Watching the Druie Drop in Slow Motion

Discussion in 'Property Market Economics' started by sash, 17th Oct, 2015.

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  1. Gockie

    Gockie Life is good ☺️ Premium Member

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  2. sash

    sash Well-Known Member

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    great article shows how irrational people have become when 80% are investors that says it all. patience the market will sort itself out by 2019.

    sydney now has gone far longer than many thought. ....will be interesting to see over the next 30 months.

    lots of newbies who have no idea of market cycles....they have comtinued to put money into sydney on a prayer that could their undoing.

    watch brissie and outer melbourne go to the next step this year

     
  3. rtaapr

    rtaapr Member

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    are 2770 areas really bad for investment now?
    they appear to be only areas where you can still get a house with decent land for low-mid 500Ks, its neighboring areas like penrith or Quakers hill are much $$$, so those are being priced out will naturally look here, specially with stamp duty exemption kicking in the area can appeal to FHBs?
     
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  4. See Change

    See Change Well-Known Member

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    in previous cycles , when sydney peaks , 2770 goes backwards for a number of years .

    If you think " things will be different this time " , buy . . but IHMO i don't think they will be .

    Cliff
     
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  5. noogie60

    noogie60 Well-Known Member

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    One of the main reasons why Quakers Hill and Penrith are priced much higher than Mt Druitt and surrounds is that they don't have large public housing estates. In a great planning stuff up, huge public housing estates were built in the 1970s at Mt Druitt and its surrounding suburbs (Shalvey, Blackett etc) and the same thing happened in the southwest around Airds and Claymore.
    It ended up in mini ghettos, with whole suburbs of housos with little to do except take drugs and smash things up.

    This article describes the area pretty well
    Bidwill: A suburb in crisis

    You also had periodic riots and mass fracas (?mini riots) like these at Bidwill and Macquarie Fields
    Sydney street riot: 19 arrested - National - smh.com.au
    AM - Riots break out in Macquarie Fields
     
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  6. highlighter

    highlighter Well-Known Member

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    I can, though maybe not by 2019. I think areas that have seen a lot of new development are where we'll see the most risk. In Ireland these sorts of heavily developed pockets attracted a lot of new, inexperienced investors and buyers, who had lower incomes so chose the more unpopular areas. There was also a trend of developer discounting, as builders couldn't sell when the market stalled so had to slash prices, bringing down values (we're already seeing this with off-the-plans). These areas just built up far too much supply, and the loss of new investors took a good 50% of demand out of the market.

    When you think about it, Australia is pretty similar. We've had a lot of fringe suburbs open up, and if investors and buyers won't or can't buy, these areas are often already pretty undesirable. If a recession hits, these places are filled with recent buyers who couldn't afford elsewhere, so on top of existing oversupply you'll then get even more oversupply as people try to offload assets.

    This is exactly how Ireland ended up with over 6000 abandoned assets and hundreds of ghost estates, which made up the bulk of the crash (some never regained value). People were buying into lots of these new housing developments even in 2007 when price falls had begun, and then they lost everything. I managed to talk my sister out of buying into one, though to be honest I definitely didn't see a crash coming (no one ever wants to believe a crash can happen).

    I think Mt Druitt is a good example of an area where there's just been too much supply added too quickly and as demand falls (because buyers can't or won't buy, or can't get finance, or don't want to invest or just won't pay a premium because there's too much to choose from) then prices could backtrack a fair bit.

    I don't think we'll see a huge retrace in good quality suburbs with mostly family homes, dominated by owners who are often paid up on their mortgages (and also tend to have higher incomes and therefore less risk of default). Maybe a bit of a panic sell at worst, which will be very temporary (these sorts of assets in Ireland regained their value fast and are now growing often 10% a year again). However places like Mt Druitt and other areas of heavy development will probably suffer most. Lots of new apartments in that area. You've also got a lot of outer, outer suburbs packed with blocks, and the builders who own them will have to discount in a market stall, many of these areas are already struggling to attract buyers. Imagine what a correction would do to demand in these less popular fringe areas.

    Get out of fringe suburbia and OTPs is my recommendation. Too much supply, not enough demand, and if we do correct that is where most if not all of the retrace is going to happen.
     
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  7. sash

    sash Well-Known Member

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    Exactly....you have hit it on the heads....when investors pull back watch out!

    If people read the thread....2019 should get interesting.....in particular OTP...know someone who paid 450k for 1brm unit in the Druie.

    People have short memories of the last carnage in Sydney 2004-2006....interesting times indeed....

     
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  8. rtaapr

    rtaapr Member

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    Yep, mt druitt area near the westfield does not seem too bad but than house prices in mt druitt are higher as compared to Shalvey/Blackett.
    there are plenty of town hoses available in mt druitt too with OK yields but seem to have poor capital growth - are they any good or would you prefer something in werrington or kingswood
    if you go to penrith side (kingswood n surrounds) yields drop and things become significantly -vely geared and yields drop which will eat in your cashflow

    any preferred area in penrith/blacktown LGAs that is recommended for investment in this market for house or TH?


     
  9. skater

    skater Well-Known Member

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    Agree!

    HELLO! Heavy development in Mt Druitt? I don't think so! I go through Mt Druitt several times every week & there's only a small amount of development happening out this way. The same can't be said for some other suburbs though.

    When the market starts to stall & fall out this way, it will be the same market forces as in the past.
    Again, you don't know the market in this area. Of course Mt Druitt is more expensive than Shalvey & Blackett. There are several reasons for this. Please explain how you think there's poor capital growth. I have made a small fortune in Capital Growth out here.
     
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  10. sash

    sash Well-Known Member

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    We need to respect differing viewpoints.......

    Just ....I know the area well..enough.....there is development in the Druie..and it is also saturated with investors....might be a good time to sell....but definitely a very poor time to buy.

    Highlighter makes an excellent point...

    Past capital growth...will not reflect CG in the future. As I have said the market will correct...and in investor held suburbs like the Druie it might be more than in O/O markets

    Have you read what the banks are doing in terms of lending restrictions in large parts of Western Sydney? This even includes suburbs like Toongabie, Wentworthville, Ponds, Doonside...so what makes you think Mt Druitt will be immune?
     
  11. rtaapr

    rtaapr Member

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    I am just referring to townhouses
    Mount Druitt Investment Property Market Data
    no growth in median between 2015-16
    in comparison
    Kingswood Investment Property Market Data
    I personally don't mind the area and researching to buy an IP, just picking the brain here to see if it is a good idea or if kingswood etc are better in long term.
     
  12. skater

    skater Well-Known Member

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    @sash, I am well versed in what is going on. This isn't my first rodeo and I've never said prices won't retract. I wouldn't buy anything in Sydney at the moment, let alone Mt Druitt. My point is that there isn't huge development in the area, as suggested by @highlighter.

    I sold several in the area and made a nice little profit, timing the market. I'll be watching carefully in a few years to pick up a bargain or two.
     
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  13. skater

    skater Well-Known Member

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  14. sash

    sash Well-Known Member

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    Hola muchacha.....this little Mexican is taking a long siesta from Sydney market too....adios.....
     
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  15. Gockie

    Gockie Life is good ☺️ Premium Member

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    Agree with skater. .. there really isn't anything much in the way of new development in Mt Druitt.
    The positives the area has is that it's near infrastructure... trains and roads.

    And it's just about the only affordable part of Sydney for freestanding homes!
    I will say... its definitely not the time to buy there though.
     
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  16. rtaapr

    rtaapr Member

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    Agree, I live in 2759 and visit druitt area almost daily, have not noted any significant new developments .
    the reason you suggest against buying here is that you tie up your capital and stress your cashflow due to NG with little/no chance of CG in coming years? and that also limits your capacity to buy further in rising markets elsewhere.

    for established investors it is easy to stay away and invest interstate but for the 1st IP buying interstate and managing it seems bit too much to bite, at least to me.
    also there is FOMO, If you don't sydney IP now and tie your capital elsewhere while SYD prices slightly keep creeping upwards you might never be able to afford a IP again in SYD

    also as you say this is only affordable area so don't you think FHBs will be naturally pushed here?

    note that I am only referring to areas around train stations and infra, I know the suburbs are the back shavely/wahlan etc are still very undesirable

     
  17. jprops

    jprops Well-Known Member

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    Plenty people buying their first IP interstate, I did. If you're not confident in doing interstate due diligence, hire a BA. It might cost you 1 - 2% at purchase, but can save you from making an otherwise costly mistake.
     
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  18. See Change

    See Change Well-Known Member

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    In the next 7-8 years , Brisbane , Adelaide , Tassie and possibly even Perth will significantly out perform Sydney , in particular Sydney's outer west .

    I first started working in Mt Druitt close to 30 years ago . Skaters been living out there since the ark came to rest on Mt Druitt ...

    Neither of us would touch ANYWHERE OUT THERE AT THE MOMENT . Both of us have been selling in sydney in recent times .

    I remember going to a property meeting in around 2003 and talking to some one who was really happy with his purchase in Mt Druitt . It would have been ten years before he could have got back his purchase priice and if he's had to sell prior to then he could have been 20-30 % down and probably would have had Skater low balling him .

    Cliff
     
    Last edited: 4th Jun, 2017
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  19. skater

    skater Well-Known Member

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    The real estate market tends to move in cycles, and is not linear in growth. Google "Property Clock", and you should get more information. Basically, here in Sydney we are at the peak. What that means, is that unless you buy extremely well, the odds are that anything you buy at this time will either stagnate, or go backwards in value over the next few years. Some areas will fare better than others..

    While there is no guarantee for the future, a cycle has, in the past, run for 7-10 years. The last boom we had ended in 2003, and prices started to rise somewhere around 2013. All of my Sydney stock doubled in price, some substantially more than double. On the properties that I have kept, I am expecting the values to decrease a little, & then, at a later stage, get another surge in value when the cycle starts all over again.

    So....you can make a lot more money by timing the market, than just buying something and waiting.
    It's highly unlikely that Sydney will keep creeping upwards....but hey, I don't have a chrystal ball, so anything COULD happen. Buying out of area is scary, I know, but sometimes thats the only option that makes sense. In fact, our first IP was bought close on 20 years ago, and that was out of area.....not interstate, but there was not the range of information available back then, that we have today.
    There are a lot of FHBs who wouldn't buy out here due to the stigma & preconceptions about the area. There's also a lot of investors who avoid the area, and that's fine by me. I like it when I go to an auction & I'm the only bidder. :D

    And there's some of that stigma I was talking about. Remember, you are not buying something for YOU to live in. You are buying for someone else to live in......and there's a lot of people that want to live there.
     
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  20. skater

    skater Well-Known Member

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    Agree 100%.

    Steady on! I'm a Wollongong girl who was thrown into Mt Druitt after a failed Business. I just decided to make lemonade out of the lemons I was given.:p

    Yep! Just had another settle last week.:D

    Too right! I do love a bargain! Some girls collect shoes.....I collect houses.:D
     
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