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

I thought it was 2000........

 

I don't necessarily believe that to be true. People are not as leveraged in other cities and yields are better

 

I was referring to the comment about vested interests that you made

 

They will try and keep it expanding but wages need time to catch up. Sydney is unaffordable. That's the general opinion even from conservative press like afr. The general opinion is its too expensive and average incomes cannot buy. Overseas money is immune to that but there's only so much overseas money whilst it's a big factor we still need the Aussies in Sydney to be able to get a loan. At this point that is getting very very hard relative to income

 

I think a lot of people are taking big risks, sure, it could keep going, but logic and reason would tell you otherwise.

Buying now, most places the yield is horrendous, so basically banking on large CG continuing.....but ad nauseum, well at some point, there will be vomit, the 2 rate cuts were a sick pill, but it will return.

For many here, it is an educated guess, for many out there, it is a total gamble and like throwing darts blindfolded, spoke to someone who bought recently in Sydney, already talking about offloading in a year, and another who, after years of avoiding, rushed in last year, and was complaining about lack of money, last time they got sick of tenants and managing and outgoings, yep, same, bought near top of market, sold in flat time at loss, setup nicely now for an encore.

Both of above will lose when they sell again, and they will sell, they jump in because of all the news and cause everyone else is doing it and after all, it has been going so long - maybe this one will go forever, but you would think after a few times you would learn, but nup

In fact, I would not be surprised, if the lending changes due to units, regulation, government pressure on banks and levies and outside pressure, all cause an over correction, they say soft landing, but lot of stuff has been going on that will have an effect & like the people saying no one knows, it could keep going, but, no one knows how much of a drag the things so far will be, but you can be sure, if Syd keeps going, and Mel, the govt will meddle more and more, that blind freddy can see, but people think it is business as usual ?....nah, no it's not !

So, people can make own intelligent decisions, sometimes, you have to have the nerve to hold back too.

 

Perhaps heed your own advice. I refuted your notion that people are moving from Sydney to Brisbane. As corroboration I used two sources based on ABS data.

Im certainly not saying that population growth in Sydney is negative. As mentioned ,currently Sydney is second only to Melbourne in terms of overall population growth.

 

The problem is that Sydney does not have much room to keep growing, To buy in to any half decent suburbs are a $2 m+ proposition. This is a tough pill to swallow even for a dual income family with 250k pa income(top 5%?) A 2mil loan would be about 100k of interest repayment after tax. I know lots of family and friends included doctors and engineers cannot afford that kind of loan.
Hence Brisbane is a good entry point for 1st time buyers and investors since to buy into a decent suburb is only a third of the cost of Sydney. This could be a strong driver for interstate migration to the North like the last boom back in the 2003.

 

Define half decent, Castle Hill has houses for just over $1m and is considered a "decent" suburb. Annandale has 3br houses for $1.5 m and that is considered a very nice suburb, I mean I know things have gotten expensive but to say a "half decent" suburb in Sydney is $2 m+ is a bit excessive.

For $2m+ you are looking at places like Neutral Bay and Crows Nest, I wouldn't refer to these suburbs as "half" decent, they are Sydney's expensive north shore suburbs.

Note, the places I researched were all houses, no townhouses and no units, that would lower the buy in price even further.

Still pricey but not 2m+

 

I am pretty sure that Castle hill is well over 1 mil and it's 30 km from the city and public transport is not great, There are 78 suburbs in Sydney over 2 mill Almost half of Sydney suburbs have a median house price above $1 million with the average of around the 3m mark. Those are the decent suburbs so I would say the half decent suburbs are largely around the 1.5 - 2.5 mil mark. houses that are below $1mil are typically located far and low social economics areas now days.

 

Do you even know where John McGrath is? Where he is based? And why the event (which was an international property conference) was held in the Gold Coast?

 

Lets put it this way - Castle Hill is around 35km from the Sydney CBD. Transport there sucks bigtime you will need a car. Buses arent too bad and the new rail is not yet ready. Most houses in Castle Hill are 1.5 Million and above.

This is an investment forum. Are guys really buying 1.5 and 2 million houses for investment? You'd be under huge financial stress the ROI is so low that you would be out of pocket a huge amount of money each and every month.

I think the biggest mistake naive investors make is the importance of cashflow. Fair enough if your a 1 house investor and thats it but to grow to > 5 or even 10 houses cashflow is king. Having ROI from rental as low as 2% is not helping anyone as an investor.

 

Yields will greatly improve in the future? Nope I doubt that. In fact yields will fall if interest rates rise. The only way yields would improve is if we have a significant decline in prices. Think about it ...

 

This is the mentality of a smart investor. Always reassessing. Looking for value/growth whilst minimising downside risk.

 

Correct 100%. With the prices being so high your $10 or $20 rental increases every 6 months aint going to make any difference to an investment bought for 1.5 million. Your still going to have to pay a HUGE amount of interest alone to the bank.

This is why Brisbane/Logan/Ipswich is so attractive to investors. Positive geared from day 1. It's really a buy and forget kind of investment that puts pretty much ZERO financial strain on the investor.

 

That is one factor yes. Property prices may go down in certain areas and may increase out west of Sydney where the prices are more affordable.

But also remember that supply and demand also control rent prices.

If banks are tightening up on lending that means less people will be investing. Demand for rental properties IMO will increase in Sydney due to these APRA rules and jobs growth from infrastructure spending, immigration etc.

And a significant increase in interest rates will be like throwing a cat amongst the pigeons ie property buyers will scatter and start renting which will push rents even higher .

So I believe that the supply of rental properties will go down and the demand for rental properties will increase. Thus leading to increased rental prices.

Sydney could become the city of renters. A city of well paid workers who haven't got the savings for their own home.

Investors with IPs or those who can still buy in Sydney may be well rewarded with high yields. High rise property investors may have to change tact.

 

All of those listed are either beaches or north shore. Are we then saying that the only "decent" suburbs in Sydney are beaches or north shore?

There are loads of suburbs west of the city which you can still get a house in for <$2m.

I can assure you they are not low socioeconomic and they are not far away (like the example I gave of Annadale which is only 5k's from Sydney).

I don't disagree that Sydney is expensive, I just don't think it can be categorically said that "To buy in to any half decent suburbs are a $2 m+ proposition"

 

so

So hope you're right Datto. The rental market's been tepid in Sydney for way too long...no offence to renters (of which I'm one lol).

 

re rents, is all about how much a Koala can bear as well......

in areas I look 3-400 is about limit for apartments (often 3 flat) and houses are 500-550, some huge places may get to 700 but your going to have people sharing, your looking at very long time for significant increases especially when we know wage growth is flat and at the lower end, everyone is pushing to *cut* incomes by various methods.

 

Yes, the rental market has been rather subdued. Too long!

I think the perfect storm is brewing over the horizon and a rental king tide is about to breach.

On the one hand we got a cashed up state govt who is spending billions on infrastructure in Sydney. We also got the Feds doing the same with the new airport at Badg Creek. This equates to more jobs for workers who will need housing.

But wait it gets worse! banks are restricting buyers due to the "bubble". So the influx of workers and new immigrants are going to have to rent and compete against all the others.

The icing on the cake will be if Labor gets in and rips apart neg gearing, capital gains tax discounting AND relaxes the immigration policy on refugees.

Then of course there is the curse of the rising interest rates.

Ay Carumba, if that happens we will be LORI (Living Off Rental Income).

 

Do you pronounce LORI like Lorry or Law rie ? Is that the holy grail ? how many do I need to retire at 25 after LORI ?

So it is buy up big in Syd from Dats, you heard it here.