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

Views from Sash and my comments on his views in Blue

1. Mt Druitt & Surrounds - too many investors and people still jumping in so late in the cycle. Possibly people could get burnt out here. I'll add anybody spending 600k+ in Penrith area may have to watch out.

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 - I think the crowd living out this way can handle their mortgages. No issues.

3. Epping/Eastwood - in particular units and townhouses. Also houses where they are paying over $1.8m - units and townhouses - worst they'll do is be flat. People buying houses over 1.8m are a bit crazy, agreed. But the median in these areas can still push upwards for a wee while as they are still fundamentally good in demand areas.

4. Part of North Shore units/ north - Lane Cove, Ryde, Hornsby, - I think flat at worst, these areas still have good demand.

5. Part of Parramatta region - Potential to be flat or negative growth, simply as it has had huge growth already. Lots of new apartments coming on in Parramatta.

6. Part of Livepool
7. Part of Campbelltown
8. Unit in Inner West and St George - Inner west will remain popular.
I dont know Liverpool, Campbelltown and St George so well so won't comment on those areas.

 

Campbelltown is big ... really need to know the area to invest there ... certain streets are a lot better than others plus the hospital is expanding almost twice the size and roads are widening there too....

St George ... I grew up in Kogarah ... and i think the price is way too over , 2 bedroom apt auctioned at 800k? I think price will adjust to $650k max for 2 bedder

 

Time will tell all.....

 

I reckon The Ponds will be the equivalent of Kellyville in 06 once interest rates rise

 

Agree with that. Particularly for anyone that bought land in the last 18 months. Land prices have been crazy in that period and the build costs that go on top when tricked out. Many people scraping every last penny. Interest rate rises will be a big shock to some.

 

Pond = Ponds Scum??

 

Given the track record of ineptitude, I doubt the government's crackdown on unlawful foreign investment is going to amount to much. Let's face it it's a token gesture. They want people to think they're doing something. Nothing more. Why would they want to stop lining their pockets with all the stamp duty revenue?

Does anyone else think the extra 5k fee for foreign owners buying properties under 1mil is a joke? It would have to be 10x that to have a noticeable dampening affect.

 

Sash,
I am with Steven on this one. Maybe 12 to 15% more.
The question I want to ask is this - have we seen the blow off top?
I am not sure we have yet.
I can remember July 2012 to July 2013 having 30% growth . Then interest rates went up in November / December and the boom ended.
Interest rates are not going up this year. More likely mid or late next year.
There is still a chance that we have 1 or 2 more cuts to come this year.....

APRA is the wild card here. If they keep turning the screws it may slow things down.

But 2018 / 2019 should be a good time to buy in Sydney.
For now , I like Adelaide , Ipswich and parts of Launceston...
David

 

@Gockie

On your point 2.. Lot of fhb @800k purchase will struggle to hold property if unemployment rises and interest rate go up.

But those who used their large equity to upgrade to bigger PPoR...will be fine...

I agree with most of your comment... Purchase price may be higher but debt on those sub600k property will be lot lesser for PPoR buyers.

 

I think it will be a few years before interest rates go up, so there wont be mass forced sales - at least not for a while.

But wont disagree, anybody starting out with loans on 800k properties, with typical LVRs of a first home buyer (ie. Little equity) then that has to be taking up a fair chunk of income to service...

I know my first property (PPOR unit) I borrowed just 200k but it felt like I was going nowhere on that debt for the first 2 years or so because I hardly paid off any of the principal in that time. Then I was hit with bills from strata, council, electricity and water so there's lots of outgoings on top of the mortgage.

Luckily/happily the interest rates came right down and the property prices in the area had its first boom for me (first 3 years it did absolutely nothing though, didn't buy at the right time.)

 

It's always hard as a first home buyer if you have started with nothing and have been given no assistance from family to stump up the deposit.

Wife and I had a mortgage of $296k in 2004 as first home buyers, we built a house in Point Cook Melbourne, big nice shiny and new.....and we struggled to pay the bills! We were actually going backwards! Scary at the time....BUT fast forward to today, most first home owners would probably be excited to have thier first mortgage under $300k.

It's all relative to the point in time though I guess.

 

The Ponds is already pretty bad. It was over inflated from the start. Exactly like they did with Kellyville "Ridge" when they turned a driving range and surrounding fields into a pocket suburb.

The missus and I put a holding deposit on this place as our PPOR back in 2009 http://www.onthehouse.com.au/reports/property_profile/5500686/77_Mallard_Drive_THE_PONDS_NSW_2769/ for 499K, The bank declined the amount saying it was over valued. Best thing that could have happened to us as it simply has not grown that much, we found our place in Northmead the day after this one fell through and we have experienced massive growth in comparison. There is just not going to be any equity in there to help weather a financial storm.

All it takes is a rate rise and everyone who stretched themselves too far are boned. Which brings me to another question, why on earth do people take the maximum they can borrow when rates are good?? But this is a question for another thread

 

I still believe Sydney has some growth to it.
2015 Sydney will grow 10-12%, 2016 will start trending lower to around 7%. The time to look for new ips in Sydney will be 2018 once the market cools, interest rates will go a tick or two up and the 5 years IO loans from 2012-3 will mature. I don't think we will see a correction but flat growth (i.e 2-3%) will probably be the reality from 2018. Next upturn in Sydney is on the card for 2022 (not based on anything but my gut feeling).
As for Brissie, I see growth this year of no more the 6% on average but 2016 can go each way. Based on fundamentals, Brissie doesn't have much going for it at the moment so 2016 can be very weak but with prices going up in Sydney and Melbourne, interstate migration will probably pick up next year which will push up demand. But main think will be job growth, Brissie has to mature to a "real" city with sophisticated economy that supports healthy job growth. They're not there yet.

 

1 - Agree, all the lower social economy suburbs that went bonanza in Sydney will take a hit, maybe even down 10%
2 - Crazy prices, but most from people with the capacity to handle the downturn so don't expect much change there. Maybe units that were sold for "investors" for way too much
3 - Nope, will not go lower. Most likely will keep on growing in a healthy manner
4 - Ryde might take a bit of a hit, North and east are solid. Units in Lane Cove will be under a fire sale and will take a healthy hit. Will be worth while shopping for bargains when that happens, but quality investments are scarce
5 - Maybe, OTP definitely
6 - See 1
7 - Hmm...probably most will be ok
8 - Nah, will always be good demand for those areas

All in all, any correction will be short lived and prices will probably bounce back to pre-correction levels in two years.

 

Sash..
Q1. Where are your IPs located in Sydney?
Q2. What are you planning to do with them?

 

I'm not sure what you're saying here

Are you saying that Growth has peaked and that we're likely to get lower growth, but prices will still rise but more slowly ?

Or when you say things will now head down you mean that prices will fall ?

 

Time will reveal...all

Lets see....

In Inner West...Central Coast....Ryde area...I am not planning to sell as some of them have grown 600%...too much of capital gain hit and somw are now returning something like 20%+ returns...the central coast and Wollongong purchases are nearing 9% returns...but less capital gains about 200k as they were bought less than 4 years ago.

 

My observation from the last cycle was it was the relatively newly developed areas with higher concentrations of relatively new owners so potentially greater percentage of mortgage stress tha had the bigger drops .

An established area like Turramurra will only have a few owners extended , but some of the new , upmarket western areas will have a much higher proportion of owners with higher LVR's and less capital behind them .

Does any one want to suggest potential suburbs to target in that category

Same would apply to newly developed unit areas , parramatta , green square etc.

Cliff

 

I agree with this......


SYDNEY IS NOT IN A HOUSING MARKET BUBBLE – IT’S A BOOM

We consulted the Property Power Database to reveal the percentage of suburbs in Sydney which currently have balanced rental markets, or where there are shortages or surpluses of houses for rent.





This analysis shows that very few of Sydney’s suburbs have house or unit rental surpluses, certainly not enough to cause a general bursting of any supposed bubble with falling rents followed by crashing prices. The data indicates instead that Sydney still has an overall shortage of both houses and units for rent.

The rental market analysis indicates that while much of Queensland suffered from a development led ‘build it and they will come’ bubble from which it is yet to recover, Sydney’s housing boom is not about to become a bubble, because housing development in most locations is underpinned by a genuine demand for accommodation.

 

The herd still may drive it up a little before it goes down:

"The global bond fund giant PIMCO has suggested that falling interest rates and rising house prices had the potential to drive a more irrational response with a 'herd mentality' that assumed continued capital price appreciation.

Based on the fear of missing out, PIMCO portfolio manager Aaditya Thakur said there was a risk that people build unrealistic and unsustainable expectations that house prices could continue to rise given prevailing conditions."

http://www.propertyobserver.com.au/...py-australian-herd-mentality-in-property.html