Sydney - the coming correction 2018-2022

More charts.

Did prices plateau through mid 70's-mid 80's or increase, how did inflation impact price growth.

 

Yes, I do agree with you on what happened in America and also in Ireland.

That's why I indicated OTP properties as the area of concern and especially so with the tighter financing where the valuation may not come back at the contract price or possibly the bank/ lender requiring a higher deposit as a risk mitigation situation. I highly doubt houses in the Northern beaches or Eastern Suburbs are going to experience a 30 to 40% drop. Possibly the newer suburbs where it has grown artificially may also experience a massive decrease.

Also, even though as investors we would like to still have easy credit to aggressively expand on our portfolios, the regulators have done a fine job to curb that growth.

 

OTP buyers are effectively taking a big punt.
They are betting that when it comes time to settle at some time in the future, values will be above the purchase price. Or, at worst, at the same level.
As with all gambles, you win some, you lose some.
Marg

 

I definitely agree places like the Northern suburbs aren't likely to see a big drop, though I think a stagnation there might be on the cards (I think the gains to date are probably the best these areas will do for some years). I think the only serious risk areas in Australia's market are fringe suburbs and apartments, especially OTPs. I think investment for the next few years will take on a stronger focus of cash flow and careful asset selection. Quality family homes are going to be at a premium in a decade in my opinion, both to rent and own. One thing we've been sadly lacking in this building boom is quality construction.

When the levels of investors in the market drop off to somewhere closer to the long term average (so down from 50%+ of new purchases to between 15-30%) the bulk of buyers will once again be buyers looking for a home to occupy. That group tends to have different tastes, and if prices do fall or stagnate, I think good family homes will be highly sought after.

 

Absolutely. I personally think these types of assets (house and land packages included) are best avoided right now. Not only are they in completion limbo (anything can happen in the time it takes to build), new suburbs and developments are dominated by buyers who've paid down little on the mortgage, so are more vulnerable overall. They're also at risk of developer or builder discounting, if prices stall. Businesses are usually in a much better position to slash asking prices than individual investors, and it would be miserable to have to compete with it if buyers dry up in those areas. Quality is going to be king now, in my opinion. Quality assets, quality location etc.

 

Def agree with you on the quality of the constructions. The buildings being developed by Meriton and Dydalm are a joke, and don't know how some of them can be signed off. Many of them are experiencing higher strata levies due to the maintenance work required to maintain the building after the builder's insurance period has lapsed.

Another reason why I told my partner that the next home we are going to live in has to be a house or at the very least low density townhouse.

 

I think the correction in Sydney would occur with the property types that are oversupplied, so we're talking units, especially high density OTP. There could be a bit of a ripple effect with unit oversupply on houses, but it shouldn't be pronounced given the current rate of net migration influx, natural population growth and the demand for this property type from families. Overall house prices will probably stagnate in value for a few years, similar to the 2003-2011 period.

Looking into my crystal ball, I can't see a big correction in Sydney unless employment conditions deteriorate to the same level as the early 1990's and the net migration influx reduces significantly.

An interesting aspect of Sydney's layout is the unusual spread of "mini-CBD's" (Chatswood, North Sydney, Parramatta etc), This could possibly ease the long term effect of oversupply and assist stock absorption (is that a term?), as the majority of development isn't centralised around the city centre like a lot of other cities.

 

Macquarie forecasts huge migration from Sydney to north.
Soaring Sydney house prices to spark mass migration north: Macquarie

and this:

THE number of interstate migrants to Queensland is the highest it’s been for eight years, supporting predictions of an emerging exodus of Sydney and Melbourne homeowners selling up and moving to the Sunshine State.

Premier Annastacia Palaszczuk has told state parliament 15,716 people moved to the state in the year to March 2017, with most of those coming from New South Wales.

Interstate migration to Qld highest in 8 years as Sydney homeowners sell up - realestate.com.au

 

Yet Brisbane and surrounds isn't going nuts. Sometimes, (very rational, plausible and coherent) cause and effect theories don't materialise in reality.

I mean I thought Steve Keen - irrespective of the fact he was proven wrong, made quite a bit of 'sense' in his arguments, yet the market is a complete, untamed animal that won't be conform to what's on paper.

 

Could it be that the migration is fairly widespread and not specific to Brisbane. I noticed upswings on the Sunshine Coast for example. Possibly people moving for lifestyle changes not employment opportunities....

 

I can't see significant interstate migration to Queensland until employment opportunities increase.

Apart from retired people and those able to work from anywhere, demand most usually follows job opportunities.

And in Brisbane, as in other cities, the huge increase in apartment building will affect the market.
Marg

 

As soon as the Marina over at Shellcove is built.....my place was bought for 241k...it is now 550k.....Wollongong will also correct but it is about 12 months behind Sydney...lots of activity there at the moment.....but 550k is still affordable...unlike Sydney......hope you are prepared son.

 

I believe outer is going to go for longer and higher than people think...

 

SQM (and two other research houses) believes Melbourne outer still has another 2 years (give or take) of growth left.

 

Time is your enemy in Sydney my friend.....I luv being a clown....

Have a go all you want....people laughed when I said Werribee and Geelong would boom....all I am sayin' is that Sydney's time in the sun is finished for a couple of years. That all folks.

My broker does a lot of duplex financing deals in Sydney...and lot of them are not turning a profit any more unless they bought the land 4 years ago....

It is about to get very interesting.....I was following about my block in Melbourne and it seems the buyers are now mostly locals...the Sydney investors have pulled back.

The biggest risk is the massive changes as people convert from I/O to P/I.....

 

Yes...I am actually quite astounded when people are telling me some houses in Cranbourne and Cylde are going go for 800s.....are they knuts???

My Officer build will cost be about 315k to complete...end valuation is now North of 550k.

 

I have not seen any sell for 800 in those areas mate

 

Here youse goes...

62 Como Parade Clyde North Vic 3978 - House for Sale #126944858 - realestate.com.au

64 Riverstone Boulevard Clyde North Vic 3978 - House for Sale #126965854 - realestate.com.au

18 Monmouth Road Cranbourne East Vic 3977 - House for Sale #126866246 - realestate.com.au

Cranbourne East address available on request - House for Sale #125186570 - realestate.com.au

Make sure you wire your mouth shut before you click on the links...as you could damage your jaw!

 

The vendor and sales guy are trying there luck as its a HOT market! Clyde for double storey 4/2/2 setup sell for high 600's. I would say in18 months time high 700's will be the norm

Cranbourne same thing!

 

Note one is already sold...apparently...they are getting them on the larger blocks...with large houses..usually 40sqm plus and have 3 bathrooms plus downstairs toilet...downstair bedrooms for granny and upstair living and 4 brms .....ethnic families luv them.