What are Sydneysiders now doing? (investors and home owners)

Where's the borrowing power going to come from? rent rises? Keep in mind that between sensitised assessment rates and HEMs you need @70-80k increase in income per $1 Million borrowed in order to restore PRE APRA capacity. And that's usable income - most lenders take 6% max rental yield for example. Many lenders shade o/time and bonuses for example. So even if your rents double it wont get close to allowing for 2 additional median Sydney INV purchases for most people on median incomes- especially if they have a PPOR debt as well.

see above, but the maths are even worse....

I disagree. With both the "maths" and the population estimate.

RE population growth . The ABS says @ 8 Million by 2060 3222.0 - Population Projections, Australia, 2012 (base) to 2101





RE the maths. Servicing calcs are where the maths can be found. Debt to Income ratio's are where the maths can be found. What you are talking about is a theory; a theory that because of population growth, rents must surge, producing rental yield that will provide the required borrowing capacity to buy multiple additional Sydney properties.

Firstly, the population estimates are way out - so the entire theory is built on assumptions that are incorrect.

Secondly - even if you get the surge in yield that you are anticipating, it won't assist with borrowing capacity. The maths (6% maximum rental yields on lender calculators) say otherwise

These are the mathematical facts while we operate under mandated 7% P&I assessment rates and CPI indexed HEM's. Where it will assist is 10 years AFTER receiving it, IF the surpluses are reinvested in debt reduction over that 10 years. Because that's how servicing calcs work now. You need to pay down debt. Thats the only way you're going to be able to accumulate more debt.

And never mind the P&I cliff on that many properties.....

This is a great example of why people who made money in real estate in the pre APRA era should not comment on the post APRA era. The post APRA era is about understanding lending. Property Cycles. Capital Growth. Population Growth. Location. Infrastructure Spending. All white noise. This is a CREDIT driven property era now. Full Stop.


#realitycheck.
#themathsisinthecalculators
#cashcowskilldebt
#decadetodeleverage

 

From what I have learnt by investing in shares, if you sell during a downtrend with profits that's probably the best strategy of locking in your actual gain. And re enter the market at a lower point with a much stronger asset position.

(ie you enter the market 5 yrs ago with capital of 100k, your on paper gain at peak is 100% but market turned and you sold at profit of 70%. Your capital for investment has now increased to 170k. You re-enter the same market when it drop a further 50% after the panic selling has finally settled and you're now on your way up again with a much stronger position)

Don't forget when the market is hot even you can sell for a higher price for your asset, other assets are also more expensive for you to enter.

 

Shares dont have stamp duty/legal transactional costs

 

Melbourne is already bigger than Sydney in population if you exclude the Central Coast

 

Sash you are correct. It's NSW not Sydney.

 

Sydney ahs never this fast developed the West or South west or North West as they have now.

I would not be surprised if the numbers are revised.

When new airport open in 2026 Sydney will be a much,much geographically usable bigger city than it was.

 

I love the diagram. Personally, I think we might be somewhere between fear and panic. Probably closer to the fear side of things. People have been fearing not being able to afford their repayments in light of constant media articles saying rates will rise. But only now are we starting to see people going “oh crap” as the rate rises hit. I think another 6 months and those that got finance by the skin of their teeth will be in panic mode if they have had a rate rise. For the younger generation, like myself, we don’t remember a rate increase in our time and saw the glamorous side of historic low interest rates.

 

That’s exactly right. Most people I know (mainly Sydney investors or home owners) have no fear for Sydney. Their ability to keep investing/buying houses in Sydney is ONLY restricted by banks not lending as much as they were lending 2-3 years ago.

 

The rate rises and the P/I going to I/O is going to sort alot of people out.

Keep your powder dry in Sydney....a lot of opportunities are going to present themselves in the next 12 months. A of people are taking a ride on the De-nial .......the market in Sydney has turned quite significantly.

These people are about to get learn a very painful lesson.....people investing now in the Sydney market are going to learn a very expensive lesson.

 

I think the 12 to 20% deposit is going to become an issue for future growth.

My gf (28) and I (30) are on a combined income of over $250k and I would have thought we'd be the perfect example of the next generation to come through and to keep prices afloat. With rent in Sydney the way it is, saving the deposit required is a real struggle for us and considering I would have thought we're on an above average combined income, I hate to think what it's like for others.

Without the benefit of equity from a previous purchase it's difficult to see who the next generation to come through and start purchasing the $1.5m+ houses that seems to account for over half of the house market atm will be.

Serviceability isn't really the issue, we're simply struggling to save the required deposit.

 

Mate you are kidding right?

250k is like 3 time the Sydney median income.....something does not compute.

Assuming you are clearing say 175k.....that crazy. You guys should be able to put away 70-100k per annum. I think you are living the high life.

The other thing is forget about a $1.5m house.....start with a cheap older unit in say places like West Ryde, Meadowbank, etc...and perhaps pay 600k...and then trade up. Otherwise you will never get into the market....

 

I've been in and out of the Perth and Melbourne markets and also the US market, unfortunately a failed business venture cost me most of my profits which were significant. Young and a little over ambitious.

And yes, the plan is to put away $100k per annum however that's with living with the parents for 12 months having arrived back from London recently. I'm not sure we can take more than 12 months, we're already considering cutting it down to 6 and lowering our expectations.

Realistically we need double that to purchase the house we would like at the $1.5m mark.

The option is there to purchase a one or 2 bedder as you suggest however in my opinion, units, particularly in the areas you have suggested are in for a long period of flat or negative growth. With no growth it's going to be even longer before we can get in to a house if we go down the path of spending our entire deposit on something smaller and with kids planned for the not too distant future we would really like a 3 bed unit or house.

 

My point is not necessarily my particular position, it's that I dont believe it should have to take 2 years for a couple earning $250k, and that's living with parents, to be able to save a deposit for a very basic house and in major need of renovation on the Dee Why/Brookvale/Narraweena boarder.

To me, it points to very little growth, if any, for the foreseeable future for the $1 to $1.5m+ housing market. There's just fewer and fewer buyers able to save the deposit, it's not necessarily a servicing issue.

 

It’s not just transactions costs - you need to factor in the costs of holding a negatively geared property for 6-8years of no capital gains (i.e year on year actual holiding costs + opportunity costs). This will mean an actual loss much greater than the 8%.

 

Needs and wants are two different things.

If you are getting into Sydney...it is going to be down for at least 5 years...

Purchasing a $1.5m home now would be a very sill idea in Sydney. ....you would also be paying (assuming a 200k deposit) would still cost about 55k in interest....

The fact that you can't live on 250k ...shows you are not capable of managing large mortgage (sorry brutally blunt)....

Maybe you should look at somewhere like the Ponds /Schofields for say 750k...pay the house and then trade up....you and your wife should be able to comfortably live on 80k and rent a place within 40 minutes commute for less than $600pw..or less. The other option is be a rentvestor in a growing market and then take the profits....things to think about....

Some sacrifice now...for gain tomorrow.....

 

I have never said I cant live on $250k. I have said I don't believe a housing market where those on $250k have to spend 2 years saving for a deposit for a 3x1 house in most areas within 30 to 45 mins from the CBD, and that's with us not paying any rent for as long as we live with parents is a stable market. Many are not in the position of being able to live with parents so god knows how they'll afford a house. We have budgeted saving $100k per annum.

Purchasing a $1.5m home in Dee Why is a far better idea than purchasing a 1 or 2 bed apartment when supply is at all time highs and will continue to be for the next 5 years.

I see houses in Dee Why continuing to fall a little however with all the amenity coming from the Pittwater Rd developments and the Town Centre Masterplan, I don't see much negative growth. Apartments throughout the rest of Sydney is another story. I don't see any growth anywhere.

And I think you have the wrong idea here. This isn't complaining about my position. It is an opinion that the Sydney market is overheated and with very little future growth and that it is justified by the fact a couple earning $250k with no dependants and living with parents requires 2 years to save a deposit for a very basic 3 x 1 house 45 mins from the CBD.

 

Although I don’t agree with your budgeting comments. I agree with your comments re income and growth.

I’m mid 30’s. Everyone I hang out with has a household income between 200 and 400k. Some own, but nobody is interested in upgrading or buying at the moment. Everyone is just wait and see due to prices being too high for what they want.

Just lots of saving or staying in existing places or renting existing place out and movIng into a rental because it’s cheaper and easier.

That’s why I stopped looking for an upgrade 12/18 months ago.

 

It looks like you know what to do........

By the way...in any major great city like Sydney in the world...you would have to pay the same or more....sometimes being patient would being the best results.

For the record...I could afford a $3m home...but does that mean I am going to buy one...no....

Have a look at Ryde, Sutherland shire (Sutherland, Miranda, etc) and Northern Beaches (Warriewood, Cromer) for affordable houses under $1.5m.

If you want bargains...have a look at the Ponds, North Kellyville, and Hills in another 12-18 months.

 

And this is exactly why I see very little growth in the $1m plus housing market for a considerable amount of time

Less than $1m has supply issues and again, I see little growth there.

Points to a very flat or negative period for Sydney for a considerable amount of time.

I will be buying something in 6 to 12 months time out of need rather than want and as such am looking for where will fall least rather than where and what will have the most growth. A house in Dee Why or Collaroy ticks those boxes for me if I can save the deposit required in that space of time

5 Bennett Street, Dee Why, NSW 2099 - Property Details
67 Lantana Avenue, Collaroy Plateau, NSW 2097 - Property Details

 

Anyone who bought poorly in Sydney since 2015 or anywhere else in Australia will suffer in the short term. However, it doesn't mean that Sydney is a complete no go area. On the contrary, this is a very good time to buy that lifelong PPOR if you have been able to plan your serviceability in the aftermath of lending restrictions

I bought a new place (1.5m PPOR) in Cherrybrook 4 months ago. Waited 3 months and asked bank to value it and they have just come back with 1.74m figure. A 100K reno would put the place in 1.9-2 million league based on recent comparable sales. I don't have much to fear for with rates locked in and good buffers in place.

However, I know someone who paid 1.6m for a single level low quality house in 2016 and they would struggle to sell it for over 1.5m if things went bad.

While many shipwrecks will get revealed as the tide gets lower, you can mitigate most of the risk if you buy well.