NSW Sydney Update Please

The question is ...are they selling......

 

re APRA, there is more coming, and banks also dropped deposit rates the other day.

I would go along with this that it has def dropped off.

 

I am eyeing the market for a PPOR upgrade.

 

I think there will be some more bank interest moves, and more for the market to cool, I think it has a way to stabilise after these changes as they are pretty fresh, at the end of the day, interest rates are still low, so no crash and burn in average suburbs......unless something drastic happens.

 

Spot on Mick......Western Sydney....has a long way to fall.....the trend is a severe down turn! That market overshot intrinsic value....lots of the newer members have not seen the cycle turn.

The picking will be greatest when interest rates rise. Here's how I see it.....

Let say someone paid 600k for property with a 10% deposit...in say Doonside...with a loan of 550k. With current interest rates they are paying 30k pa in repayments at 4.68%...at 5.5 it goes up to 33k....at 7% it goes upto about 42k....wages are not going up much...figure that one out...

 

than banks figured it out, so one can assume they can repay the 42k still

 

No... banks are inherently stupid when it comes to property bubbles and don't react when a bubble forms, they just keep on lending until it explodes. So regulation is important to try to bring them to their senses. Unfortunately governments are usually too slow to react (if at all) so the whole thing collapses eventually.

The same scenario keeps getting repeated the world over, again and again. Some governments have implemented permanent safety features, eg Switzerland imposed a 20% minimum deposit after their property crash 25 years ago.

 

Very little upside value left in Sydney at the moment. Of all cities affected by an eventual interest rate increase, Sydney will be hit hardest.

 

Agreed in this cycle v.little if any upside in most of Sydney. Really have to buy well in the near future.
Regarding interest rates, the Hi risk and over valued Sydney properties will be hit hard, but the stable, Well located ones in Sydney will mostly be steady; maybe soft falls then steady - just in line with normal.cyclical patterns, as the economy there is still strong with high paying jobs and plenty of them as well.

 

Mick

Even at 100-150 k discount I still wouldn't be buying in western Sydney .

It's going to have at least 6-7 years of minimal growth , in the meant time there will be various markets that will do better than the discount you've got .

Cliff

 

Banks are greedy, not stupid, after all, it is all driven by humans.....

 

Driven by humans

That makes them greedy and stupid ...

Cliff

 

Well, I think it is us (I mean the general public) who are stupid, they create credit from nothing with computers.

It is greed driven, they know the risks and likely losers.

 

Went to a couple of local house opening today, before and after taking my boy to swimming class, and what an interesting observation that was:

House 1: Started on sale 7 weeks ago, originally offered $1.13 million, the vendor didn't take it as they thought they can get a higher offer. Now they put it on sale for $1.068 million and REA indicated that the vendor will take offer of low $1 million. To make it worse the house is very close to high voltage power lines which would be very hard to sell now given that the heat is gone. The vendor bought a bigger property locally so they may need to have even lower expectation if they need the cash to find their new abode. This property will be very hard to sell from now on, unless they take really low offer.

House 2: Auction in August 2015, passed in at $1.22 million as vendor wanted $1.28 million. Then about 4 weeks ago contract exchanged for $1.15 million with 2.5 weeks cooling off period. But it fell through when the buyer could not sell their existing property to fund this one. So now it is on market for $1.19 million but REA said he is willing to take offer from $1.1 million. This one is better than house 1. Land size is 1050 sqm but a lot of it is taken by shared driveway (battle-axe/hammerhead) between 3 houses and the land doesn't feel that big because of the way it is landscaped. I think it could go less than $1.1 million as it is a battle-axe house anyway.

So what I can see is that the market has turned dramatically in space of few months. Previously I have REA keep asking me to sell my house as they don't have stock. Now there are plenty.

 

Here is something I am hearing more frequently....I am hearing the banks are thinking about taking a more tighter lending outlook in parts of Western Sydney...it is early days...but if that eventuates it will have an impact on whether people get loans for Western Sydney as readily.

This happened during 2005-2006 in Sydney....some vals did not stack up. Will be interesting to see what happens. I seems that it will affect mostly the high density product but will also have an impact on houses.

Time will tell...how this is implemented....

 

Sash why is that you continue down play in Sydney, in particular Western Sydney and Druie so much?

Is it simply you called out Mother of all Booms Sydney in 2010 but didn't buy put money where our mouth is and missed out on Sydney totally?

Or is it simply you are seeing your long buddy investor for the like of @Travelbug and @skater purchased heavily in Western Sydney and is now retiring?

So far we're see generalized 5-10% cooling off in Sydney. In some 'personal situation' there may be more.. I see no evidence of Western Sydney overshoot in growth in the last cycle, nor I am seeing it loose value more than the wider Sydney market.

 

Clearly the market is changing, but I guess if you got in early it does not matter you basically have made some amazing gains.

 

Retire Rich.... I think there's truth in Sash's comments. If its a 30% drop or not remains to be seen but I think the West, North West and South West will fall. The rest of Sydney is more insulated against price drops, you'll have upgraders keen to buy in other parts of Sydney, keeping a stronger floor on prices.

Yes, you will find people wanting to buy in the West, South West and North West, but I think there wont be enough demand to support the current prices. I think for the rest of Sydney we might lose the last year's worth of gains at worst. But that won't matter much except for anybody who bought in the last few months of the boom and needs to urgently sell. The collective voice of this forum said, dont buy.
Anybody who didn't heed that advice and bought in the last 12 months in Sydney and urgently needs to sell... well... I pity anybody facing that situation.... I'd consider that to be a good lesson learnt.

So there should be few people here who have ended up underwater by investing in Sydney.

Yes, there was merit in cashing out/selling down in the West in hindsight for many... the ship has sailed in much of Western Sydney... I saw what happened to median prices in the last cycle for the West/South West areas..... it took something like another 5 or 6 years for prices to exceed the previous peaks... there's not a lot that can be done about that now. Sellers may get ok prices now but nothing like a few months ago... Call it a history lesson.

I also think there's truth in RR's comments in the second paragraph. But anyway... Sash is big and bad enough to take care of himself.

 

I think the smart investor have cashed/equity out some of their portfolio in Sydney early this year.

We are now cooling off 5-10% but this is an expected retraction part of the cycle.
There will be more fall to come and bumps and kinks on the way, who knows..its all guessing game for now.

Looking at some of the suburb median increase from 2006 -2015

• Epping 718k to 1780k, 237%
• Strathfield 1087k to 2250k, 108%
• Chatswood 989k to 2078k, 110%
• Hornsby 569k to 1103k, 94%

• Parramatta, 494k to 1171k, 137%
• Blacktown 323k to 662k, 105%
• Penrith 306k to 623k, 104%

Some investor may seem looking at 10 year median house value is irrelevant, but it gives me a snapshot that some western sydney suburb is just doubling in value in 10 years. It has gone hard in the last few years but that's just catching up with rest of Sydney. Blacktown to Penrith median is 600K and is not that out of reach for alot of first home buyers and is still the cheapest in Sydney if you want to stay in Sydney...

Last cycle, western sydney had falls in the 15-20%. Elsewhere in Sydney also saw falls in the 10-15%. If history represents the future, yes we might see in the retraction...

Western Sydney had an increase in house value in 2010-2011. This was fueled by affordability + alot of migrants such as the Indians and Chinese moved into the area.
A number of these Indians enter Australia under skilled migrant, most of these are in IT background which has lesser problem paying mortgage.
As for the Chinese, these are lower/middle class migrants (else they live in other privileged suburbs), not sure how they do it, but most have a smaller mortgage.

The train I catch on the Sydney Western line has high % of Indians in the last few years.., as compared to say 10 years ago.
They're willing to go out and put food on the table, and mind you an IT contractor paid pretty well in their field as you're aware...

I am seeing this retraction part of the cycle, the Western Sydney % fall would be similar to wider Sydney fall, but again what would I know

 

Hi RR, yes, Indians like to be near the temple so there's support for Pendle Hill and Girraween.

But even if there's been 100% growth in both the East and West in the last 10 years, it doesn't mean the West will continue to maintain the price gap to the East in a downturn.

See this thread... the gap between the rich and poor will likely keep expanding imho.
35 years of Sydney median dwelling values.

Ps. On another note... Wow.... Epping's median is roughly 1.7mill? Totally amazing. (I think you typoed 237% not 137% though). Both figures still very very strong. I am very happy to have bought in a very quiet year pre the most recent booms.