Any feedback on Sydney units?

[blueport]

Hi all,
Im new to the forum & have read quite a few posts & there is a lot of great info posted.
I havent made the plunge into property yet but I am looking at various possibilities, one of which is a unit in Sydney.
This is against what Ive originally wanted to get into i.e positive/neutral gear but I may have missed that run & also the unit Im looking at is brand new & in an area that similar units are at least $40k dearer, with next releases $100k + dearer.
I feel that the purchase price is 'cheap' compared to the rest & therefore, if I can afford it, I am looking at the long term capital growth that I expect will slowly happen.
Im not worried about the exit tax, just if I can afford it, will it grow in value at a reasonable rate & are we oversupplied?
I must admit, if I didnt know how it cheap it was compared to the rest, I wouldnt be looking at it.
I havent stated the price or location for obvious reasons but any opinion from members would be appreciated.

 

[Panic]

Sydney

I'm following prices in Sydney on regular bases.

IMO Sydney prices are on their way south. It has been happening in the last 6 months more dramatically. All in all I will stay out of purchasing in Sydney for at least 2 years, or until the vacancy rates improve.

In any street in any suburb in Sydney you will find several signs "for sale"... that is not very comforting from an investors point of view.

I would expect the Sydney prices to go down further 20-30% (on top of 15% overall already down).
Keep in mind that some areas in Sydney havent moved either way, or have even increased in value, but those are very few, and highly sought after (expensive) areas. Usually costal.

Thx
V

 

[Aceyducey]

Panic, was your past name L Bernham?

Blueport - Sydney is a big area & different conditions apply in different parts. Know your market, then buy if appropriate.

Cheers,

Aceyducey

 

[blueport]

Thanks guys,
I appreciate the feedback.

Regards
Blueport

 

[Jamie]

Blueport - Sydney is a big area & different conditions apply in different parts. Know your market, then buy if appropriate.

Agreed.

Blueport, Sydney has some 250+ suburbs - in the next year, some will increase by 10%+, some will remain stagnant, and some will fall by 10%+.

Which suburbs in Sydney are you asking for advice on?

Jamie.

I would expect the Sydney prices to go down further 20-30% (on top of 15% overall already down).

Up to 45% falls citywide in Sydney? You dont work for BIS do you?

You've certainly picked a great name

In any street in any suburb in Sydney you will find several signs "for sale"... that is not very comforting from an investors point of view.

Sorry Panic - youve been down every street in Sydney?

Im not even looking in Sydney at the moment, but was down there last week on business. I actually spent time in 3 streets that did not have ONE for sale sign. Perhaps you can provide a reference for your assertion

 

[the_captain]

Hi Blueport & Welcome,

Been AGES since I've posted but here goes.

You may have found a bargain, but some Due Dilligence (DD) will tell you for sure.

With units you need to make sure you are comparing apples with apples and personally I think Units are difficult to compare with one another. The reason for this is the complex you are looking in may have different values for the same thing based on factors such as, views, aspect, proximity to the garbage corral, noise from traffic, how close to the lifts / stairs it is etc...etc... so to make sure your comparing apples with apples you need to get an idea of how much similar units in similar positions to your one in your building have sold for. Once armed with that I'd then go and repeat the process for nearby complexes, if anything this will give you a good feel for the unit market in your area of interest.

You will then need to find out the comparable rents on units in your area of interest and work out how much your per week cost will be, if you go ahead with the deal. Don't forget to factor in vacancy. The thing to note here is that if newer or better units come onto the rental market in the same location then you have to compete against them with an older and fairly generic product. Given the level of oversupply that exists currently you may have a fight on your hands, however if your unit offers something unique such as AMAZING views or extra large outdoor area you could do OK.

Next I would take a look at the body corporate fee's. If you complex you are interested in has a lot of wizz bang features such as a Gym, Pool, Lifts or Cinema then you will have to pay for the maintenance / upkeep of said facilities. This can become unexpectedly expensive if some piece of capital such as the Sauna or Camera craps out and needs replacing as all of the owners will have to fork out via a special levy. Remember in the early days of a portfolio Cashflow is everything.......heck cashflow is always a good thing to have.

If it all passes muster at this stage then you stand to make a paper profit of around $32K (80% of 40K). I'd have a look around at some regional / outer areas and see if you could make similar / better money doing a cosmetic rennovation.

Best of luck with whatever you decide. Remember DD may seem painful but at least you'll be going in with your eyes wide open.

 

[Panic]

Sydney units

Panic, was your past name L Bernham?

Blueport - Sydney is a big area & different conditions apply in different parts. Know your market, then buy if appropriate.

Cheers,

Aceyducey

Never heard of him, why... did he also belive that Sydney is overpriced?

 

[Panic]

Up to 45% falls citywide in Sydney? You dont work for BIS do you?

You've certainly picked a great name



Sorry Panic - youve been down every street in Sydney?

Im not even looking in Sydney at the moment, but was down there last week on business. I actually spent time in 3 streets that did not have ONE for sale sign. Perhaps you can provide a reference for your assertion

Jamie,
On average according to official statements Sydney has fallen by 16% till Dec04, we are waiting for the March quartile figures. Another 20-30% in the next 2-3 year... I surely think so...
WHY? Because Sydney is way overpriced, and the property prices are not sustainable....
As for the 3 Streets that you spent your time in Sydney... well maybe they were highly sought after areas with houses... we are talking units here which will loose value, I haven’t addressed the houses.
Reference is all over Sydney

 

[L Bernham]

I'm not Panic, but its interesting to see that there are a few more people on this forum who believe that its actually possible that property prices can be overvalued. Suggesting this about a year ago was tantamount to admitting you should be institutionalised! At least now people are seeing that property can actually go down in price (YES even in Sydney).

With so many warnings out there about buying in the current market, more interest rate increases, currently falling prices and a MASSIVE oversupply, I expect that anyone buying now would lose their money one way or another regardless of how they invested. A bit why I havent felt the need to post much lately.

cheers
L Bernham

 

[Aceyducey]

L Bernham,

Considering that you've only every owned one property (that you sold what 2-3 years ago) & that you're only interested in investing in the share market I'm not surprised you've not been around for awhile commenting on property.

We certainly haven't seen the declines you were emphatic about 12 months ago and many areas are happily appreciating - at slower rates than during the boom granted.

And there's not proven to be a (in your words) MASSIVE over supply of property anywhere in Australia. In fact there's still a net shortage nationally.

But please come regularly and post. It's great to hear from the people who assist good investors in buying property under market value.

Cheers,

Aceyducey

 

[L Bernham]

We certainly haven't seen the declines you were emphatic about 12 months ago and many areas are happily appreciating - at slower rates than during the boom granted.

sure we have. And like I always said it would take a good few years before we saw the end of the declines. We've just had year one. ( yes and there will still be some areas that see price gains - its a lottery finding them though but aussies like to gamble so you can bet some will still try).

And there's not proven to be a (in your words) MASSIVE over supply of property anywhere in Australia. In fact there's still a net shortage nationally.

Can I suggest that you contact some of these House and Land package companies (Devine, Tamawood,stocklands et al) and let them know that we have a net shortage. I don't think they've noticed it. 3 months interest free, 3 months delayed settlements, constant TV ads etc- this reeks more of oversupply to me.

More than 15,000 properties for sale in the Sunshine coast area pretty much confirms it.

LB

 

[always_learning]

The old L.B vs. ACDC debate...sparks are flighing just like old times.

Clearly L.B's predictions of a significant crash -35% (or more) in market values hasnt occured. Do you dispute that LB? I forgot who said that prices have never declined in Australia, guess they are wrong too.


If I said "in general" the australian residential market could be characterized as having experienced a moderate declines and its anticipating further moderate declines. In the market I have been watching (Pymble) in north shore Sydney (as a IP and future PPOR) it looks like 15% at least has be lost from the market peak. Another (should it occur) 15% and that will total 30% down (from the peak, not from the average 2003 values) maybe LB will have the last laugh. (But so will I if I can buy at lower prices!)

 

[Jakk]

With so many warnings out there about buying in the current market, more interest rate increases, currently falling prices and a MASSIVE oversupply, I expect that anyone buying now would lose their money one way or another regardless of how they invested.
cheers
L Bernham

My dearest Mr. Bernham,

Speaking of losing money, I was just wondering how much in rent you have paid in the last 3 or 4 years since you sold your last property and would you be so kind as to convey to me what you currently have to show for it.

regards

 

[JP1746]

I'm not an expert on Sydney unit prices (never had a unit), though the residential land sales adverts in the weekend papers were revealing.

Across the NSW Eastern seaboard, Landcom is offering $10,000 to $20,000 off list prices, for speedy settlement on many blocks (last month it was only $10,000) And I might add, in some cases, blocks in stages that have already been repriced downwards.

Also, I saw an large display advert where a private land developer was offering cash discounts of $30,000 on residential blocks (he developer was one of the larger ones, though I can't recall name - it should be in this weekend again - I'll get it and post it)

I recall doing a rough mental calculation, and figuring such discounts amount to around 15% + drop.

Interesting, though as another poster here suggested (LB ?) this kinda talk is apparently a big 'NO NO' 'round here.

JamesP

 

[Aceyducey]

James,

Have you ever heard of the practice of raising the price of a product by 20% and then discounting it by 15% for a fast sale?

Private developers & property marketeers certainly have

And Landcom has instructions from the NSW government to keep the heat off property prices.....best way to do that - release more land and sell at a lower price. The government doesn't have a profit motive.

Look at the bigger picture.

Cheers,

Aceyducey

 

[JP1746]

James,

Have you ever heard of the practice of raising the price of a product by 20% and then discounting it by 15% for a fast sale?

Private developers & property marketeers certainly have

And Landcom has instructions from the NSW government to keep the heat off property prices.....best way to do that - release more land and sell at a lower price. The government doesn't have a profit motive.

Look at the bigger picture.

Cheers,

Aceyducey

Granted, Aceyducey, though I should think that the big picture includes the reality that a time ago, they were achieviing that extra 20%, thus, that was the value, but now they have to discount, thus this is the value !

What of the developer discounting 30% ? (I promise, I'll post it if in this weeks paper). Surely they're not dropping 30% that they could have otherwise achieved, out of benevolance ?

Cheers
JamesP

(PS the Gov. doesn't have a profit motive, but it sure has a maximum revenue motive, doesn't it - see thread on land tax, etc.)

 

[Aceyducey]

James,

I direct you to Landcom's stated goal:

With homes prices in Sydney and other parts of New South Wales continuing to increase, Landcom is active in seeking to develop housing that is affordable to moderate income households.

Moderate income households (defined as having incomes between $46,000 - $69,000 per year - 2004 dollars), find it increasingly difficult, if not impossible, to purchase an affordable home. Many such households are in housing stress, having to rent or pay mortgages in excess of 30% of their gross income.

In the longer term, lack of moderate income households may lead to the effective exclusion from many local areas of moderate income earners who are:

locally born residents;
local residents who have suffered family break up;
older residents who, with retirement or illness, no longer have the income to pay for local housing; and
local essential services workers.
The Landcom approach is to anticipate this issue and to develop a sustainable means to address it, in partnership with industry and local government.

A Moderate Income Housing Strategy has been developed which includes the development of Demonstration Projects, Research, Liaison with industry and local government and the development of a Moderate Income Housing Policy for Landcom.

It is a market based approach where by moderate income housing is provided where it is commercially feasible.

http://www.landcom.nsw.gov.au/LANDCOM/NSW/me.get?site.sectionshow&PAGE184

You might want to click through and read on..... (BTW there's a report very favourable towards vendor financing BTW - well worth reading by wrappers... http://www.landcom.nsw.gov.au/LANDCOM/NSW/RESOURCES/DOCUMENTS/HousingMkt1.pdf)

The stated goal is not to maximise revenue on land sale, but to house people. Once they're housed the government can begin the land taxing - thus recovering any 'discount' on the land over a period of time

The government will get it's pound of flesh - but being the government it can afford the time to take it in little nibbles over a long period of time.

Cheers,

Aceyducey

 

[JP1746]

James,

I direct you to Landcom's stated goal:


http://www.landcom.nsw.gov.au/LANDCOM/NSW/me.get?site.sectionshow&PAGE184

You might want to click through and read on.....

The stated goal is not to maximise revenue on land sale, but to house people. Once they're housed the government can begin the land taxing - thus recovering any 'discount' on the land over a period of time

The government will get it's pound of flesh - but being the government it can afford the time to take it in little nibbles over a long period of time.

Cheers,

Aceyducey

Agree with all the above. Landcom land is generally better / perhaps 5% to 10% cheaper than privately developed land. (I have bought many Landcom blocks over the years)

But it DOES follow (and sometime lead) market trends. It IS subject to the same market forces, and thus a good barometer for what's happening. Often, when markets are heading South, they are the first to ease off on prices, though I must admit, I've never seen discounts of this magnitude from them before.

Now, as to maximising returns - on occassions, when they percieve there is huge demand for a particular developement, they auction the blocks to homebuyers, and 1st homebuyres at that ! I've been to many such auctions, and seen struggling 1stHB's and others, knock themselves silly trying allow themselves to be hoiused by Landcom. No Gov. rep stepped out from behind the gavell and declared "enough, we don't want to maxinise our returns"

And their decision to auction (contrary to their customary ballot where you camp outside their office for the weekend to buy at a fixed price) is motivated by nothing more than a desire to get the most they can.

Anyhow, good night for now Aceyducey. It's been very informative.

JamesP

(edited to add 'to buy at a fixed price')

 

[suggo]

I haven't been on here for ages either I come and find LB is still speaking rubbish....and it looks like he might (I realy hope not for your sake Panic!) a fellow Henny Penny in tow. Reading his crap and willingness to ignore any piece of evidence contrary to his theories, is a large part of the reason I am not as interested in participateing in this forum......but that's my choice

BTW my IP's are going great, capital gain has stopped and may have receded a bit (as we all said it would but not by the silly figures LB was trying to tell me) but the rents have risen and it would seem to me that there are more people than ever out there wanting to rent....lifes all good!