Does it still make sense to buy in Western Sydney?

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DennisLeung

Yes I know I'm a bit late to the party, BUT, from what I've heard there will be a 2-3 year boom in property in Sydney. Do you guys think this will be worth overpaying for 2 bedroom units in the Jamisontown, Kingswood, St Marys, Penrith area on the account that the price will continue to go up in the future versus stagnation and having to wait for the next boom cycle? It seems that there is nothing reasonable priced (that is, everything seems to have increased by at least 20K over what it was about 3-5 months ago) at the moment and any entry into the market at this stage requires such a 'premium'.

The question is, bite the bullet, buy anyway and simply try to minimise overpaying, or look elsewhere?
 
My take is that the market has a way to go , but personally I'm buying elsewhere at the moment in other places , and a price bracket , that are still relatively negotiable and are not as far into the boom phase .

Read some of the recent posts on different areas and you'll get an idea where people on the forum are looking or thing are reasonable places to buy.

Cliff
 
If you wish to purchase in Western Sydney, then by all means do so. My feeling on the market is that it still has a long way to go, so you would still receive a reasonable cap gain. BUT just be aware that there are some agents that are milking this buying frenzy as much as they can. Don't just buy anything, still look at the properties objectively.

OR you could look elsewhere that isn't as hot, as Seech suggested.

Disclaimer: I live in Western Sydney AND have IP's here.:D I'm looking elsewhere, buy Hubby's still looking here. So, there you have it, 50/50 in the same household. The race is on to find something I like before he finds something HE likes.
 
Yep... Kingswood unit as an example, comparables of 200-205k as late as May, asking prices 240k+ as "thats what the market is demanding"
 
I think it has little bit more to go. Let’s look at the ‘push’ factors.

1.Supply: Currently demand is exceeding supply.

2.Economy: I think average household income is increasing in these areas as more ‘professionals’ moving in. Parramatta expansion should keep the employment at a good level.

3.Demographics: Dole bulgers are being driven out and replaced with hardworking groups. Home ownership is one of the ‘essential’ for most of these groups.

4.Interest Rates: Very low making rental yields attractive. Hence investors are also joining the party. Pushing the demand higher. Renters also thinking “why pay rent if I can afford to buy?”

5.Affordability: It is a bit concern as wages haven’t increased much. However, more than 66% of them are home owners! These households generally have larger household size. Even if the bread winner loses his/her job their whole social benefits should be enough to service the loan! Compared to all other well connected suburbs, these areas are still reasonably priced.

6.Government grands: Most government grands are winding back. Few people might try to take advantage of it while it is there.


Disclaimer: I live in inner-west. Lived in middle-west which is an IP now.
 
devank said:
I think it has little bit more to go. Let’s look at the ‘push’ factors.

3.Demographics: Dole bulgers are being driven out and replaced with hardworking groups. Home ownership is one of the ‘essential’ for most of these groups.
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This may apply to some areas but not to the most of 2770. They have to live somewhere. And for the foreseeable future it will be 2770 .

There are no geographapically drivers for the area .

It's in the middle of the flat area of the western suburbs . It doesn't even have Mt Druitt heights . I'm not sure where the mount is . Maybe a gentle rise some where ....

It's half way between Penrith ( nepean river , blue mountains ) and parramatta with its river and river cat to the city .

About the only thing it has is the railway. And for most that is a bus trip away.

Cliff
 
see_change said:
It doesn't even have Mt Druitt heights . I'm not sure where the mount is . Maybe a gentle rise some where ....
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As the old saying goes... Mount Druitt - the only Mount in Australia that is actually a hole ;-)

Has changed a lot in the past decade... I took Jaspn for a drive through 2770 during his recent visit to Sydney and he didnt run away in tears :)
 
DaveM said:
Has changed a lot in the past decade... I took Jaspn for a drive through 2770 during his recent visit to Sydney and he didnt run away in tears :)
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That is the thing! It HAS changed!

Sure, you've still got some undesirables, but there are certainly many that buy to live out here because it is affordable. You can afford to pay the mortgage and have a life, OR have one spouse at home with the kids, or get involved in an expensive sport or hobby.

In close proximity you can:

Play all the usual sports
Roller Skate
Ice Skate
Rock Climb
Sail
Horse Ride
Wet 'n' Wild

There are many things that this area has that some of the more expensive area's don't. This is why we bought here. We could afford for the entire family to spend up big on our sport of choice. Something we could never have done if we bought elsewhere.

Because the rail line is here, you can commute to the city. Again, something that is not available to all area's.
 
Skater , the cynic in me thinks you've been out there too long :eek:

At some stage I'll have a drive out there for old times sake , but certainly for me , I can see places I would prefer to buy at this stage of the cycle

You have an arguement to win with BH .

Get searching .... Maybe somewhere colder . Maybe somewhere warmer ....

Cliff
 
see_change said:
Skater , the cynic in me thinks you've been out there too long :eek:

At some stage I'll have a drive out there for old times sake , but certainly for me , I can see places I would prefer to buy at this stage of the cycle

You have an arguement to win with BH .

Get searching .... Maybe somewhere colder . Maybe somewhere warmer ....

Cliff
Click to expand...
Just have to ask see-change what do you think on the current market in QLD,?,afterall you have experience up this way for a while,not as good as walking around Darling Habour or China Town on a sunday afternoon ..
 
see_change said:
Skater , the cynic in me thinks you've been out there too long :eek: Haha, no, not at all. We bought because it was cheap & we're never home, so heck, it didn't matter that much where we slept. Fast forward & I truly LOVE it here. Mind you, we're no longer in "Letho". I like that I can do whatever I want (activity wise) that I live in a nice neighbourhood (told you it wasn't Letho:cool:) and am a hop, skip & a jump to the M4.
At some stage I'll have a drive out there for old times sake , but certainly for me , I can see places I would prefer to buy at this stage of the cycle

You have an arguement to win with BH .

Get searching .... Maybe somewhere colder . Maybe somewhere warmer ....

Cliff
Click to expand...

Yes, yes, yes, I've got more than enough exposure to this area. But where to next is the question. Already got stuff in Regional NSW & one in Regional Vic plus a few in Campbelltown. Need something interstate methinks.
 
The market has moved a fair deal in a matter of 2-3 months, in the sub 300 price bracket. When I first had my eye on investment units, you could buy for 210-230 with an easy 7% gross yield.

Over the past week I've conducted extensive on the ground research around the areas of Jamisontown, Penrith, St Marys, Kingswood, Werrington, and to a lesser extent, Mt Druitt. Agents and vendors have caught on to the demand, and prices have risen 20-30k for units in my price range. Rental yields haven't adjusted, with everything I looked at now being well under 7% gross. Mount D may be the exception, but even that's moved.

My course of action really depends on what comes up, as the chance of getting a good deal is slim. I haven't ruled out western syd, but the past week has been a sobering experience for a budding investor. I'm annoyed at myself for not getting onto things when I first started monitoring the market three months ago! I won't make the same mistake twice. If the right property comes along, sure, I'll buy, and accept the drop in yields. I think the demand is still very strong, and cap growth has a bit of steam in it still, so a buy now wouldn't be a bad thing, so as long as you can service the negative cash flow there's still money to be made.

The question which comes out of this cap growth, is when will rental yields adjust? I spoke with every sales agency in Penrith and St Marys, and on my travels encountered two instances of tenants asking if there were rentals available under 250pw. The answer was in both instances "no, sorry". I don't know if I was just in the right place at the right time, but if this were a part of a larger trend, what would it mean for tenants in terms of affordability if rentals do rise to compensate?
 
jaspn said:
The question which comes out of this cap growth, is when will rental yields adjust? I spoke with every sales agency in Penrith and St Marys, and on my travels encountered two instances of tenants asking if there were rentals available under 250pw. The answer was in both instances "no, sorry". I don't know if I was just in the right place at the right time, but if this were a part of a larger trend, what would it mean for tenants in terms of affordability if rentals do rise to compensate?
Click to expand...

It may be that yields don't adjust for a long time, if ever.

e.g. some suburbs in Brisbane had yields of 8% back in the late 90s. Following the boom, yields fell into the 4s. They've never come back to the 8s.

As an area becomes more dominated by owner-occupiers, yields often fall and stay low.

That doesn't mean there won't be more capital growth in the future, but that it'll cost you more to hold in the meantime. Either you think the capital growth will be strong enough to compensate you for that, or you go to other areas with higher yields.
 
As it is our first boom we are seeing, just lost as to at what stage it will be considered excessive prices?

We bought a villa in 2770 for 230K just over a year ago, and similar villas, which could do with tidy up, and do not have garages, are advertised around 290K/295K. We bought well to start with (we think fair value was 245K).

In my view 60K is a fair bit of gain in the last 6 months, as the boom apparently started earlier this year.

At what stage would it be considered peak? The villa is renting for 350pw - would prices keep increasing to a level when yields are about 5% or lower? If all goes to plan, after the next two purchases, we are hoping to get another two - but the question is whether we squeeze in another two in Sydney? I am inclined to buy elsewhere given we have seen super cheap prices previously here just last year, and the yields are highly unlikely to cut it for us.
 
I bought a 2 bd townhouse in werrington about 2 yrs ago and in my first attempt of up front val I was dissapointed I'm just going to wait a few more months, get more comparables, and try again, but I totally agree with you Jaspn, yields are not that good anymore. Is there still more room for growth? Yes!
 
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