Mortgage Stress and Rental Stress in Sydney
- Thread starter kamchatsky
- Start date
Alex,
In areas closer to the city people who bought there have been upgrading so being their 2nd PPOR their mortgage won't necessarily be very high.
Others would have been given money from mum and dad or would have inherited family assets and with a large deposit, again they wouldn't have a very large mortgage.
Also, as we get closer to the city a larger percentage of people would be investing in the stock market
and in recent times they would have made lots of money and are doing alright.
I am guessing that a lot of these people would have used their home equity to buy shares and as long as the stock market is doing ok I cannot see them running into financial troubles.
If however the stock market collapses it will all change and they could be forced to sell some or all of their assets.
Cheers
I'm also expecting a sharemarket crash, by the way. I think that will trigger the falls in these areas.
What you're describing is just people leveraging their PPORs to buy shares. I doubt people who have seen such great profits in the market in the last couple of years would say 'let's cut back on these profitable shares, pay the CGT and lower our debt levels'. I think they'll continue to hold, and therefore get hit in the correction.
Higher rates will mean people can't offer as high prices for homes. Obviously sellers won't lower their prices unless they have to, but if the economy goes south the fear will set in.
So far services and professional jobs have been robust. A sharemarket correction will change that. Banks in the US, for example, are firing a lot of people because of the subprime thing. Lack of financial discipline is not limited to people with lower incomes: most of my friends are financial idiots, and would go broke in 3 months if they lost their jobs.
Subprime isn't done. Interest rates will go up further. And I think the liquidity crunch will cause some companies to be unable to fund their operations and go down. I also think a US recession will curtail Chinese exports to the US, and therefore reveal the weaknesses in the Chinese economy. I've been dusting off my old books on the Japan boom/crash.
I'm forecasting a crash, and I don't see how any property price range is going to be immune (except maybe the very top). I would hope the crash happens soon, since my job is as safe as it can be now, so I'll survive a crash. I wouldn't be this confident in 10 years about my job.
Alex
alex
I have been considering investing in the NW os Sydney too. I am still unsure where would gibe me the best bang for my buck. baulkham Hills looks like it has come down a bit, and may represent fair value in time. Problem: no train.
Carlingford and parts of Dundas Valley are closer to the train line, and to good schools. Yield is low though.
Castle Hill is too expensive.
While I like Epping, Eastwood, North Ryde, they are expensive too.
What do you think?
Howdy Alex. Love your posts.
Just what is your current employment? I thought you were in banking/finance in some way? So I thought in a crash you would be hit.
I think my job would be pretty safe in a big crash. A grain grower.
Historically little correlation with financial and property markets.See ya's.
Howdy Alex. Love your posts.
Just what is your current employment? I thought you were in banking/finance in some way? So I thought in a crash you would be hit.
I think my job would be pretty safe in a big crash. A grain grower.
I'm an accountant with a bank. When markets tank, traders, investment bankers and other 'front office' (client facing, revenue generating) staff get killed first. However, they always need accountants. My bonus would disappear but I'm less likely to get fired. I'm at a level where I'm experienced enough to do stuff by myself (the intake of grads often decreases during a recession) but comparatively cheap (while more expensive and arguably less directly useful middle to senior management get axed). i.e. they would rather fire a manager costing $200k than a couple of line guys making $70k. You can live without a manager, but someone has to produce the daily reports.
I'm an experienced grunt, basically. Like I said, in 10 years I wouldn't be this confident, because by that time I would be more expensive and doing more ethereal 'management' stuff. Planning to be out of all this in 10 years, though. That's why I'm really focusing on the next couple of years: I need to play this well.
In my personal case, I always have the option to go work in Tokyo (I speak the language) or London (I have a visa) or Hong Kong (I have PR) if things get really bad in Oz. I'm pretty used to working overseas so I'm not locked into Oz or anything (though I would prefer to be here for the investment plans and lifestyle). I don't think it'll get that bad, though. I remember back in the mid-90s friends went back to Hong Kong after graduation because they couldn't find work in Oz, but that was because they were grads.
Alex
To be fair, I'm looking for a PPOR in these areas, so for once I'm not looking at yield! I love the Hills (new, big houses, new shopping areas, quiet street layouts), but I have to commute into the city (for now) so I need a train. That's why I personally would choose Normanhurst, Thornleigh, etc over Cherrybrook, Carlingford, etc. (the Carlingford line sucks, in my opinion). I'm looking for a McMansion so anything from Epping south would be too expensive for my budget. Similarly, I'm not looking at Ermington, etc because of the lack of trains.
For IPs my choice in Sydney would still be the West. Yields are still low there, but I'm expecting prices to come back a bit and rents to rise. The combination should increase yields.
Alex
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