Belbo mate
As you know Sydney growth over the past decade hasn't been very good and this is what you see in API magazine. Penrith like many Sydney suburbs had a lot of growth in a short of period of time so we brought forward future growth and it was inevitable that we were going to have a longer period of price stagnation.
Ofcourse we all know that past performance isn't an indication of future growth but investors are attracted by numbers so we tend to go for higher performing suburbs thinking that the same growth will be maintained forever when this is not the case.
Suburbs are next to each other so there is always going to be a price relationship between them so when 1 suburb gets too expensive so does the neighbouring one and so on. Therefore Penrith is likely to track the performance of its neighbouring suburbs.
You might think that you're on a winner because you bought a Newtown property for $500K and is now worth $1Mil but if you bought 2 IP's worth $250K in Western Sydney you could have had the same result. Even if the 2 IPs didn't have exactly the same growth as the Newtown 1, your overall holding costs would have been much lower and if you timed your entry and exit from the market you could have made just as much money if not more.
I'm not saying that 1 technique is better than the other but you should also consider that the person who could afford the 2 IP's in W Sydney perhaps wouldn't be able to afford the $500K IP in Surry Hills because of the lower yields.
Something to think about
HI BV,
You're not wrong I
now think, plus, that better yeilds in the western suburbs will serve the investor's accumulation of properties more speedily, to say nothing of the safety in splitting your vacancy risk.
If I had my time over again I'd definitely have taken a different route. Buying into city-fringe suburbs is definitely a CG play, horribly NG'd, and hopelessly outmoded for the immediate future years of highly-likely slow CG all round.
(On a personal note: I bought the PPOR in SH in late 2004 because I worked there, the wife could walk to work in the city, and the she-devil-to-whom-I-am-devoted fell in love at first sight with our tiny sandstone cottage with it's rough-hewn internal walls. Buying the other half of this semi (that is, the house next door) in 2007 50:50 with my sister was a long-term paired-development prospect sort of thing. Buying the Alexandria apartment in 2008 was to give my brother a place to live when he came to work in Sydney, but he hated working in Sydney and went back to WA quite soon. Buying out my sister's 50% of the place next door at the beginning of this year was so she could buy her own place in Melbourne, but it suited my desire for absolute control anyway.
All NG'd; all emotionally-driven purchases; none rationally-analysed to work within a long-term financial strategy, and an annual land tax kick in the butt for my troubles to boot. I am the poster boy of impulse property buying, I admit. Hedland is my penance and my prayer! But I do wish I'd seen the light earlier: I'd have bought 10 less-costly IPs elsewhere all around the place instead.)
I reckon on hard-earned reflection that Skater's got it fundamentally right. If you're starting out, buy lots and lots of cheaper property with a view to CF neutrality asap (of course do quick schmick renos where money and time allow), and don't be tempted by the NG tax tail temptation to wag your PI terrier. It's not wise, even if you're collecting an after-tax 6 figure salary. It just makes you cash-poor, and leaves you struggling to remain motivated even if you can make ends meet.
If you're young and on a starting salary, I'd advise to live at home with the parents and buy cheaper IPs as fast as you possibly can. If you're a bit older and have money-incinerators in school, buy the cheapest PPOR you can personally tolerate and keep buying budget IPs accordingly. Only if you're seriously cash-up or well-spread PI-wise consider buying into a mining centre for some quality CF+ cream, but recognise that it's incredibly risky if anything goes wrong.
BV mate, I don't mistake myself for a winner. More of a mug punter trying to put things right with a bigger punt. Not widely recommended (indeed, not narrowly recommended)! Consider mining centres when you're fundamentally desperate or financially flush only. They're kind of like CIP profile - or worse - in both their risk and reward.