Sydney - the coming correction 2018-2022

Sash, I always like your insights, thanks.

I think parts of Sydney have bottomed and will go sideways from here (parts of North Shore, Eastern Suburbs for example), and other parts have more to go down (West, North West, Hills). Sydney's average price will probably go down from here, but it will be far more nuanced in 2019 compared to 2018 when there was a wholesale shift down in prices.

Remember the Sydney correction was extremely sharp, which is both good and bad. Sydney retraced about 12% in 1 year - it took Perth 5 years to achieve this.

So when people predict a multi-year grind lower, this is more reminiscent of what happens when economic drivers impact the real estate market (think Perth, Darwin). In Sydney, it wasn't driven by economic factors but rather a re-set in lending standards. So I can't see a multi-year grind lower, but instead a sharp price re-set to the new standards. The demand for housing is still simmering away.

Just my view.

 

expert comment?

 

If you have an argument, feel free to make one. Snark is not an argument.

 

relax bud, i was pulling your leg

 

I tend to disagree, given how quick it has been and the drops for the most part haven't been that pronounced.
I think that people can and do tend to hold out for the turn in the cycle thinking that there is light at the end of the tunnel.
As most people are generally positive/optimistic by nature.
We are seeing that now by the dramatic fall in new listings.

The longer it go's on the duller that light gets as they keep looking at their investment and the holding costs.

 

Also the market is still falling rapidly - it is unlikely to suddenly plateau - more likely the % falls will become less then it will plateau. But rental yields are still ridiculously low so i think there is still another 20-30% to go

 

As long as people can't borrow market will keep falling in cities like Melbourne and Sydney with high prices.

Hobart where you can get a house near the CBD for $500k will have less impact to APRA

 

I personally think there is more to come....in terms of falls.

This is because there is multiple factors happening....

1. Baby Boomers are now selling but less Millenials and Gen Xers willing to buy the larger homes. There is much more demand for low rise units, Townhouses, and Villas in particular Sydney.

2. People cannot service larger mortages.

3. The nature of jobs is changing...not only are people losing certain jobs but they are also increasingly gig related.

This all affects buying behaviour.

John.....in some areas there are other factors which have not shown

 

@sash what do you mean by gig related?

 

To me based on everything I've read and the general sentiment I don't think we can say Eastern suburbs have bottom rather I think this is still the start of the falls. that would be one heck of a quick cycle to say that they are at the bottom now. I've watched some prices in the eastern suburbs in particular stock go down and I'm not feeling that this is anywhere near the end. I do think the eastern suburbs will bottom faster than some other areas but that's pretty standard property economics that usually blue chip suburbs close to the city are the first to rise and the lastl to fall

 

Yep agree. I have seen some stellar bargains in the East

 

More contract work or work that is fixed price like you see on airtasker and freelancer. Eventually this will be something like 40% of jobs. Question is how does one manage a mortgage. Banks are going to have to find products that meet this market

 

This property was sold last year on June 2018 for 1.6m and duplex is being built atm 107 Carlingford Road, Epping, NSW 2121. It's even on busy road

I believe the new duplexes would be on the market by this year end and I do believe that they will make some decent profits

Anyone wants to guess how much it will be sold for?

 

1.3-1.4m

 

I think you're on the lower side will see in a few months

 

2.8m in sales....waste of time really.

 

Is it property type specific though?

Are you talking 3m+ houses, 2m houses, units or all of the above?

 

There is not a lot of stock around the beaches and LNS so it appears people are holding to see the results of the election. There are so many variables at the moment where underlying demand still appears to be there, restricted by credit which is causing price falls for the most part.

Pending the outcome of next month we could see increased stock levels as people decide to offload prior to NG changes, which will precipitate further falls, or a frenzy of buying to take advantage of favourable contract dates - the fine balance of these two groups will probably determine the next phase of market direction.

It’s usually a little quiet prior to any election but given the wholesale changes to investment policy proposed by a (still likely) Labor government, it’s probably too early to be calling anything yet given there is more riding on property markets this time around than usual.

Of course, it also depends on the balance of power and whether these changes can even get through in their current proposed iteration. I don’t have any stats, but my general feeling from chatting to many people from different walks of life in the industry and/or looking to sell/buy is that most people are sitting on the sidelines waiting for an outcome.

As always, the invisible hand of the market will move the pieces around as it sees fit and when the time is right. There’s not much any of us can do to stop it.

- Andrew

 

Thanks Whitecat,

In the better areas I am seeing very slightly higher prices than Q4 last year, and most agents that I speak to tend to concur.

I was in Paddington and Bellevue Hill today, and prices are generally off their lows of last year, albeit very slightly.

I don't think we can say it is "the start of the falls" given what we lived through last year. I suspect the better areas will go sideways from here. Outer ring suburbs have a bit of extra supply to work off and will continue to soften in 2019. What I can say, at least from what I am seeing, is that it is different to 2018 (in terms of price action).

We are nearly in mid 2019, and Sydney prices peaked in about September 2017. So prices have been falling pretty quickly for 2 years, therefore I don't think the cycle is quite as quick as you suggest.

According to the 18 Year Cycle hypothesis, mid cycle corrections tend to last for 2 years, while end of cycle corrections last for 4 years (think 2008-2012). So a 2 year correction, with a bit more to run from here is about normal.

 

All of the above.