What will stop the BOOM in Sydney and Melbourne

Blue chip, investment grade, under-supplied stock will probably hold up because even if there is poor sentiment, the owners simply will not sell unless they have to (mortgage stress etc.)... Unemployment is low and people in these areas are seeing pay increases...

I don't think you will find too many bargains for well located 3-4 bedroom townhouses/houses/terraces in the inner west, lower north shore or eastern suburbs.

I probably wouldn't buy OTP or secondary highrise in Mascot, North Sydney, Waterloo, Wentworth Point, Homebush, Parramatta or Canterbury right now - just my opinion.

 

I think my concern with "Blue chip" is that some people may have gone a bit crazy over the last few years? I have seen some sales that literally made my mouth drop and I've been through 3 Sydney cycles. Although its hard to know individual situations and the majority of owners of these big sale properties may have bought in using huge reserves of cash.

Although I personally know people who have bought nice homes in good suburbs (some in addition to owning Sydney investment properties) but really did over extend themselves. I actually wondered how they were even lent the money but I assume time will take care of that. I guess even if some do run into issues, Sydney Blue Chip will always have plenty of buyers for good cash.

 

Still comes back to timing, have you read the thread, flip in Marrickville, owners will lose money on this

 

I agree that some people have gone crazy but we can't underestimate the wealth that is in Sydney and also Melbourne... there is some serious coin around. Let's just say that McMahons Point and Balmain Terraces; Mosman houses and Bondi penthouses are not going to be selling for low $1m's in any lifetime. As much as people who have missed out would wish it be the case, the ship has sailed.

Some people will suffer if there is a GFC, mass unemployment and all coinciding with interest rates going through the roof but most people will sell their kidney before they give up their PPOR...

 

How much of the wealth in Sydney and Melbourne is down to the property boom?

According to the 2016 census, the median mortgage payment was $3000 per month. At 4%, that's roughly a $600K loan. Realestate.com.au puts the median house price in Mosman at $3.8 million, so owners would have at least $3.2 million in wealth from their PPOR.

In contrast, the median household income in Mosman is about $130K. So it's likely that most of a family's assets would be tied up in property. It'd be hard to save millions out of that salary.

If wealth is supporting property prices, but it's also down to them, then it feels like a circular argument.

 

I think it's also a case of inherited wealth too. Old person dies, their modest Eastern Suburbs house is now worth $3mill or so. Family member inherits it. They become instant millionaires. They have a few choices - sell it, live in it (or rent it out). If they don't desperately need the money for it, then why not keep it?

 

Oh, don't get me wrong, I am well aware of the wealth in Sydney but I also feel that some people may have pushed their limits to try and keep up with some of the competition that poured into the market in the last 5 years.

Depending on what they did they may not be able to avoid the repercussions of those actions but only time will show us that. Its probably unlikely to be an issue but just a nagging feeling I have based on what I've seen in the last 3 years looking in some of the more expensive Sydney markets.

However I am certainly not one of those people predicting some huge price correction! As you say, no drop dead cheap Sydney Blue Chip, not going to happen!

 

The drops we are seeing in the more expensive suburbs defintely not happening in the west and south west where affordability and FHB's are going.

Going to an open home out in the west today. Lets see how many investors are there.

OK so once again looking at the moving medians for the greater west.

Guess What? LOL - up up and up again. Who said western sydney housing sucks? I've just calculated the growth of my western sydney housing over the past 12 months and in total its easily grown in excess of 1 million+ in capital collectively.

Last Month Medians (3 bedders)

Colyton = $637,500
St Marys = $646,500
Mr Druitt = $646,000
Tregear = $515,000


This Months Medians

Colyton = $640,000
St Marys = $660,000
Mt Druitt = $650,000
Tregear = $517,500

In fact every single suburb I've looked at so far in Western Sydney has grown since last month and it has continued this trend. Affordability and FHB's are buying up I'm telling ya.

I love western sydney Real Estate. Come on baby keep growing so I can demolish a few more and build duplex's and double my profit!!!

 

Didn't expect it in ballarat and queues like this.

 

This reminds of boom times in Perth, just dont want to be the last one holding the baby, considering build times
Lets see end of 2018 what happens

 

I have just checked with my broker today and confirmed that unless I go to non-banks like Pepper/Liberty etc I cannot borrow money, despite an increase in income this year. So for me it would be the lack of borrowing power.

However, that would also affect any potential booms in say Brisbane or Adelaide or Perth, for now.

The questions is how many FHBs are coming out of the woodworks to support the market, at least at the lower end for Sydney and Melbourne?

 

Look at RAMS lo doc good product need ABN number

 

whats wrong with Pepper/Liberty?

 

From personal experience Pepper is OK. The rates arent THAT high if LVR is <90% - well my ones arent.

Liberty on the other hand - pretty damn high.

Why dont you start using non banking lenders? Absolutely nothing wrong with them and some provide outstanding service.

Loans.com.au for one is awesome. I personally found them to be great.

 

North West looks like its still got buyers at the top end. 3.3 million for Kellyville. WoW

Three-storey mansion sells for $3.3 million breaking Kellyville record

 

“We wanted to sell a year ago and it would have fetched another $400,000 but the sale was a fair price for today’s market.”

10+% drop?

 

Dunno - its easy to take advantage of a heated market and get someone to overpay for something.

If he did sell last year at 3.7 million would that have been a fair price for the buyer? Probably not. Even at 3.3 million its way overpriced imho.

Its just that there are less stupid buyers out there now. But hey if you can afford any house above 2 million in this APRA age they probably have enough coin to burn so good on the buyer. I hope they enjoy the house.

It is quite nice.

 

Hi MTR, Just want to point out that this isn't necessarily good advice. Trying to pick the cycle is never easy and property investing is a long term strategy. Its better to have "time in" the market than "timing" the market. Look at Steve Keen and his sale and exiting the Sydney market because he was looking at what he thought was a macro cycle and prices set to plummet. As a result he's likely priced out of the market now. Had he just ridden the cycle out he would be a rich man now. Those thinking Sydney has peaked are speculating. Actually, so to are those saying its about to boom again. No one can say for sure and there's a lot of evidence to say that its just slowing before catching its breath. Even if it has peaked, buying now is not necessarily a bad idea if you have a long term strategy of buy and hold.

Yes, just because there is a bit of a consensus view being touted on this forum in no way makes it fact. Only time will tell what point in the cycle we are at and what the next 12 months hold. A lot of analysis suggests Sydney prices will be higher in 12mths time from where they are today. Maybe they will be, maybe they won't, but if you're a buy and hold investor: who cares!

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Sorry, going to have to disagree with this quote though. There's a lot of people on $100K incomes that can afford $1.5 = $2 million dollar houses or more. They just use big deposits to limit their borrowing. Lots of upsizers who buy their $1M house to trade up to the $1.5M house. If its a PPOR then its CGT free. I could be on $100K and be selling my $5M Mosman duplex to trade up to my $5.5M Balmoral beach views pad. Income is only important as it relates to serviceability and serviceability is a factor of loan size, not purchase price.

Cheers,
Michael

 

We will have to agree to disagree.

Time in the market means you will be riding the bumps and servicing debt in downturn. Holding property for long term when markets are falling is not necessarily good advice. What is speculation????? hoping that interest rates don't rise, expecting rents to continue to rise while holding an asset that is not rising, hoping that property will eventually double in value.

You cant time the market, but you can buy when it starts rising.... you can also look at volume, and whether it is a strong market by looking at some fundamentals and measurements, it may not be perfect but the other is guess work.

 

With the context of Mining towns and to a lesser extent Perth in mind, I have to agree with MTR on this one.