Watching the Druie Drop in Slow Motion

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

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  1. skater

    skater Well-Known Member

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    I think you are just having a lot of fun bashing Mt Druitt.
    This is incorrect! At the peak of the last boom, houses were selling for around $260. Prices came back, but nowhere as low as you suggest. The really low ones were few & far between & mostly owner occupied. Some were burnt out shells.

    Correct!
     
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  2. RetireRich101

    RetireRich101 Well-Known Member

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    Sash wrote:
    " houses could be bought for $250k or less comfortably in Blacktown around 2003 after the last boom"

    Incorrect!!. There are many evidence in your post these figures are purely based on 1 or 2 sales out of 100, that are sold for this value.
    2006-2008 would be the vulnerable in Blacktown where you see price drop and distressed sales. I crunched for those years. There were 836 properties sold for the 2 years. 57 of them were UNDER $250k. Out of 57, at least half of them are non open market transaction , meaning title transfer due to deceased etc.

    I know you dont like graphs, below suggesting median is around 320K during Blacktown falls

    upload_2015-10-19_8-46-45.png
     
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  3. sash

    sash Well-Known Member

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    Well lets see what the market does...time tells all....there are things in the pipeline from the banks which will make the Sydney market even more interesting.

    As I said these are my views...and you have yours.

    Remember that I expect similar things to happen in the Central Coast market also.....which I have a few. It is just market timing. The Hills is another area which will be affected. The low point is when interest rates peak which they eventually will probably not 8%...but high sixes is a reality.
     
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  4. Scott No Mates

    Scott No Mates Well-Known Member

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    Less dramatic correction in the Hills IMHO - the driver is infrastructure NE railway, Pennant Hills Road bypass, Schofields/Riverstone flood mitigation works (hence land releases).
     
  5. See Change

    See Change Well-Known Member

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    Hi Skater , I'll agree that the median didn't reflect that , there were some out there even if they were few and far between , but since when did you or I aim to be average :cool:

    The units we bought in 09 have gone up around 80 % even though the median price change for the suburb is well below that . Comes down to buying well .

    Clif
     
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  6. sash

    sash Well-Known Member

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    Correction will happen...a lot of people at work live there. Houses which selling in Castle Hills for 700 now over 1.35m. Baulkam Hill houses worth high fives now just over a mil at highpoint.

    A lot of these people are white collar workers where there is a lot of churn and change..where jobs are being restructured or outsourced.
     
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  7. Scott No Mates

    Scott No Mates Well-Known Member

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    Also a lot of high sales due to rezoning and proximity to the new stations.
     
  8. See Change

    See Change Well-Known Member

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    IMHO , the places to target in the Nicer areas are the ones that have only just been developed . They haven't had the chance to move up as much and give the owners elbow room to move.

    Still not sure if we will buy in Sydney in the next couple of years , but if we do , it will be in a very nice central area , low balling on distressed sales . I'll be checking out barangaroo , inner city developments .etc . Might even get around to buying in Mt Druitt in a few years , though I did say that in the last cycle , but never got around to it .



    Cliff
     
  9. Scott No Mates

    Scott No Mates Well-Known Member

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    @See Change - prefer blue chip to blue collar or blue rinse?
     
  10. sash

    sash Well-Known Member

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    RetireRich101....2003-2006....were you round to see what happened with mortgagee sales....2006-2008 price were rising.

    As I said if I relied on graphs...I would not have got to 25 plus properties. As I said median means 320k means 50% are under 320k and 50% over. Also the median has a deviation sometime of 20-30% under or over the median....but it balances out. Remember the median is calculated on the number of houses in price order and then picking the price point right smack in the middle. So if you have this

    200k 210k 220k 230k 260k 270k 280k 290k 310k 330k 350k 360k 370k 380k 390k

    The median is 290k...deceptive isn't it??

     
  11. sash

    sash Well-Known Member

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    Correct...the Hills has a lot of new stock....there will be some mortgage stress there.

    The other areas are part of Campbelltown, Central Coast, and Liverpool....
     
  12. Travelbug

    Travelbug Well-Known Member

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    What areas went up buy 200%? A double in price is a 100% growth. So in some areas prices quadrupled?
    With the rents, one could argue that rents will now need to come up to equate the expected yield (instead of price going down). Which would mean the Lane Cove property will need to drop to return to the expected rental yield.
    If you are comparing it's best to compare apples with apples. Unit yields are typically higher than houses. I'm getting nearly the same rent for my daggy units as my renovated houses.
    I think rental yields over time are generally dropping everywhere. Before the last boom rental yields in Mt Druitt were much higher than 6%. 20 years ago they were 8%. I don't have a chart, just remember houses in Oakhurst were $55,000 and getting $85 a week rent.
    People now get excited if they get 4% yield.
     
  13. sash

    sash Well-Known Member

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    Travelbug...I realise you have your over 80% of yout portfolio in Blacktown and Mt Druitt...200% is doubling. ...is what I mean. If you use the rule of 72...is your property doubled since 2010. It has grown 14% per annum compounded at 300%....29% per annum obviously not sustainable. When there is a correction it always takes a hit.

    If people are excited about 4%....and interest rate of 6.5% will floor them....there is not way rents are going to go up that much.

    As I have always said....unless people have diversified portfolios or have an exit strategy from the current Sydney market...they are going to feel some pain in the Sydney market...in particular when interest rates rise.

    Remember you cannot control the behaviour of most of the general public...they got punch drunk on the Sydney market as it went up between 2 and 3 times in some suburbs. It will now turn the other way...it always does.

    Some of really smart guys I know pulled their money out late last year and early this year and took it to parts of Melbourne and Sydney. One guys I know is land banking 10 acres in Brissie...I laughed at him...he had the last laugh when the zoning changed. I told him he was making a mistake when he sold 80% (3 properties) of his holding in Sydney.

     
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  14. Tonibell

    Tonibell Well-Known Member

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    I think the employment associated with the airport construction and other infrastructure will somewhat cushion the impact on housing prices in the west during this part of the cycle.

    There is a lot of difference between a median house price and a median all dwelling price. @sash seems to be talking about house prices where the current median is mid 500s - I could see that coming back around 10% but not much more than that.

    It is important to have have some diversity (Western Sydney represents less than 10% of our portfolio) - it is a worry when you see these portfolios that are 80% Western Sydney or Logan.
     
  15. Phantom

    Phantom Well-Known Member

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    Is that your final answer? :p
     
    Last edited: 19th Oct, 2015
  16. sash

    sash Well-Known Member

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    Correct....Tonibell....and a good point.

    Lets compare two suburbs...an older established suburb like Quakers Hill will probably do the typical deflation where prices come off 5-10%. Why it is near employment...it is predominately owner driven and is good value compared to nearby Marsden Park and Scofields. The median is the high sixes with a yield around 4%. It was around low 4s median...and yield of around 5% a couple of years ago. Lots of people in decent middle class jobs...and high ethnic population.

    On the other side the Mt Druitt suburbs have a very potion of investors...thus why the boom bust cycle. Median lets say was 2s...now it is more like mid 4s. Typical yield a couple years ago was 6% plus...now it is more like 4%. Mt Druitt demographic is of disadvantage.....lots on disability and centre link benefits compared to rest of Sydney.

    Guess which area will take the larger hit?

    As for the airport construction....most of those people will probably be in well paid jobs and will select the better suburbs in the Southwest and West to rent.

     
  17. sash

    sash Well-Known Member

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    I really??? :) ....want to jump in when prices hit that low? ;)
     
  18. Phantom

    Phantom Well-Known Member

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    Edit - didn't mean to tag you Sash. Was having a joke with Bob Shovel. :)
     
  19. Phantom

    Phantom Well-Known Member

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    Like I said ealier on, IF they get as low as you say 280 - 340 mark, yeah I'll jump in. Returns will look good at that price and will help weather the 6% IR when it comes in a few years.
     
  20. sash

    sash Well-Known Member

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    Darn....I was hoping you would say you would jump into the market when it takes a hit.....
     

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