NSW Sydney Price Correction 2019 - post examples

Discussion in 'Property Analysis' started by Charch, 1st Jan, 2019.

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  1. Whitecat

    Whitecat Well-Known Member

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    I have to admire John the buyers agent comprehensive arguments for buying now when the consensus on here and pretty much every piece of published media is that Sydney and Melbourne are going to drop further. We have only had one year of price drops. Typically cycles go for longer than that. I think there's no hurry. I personally do want to buy in Sydney I don't like the idea of renting here and I've just moved here. But I'm not keen to buy in such sentiments even at a discounted price because I think there will be a flat period forfa while too.
     
  2. Whitecat

    Whitecat Well-Known Member

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    I agree with your point about trying to pick the bottom it is actually in practice very difficult to do that. For some it was very difficult to predict the top based on how many posters on here were going on about Sydney never falling all those posters are silent now. However while picking the bottom may be difficult there is so much negative sentiment around right now and so many reports of further drops that I think it's risky to suggest that we are near the bottom and to buy now. I don't think the bottom is when there is so much consistent negative sentiment and negative forecasting. Because that type of coverage didd affect majority behaviour. Markets are about sentiments The bottom may not have positive forecasting either at that point but it won't be in the midst of overwhelming extreme negativity. It just doesn't feel right with so much negativity that this could possibly be close to the bottom. That's my gut feeling.
     
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  3. Whitecat

    Whitecat Well-Known Member

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    Not just Sydney. Most property markets.
     
  4. Illusivedreams

    Illusivedreams Well-Known Member

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    Not exactly correct when looking at the last 30 years.

    Only a few periods.

    I can find the graph (excel spreadsheet which shows last 30 years) continued negative growth hasn't occurred often in recent history of Sydney.
     
  5. Shogun

    Shogun Well-Known Member

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    A bit of google finds 20 years for Sydney
    The history of Sydney house price movements, in one chart

    While the upswings have been far larger than than the downturns, there’s actually been four periods when Sydney property prices have fallen during this period, ranging from 3.7% to 8.9% for units and 3.5% to 6.5% for houses.
     
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  6. Jana

    Jana Well-Known Member

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    Thanks John. Few good points. Agree with a), can’t fully agree with b) all the times. If you r pretty sure the mkt drop further then no point of accepting wrong as an investor. You anticipated a wrong results.

    Finding bottom is hard as you said. But the thing here is we know this is not the bottom as no positive news around here. Rather catching falling knife, I would say catching once it stabilized will still give good bargain and better return. Fortunately stock may give this experience frequently whereas property mkt gives this learning for long run-10 years. So most people get this wrong.

    Knew a friend who got into property mkt in 2011, said Sydney never fall, and Brisbane doesn’t move. He is considering selling in Sydney now due to panick- this is call immature and nothing wrong with him as property learning need 10 years experience atleast to be successful.
     
  7. Jana

    Jana Well-Known Member

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    Is this annualized fall or absolute fall? It looks you need to multiply the fall with no of years to get absolute fall in the graph.
     
  8. euro73

    euro73 Well-Known Member Business Member

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    That's because we have had 30 years of consistently falling RBA cash rates. You'll also find that 30 year period happens to be pretty well precisely the same 30 years since deregulation. So in laymans terms, for 30 years rates fell (except for a few periods of modest rises) and for 30 years borrowing power increased ( except for a few periods of modest declines ) In fact, you can almost lay the price charts over the rate charts for the 30 years and identify the trend no-one here had been willing to acknowledge until APRA came along - credit has always been a significant driver of prices.

    While "actuals" were in play, and while endless IO was in play, every rate cut essentially equated to a pay rise on servicing calculators. Take a close look at real estate prices in the 6-12 month period following a rate cut or a rate rise, and you'll see that one tracks the other pretty closely, most of the time. That's pretty compelling evidence over a 30 year sample period that servicing calculators/credit expansion or credit contraction is directly related to price expansion or price contraction.

    There are some exceptions of course, such as Perth - where the influx of mining money blew that market up very quickly, and then deflated it when the money left - but by and large, it's credit that has driven most markets most of the time. It's certainly true of the two major cities- SYD and MEL.

    And it's why we arent likely to see any growth in SYD or MEL for several years yet, unless the assessment rates/debt to income ratio's are returned to pre APRA settings or at least close to pre APRA settings . There's a very simple difference in play now. For the first time in that 30 year period, RBA or lender rate cuts will have zero effect on borrowing capacity - we now have a mandatory assessment rate in place instead of "actuals" - so rate cuts no longer fuel buying power.

    My views on Sydney are- if you need to buy a PPOR - whether that's because your ability to borrow is going to change and you need to hit the go button before that happens , or whether it's because you need more space for kids or in laws etc.... buy. It should be a 20-30 year purchase, and it shouldnt be assessed in the same way as a speculative INV purchase . But certainly, if you only want a PPOR and arent in a hurry - leave it another 6-12 months.... What's the harm in waiting to see whether there's another 5-10% that can be saved throughout the year?
    Investors should probably wait 6-12 months as well....

    Never say never of course, but the chances of Sydney's price slide slowing this year is probably next to none. The chance of price increases is probably slimmer still. We have a Royal Commission that's likely to make lending tighter in the short term at least. We have bucketloads of IO migrating to P&I... and we have bucketloads of apartments coming into the market for settlement. It's possible that investors will pile in at some point if Labor wins and if they announce NG changes are proceeding and if they provide a date for implementation ( say July 1,2020 for example) in an effort avoid NG changes... but that will be temporary - the fundamentals still appear as though they are tilted towards some further price declines.
     
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  9. wilso8948

    wilso8948 Well-Known Member

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    I'm nowhere near a 'seasoned' investor but surely 'opportunity cost' needs to be taken into account? I think that is often overlooked with the notion of "it'll eventually go up.."
     
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  10. John_BridgeToBricks

    John_BridgeToBricks Buyer's Agent Business Member

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    Well, we have mature market interest rates, and emerging market demographics. This is the shortest explanation of why our property markets have boomed over the last two decades.

    And it's not so much deregulation (a good thing), it is the distortion created by central banks to the price and quantity of money (would the free market have put interest rates to zero during the last decade?).
     
  11. Simon L

    Simon L Well-Known Member

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    The house I had in Blacktown was pretty much exactly that....old 60's fibro and plenty of asbestos. When I put the granny flat on it achieved around $800pw before I sold it.

    Its been 3 years since I sold it and there has not been one day since where I think I could get more than what I sold it for. I think there could be better opportunities in this area in the future....
     
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  12. TheSackedWiggle

    TheSackedWiggle Well-Known Member

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    We are already very close to having highest falls in sydney index in last 30 yrs if not already, so that's a first.

    In last 30 yrs, have we had multiple headwinds all acting in parallel with households debts at an all time high? So that's another first.

    Just because it has not happened in last 30 yrs doesn't guarantee it won't, there is always a first time.
     
  13. lynchy

    lynchy Well-Known Member

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    6/82 Dee Why Parade Dee Why, NSW 2099

    6/82 Dee Why Parade, Dee Why, NSW 2099

    Sold in Feb 2018 for $900,000
    6/82 Dee Why Parade, Dee Why, NSW 2099

    1. Listed on the market in July 2018 for $850,000 to $900,000 (For sale)

    2. Updated to $820,000 - $850,000 August 2018 (For sale)

    3. Price guide of $775,000 in September 2018 (Auction, failed to sell)

    4. For Sale - $775,000 October 2018

    5. For Sale - $825,000 November 2018 (The for sae $775,000 was obviously to try and attract people)

    6. For Sale - $779,000 - $800,000 November 2018

    7. For Sale - $695,000 - $760,000 Dec 2018

    8. For Sale - $750,000 - $825,000 Dec 2018

    Auction February 2nd
     
    Last edited: 10th Jan, 2019
  14. sash

    sash Well-Known Member

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    Classic example of buying at the top of the market.

    I watch the Dee Why market....I too am really surprised how quickly it has fallen and by the degree. The trouble I am hearing with that market is the number of new units and supply of older units. On the non-beach side....units have sold for the mid 5s or under.

    I am expecting we will see older unrenovated units on the beach side at under 600k at some point. It is crazy what is happening in areas where there are significant new builds. Older units do hold value but they do take a hit.

    In the below case I suspect they will take 15% bath...from the 900k they paid. That means a figure of somewhere around 765k. That means a loss of 170k (assuming stamps and legals are 35k)! :eek:

    I warned people that this would happen...but no one fathomed this would happen. When I see people on the forum trying to jump back in now....I shake my head.....I can see the market in Sydney come off another 5-10 over 2019-2020. So in this case a unit like this would be in high 6s....which I think is more fair value. Besides I think it is over priced anyways...

     
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  15. AlexV_Sydney

    AlexV_Sydney Well-Known Member

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    +1

    As for now, QoQ fall is -4.01% and YoY fall is -9.07%. Everyone who tell us Sydney reached the bottom is either has a vested interest or wasn't good in math at school. The fall rate is accelerating.
     
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  16. sash

    sash Well-Known Member

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    100% agree......it accelerated in Q4 last year.....there is more to come.

    By the way some places have fallen a hell of lot more than 9%...some are already down 15-20%.

    Also agree about the vested interests....
     
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  17. KinG3o0o

    KinG3o0o Well-Known Member

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    any "real" investors agree with this. why pick the market? no one have the crystal ball.. these are speculators not investors. remember your goals/objective and pick the right method to get there. if you wanna buy and sell short term property is the wrong asset.

    one thing i would say with stock investing is you dont win every single time you invest. thats the rule of the game and game your in you cant change or beat that. even buffet loses. Only thing you should remember is your winners should weight all your losses. this is really how share investors rule of the game but should/could/would apply to property as well ?


    Did the yanks actually been to the moon ?? or your really watching hollywood ?
    In regards

    in regards to buying now,

    i agree buying a PPOR 2019/2020 might be the time everyone been waiting for, its a need not an investment, (for me at least) so that 100k spread over 20-30 years, it dont really make a difference. u should pay it off ASAP cause the interest is dead money anyway.

    in terms of IP, people dont get caught up, buy whats right for you. and remember why are you investing, there are so many different asset type within property, not just house or units, commercial too.
    and then there is stock market ?
     
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  18. lynchy

    lynchy Well-Known Member

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    Plenty of 1 beds on the beach side selling now for under $600k. I was looking 18 months ago and they were all $650+
     
  19. sash

    sash Well-Known Member

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    Yep that is a given....I was speaking about 2 beddies......it crazy out there......

    What is unfortunately is unlike Melbourne...where rents are holding up....rents in Sydney are dropping.....but both markets are dropping in price from a slaes perspective...
     
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  20. euro73

    euro73 Well-Known Member Business Member

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    The free market would have kept selling NINJA loans, created hundreds of billions more in junk bonds underpinned by non recourse assets , and brought the global banking system down.

    In Australia, lenders would have kept lending IO and servicing loans at "actuals" with Henderson Poverty Index living expenses, and created a systemic risk here.

    Free markets need a little maintenance and monitoring from time to time.... just to make sure they don't become radically unsafe free markets

    The re-regulation era we are in, is necessary . One can argue it was necessary 2-3 years before they realised it.... but that's neither here nor there at this point. We are here now. It will pass one day, and then Sydney and Melbourne may well grow legs again... but that day is not now. That year is probably not 2019 or 2020 either..... and quite possibly it isn't 2021,22,23 or 24 either... I'm not suggesting price will continue sliding that long, but with Sydney's median price nudging 10 x median income, and lenders capping most borrowers at @ 7x income, there needs to be a 40-50% void filled before we get most people to a position where they are "servicing neutral" again.... I understand there are still people out there with capacity- but there are also many without capacity. So if 20% - 30% of that 40-50% void comes from prices correcting, the other 20-30% needs to come from debt reduction or wage growth... and that will take several years one would imagine. if prices correct by 40-50% the majority of borrowers will become "servicing neutral" faster than that..... but lets all hope a 40-50% correction isn't on the cards, eh.
     
    Last edited: 10th Jan, 2019

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