Sydney

I am not thinking with my investor hat today

 

why do I feel your emoticon is starring right at me ....

 

Too add to what the others have said, some of the reason can be explained by the number of investors in the market buying properties to rent out.

Normally investors are 30% of the market with OO's the other 70%. Towards the end of last year, in NSW, investors were 60% of the market (double the normal) and this has moved back to approx 50% now (still over-represented). This has 2 x effects:
1. More available rental properties on the market (so rents soften in response to greater choice and availability). It takes some time for this additional rental stock to be tenanted - but it does wash through the system and normality returns.
2. Shortage of stock on the market. When an OO buys a house to live in, they normally also sell their current house, so there are 2 transactions. When an investors buys a house, he/she just buys a house, there is no corresponding sale. This goes some way to explain why stock on the market in SYD is at the lowest levels it has ever been in some areas. Add to that the fact that many OO's are afraid to sell first, in case they cannot find something to buy and you have a recipe for low supply coupled with high demand - and we know what that leads too.

 

A colleague purchased in Blacktown in 2013. The owner said they wanted to rent back for max 6 months as they're looking for a place to buy. My colleague agreed.

Today, this owner is renting my colleagues place....

 

Poor (ex-)owner...

 

I like your response @Propertunity.

Anyone have an idea how many households make up Sydney?

Going by roughly 90,000 people coming to Sydney every year, how long would it take for excess supply of rentals to be absorbed and rents to move up. 90k/4 people(assuming 4 people make a family) then that leaves 22,500 households required to live somewhere every year. That's assuming everyone wants to rent, others will want to buy and own, guessing this will add more pressure at the moment.

 

4! haha. This is how they do it properly in Sydney

A THREE-BEDROOM house with 58 beds in it and a person sleeping in a pantry were among the shocking findings of an investigation into Sydney’s illegal accommodation rackets.​

No Cookies | Daily Telegraph

 

Lol that's crazy, do you think it would be cashflow positive?

 

Hey Barny - not sure where you made that observation. In the last six months we have increased rents on all Sydney IP's by $10 or $20 - more than once some IPs

On the contrary, early 2013 when the boom started, it was noticed a few tenants moved on because they either bought a place or they had a lot to choose from in terms of rentals.

 

For sure!

 

G'day, corelogic showing negative 1.1% last quarter for Sydney.

 

@Barny, the average household in Australia is about 2.5 people. (It was 2.53 in the 2006 census.)

So 90,000 arrivals in Sydney mean about 36,000 homes are needed. Assuming around half buy, which would be in line with @Propertunity's figures, 18,000 rental properties would be soaked up by the incomers.

Given the city's population, you're probably looking at around 1.5 million households in total.

 

Cool...may be a blanket percentage. Western Sydney rents have been increasing.

 

For Sydney, I would also add foreign capital as a big driver. What's happening in Syd/Melb is really no different to many other major cities eg: New York, Vancouver, HK, Singapore, Auckland, London etc. In other countries, a similar theme is occurring - a widening in the valuation of major cities vs rest of the country.

 

Could you say you don't see change?

Do you have any main things you look for when exiting at the peak? >70% growth or median graphs or agents? I realise may be more scientific when you get to it but the main things to look for to get best price but not have a hard time selling

 

I think It's hard to pick the peak

We sold two units in mosman late last year . The markets probably moved up since then . As a result of selling those , we were able to buy multiple houses in Brisbane which have probably gone up more in value than any additional value we would have got if we held in Mosman .

We're about to sell in Manly . Is it the peak ? Don't know .If I was a gambling person , Feb next year will probably be higher , but i'm not a gambler andt you never know what's going to happen BUT I do know there is very little on the market at the moment and everything is selling well over expectations . Manly units moved 30 % up last year and still seem to be moving . Given what already happened it looks like ( in share trading terms ) a blow off top . Looks like a good time to sell

Selling in Manly will enable up to pay off one other property and either pay off another one , or buy another outright . ( this is in our super ) so it will start generating serious cash flow within our super which will enable us to either keep paying off the remaining debt or maybe even buy some shares .... did I say that . Probably not . We'll put it an offset account .

Cliff

 

Wow, love the strategy!! buy and hold*!

*til it's near the peak then go hold elsewhere!

I'm already looking ahead planning the exit and buy again(s) strategy

 

Markets within markets

We have two units in Manly . About to sell one . the other has just been re rented with an increase of $40 / week .

Don't know what core logic say about Brisbane but one of our ipswich houses re rented with an increase of $20 / week .

Cliff

 

Intersting article on SMH today
Sydney property would be $100,000 cheaper with 'more appropriate' interest rates

My main take out (which is not the point of the article)
"While large-scale infrastructure investments are helping Sydney’s economy generally, buoyant financial and insurance services are boosting specific areas that house people working in those sectors, and this is pushing up clearances and prices, he said."

Rings true with what I'm seeing on the ground. Sydney is flush. Would be interested to hear from those in other areas, @Gockie , what's the general vibe Epping way? Does everyone seem comfortable with work and generally fairly well off?

Agents are still telling me they don't have stock.
Even ones that generally talk things up way more than reality are saying they don't have a lot of stock to bring to market in spring. Which will surely keep upwards pressure on prices.

 

The other out take is this chart indicates that we are basically just back to average growth since 1996.
With much lower rates than 04 we might actually see this keep going and overshoot the average before pulling back...??...