Watching the Druie Drop in Slow Motion

We buy both , our last buys have all been cheapies .

One's before that were in central places in Sydney .

About to make more offers on a cheapie and a well located property.

Cliff

 

Yeah mon. After it takes a hit.....where there is chaos, there is opportunity...right?

 

Correct....just watching the media beat up happening...it is very negative for Sydney. They are indicated that Western Sydney/South West has a clearance rate of 45%.....this is going to affect people's psyche....the market there is definitely in for a rough ride despite what anyone says.

I don't think we will see the bulk of the buys will interest rates rise...that could be 18 mths plus away...Sydney is now definitely a no go zone....

 

@sash - How does that clearance rate stack up against the long term average for western Sydney? IIRC auction isn't the preferred sales methodology in the demographic.

 

Yes,

• I purchased 2 properties in Oct and Nov 2003 in Blacktown. Including a PPoR that I currently live in
  
• 2003 is definitely NOT a falling market for Blacktown.
• I have compiled rpdata for June 2003-2006. see attached file. there are 67 out of 817 properties that are under 250k. Again, of the 67 properties, there are 50% due to transfer of title, no open market transaction. This leaves 34 out of 800, which is about 4% of property.

Let's go back to 2770 discussion.

• In the same attached file, I compiled rpdata for the suburbs Whalan; Tregear; Lethbridge Park; Emerton; Dharruk for Oct 2014-March 2015 ( would this be the peak months for 2770?)
• According to 160 sales in that period, only 5 were over 500K. If you drill into those sales, they likely outside the norm sales, such as with Granny flat etc
• I coloured the same, so under 400k it is yellow, under 500k it is orange, and above 500k it is red. you get the drift.

If you don't like graphs or median, I will dance with you. I've provided actual sales occurred during peak of 2770 form rpdata. Sales mostly occur high 300k to low/mid 400k, NOT the mid to high 400k or over 500K that you're referring to

Here is my view,

• I AGREE your view that 2770 suburbs may, could or will fall back in value in the next few years. How much $, % I is a future prediction and I am not here to provide my view or argue.
  
• I DISAGREE your view regarding 2770 value during the peak, now and in 6 months. There is no hard fact provided by yourself, but seems only provided examples of RE listing of 'over and above'..
• I am CONCERNED that in 2019 you will again use the same logic to price. Where would you base your figure from then? rpdata, your own diligence, RE listing, few calls to RE agent?
• There is NO EVIDENCE that 2770 grew 100% in the last 3-4 years. RPdata suggest a 75-85% increase in the last 5 years. This % increase is in align other properties in Sydney West.
• There were buyers purchased in 2011 and now doubled, but there is not the majority of us, and assumed purchased well.

2770 suburbs may, could or will fall back to 280-350k, but it wasn't from 500k or 450k

 

RetireRich101...a question...do you believe that your comprehensive analysis of property might have prevented you from buyin more property in Blacktown and Mt Druitt prior to the boom?

 

Correct...Scott...the auction method is relatively new in Western Sydney...and is predominately due to a hot market. A couple months ago...the clearance was high 70s..albeit on a low base...

The media does not highlight what you have said...but will affect the psyche of the "herd".

For the record...I have already pulled most of my equity at the high point. For example one place I had in the Hunter (Tenambit) was valued at 360k last year. I was delighted as I pulled 80k out in equity...the mortgage on it is about 195k. There is no way I would get a valuation of even 300k for that now. Such is life.....

 

So if the top is 500k and you pulled all your equity out assuming 80% you now have a loan of 400k against this 500k property.

When it drops to 350k in value do you have the 120k to tip in to keep it at 80% lvr if/when the bank asks you to rectify the negative equity?

 

The chances of bank asking for the money back is slim unless there is a catastrophic collapse of the market. ....I have already done this for most of my NSW properties. Do it now...if you wait you won't get much out.

 

Do you mean 'Sydney' or actually the whole NSW including Newcastle and Wollongong?

 

I haven't heard of banks wanting extra equity on residential loans , but I have seen it happen in the commercial sphere with disaster out consequences.

Though , just because it hasn't happened doesn't mean it can't .

It comes down to how much of a risk you want to make and that's a personal choice . If your 30 , single , with a good job , you might be prepared to roll the dice more than if you're 36 , three kids etc .

We're lucky that we haven't had to refinance as we have enough equity ( from existing LOC's ) to max out our serviceability , though if I was refinancing at the end of a particular cycle , say in Sydney and using that to pay for deposits to buy in Brisbane , id want to keep plenty in reserve . We have plenty in reserve .

Cliff

 

I agree, but Sash is making out that anyone could rock up to an Agent & buy a property for silly prices. Some silly prices were available, but it was far, far from the norm.

 

It is not a comprehensive analysis. Just 30min on rpdata, confirming you initial post of the peak, current for 2770 maybe inflated...

I am trying to stop you in 2019 claiming 2770 has peaked 500k in 2014 and dropped to whatever price. As I said previously I don't care what your prediction is, as this s future crystal ball thingy. BUT what is known is today and past sales. We have real data to show the past and present.

 

All my NSW ones where I could get at least 50k out......

As I wrote in my previous posts on Somersoft...cash is king.

Here is a scenario.....lets say interest rates increase from say 4.5% to 6.75% by late 2017. Lets say some of the people geared up to $2m in IP debt. Can they service a 135k interest only debt vs a 90k debt? That represents an increase in repayments of approximately $3750 per month. Whilst I acknowledge it will only stay there for less than 9 months. On average lets say they will need to find about 60-80 over 2 years in repayments...can they still remain solvent? Have they stress tested the portfolio....this needs also consider the rent increase possible.

Not everyone...but if you know what you are doing...you should be able to do this. Silly prices are available in Perth now due to its place in the cycle....know a buyers agent who is dropping some silly offers and can't believe a few are actually taken up. Mostly high end at the moment though...

 

Even those that know what they are doing weren't getting those prices. There are only so many in that much distress, or lucky enough to be the only one at auction with a lower than low reserve.

 

I have pulled equity out across the NSW portfolio. Some examples:

1. Maitland - debt of 195k odd...pulled out 80k based on a val of 350k
2. Barrack Heights - debt of 226k ...pulled out equity of 110k based on a value of 420k.
3. Woy Woy - debt of 255 pulled out 145k in equity based on value of low 500s.

The list goes on.....

 

You would realise incorrectly then. Blacktown/Mt Druitt is just over half my portfolio in $$ amounts.

 

Post or pre
Ivan?

 

Judging by the reaction ...we know who owns in the Druie.

In any case my post was not to offend just to call out what I am saying..happy to be proven wrong.

I plan to spend money in Sydney in another 2-3 years...I have not been too far off before..hopefully it plays out the same in this instance. But if you are exposed just to the NSW market....some people are going to be wondering the wilderness for the next 8-10 years. That is all I am saying.

 

I think its important to realise that everyone is at a different stage in their journey. Someone might only have one IP and that one IP is in NSW, and that's OK. Most people that I know that have a serious amount of IPs have them spread across different States, if for anything else other to manage Land Tax.