and media stories are all in unison in talking down the Sydney market. I believe lending policies will also make it harder for lending in Sydney. Overtime this will affect people's psychology and they will move to other markets outside Sydney. Hopefully it will not be like a herd of buffalos.

2. I believe the smart investors have got out of Sydney and have moved to the Brisbane and Melbourne markets. As per the article above...the other market growth rates are now where near Sydney's...though inner Melbourne and some parts of mid Melbourne are concerning.

3. I feel that you will see lending for investors in Sydney will be seriously stifled by bank policies.

Love to hear what other people think.

 

I'll bite and say the Sydney market in the next 2 years will be at worst, flat to 5% growth. People wont sell unless they are forced to sell, the Chinese and other people are still buying. Interest rates are still down and there's still pent up demand from buyers out there. Jobs arent doing too badly. The AUD is heading south which makes it cheaper for people with foreign money. So we won't see this crazy double digit growth, but I still think it will be positive.

 

And what happens if China tanks???

A couple of things to note:

1. China is not doing so well economically anymore...watch this one....
2. The fed are now starting to restrict investing here...watch this space
3. As for jobs....Sydney is doing ok...but really well paid jobs are disappearing...and when they are replaced they are mid pay jobs. So there is alot of structural changes happening. I work in IT...there is a lot of letting expensive people go and replacing people on say 80-110k....so a rebalancing is happening.

The Sydney market will now stabilize in some areas so a little growth...but in others watch out!!

 

Theres still the pent up demand and people who arent PCers are still going to buy in Sydney. My colleague was looking to buy a townhouse for about 6 months and was continually outbid. She finally bought one 2 weeks ago to much surprise! Not in the suburb or area she was originally wanting though, it was just too hard.

Also, do you think China will slow down that drastically in the next 24 months? I don't know about that.

 

No one can tell...as there is no transparency with the Chinois.....but not all is well in Denmark.

I was talking to Chinese Mainlander and they are saying that people are getting money of China in droves. They are moving it overseas. Some of this is being removed via fraud other via people concerned....the Chinese govt is now trying to slow this down.

 

Yes, and this not a surprise . Sydney and melb have for a while now been the beneficiary of (often dodgy) overseas money especially from china.
Look at it from their perspective - quite a few have ill gotten gains, which is entirely possible in third world countries, and some times even accepted, and they need to legitimise it and if they can do that by getting it out of the country into a safe stable non volatile democratic society...then all of a sudden Melbourne and Sydney OTP looks like a fantastic proposition.

 

Ponzi scheme??

Watch where you buy units...if this comes undone..and the Australian govt cooperates to nail fraudster watch this space.

 

It's not a Ponzi scheme ..It's more a form of money laundering ..Ie washing dirty money clean, hence the name.
As you said, many probably won't want to circumvent aussie law , even though they have been lax about enforcement in the past. I suspect most will be channelling it via their relatives who are perm residents or the like and thus authorised to purchase even established properties. . The catch with that is that the property will have to be on the relatives name and not the person who is funnelling the money. If that is unacceptable , then OTP is the option. So it's not so much fraud...in their home countries yes, but that's not Australia's govt problem nor are they authorised to do anything about it.

 

I think overall, Sydney has double-digit growth left this cycle. 12-15% over next 12-18 months. And if I'm wrong, I believe I'll have been too conservative.

There will be a little pain after the top in the apartment gluts. I think people buying OTP apartments south of the city, CBD and Blacktown/Penrith area are in the casino but otherwise I think growth will just ease up rather than diving south by any significant amount.

The most critical factor is the first rate rise.

Second most, but far less (IMO) is further APRA intervention.

But where we are positioned at the moment:

- High levels of construction approvals, starts and competitions BUT still underlying undersupply.
- Stock for sale is way down. Less to chose from but more buyers with deeper pockets than ever.
- Aussie dollar headed towards $0.70USD
- Offshore money piling in to the new crap being built (your point on the Chinese economy is an important one and if China were to tank, it would impact our market a bit)
- Another rate cut looks imminent unless something major changes. Maybe more than one.
- APRA will tighten the screws again if need be but their intervention really affects the fringes...unless they do something very drastic.

That said, I stopped buying in Sydney more than a year ago and would not be advising anyone to buy there unless they're picking something up well under market value.

Also going on the record calling Sydney to see higher median price growth between Jul 1 2015 - July 2016 than Brisbane.

 

We'll see...I think Brisbane will pull ahead..just...the dark horse if Melbourne which should surprise this time next year!!

 

I openly admit I have absolutely no clue about Melbourne. It's gotta go a some point but I would not have the faintest...

 

I like Melbourne but not sure where to start. Any recommendations for a BA? I'm in sydney.

 

C'mon Steven get with the program....I was heading North then I saw the crazy prices for new H&L in Melbourne...stuff for less than 320k for a 3x2x2..or 3x1x1 houses ....30-45 klms from the CBD....rents 360pw plus...

 

What sort of payment terms are you getting for H&L packages? ( % deposit and are stage payments involved ? )

Or are you buying registered blocks and then independently selecting a builder?

 

Sash, where is the "others"?

 

I am gaming the system.

I am telling the developers the banks will not finance land only..so I need H&L...the developers are happy to see this as they don't want empty lots on their estates. My last one was bought in Dec...and I settled the land in April 2015.

They payment terms are 5% on land and 5% on building contract upon approval of finance. The last one was a pearler the bank stuffed up...as a concession they waived my LMI!

 

In my personal view..some examples..

1. Mt Druitt & Surrounds - too many investors and people still jumping in so late in the cycle.
2. Hills Area (including Scofields) - too many people paying way too much...they have never seen what happened in 2006 when there were mortgagee sales weekly in Kelllyville
3. Epping/Eastwood - in particular units and townhouses. Also houses where they are paying over $1.8m
4. Part of North Shore units/ north - Lane Cove, Ryde, Hornsby,
5. Part of Parramatta region
6. Part of Livepool
7. Part of Campbelltown
8. Unit in Inner West and St George

 

Not going to comment on the credentials of this poster but he has a reasonable argument.

http://www.cashflowcapital.com.au/update/foreign-buyers-just-got-a-massive-advantage/

 

Thank you ... those are the areas to hunt for later on

 

Sydney still has an auction clearance rate above 80%, rental vacancy rate below 2%, and strong housing finance approvals (a leading indicator). Also, stock levels in Sydney are lower than in Melbourne, Brisbane and Perth!

When Sydney last suffered a substantial correction in 2004, the rental vacancy rate was at 4.5%, there was a lot of stock on the market for sale, housing finance approvals had crashed, and interest rates were rising. Those are some of the signs we need to look out for in Sydney in the lead-up to the next correction. We're a fair way from that yet. I'd say another year or two of growth.