NSW Sydney Price Correction 2019 - post examples

Investors make their money being counter-cyclical. Not sure what will happen next, but I am sure that there is just so much opportunity out there at the moment.

 

Seven Hills is not North West

 

4 Iona Street, Blacktown, NSW 2148

Sold for 510k after being listed at 550-580k.

 

Yes, just 455 land. The one who bought now should have considered the previous price as a norm, hence might have thought buying 100k bargain.

 

Blacktown got serious hit. This could have sold about $670k a year ago.it is over 20% fall. Too many panic sellers.

 

I’m tempted to catch a knife now, anyone familiar with the area know what would be the rental on that +granny flat?

 

Be my guest .....make sure the knife does not hit any vital organs or arteries.....

 

Why @sash ? That $500K plus another $150K for granny will give you more than $800 p/w. That not a bad yield for Sydney isn't it?

Why would you say it could be a falling knife...

 

Because there is an oversupply of rentals...spending $150k granny flat will give you CF but not additonal equity.

This is a sole CF play....so essentially you are destroying equity.....

 

Equity is not very useful anymore , without the borrowing power to harvest it. Without borrowing power, it's only useful if you sell, and the equity achieved through growth needs to have been significant enough that all your entry and exit costs and CGT are covered and you still walk away with a tidy sum . Even where that can be achieved it typically takes years - and usually much longer than 5 years - exposing you to the risk of being forced into P&I repayments - which , without good cash flow, can bring your strategy undone because you cant afford to hold on long enough to realise a good profit.

Cash flow on the other hand, if redirected towards debt reduction will still create equity that you wouldnt otherwise achieve, by reducing debt you wouldnt otherwise have been able to reduce - all achieved without needing to sell, and if you are eventually forced onto P&I ( which is likely for any investor on any property these days) you can afford it. It allows you to hold P&I, meaning you never need to sell on anyone's terms but yours (if and when you choose) and improves your borrowing power.

Buying any resi investment these days , under these credit conditions, without the ability to handle P&I , based on an assumption that "growth first" is going to deliver the same results to post APRA investors as it did for pre APRA investors, is the real falling knife.

If and when the servicing calcs change back to pre APRA policies, different story. But right here, right now, and for the foreseeable future under this set of credit policies, cash flow and debt reduction are king. Anyone saying otherwise is kidding themselves, and doing you an disservice. One day, if and when expansionary credit conditions return, their advice will serve you well. That is not today, though.

 

I am really startled by many on these blogs that are convinced that the market will move down from here, and that buying before it bottoms is foolish.

Importantly, it is the "pretense of knowledge" (F A Hayek) to think we know when tops and bottoms occur.

Being so convinced of your own knowledge around market tops and bottoms will usually serve only to prevent people doing anything.

Some quotes:

“Your chances of picking the bottom of the market are very slim, but if you’re within five or ten percent, your gains can be extraordinary” Shelby Davis

“Since the “bottom” is only declared in retrospect, those who wait for it almost always go away empty-handed” Frank Martin

“Even in more normal markets the typical investor feels uncomfortable when he buys too soon and unhappy when he sells too soon. Yet to be a true practitioner of the buy-low-sell-high rule he must be entirely ready to do both” Benjamin Graham


The market is 10%+ down. I would risk catching the falling knife from here. Go for it.

 

It is always a good time to buy. You just need to know what you’re buying and understand it’s worth to YOU in relation to YOUR goals.

As others have said, run your race, not someone else’s.

 

I don't think the potential buyers wait or try to predict the bottoms... It's more important to monitor the global / domestic economy and regulations applied to immigration, borrowing, taxation, exchange rates, etc. So it doesn't make sense to buy now if the factors that drive the prices down are still in place... unless you can add value for specific cases, which is not applicable to majority.

 

Heard a lot of "unless you can add value" what does it really mean? Renovate/ Extend and expect much more then the renovation cost on sale then it would have been without that value add?

If so, does it work in an falling market?

 

We have multiple simultaneous headwinds being played right in front of us, and likely continue to play for few more year at least till 2021, be it tightened credit, over supply, OTC supply pressure , IO2PI rollover, total debt cap, NG reform, CG reform, none of it seems to be going away in a hurry, this on back of stagnated salary, high household debt and falling rents in Syd/melb.

Curious what makes you think we are close to bottom in Sydney/Melbourne.
To assume IR falls will bring back foreign buyers in drove is silly given the global headwinds.

Wishing and hoping is not a strategy.

 

I think we are closer to the bottom than the top. But I wasn't really addressing that.

My point was that trying to pick tops and bottoms is a mugs game, particularly in property which doesn't have the amplitude of more liquid markets like stocks.

Without being too clever, 10%+ down is a good entry point for the relatively stable Sydney market. That's all I'm saying.

 

This is all normal. Demand will rise as price falls. Many have sat on the sidelines just waiting to pull the trigger.

But why go first into a falling market? Why not wait for the first positive price reading and then go from there? It's unlikely to shoot up relative to 2013-2016, so being a bit late to the party may be OK too.

That's typically the buyer mindset now. At least whats we hear a lot. If the economy continues to fire, this will change soon enough though.

Cycles.

 

Redom, my last quote for the day which I believe answers your question.

“You must buy on the way down. There is far more volume on the way down than on the way up, and far less competition among buyers. It is almost always better to be too early than too late, but you must be prepared for price markdowns on what you buy” Seth Klarman.

Guys, data is typically patchy:- one quarter up, another down, and so on. Again, waiting for sustained price increases before you buy means you are just relying on social confirmation before you do anything. Have some courage.

 

Hi John

Why would you say bottom in a property market is hard to pick like stocks? A stock market is much more volatile and moves rather quickly while property market like Sydney is known to stay flat for years before a upwards trajectory.

 

Yep, which is why I say earlier in the thread above: "My point was that trying to pick tops and bottoms is a mugs game, particularly in property which doesn't have the amplitude of more liquid markets like stocks.

Without being too clever, 10%+ down is a good entry point for the relatively stable Sydney market. That's all I'm saying."