This Housing Downturn is Over 2020

Not true..... if they see risks with certain suburbs they won't lend you money.

In my view Sydney is the riskiest market in Sydney....people are highly geared...if they lose their jobs it will be a house of cards.

Those sitting on $2m house could be sitting on $1.5m dollar houses..... too many people get smug...but this event is a definite black swan..it will have far reaching consequences.

You will see a lot of baby boomers get pushed out of high paying jobs...have little to retire on...and live in a retirement that they did not plan for. The lower end in Melbourne and other state should do okay ...

 

Sydney is the least risky market in Australia. Lowest yield, lowest risk.

Now Sash, you might think Sydney is the least compelling investment market. And perhaps you are right if you are investing for yield. But if you are just assessing risk, Sydney is not a risky market.

 

Nope....not if CV is not contained....do ya think we may have a lock down? If you don't think so...neither did Lombardy in Italia? Va bene?

 

I live in China. The level of security to contain it here, I don't think a lot of countries can pull it off.
I think we are in for a rough ride.

 

That's true. You can't get finance to buy rural.

 

It won't only be rural...it could be certain Sydney suburbs,,,,

 

I have a sneaking suspicion we will see the Government try to relax restrictions. I think we are being slowly softened up for this.

 

Lowest yield, lowest risk?

If the recent share market correction turns into GFC2 then Sydney will be the most vulnerable since it's knee deep in the finance industry. Prior to the last 4 interest rate cuts, tax cuts and regulators expanding access to credit, Sydney prices had already gone through a correction. However, the real economy is actually worse now than it was in 2018. I don't see prices faring too well in Sydney in the short-medium term. Investors receiving 2% yields may be tempted to cash out, particularly if prices appear to be going through a stabilisation period e.g. Sydney mid 2000's.

 

The other factor to consider is that when unemployment increases the electorate becomes less favourable to immigration. When unemployment is low most people are apathetic to immigration. However, when unemployment rises suddenly people start blaming migrants for unemployment, low wage growth, high costs of housing and congestion etc.

 

Yield is a proxy for risk across all asset classes.

When you invest in say Brisbane (great city, no problems with Brisbane), the higher yields you get there are compensating you for higher risk. It is the same for the higher yields in commercial property, and it is the same for high yield bonds. They are lower quality.

Sydney is, for want of a better word, an extremely boring city to invest in. Very strong fundamentals.

 

Personally I believe there's far less risk in Brisbane compared to Sydney. Liveability, affordability, scale and future economic prospects all suggest that Brisbane is a market where you can confidently buy. Brisbane property prices are still about 55% of Sydney’s while household incomes are only around 12% lower. The only negative Brisbane has in comparison to Sydney is slightly higher unemployment but the prices more than compensate for that.

 

Brisbane is a good city, no doubt.

 

If you mean a lock down...it can happen...particularly in Sydney...

 

100% correct...you need to excusee....John....he is young..he did not see the impact of the last recession in OZ in 1989.... 100% agree...Sydney has a huge risk!!

 

But brisbane has always had those advantages. Why hasnt it boomed yet? Has anything changed in bris in the last couple of years? Or just that syd has become more expensive?

the problem is that expensive isnt necessarily a deterrent.

 

Inflation was almost 8% and interest rates were at 18% with unemployment at 6% and then Syd resi values dropped by approx 17%.

Given the int rates are 6 x lower and inflation at 7x less vs 1988/89, the parallels are not there by the looks of it. With the Syd market paring all losses since 17, if things were to go pear shaped, aren't we still looking at going back where we started from in May 19?

Just trying to get my head around this..

 

Yes and no.....yes inflation and IR were much higher.

But this time around people have much higher debts....and less savings. If the employment market gets hit...it will not bear well in Sydney.

 

There is no inflation though. If anything it might be deflation. Thats usually bad for property, but if interest rates are zero, the central banks do more qe, and people still stay out of equities, where is the money going to go?

the only thing you can say is that a lot of things are possible at this stage.

 

You are correct it could flow to property...but like you said is deflation....but more importantly is jobs. Will that continue to stay strong like before when the property markets performed.

I disagree with Scomo who is sayin that is health problem. This is the major symptom....but the economy was already crook.

 

I don't see the correlation, low yields in equity markets are often a signal of overpricing and greater risk. You are essentially overpaying today for, hopefull outperformance in the future.

Imo the same argument could be made for current Sydney prices.