Sydney - the coming correction 2018-2022

Thanks. At the end of they day it’s up to them to decide. I would personally wait at least a year to see where appartment prices are heading.

 

the ponds is still considered hill district ?? if we dont know any better . we will be thinking u are a property marketing agency.

 

Is 'the hills' the new inner west? I have people claiming lidcombe as inner west

 

Just saw this article on borrowing cap likely to be further cut between 20%-40%. Now this wasn’t totally unexpected-was it?

Homebuyers' borrowing capacity could be cut by up to 40 per cent under tougher rules - ABC News (Australian Broadcasting Corporation)

 

I know its only anecdotal as we only have 4 IP's but in the last 6 months 3 of our IP tenants have quickly re-signed 12 month leases with $15-$20 weekly rent increases as they come up for renewal (the 4th one comes up in August).

Based on scanning Domain app etc I see rental prices for Sydney holding firm/increasing and not going down (well for apartment comps for mine anyway).

Currently our annual outgoings to service all 4 IP's is just a little over $10k (that's in total not each), I'm in no rush to sell.

 

I cannot stress this enough after living in the USA for the last decade the difference in the USA is people move here for work all the time.

I cant even get Sydney people to move to Adelaide.....can you imagine trying to get them to move to Dubbo?

There are 25+ tier 1 cities in the USA that people happily move around to.....this just doesn't happen in Sydney/Australia

 

Is that with IO or P&I?

 

If true this would be huge! Would be the end pretty much all new developments and would likely bankrupt some developments already in progress.

Most likely 40% drop in capacity would only be extreme cases.

tougher lending rules and higher rate of casualization in work force and a drop in development, will the government need to introduce rent control?

 

That's on an interest only basis for calculations of holding costs - it wouldn't make sense when calculating holding costs/returns to also include payments against principal

We pay down principal each year of up to the $10k max each property as allowed with fixed loans.

As we aren't in a rush to borrow in the future and all but one of our loans is locked in 5 year fixed we aren't rushing to pay down principal as much in the future as we have in the last few years so expect to continue making a slight loss of around $10k a year moving forward (or slightly less as principal goes down slightly each year).

Keep in mind....on another topic....
.....because of LTCG tax changes to expats we will NOT be purchasing any more property in Australia because of the ridiculous tax treatment of expats. We now put additional funds left over each month into USA equities and will continue to do so until changes happen by future Australian governments. 20c vs 41c CG....no brainer.

My point being....long term investors aren't going to be rushing to sell. Its only people who bought one or two that are going to be feeling the squeeze of interest rate rises.

Pay down your principals...bide your time......build equity for the next round in 2020 etc.

 

Thanks. Was just asking re: P&I because it's becoming the norm for it to be an obligation vs an option these days.

On the investing climate, I just can't imagine that the banks will contend with heavily crimped lending activity for a protracted period of time - that's their bread and butter. They'll find a way I reckon to skirt around the 'rules'.

OR, if things start to get too painful for borrowers, the Govt will ease up on restrictions.

 

Great article. The credit crunch will just create a lovely undersupply again and all ready for another boom in 8 yrs..

 

P&I is not norm is hysteria.

They have dropped off the cliff only because bank penalized IO loan holders with up to 100 basis points.

As of this months Commonwealth bank and a few others are offering near same rate to attract back investors.

 

Thats what im saying
Developers stop building we are bringing another 250,000 people rents go up yiels improve.
Developers build again credit conditions relaxed.

During the the middway point of GFC my yields started improving. Rents increased.


Life goes on.

 

@Joseph33 - I am quoting you here as we are sort of in a same boat. Any particular area you guys looking into?

So this is the best correction that there ever be? ?? @standtall

Also I have noticed the price gap between suburbs that are just next door e.g. North Rocks and Carlingford

 

@sash would you be able to throw some light?

 

So far from what ii have seen, Carlingford has been bit resilient to the overall Sydney market slowdown, specially the Murray Farm catchment. There still is strong demand from Asian buyers.
Comparatively Hills- BH and CH have been bit cold and can see bargains upto 100k.

 

The majority of consumers would not understand that the median price is a garbage indicator. It becomes more meaningful at the street level or suburb level when discussing houses of similar land size and bedrooms.

What the first home buyers don't realise is that if they all don't buy, stay unified and all just continue renting and saving and investing in a good vanguard fund, eventually property prices drop and this is the best way to buy a property for them. There is never the situation where property prices run away. There is the situation where the young are smarter and leave. Right now the best thing for the young people of sydney to do is to leave Sydney and go to Perth and buy a house with minimum land of 650m2 in Perth at no more than 4 times annual salary and pay that down. Buying anything in Sydney with minimum deposit in the last 2 years is a guaranteed financial ruin or failure to thrive situation.

 

Sydney market is quickly changing for worse. I made a few low ball offers 2 months ago and consider myself lucky they were not accepted because I would have still overpaid considering prices on new listings.

Yesterday was a truly terrible day for Sydney property with real clearance rate (including non reported) was worse than post GFC 2008 levels for this time of the year.

I spent sometime analysing the downturn across some of the suburbs I am following and it's quite simple to see why certain suburbs are sinking rapidly. First off, it's not about certain price range as some people (including myself previously) believe that 1.5mil+ property is in danger territory as opposed to under $1 million.

Based on quick numbers from RP data, its really about 'yield'. It just means people paid way too much for certain suburbs based on their false sense of desirability because if they were truly that desirable, rent increases would have followed the upward trend. Note that yields are dismal Sydney wide but some suburbs now have really poor yields and these seems to be the exact same suburbs where market crash will hit the hardest. I think you can safely draw a line on 2.5% or below yield being a generous indicator of too much greed $$$ invested in a suburb.

Some examples:
Epping - 2.1% yield
Carlingford - 2.25%
Beecroft - 2.2%
Pennant Hills - 2.34%
Castle Hill - 2.44%
North Ryde - 2.18%
Eastwood - 2.13%

Suburbs in similar price range with better yields
Cherrybrook - 2.72%
Wahroonga - 2.7%
St Ives - 2.8%
Glenhaven - 2.75%

Most suburbs on lower north shore and eastern side have yields around 2.7-2.8% plus volume of sale in last 3 years a lot lower than low yield suburbs I mentioned above. Not only these suburbs have low yields, they also have loads of 'new owners' who bought in last 3 years.

I also don't think its about school catchments either else Baulkham Hills would have easily been more expensive than North Ryde. I think foreign speculative money poured in to existing ethnic clusters regardless of school catchments and their prices are already going through a sharp correction.

 

I quite often look at the auction clearance rates for Sydney and Melbourne , and over the last few months have watched Sydney go from high 70s, and this week has just hit the high 50s on Domain..
Just curious at what point does it start to look bad , and what is a low point in a historical sense.

 

Mate we were looking from Blacktown to st marys area as that's what we could afford.

After careful discernment we've decided to stay out of it. I think in the current situation and for our strategy, we are better off renting for now and wait for better Opportunies. Sydney has been falling for 12 months now and it hasn't bottomed out. I think it has another -10% followed by a flat market. I think ones money is better spent investing with a good yield interstate rather then buying here. Just my opinion