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The Psychology of Declining Markets....

Discussion in 'Where to Buy' started by sash, 28th Jan, 2016.

  1. sash

    sash Well-Known Member

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    On the back today's news story below about the Sydney market...there are many who think that this is not much of a correctonm....in fact it is the first signs of that the Sydney market is now entering a correction phase.

    Sydney house prices drop 3 per cent

    A lot on this forum think that this is not going to be significant. People's natural reaction is to say it can't drop 20% can it? Well ask the question if it increased 50% in three years..can't it drop 30%...that still leaves a 20% gain?

    I see that certain markets of Sydney will continue to deflate...already certain areas of the West have experienced this...the Southwest and Bankstown-Canterbury had the hardest hit. Interestingly..it will be areas like the Upper North Shore which will continue to hold their values well...they did not go up as much. Areas like the Hills, Campbelltown, Blacktown, and Mt Druitt suburbs will have the largest drops.

    The smart money moved into Brisbane over 1 year ago...

    The calamity for Sydney is when (not if) interest rates head...up towards to the 7% mark. Most buyers are highly leveraged...rise will deflate the Sydney market in particular.

    Why is this? Well humans are like sheep once the panic via news stories like the above enter people's minds they are conditioned to think its all bad. 99% of people will get worried and it becomes a self-fulling prophecy. I have seen it many times. A recent example was a person told me that the Perth market will hold up as China was always going to have strong demand for Australian resource...the rest is history......

    I feel that this is an exciting phase for people who are patient...they will be able to pick up some excellent buys very shortly. Despite a few on this forum being in denial. I feel that the areas targeted by new immigrants (Indian and Chinese) buyers will feel it hard as most have not seen a downward cycle in Australia...this will be a great education for them.
     
    Last edited: 28th Jan, 2016
  2. Perthguy

    Perthguy Well-Known Member

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    Agree. I'm ready. Are you ready? :)
     
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  3. sash

    sash Well-Known Member

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    I am mate.....look to the West and Southwest.....lots of immigrants who got in at the tail-end and l don't think a lot have seen one cycle.

    I am looking at Perth and developers are offering 25k off the asking land price....so stuff for 240k for land is now on offer for 215k...these are quite decent areas. But rents have come off from 480pw to 410-420k so a 10-15% drop. I am low balling so there is resistance...hoping one lands.
     
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  4. neK

    neK Well-Known Member

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    I'd like to think I'm ready. :)
     
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  5. larrylarry

    larrylarry Well-Known Member

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    I think I'm ready but still have not decided where to look at. :(
     
  6. JDP1

    JDP1 Well-Known Member

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    The smart money is still moving to brisbane. .its moved a bit yes, but hasnt moved enough to warrant overvalued nor unaffordable status.
     
  7. sash

    sash Well-Known Member

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    Yep....compared to Sydney Brissie a bargain..if the migration from the Southern states happens..who knows what Brissie can do...but have not seen that happen. But this time it is not happening ..yet.....
     
  8. Biz

    Biz Well-Known Member

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    At the moment all I'm concerned with is preparing for this years nsw land tax bill. :(
     
    Last edited by a moderator: 2nd Feb, 2016
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  9. sash

    sash Well-Known Member

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    I just got it...about the same as last year....about 9k......not too bad...still hate paying it!
     
  10. Biz

    Biz Well-Known Member

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    The threshold we get is complete bs. 485k. 1 property in Sydney and your there.
     
  11. sash

    sash Well-Known Member

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    Trick is to get the spread right....my Woy Woy and Barrack Heights land average over the last 3 years did not rise much. Yet they grew over 100% in those 3-4 years...now that is value for money

    What is going to be interesting is what happens to people who bought multiple houses in the Druie. If someone has a land tax bill...I believe the land content there should be now in the 200-250k range. So own 4 there...and wham...tax bill will be about 8k...add a declining market...it gets interesting....
     
  12. Xenia

    Xenia Adelaide Property Manager Business Member

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    Why are you so concerned about people who bought houses in the "Druid"?

    Do you have properties there?
     
  13. sash

    sash Well-Known Member

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    Xenia...not concerned...just an area of high investment activity.

    Called this out before....I can already see part of Sydney like Bankstown/Liverpool move downwards quickly also...similar circumstances.

    I don't own there yet...but lets say....it is on my watch list..in particular Blacktown. Lasy cycle...this area copped it...so did Parramatta. Much better suburbs than Mt Druitt.

    Just like Adelaide...people told me I would not pick up a place in Adelaide Northeast for 232k 10 klms from the city. Well..I did it settles in another 2 weeks.
     
  14. Travelbug

    Travelbug Well-Known Member

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    No! This seems to be a rehash of the Drui thread. why? Can't see the point in saying the same things all over again.
    I thought, reading the title, that there might be some relevant Psychological references. But no. Why that title? What's the psychology in declining markets?
     
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  15. RetireRich101

    RetireRich101 Well-Known Member

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    You quoted the article, yet failed to acknowledge that Sydney West didn't decline with rest of Sydney suburbs ...

    Do you simply have a problem with Sydney West or problem with reading?
     
  16. sash

    sash Well-Known Member

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    Not just targeting Druie this time...I think the Southwest in worse shape at the moment.

    If you want a hell in hand basket market look at Perth...now that is one which has deals going like no tomorrow. Sydney has not reached that level of downward momentum yet...but it will. If you read the article ..they focus on Bankstown-Canterbury being the most dire.

    But the deflation in Sydney is turning up....I think places like Baulkham Hills have deflated a lot quicker.

    My interest will be in areas like Blacktown, Campbelltown, and Liverpool as I see these areas have the best bang for buck.
     
  17. RetireRich101

    RetireRich101 Well-Known Member

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    Feeling sorry for you didn't buy there in the last cycle. In fact feeling sorry that you didn't buy anything in Sydney in the last 20 years Sash
     
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  18. sash

    sash Well-Known Member

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    Mate again you are focusing on the wrong area....Sydney West will bring the best bank for buck. That MEANS....when the decline happens...areas like Blacktown, Liverpool, Campbelltown being middle class areas (not lower socio-economic) will offer a chance to get in again. I feel that these areas had a lot of new immigrants go into these areas...and build their Taj Mahals so to speak. The current trajectory is down...it has only started...when the contagion spreads it will head down much further than people think. It is like a Frog in boiling water so to speak...so are you a Frog?;)
     
  19. Andrew H

    Andrew H Well-Known Member

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    I have to agree with @sash. The heard mentality takes prices up and takes them down hard. And the 1% makes use of either market, media coverage is only making things more amplified.
     
  20. Inov8ive

    Inov8ive Well-Known Member

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    The South West was not the hardest hit, in fact this article states that the south west remained flat and had no decline. The West has powered on and leads the way contrary to you saying the opposite for a while now. It's Canterbury-Bankstown, The South and the City and East that took the biggest hits. The Inner West was hardest hit on apartments. Sorry @sash but you can't argue with the stats. You only need to look at those graphs to see where the real drops may occur.