NSW why people are still investing in Sydney when market is near to high?

Discussion in 'Where to Buy' started by SteffS, 26th May, 2017.

Join Australia's most dynamic and respected property investment community
Tags:
  1. SteffS

    SteffS Well-Known Member

    Joined:
    23rd Apr, 2017
    Posts:
    134
    Location:
    Sydney
    Judging from comments in this forum seems its almost at high or near high market in Sydney. Many suggest investors to look at Brisbane etc. But wondering why people still investing in Sydney market?
     
  2. Marg4000

    Marg4000 Well-Known Member

    Joined:
    18th Jun, 2015
    Posts:
    6,380
    Location:
    Qld
    No one has a crystal ball.
    Sydney may well keep increasing for many years.
    People have been calling the top of the market in Sydney for quite some time.
    Hasn't happened yet.
    Marg
     
    Phill74, beith, Perthguy and 5 others like this.
  3. Scott No Mates

    Scott No Mates Well-Known Member

    Joined:
    18th Jun, 2015
    Posts:
    27,103
    Location:
    Sydney or NSW or Australia
    [​IMG]
    Substitute "Property" for "Underpants", there is no Plan B for when things go belly up.
     
  4. Tenex

    Tenex Well-Known Member

    Joined:
    14th Aug, 2015
    Posts:
    570
    Location:
    Sydney
    Sydney and to some degree Melbourne are about the only places in Australia where the price growth is warranted.

    There are investors whose main rationale behind buying boils down to "if its cheap then it can only go up". Thats why they buy in places that are cheapER than Sydney, including overseas.

    They buy based on assumptions not facts (albeit they will disagree with a passion).

    The reason for property growth is not the price but rather the demand. The demand is usually based on the reasons why people want to be there. The big ones being strong employment options in a highly diversified local economy, universities, weather and lifestyle and access to amenities and infrastructure.

    The above is the reason why a lot of investors are still only investing in places such as Sydney.
     
    Phill74, pinewood, ATANG and 6 others like this.
  5. hash_investor

    hash_investor Well-Known Member

    Joined:
    11th Oct, 2015
    Posts:
    2,439
    Location:
    Sydney / Canberra
    nothing to be surprised about. in "markets" there are always buyers and sellers and people have different opinions
     
  6. zlatan9

    zlatan9 Well-Known Member

    Joined:
    30th Aug, 2016
    Posts:
    151
    Location:
    Brisbane, Sydney
    This.

    And in the past few years, one year of Sydney's growth is more than 2 or 3 times Brisbane's growth. If Sydney falls, it doesn't mean that other parts of the country wouldn't fall either (ie back to the point nobody has a crystal ball).
     
    Marg4000 and hash_investor like this.
  7. hash_investor

    hash_investor Well-Known Member

    Joined:
    11th Oct, 2015
    Posts:
    2,439
    Location:
    Sydney / Canberra
    Totally agree.

    no one knows what is going to happen next. ignore anyone who claims to know "facts" no matter how loud they are. (loud are desperate people, bully up already. and you know you don't want to be in that situation)
     
  8. hammer

    hammer Well-Known Member

    Joined:
    28th Aug, 2015
    Posts:
    2,854
    Location:
    Darwin
    There's also the illogical/emotive factor.

    I.e. People terrified that they'll never own a home in their lifetimes.

    I've felt it before and it's a horrible feeling that you'll do anything to fix.
     
    Bunlee likes this.
  9. JDP1

    JDP1 Well-Known Member

    Joined:
    19th Jun, 2015
    Posts:
    4,244
    Location:
    Brisbane
    This is an easy question to answer: jobs jobs and more jobs.
    No one can match Sydney at this game.
    People always migrate to where the jobs are.
    Whether they buy there is another question..
    There is a difference between being based somewhere vs buying there, although there is a fairly strong correlation between the two.
    This correlation will weaken if price growth outpaced Sydney salary growth. That's is already happened and is happening to degree - hence one of the reasons why people are based in Sydney yet look elsewhere to buy. This correlation is still fairly strong (and it probably should be in my view - residents of Sydney are contributing to the local economy after all).. However the correlation is getting weaker as prices run away from salaries.
    It's probably cyclical. There will be a time when salary growth forges ahead and Sydney house prices are below the salary growth rates. I'd suggest that's when to buy Sydney.
    Unless of course you have alternative sources of money eg BRICS money..in which case the world.is your oyster and I'd look at London Ny Paris etc :)
     
    Last edited: 26th May, 2017
  10. Tenex

    Tenex Well-Known Member

    Joined:
    14th Aug, 2015
    Posts:
    570
    Location:
    Sydney
    A good point and quite true. If however the interest rates keep going up at a fast pace (which I dont see happen but it can), people who live in Sydney but have invested elsewhere may find themselves forced to sell their interstate property to keep up with their repayment/rent in Sydney.
     
  11. Tonibell

    Tonibell Well-Known Member

    Joined:
    18th Jun, 2015
    Posts:
    1,107
    Location:
    Sydney
    The calls of "Sydney is at it's peak" have been around for 3 years which has caused some bad decisions to be made - almost tempted me in to selling a couple of years back.

    There is always a range of views on where the market is at.
     
    Invest_noob likes this.
  12. Terry_w

    Terry_w Lawyer, Tax Adviser and Mortgage broker in Sydney Business Member

    Joined:
    18th Jun, 2015
    Posts:
    41,675
    Location:
    Australia wide
    Hang on, didn't Sydney peak in 1997?
     
    datto, Tyla and Tenex like this.
  13. Perthguy

    Perthguy Well-Known Member

    Joined:
    22nd Jun, 2015
    Posts:
    11,767
    Location:
    Perth
    FOMO
     
    bob shovel likes this.
  14. Gockie

    Gockie Life is good ☺️ Premium Member

    Joined:
    18th Jun, 2015
    Posts:
    14,742
    Location:
    Sydney
    Most Sydneysiders bought one or more properties well before the boom started. People who bought their first place recently (with large loans) are at risk if interest rates rise. At the moment; jobs aren't really an issue.

    Re: Wages vs. House prices... it doesn't stop home prices in HK rising to ridiculous prices though. I think its the demand from the mainland that keeps the prices high. We get some of that here too.
     
    Zoolander and ndpjai like this.
  15. Rolf Latham

    Rolf Latham Inciteful (sic) Staff Member Business Plus Member

    Joined:
    14th Jun, 2015
    Posts:
    10,599
    Location:
    Gold Coast (Australia Wide)

    thats a really good question...........

    when we work with potential clients and introduce the concept of the "property clock" some fully agree we are at 1155 or 1205 in sydney per se...........but still want to buy Sydney............for cap gain

    Seem contra, but who knows

    ta
    rolf
     
  16. House

    House Well-Known Member

    Joined:
    13th Sep, 2015
    Posts:
    929
    Location:
    Sydney
    No, 1929 :cool:

    IMG_0602.PNG
     
  17. Piston_Broke

    Piston_Broke Well-Known Member

    Joined:
    30th Jul, 2015
    Posts:
    4,081
    Location:
    Margaritaville
    Selling propertty at Sept 1929 just before the crash would've been a great idea!

    Property prices fell around 60% the following 5 yrs.
     
  18. highlighter

    highlighter Well-Known Member

    Joined:
    2nd Jun, 2016
    Posts:
    930
    Location:
    Australia
    The thing about housing bubbles is they're as much a collective state of mind as they are a financial phenomenon. Bubbles are grown by 'positive' feedbacks. Prices rise naturally in a boom, then this attracts a lot of investment, which causes prices to rise, which attracts investment and so on. At some point, attention to market fundamentals that otherwise drive housing demand (income growth, population growth rates, inflation, rental demand, physical housing supply, construction rates, debt levels) gets left behind in favour of sheer speculation - essentially, people betting on the direction of those fundamentals. When investment becomes the dominant buyer force, this can be a powerful thing, but it's almost entirely sentiment based.

    Basically, people buying as they bet on price growth, becomes the main reason for price growth. That's pretty much all a bubble is - a boom extended beyond any real support from market fundamentals. A boom unnaturally stretched by speculation.

    Now, most smart, long-term investors like the people on this forum do a strong fundamentals-based analysis when buying... however, the bulk of the market for five years or so (from around the time fundamentals started to no longer favour growth) has been dominated by new, noobish, recent and very inexperienced investors - a tide of bandwagon jumpers. Over 50% of the new buyer market has been investors for years and many of them are reliant on continued price growth. I doubt many of this recent group will tolerate price stagnation let alone falls. Many are on IO loans, and vulnerable to rate rises. I'd say most of our recent investors are not savvy. We are the minority here.

    Back to the mindset. Bubbles burst when a positive feedback becomes a negative feedback - people start to sell because prices are falling. It's the same process that grew the bubble, only in reverse. The same group of vulnerable, inexperienced investors are usually among the first to panic and sell - because often, they bought what they couldn't afford, had no idea what they were doing and had no long term plan. They are prone to panic selling, just as they were prone to panic buying.

    I don't think the commenters on this forum are, broadly, representative of that group. People here are starting to doubt growth, but the same late-to-the-party noobs who tend to crash a bubble tend to be the ones still buying right up until the party stops. (This is also known as the 'greater fool' theory; the longer a bubble runs, the less experienced and less able the buyers become. You saw this with the Shanghai Composite a couple of years ago - grannies on the street borrowing and buying stocks. When every noob and his dog are doing it, that's a bad sign. The whole "be fearful when others are greedy" mantra also applies).

    I think that's what we're seeing. Experienced investors are starting to question the longevity of the bubble as negative sentiment increases. Some inexperienced investors are still looking to buy (eg. look at the posts we often see here, where new posters want advice on how to buy their first Melbourne CBD off-the-plan at some exorbitant price, and long term posters collectively try to talk them out of it).

    When bubbles burst, people always keep buying. It's not like everyone suddenly stops. It's the same effect you see where, when bubbles are in their early phases, the early bears miss out on strong growth because they were in the minority of that psychological force). Bubbles are like a hive mind. The question to ask is, what is that hive mind telling you? If you think the majority of people have turned bearish, there's probably a good reason, and that negativity can quickly become self-sustaining. The minority won't prevent a snowball effect on the way up or on the way down. The trick is to work out which way that snowball's rolling.

    The "it hasn't burst yet" and "I've been hearing about this crash for years" is not a good thing to focus on, because in the end, those rationalisations don't save markets from themselves. The only pin that ever matters is sentiment. What do most people think is going to happen? Because it will probably become a self-fulfilling prophecy. It was by far the biggest sign in Ireland (the media was even blamed for crashing the market with its constant negativity).
     
    Northboy, Whitecat, Blueskies and 5 others like this.
  19. hash_investor

    hash_investor Well-Known Member

    Joined:
    11th Oct, 2015
    Posts:
    2,439
    Location:
    Sydney / Canberra
    I wouldn't look at 1929 and 1987 crashes to predict this one. There may still be a crash but not just because there had been in the past. This time its different becasue of Asian money. Those previous crashes were in the western era. This is Asian century and Chinese are better with their money planning.
     
    Whitecat likes this.
  20. The Y-man

    The Y-man Moderator Staff Member

    Joined:
    18th Jun, 2015
    Posts:
    13,443
    Location:
    Melbourne
    ...uh..... 1997....? :eek:

    The Y-man
     
    Piston_Broke likes this.

Build Passive Income WITHOUT Dropping $15K On Buyers Agents Each Time! Helping People Achieve PASSIVE INCOME Using Our Unique Data-Driven System, So You Can Confidently Buy Top 5% Growth & Cashflow Property, Anywhere In Australia