NSW The definitive Sydney 2022 Q1 and Q2 market analysis and conclusions

Hmm I don’t think they are smarter it’s just that model doesn’t apply uniformly for this asset type. Personally I find most site buyers amateur hour, even by many who are quite experienced at it.
Development sites are about profits. That’s how valuations are formed.
Not random yield calcs. That’s for property that’s realized and to form valuations. New stock should have higher %s though.

 

@Tofubiscuit quick calc for how to value a site, 1.1m land each, 750k each side build (this should be adequate), 150k others (stamps, plans, interest, sales) = 2m each.
At 900 sqm (450sqm each), you may get granny flats on both too, which makes it 4 rental incomes and quite juicy.
If duplex Vals are 2.3-2.5, than there's a healthy enough profit in it to entertain the valuation.
Of course, if end values trade lower than the land valuation will correct too.

 

Thanks @Redom

that’s roughly the numbers I got in my mind except the granny flat aspect.

I have doubts on the end value if $2m for a duplex on 445m land in the St George area in 12 month time.

that and my carry cost (interest+stamp duty etc) was slightly higher. Hence why I was surprised at the result in today’s environment.

 

Ah yes, likely a bit high then. Can probs squeeze the build cost down to 1-1.1m, particularly if owner built. That block size is huge though so build may be large.
Generally easy peasy duplex sites trade backwards allowing for around 10% margins from whatever end values are. Given market uncertainty perhaps a bit of discounting on end values.
DA approvals can shrink that margin level down a bit further.
This assumes retail build rates.

 

Re rates some intel for those that are interested:

- Since October, when we were posting about the big rise in fixed rates coming, there's been at least 1 rate cut in OO P&I variable loans. This makes the overwhelming majority of loan applications. Realistically between big 4 competitors its about 40-50bps, closer to two rate cuts. Essentially banks have been moving borrowers there...now no one is really seeking fixed loans vs what the demand was a year ago.

- Variable rates were around 2.5% then. Now its possible to get are around 2.3% (after one rate rise). Effectively this wipes out the first one to two rate cuts on the variable market.

Some have decided not to compete too aggressively here, others are using price. Essentially a deep and competitive credit market is driving pricing down. Big 4's no longer have processing or product edges, so are using price as their tool to win business.

Some have harped on about rates rising independently for 6-9 months. Realistically the results are (6 months later) is that price of credit has fallen, materially, in the variable rate market. This will change in due course though, and those predicted independent rate rises will begin soon enough, particularly from non-banks.

 

The Big 4 are dropping rates is to keep their book in place so it does not drop too much.

People who jump onto will regret as once you move there they won't budge on rates once rates rise. If you do move make sure you have enough in the tank to refinance. In particular CBA...lots of people now realizing they will not budge on rates once there.

Agree on non-banks...but it is likely to be people like Resimac, Bluestone, Liberty due to the way they are funded.

 

It looks like the data is showing 10% plus falls in the expensive suburbs...

Property prices: Suburbs where Australian property values have fallen the most

And opportunity about to present..... bewdifuul.

12ft |

 

The rates ("fixed") have been rising independently as RBA gave up on Yield Curve Control & the rolloff of the Term Funding Facility.
It's not surprising that variable had room to fall as banks compete given where the RBA has held the overnight rate. Good marketing tool.

Variable rates should move most from here.

As it appears markets hit affordability caps (i.e. using maximum available borrowing capacity to purchase), a subsequent reduction in available borrowing capacity should be very telling (Christopher Joye adaptation of Tulip model).

The problem is we are effectively in no man's land as to how high rates get too & how long they stay there.

You definitely don't want to be purchasing before the steepest part of the rate hiking style unless it's something pretty special.

 

No chance ...I would envisage in a dropping market...the St George area duplexes could hit under $1.7m

Look at this one in Caringbah....these guys got a decent price now $2m. Build spec is quite decent. Issue is if they waited till say next year you could pick this up for as low as 1.6-1.7m based on what happen in the area in 2017-2019.

https://www.realestate.com.au/sold/property-duplex+semi-detached-nsw-caringbah-138748435

 

I have never experienced multiple rate rises or ones bigger than 0.25%. let's see what Phil can do. bring it on!

 

Fake news ! Must be a lie ! remember all the people who said/say Sydney never goes down ?

I was starting to believe it myself, as the markets defied all sense since about 16.

The reckoning is coming....shopping time in much of Sydney in a year or two.

What you say ye olde sea dog ? A place in Bondi proper for you perhaps ???

 

It will be brung.

People are gonna pay ! pay for the huge party we all been having !

I know some are leveraged to the hilt, I would be buying a bunch of nappies in case the cashflow is interrupted !!! gulp, it is only the beginning of the start (of the end for some)

 

Two townhouses same configuration 3/2/2, same strata, sold 4 months apart and the price difference is 11% ($ 140,000).

# 9 sold today for $ 1.1m
#10 sold Jan 2022 for $ 1.24m

 

the land I saw sold for $2m was 920m2. So it would be 450 per duplex.

The Caringbah one look like it was built on land that totals 560m2 so 280m2 per duplex and the land was sold for $1.3m in 2017.

To sell one duplex for $2m on 280m2 is definitely profitable. I just wouldn’t have paid that price…

Maybe we are the shumack for thinking the market has another 15%-20% to go. I’ve never being a property bear, until now because I can only see inevitable headwinds coming.

 

Some of those loans are for high LVR borrowers only.

Few days ago ANZ cut 15 bps variable rate for OO new borrowers only and same day increased 20 bps on all investment simplicity plus loan products.

 

Without seeing how they are fitted out internally, some could argue that was the reason, but most will no longer doubt the market is dropping back.

 

Great example given like for like product and close time periods.

 

Yeah, I saw that, and instantly thought, marketing tactic to corner last chance borrowers moving before the storm smashes things

 

very basic 20+ year old townhouse, both semi renovated, both comparable, # 10 got 20sqm extra land, # 9 got outdoor spa,

nothing there to differentiate $ 140,000

 

I am sure that is correct. I see what is happening in market where I am looking.