NSW Watching the Druie Drop in Slow Motion (2018)

Nah...now is the time to buy in the Druie...the Vaucluse of the West never drops....

 

@sash @skater whats happening out further west? Bet you’re glad you got out

Read this today..
Western Sydney showing early signs of loan stress


A couple asked him to sell a two-bedroom weatherboard home in Veron Street in Wentworthville, 27 kilometres west of Sydney, for $950,000 when it was only worth about between $820,000 and $830,000. They bought the home for $790,000, two years ago.

"I asked them where they got that number from and they said that was the number they need to pay back the $200,000 they borrowed from family to buy the home as well as repay their interest-only loan," he said.

"A lot of them initially paid $2000 to $2500 a month on their interest-only loans, and now they have to pay $4000."

"Many owners are going through loan issues. If they let the banks take over, the bank will sell their homes for a lesser amount than if they try and sell it now."

 

If they bought it 2 years ago it's unlikely the IO would expire for a few years.

If they had a 20% deposit at the end of 5io. Their p&I would be $3500 based on 25 years P and I

If they had no deposit no idea I'm happy for them to loose.

 

There is definitely pressure in Sydney. As I have diversified portfolio I have only sold one in NSW (Albury).

A lot of people have listed places for sale...but it has been done quietly.....the real stress will come from late 2019 to 2022....this will cause some forced sales......unfortunately.

The West will be hard hot no question.....if did last time.....

 

That's really no news at all. The west is no worse off than any other part of Sydney. Anybody buying at the top of the market, especially if they go IO, could find themselves in hot water if their situation changes & they need to sell as prices pull back. It won't matter if they are in Western Sydney, North Shore, Eastern Suburbs or any other area.

The real story in that article, I believe, is some smuck with no savings, borrowing his deposit & stamps from family & purchasing at the top of the market. He now wants to get out & finds that he's got negative equity.

As for getting out......I've still got several & not at all worried, and unless @sash has recently bought in western Sydney, he's never had any out this way.

Most areas will pull back, in fact many have already started, so there's no question that prices will/are coming down, but I think you will be mistaken as to how far back they will go. I'm betting for a softer landing than previous boom cycles.

 

What's that in percentage terms 'drop from the peak'?

 

I am no so sure about that, I know someone brought a land for $.5 mil and finish up with a house for just under $1.1m in Edmonson park that is not close to the station. The finish is quite low standard, your typtical mc mansion. During the good times, land, building material and labor prices are significantly inflated. Now all the sudden you can get someone to do the same job for 30% less so that's the difference.
I think there's going to take a huge hit, like 30% hit for sure. Older stocks might be smaller discount but at-least 20% nevertheless.

 

We'll have to disagree...then.....some parts of Western Sydney are among the most disadvantaged in the country. In places like the Druie investors bought multiple properties on I/O for 350-400k......that will prove very interesting....in a couple of years when they go P/I. Most of these don't have the skills to analyze CF and the impact when I/O comes off.

Areas like St Marys, Srt Clair, Minchury are ridiculously priced for their locations...they will also come off a lot.

When you now see land under 350k (small blocks)..and where for 250k you can put a small house when the boom in Sydney comes off...I can't see areas like Mt Druitt staying in 400-500s..more like 300-400s. Happened before and it will happen again.

People argued that Sydney would flat line.....this boom was much bigger for Sydney now as people move to other states...and the banks tighten...there will be a dire impact. But you are correct places like the Northshore and Inner West will have their fair share of the pain. But these places do have a floor as they are much more desirable to live than Mt Druitt......

 

I thought this would be relevant.

"The size of Mount Druitt is approximately 6.2 square kilometres. It has 16 parks covering nearly 5.6% of total area. The population of Mount Druitt in 2011 was 15,793 people. By 2016 the population was 16,714 showing a population growth of 5.8% in the area during that time. The predominant age group in Mount Druitt is 0-9 years. Households in Mount Druitt are primarily couples with children and are likely to be repaying $1800 - $2399 per month on mortgage repayments. In general, people in Mount Druitt work in a machinery operators and drivers occupation. In 2011, 52% of the homes in Mount Druitt were owner-occupied compared with 48.3% in 2016. (source: Australian Bureau of Statistics)"

With all the information readily available nowadays with the internet, I would imagine most of the investors in Mt Druitt should be able to do basic math to calculate CF and implications of I/O period ending.

Plumpton property: First house to hit $1 million mark - realestate.com.au

Though this still amazes me, from a couple months ago.

 

Good post. It show over 50% of properties are rented.....and most are families with young children - ie. at the costliest periods of theit lives and not in positions with great prospects because machines operators and drivers will lose their jobs over the next 5 years due to automation.

$1m....if they get into trouble...they are seriously stuffed...you are getting much superior locations like the Ponds..Kellyville...they serioulsy overpaid...can't believe the vals went through unless it was a cash purchase.

As for investors being able to do basic maths maybe...but a lot think..I will simply refinance....that may not be an option if they can't service....interesting times indeed.....

 

Some parts are disadvantaged, yes, but no more than any other Housing Commission area in Sydney.

The smart ones bought at well under $300k, which is where they were at the start of the boom. Math skills are not determined by postcode.

Let me fix your spelling for you. St Clair & Minchinbury

Yes, they will come off, as stated above, but don't be fooled by the location. The area is very much in demand and prices are slowing, but there's been no big retraction like previous cycles. There is a distinct difference this time around.

 

@sash
Firstly the Sydney unemployment rates are the lowest they've been in a long time.



As for people's repayments going up etc, as you say, over 50% of properties are owned by investors, who don't necessarily have low paying jobs and whose situation you don't really know to say that they'll be affected more than the rest of Sydney.

If they purchased over than 2 years ago, their properties would have already gone up in value and they could easily sell and cash out if they have financial issues. Plus, the rental yield in that area would have been higher than other places in Sydney when they purchased

If they purchased recently, serviceability would have already been calculated at 7.5% at the time of purchase, so less chances of major issues compared to the rest of Sydney.

Plus you're forgetting that Sydney's population is growing by 100,000 people every year. The interstate migration out of Sydney is not really high to put a dent in this figure. Which means, the Dru, which in the last cycle was riding on how the rest of Sydney performs will not follow the same pattern this cycle. It is very much a part of Sydney this time around and is well connected and in a central location.

Add to that the first home buyer's grant.

Though personally, I hope it crashes hard in 2020 so that I can pick up a bargain. I would love that.

 

Employment is a lagging indicator...

Most investors have less than 1 property and most have average incomes based on stats.

Lets wait and see...but I am getting this feeling all is not well in Denmark....

 

Another overprice Bogan mansion.....OMG......someone is going to lose their shirts/skirts.....

Claremont Meadows house sets new record price - realestate.com.au

 

Not necessarily. It's sitting on 1500 sq metres of land. Think mini farm, cash crops, bogans and what have you got? Those crafty devils are gonna start living off the land.

 

Dobbie mon!

 

They seem to like their tiled living areas

 

They must be CUBs (Cashed up Bogans).........

 

I have been following this thread for some time. Any update on prices in Mount Druitt? I recently sold house in Melbourne and prices are off ~ 15% compared with the peak. Has Mount Druitt experienced a drop from the peak of that order?

 

Yep.