Poor old Sydney...Tough Cookies

[Ray Brown]

From the ABC "Govt urged to address rental property shortages.

The real estate industry is calling on the New South Wales Government to offer incentives to property investors, in order to address a shrinking pool of rental properties in Sydney.

The Real Estate Institute of New South Wales says the availability of rental housing is at its lowest in six years, with the vacancy rate falling to 1.5 per cent last month.

Institute president Cristine Castle says property investors are turning to Western Australia, the Northern Territory and Queensland and need to be encouraged to stay in the New South Wales market.

"We'd like to see some further incentives in the way of perhaps some land tax relief, particularly for residential property," she said.

"After all, [this] is the one that we're talking about today and the one that is under so much pressure at the moment." "



Like that is such a no-brainer. The problems in NSW are a direct result of "rich" property investors being state taxed to the hilt.

I'll keep my resi property investment dollars in QLD for the mo thanks!

 

[grossreal]

hi
The problems in NSW are a direct result of "rich" property investors being state taxed to the hilt
this is not the reason that we are in the position we are at the moment.
for me the reason is.
the local councils have been hell bent on the nimbii solution to developing and the locals have been hell bent on stopping anything that looks larger then a duplex.
the parties from both sides have dropped the ball and looked at other issues and have allowed development applications to stall for upwards of 12 months and some councils strathfield,ashfield,marrickville,rockdale, are no go zones for developing.
put on top of that banks the jitters as they are holding large amounts of stock,
and you have wa flying along.
its afunny thing in thatif you don't have development you don't have new units and if you don't have new units you don't have units to rent.
you could have the goverment bring in a developer gets 21k per unit similar to fhog and it will not make a .001% change in the market here.
why
because we are just not developing and what is being developed won't be on line for another 12 to 18 months.
you can't tax it if you haven't built or you can't buy it.
the next will be today tonight
sydney in the grip of a rental crisis.
and then prices rise as developer rip of the home buyers as new property sales go thru the roof.
real estate agent a crook as his window price for rental jumps over 20% over night the goverment should step in.
I'll cut and paste as they come home to roost.
and I hope bob carr gets to read this forum as its bob that put this in place.
and the greens for grabbing the opportunity to stop developing in sydney.
you plant it you reap.
for me this is going to be the worst I have seen it falling 1.5% wait till it says you are in karratha vacancy rates of no new rentals in the window at all for 6 months lets then here the screams.
for those interested ring you local council and ask have they approved any development over 40 units in the last say 6 months it wil give you an idea of the problem.
sydney is in the eye of the storm at the moment but all the indicators are there it just no point if
a they don't understand the indicators
b they don't want to understand the indicators.
c it doesn't meet with there political agenda to lo or sound out those indicators.
or d which is the worse the people in these local goverments understand them, they just put there head in the sand and say nimby let the council next door have the units were ok here and you have the local lolli pop lady stopping or cancelling a 100 unit 30mil project because she is a nimby.
so I agree with tough cookies the one that will have those tough cookies are the people in 6 months looking for some where to rent.
my .002

 

[Peter 14.7]

Agree with Grossreal.

The NSW Vendor Tax was truely, one of the most stupid taxes, ever.

It was so bad that you could buy an IP, pay stamp duty, sell, and lose money in real terms and still have to pay a tax on your gross profits!

It killed investment for the year or so it was in and stuffed the fundamentals of supply prior to it, as sellers rushed to beat the start date.

Iemma Gov should be gone but the libs dont seem to have any solutions.

Peter 14.7

 

[grossreal]

hi all
I won't to point a figure but it does seem to me funny that the tax was put on here
the person in charge buys a property in an area without the tax,
once the tax is in place the area that the person bought in increases to a very large amount
when that market cools the person sells
and then low and behold the tax is removed and the person resigns and lives on tax payers money and the profit from the little venture.
cynic maybe .
have alook at the timing it is very interesting.
and yes it killed investment in nsw but it drove investment into nz and qld.
and was openly marketed that way.
again call me a cynic.
not so much an even playing field if the gardener is working for the opposite team and can change not only the goal posts but the side line as well.

 

[lizzie]

we're buying a new ppor - $40,000 in stamp duty - choke, cough, gasp ...

no wonder the market is suffering. that's a lot of money to pay out for no real return.

 

[XBenX]

True Lizzie.

But its transaction costs such as these that help maintain price stability in tough times.

 

[redwing]

Interesting read from a few sources

The Housing Bubble

The Gold Coast Bulletin reports from Australia. “Interest rates have hit their highest level in six years and Prime Minister John Howard says the pain for households is necessary to get inflation under control. But leading industry figures have warned there will repossessions ‘within weeks’ as a result of yesterday’s interest rate rise.”

“Gold Coast independent property valuer Iain Herriot said the rate rise was ‘really bad news’ for the investors who had stretched themselves to buy investment properties. ‘In a matter of weeks you’ll start to see investors selling their rental properties so they can hold on to the family home,’ said Mr Herriot.”

“‘It’s particularly prevalent in those new estate areas where people have been sold house-and-land packages that quite simply don’t add up in terms of market value,’ he said. ‘When they go to put their investment property on the market in the next couple of weeks because they can’t afford this interest rate squeeze, they are going to get a very rude shock.’”

“Leading valuer LandMark White said the rate rise would ‘murder’ the Queensland property market. Mr Herriot could see some benefit to first home buyers.’I think their Christmas stocking will be full of decent buying, unfortunately though it will be at someone else’s expense,’ he said.”

The Australian. “Low-doc, no-doc, half-a-doc loans. Any-doc-will-do. Get rich quick. On the outskirts of Sydney and Melbourne, things are getting ugly. ‘For Sale’ signs abound.”

“What they don’t tell you is who’s selling. The banks, you see, are telling the agents not to disclose the vendor, to not say a word. The bulk of these sales are mortgagee-in-possession jobs.”

“An ABC crew toured the western Sydney arc from north to south last week. Its findings were disturbing. The bulk of house auctions were mortgagee-in-possession sales.”

“Agents said it was the worst they’d seen it: negative equity everywhere, locks changed, savings lost. One house in western Sydney suburb Fairfield, a three-bedroom weatherboard number, had just been passed in at auction for $279,000. The bank was the vendor. It had been sold for $560,000 just 18 months earlier.”

“The banks are calling in their loans, folks. The credit binge is kaput and the waking hangover will be so bad the lawyers will be sorting it out. Who will sue whom? Mortgage brokers, banks, non-bank lenders, lawyers, mortgage insurers, dodgy valuers. Pick a box.”

“What of the banks and other assorted credit spruikers? Did they exercise the required care, outsourcing their sales to spivvy operators who loaded up their prey with home equity withdrawal products while rates rose and household disposable incomes sank? They’ll blame the brokers.”

The Sydney Morning Herald. “The managing director of property research firm Braxton Chase, Andrew Donnelly, said there were plenty of bargains in the market as higher interest rates force vendors to slash property prices.”

“‘We are regularly coming across developers selling at up to 20 per cent below current valuation,’ he said.”

“Mr Donnelly said investors were becoming more aggressive, and in Sydney had been known to put in offers of $320,000 to $330,000 for properties valued at $400,000.”

“‘And they’re being accepted simply because vendors and particularly developers are not able to afford the holding costs that these rate rises are putting on them,’ he said.”

“Mr Donnelly said that while mortgage repayments would rise as a result of Wednesday’s interest rate increase, which pushed official rates up to 6.25 per cent, the increase would have only a minor effect on investor returns.”

“‘In most cases any increases will be significantly outweighed by the capital gain that can be made from buying at a major discount,’ he said.”

 

[geoffw]

Hmm. From a site called "The Housing Bubble Blog". US based. Perhaps not an unbiase source

 

[Kennethkohsg]

Dear Redwing,

1. Thanks for the link and the article.

2. I have no doubt that this is taking place on the ground already, having recalled reading at least 2 separate news artices about the recent occurrences of such mortgagee house sales in the South-Western parts of Sydney , one about the house sale at St. Claire, and the other about a unit sale in Campbelltown? prior to this third interest rate increase. The new sale price achieved for the same house/unit reportedly amounted to only about 40%-60% less than what the owners have paid for previously during the last market peak in 2003.

3. I also believe that we can expect more of such mortgagee house sales to spread out too to other regional areas in the other States, like Victoria and Queenslands, soon in the near future as more banks start to tighten on their lending polices as well as starting to recall in all those housing loans whose monthly interest payments are presently in arrears, especially those whose houses are presently caught in a negative house equity situation.

4. If existing investors in the Perth property market are not careful and continue to chase after the non-sustainable peaking house prices by continuing to buy into this stage of the property cycle, I further believe that they are also likely to suffer the same fate some 3 years subsequently, probably some time in 2008-2009 period.

5. For your kind update and further comments/discussion, please.

6. Thank you.

regards,
Kenneth KOH

 

[asdf]

Unemployment rate at 30 year lows so unless this hits 10%, I don't see many more mortgagee sales coming on. I would suspect these drastic drop in house values are investment properties which investors can no longer hold. So its not quite blood on the street just yet. I doubt it ever will. Australians will have a way of bunkering down when we need to. But I am on the lookout for a bargain leading into X'mas. Feel kind of bad profiting from someone else's demise by doing so.

 

[Kennethkohsg]

Dear ASDF,

1. I sincerely hope that you are right.

2. From what I have read in the various mass media, I believe that unemployment rate in Australia has hit its 30 years lows and has gotten as low as it could already. It has also reportedly "troughed" and will soon be expected to rise again in the near future, especially if the 4th interest rate should come in Feb 2007, triggering off a technical recession in NSW and Victoria and with the resource boom starting to lose some of its steam too.

3. Although nett overseas immigration is still strong, NSW is also losing a high number of its residents due to inter-state migration reportedly in search of more affordable housing, higher salaries and better employment prospects in tne othe Australian States.

4. For your kind update and further comments/discussion, please.

5. Thank you.

regards,
Kenneth KOH

 

[Kennethkohsg]

Dear ASDF,

1. I wonder what is the percentage of properties held by investors (i.e non owners-occupiers), in each State at this point in time?

2. I recall reading from REIWA.com.au, as having reported some 32%-40% house sales within the Perth property market were due to investors during the Jun and Sep 2006 quarters.

3. This same high level of rental properties (at least 48%) is presently reported in suburbs like Rivervale (WA 6012), according to the REIWA.com.au.

4. Subject to further confirmation, I also expect to see the same high level of investors' property ownership in the Goldcoast and Sunshine Coast property markets too.

5. For your kind update and further comments/discussion, please.

6. Thank you.

regards,
Kenneth KOH

 

[sailor]

Rent crisis grips Sydney

From today's SMH:
Sydney's overall rental vacancy rate in December equalled the year's low of 1.5 per cent, down from 2.6 per cent the previous December, despite it being a month in which renters tend to stay put.

The squeeze in the outer suburbs - more than 25 kilometres from the CBD - was even more dramatic, halving from 3.3 per cent to 1.6 per cent. This area includes Hornsby, Gosford, the Blue Mountains, Campbelltown, Sutherland and Penrith.

The institute is calling for the complete abolition of land tax on residential investment properties to ease the rental squeeze, although this would cost state revenue about half a billion dollars.

Full article here: http://www.smh.com.au/news/national...s/2007/01/19/1169095977191.html?s_cid=rss_smh

Seems like the latest figures are showing even more of a tight rental market for Sydney and suburbs.

 

[Mr. Fabulous]

Feel kind of bad profiting from someone else's demise by doing so.

Why? If people choose to borrow to the hilt, then get in trouble when rates rise, that's their fault and their problem. You didn't put a gun to their heads and force them to borrow that much.

Mark

 

[wylie]

I agree with asdf about feeling bad about buying someone's house cheaply, but then I am a bit of a softy.

I realise some people have borrowed too much for their serviceability (and I have to say we fall into this category - but with calculated risk and considerable equity - just pitiful cashflow). If we had to sell, I suppose we would be faced with people making low ball offers.

But what about the wife with children whose husband has left, or died, or gambled. Many people are left in difficulties through no direct result of their own. It is not just the "greedy" onces who get into trouble.

I also am not religious at all, but I believe that "what goes around, comes around". If I got a bargain at someone's expense, I wouldn't feel right and would be waiting for my "turn".

Wylie

 

[Peter 14.7]

. But I am on the lookout for a bargain leading into X'mas. Feel kind of bad profiting from someone else's demise by doing so.

I use to feel sorry for those how don’t seem to get ahead but as I got older into my 30’s I came to realise not everyone is trying to get ahead like I am , although many here at SS are.

That is, they did not leave behind their family, girlfriend (and future wife) for two years to start a marketable career in outback NSW, they did not wait to buy thier first new car until they were 31. They did not buy a home at 22 and work hard to pay it off.

They had new cars at 22. Went overseas (we have been once in 2003 at wife employers expense). And as for flat TV's!!!!, only 18 months ago did we get a LCD TV and it still hurt to pay $2200. But we needed to space saving.

So my point is don’t feel sorry for those doing it tough.

They can always get a second job in Sydney. Sell the flash car and buy an older one or heaven forbid use public transport. In fact, get a job as overnight security guard and they provide the car so bingo two issues solved!!!

The issue is today’s generation Y need a reality check and better some small pain than the 18% rates us boomers enjoyed in 1990. Not!

As for investment it is all a game.

I sold in 2003 an $0.5M IP and did great. I sold because I could not see the market going up. The purchaser bought with the intention to on-sell in 12 months as she had done before and done well but this time the party stopped.

Should I feel guilty because I cut my risk and pocketed a profit. Would she had given me some $$$ had IP had gone up another 20% for selling to her in 2003???

Provided you don’t take advantage of the disadvantaged (illiterate, old, intellectually disabled, etc..) you have no reason to feel bad.

Those who bought in 2003 in Perth are sitting pretty and no-one predicated that boom.

Peter 14.7

 

[tubs]

The problem in NSW is the same as elsewhere, although perhaps more extreme.

The economy takes off, so house prices go up and rents fall.
Then there's a big push on affordability because first home owners can't buy anything. So, the growth rate slows, stops or even reverses.
Then, because IPs are no longer attractive, everyone sells.
And then, rents go through the roof as a result.

They can't have it both ways. Either its affordability thats a problem, or rental prices.

Incidentally, I do feel sorry for those who are forced to sell. We see it as business, which it is for us. But for those forced to sell, they're not in it as a business, which makes it feel very predatory to take advantage.

 

[Mr. Fabulous]

hi wylie,

I hear what you're saying. In my opinion, there is a difference between putting in lowball offers and deliberately targeting people in financial strife. Some people are okay with it and that's fine - who am I to look down at them (judge not, lest ye be judged *wink*). It's just not something that I would do.

But if I'm in the market for a property and find a property through the usual channels (agents, internet etc.) that I like and I put in a lowball offer and it gets accepted, who am I to question that. That's just the way I look at that situation.

In my recent purchase, I put in an offer that was fair below the asking price. The offer was accepted straight away. First thing I thought was 'Damn, should have put in a lower offer.' That's the way things go sometimes.

Mark

 

[asdf]

In my recent purchase, I put in an offer that was fair below the asking price. The offer was accepted straight away. First thing I thought was 'Damn, should have put in a lower offer.' That's the way things go sometimes.

Mark

Appreciate the feedback folks. Mark, where was this latest purchase? NSW or VIC? Some vendors still quite stubborn in WA and Qld.

 

[Mr. Fabulous]

Brisbane mate! 4 k's from the city. You'll excuse me if I don't post details, as I don't want them on a public forum. I will say though that I got it for about 5% below asking price, with other vendors asking a lot more for similar units in the area. It's in a great location, five minutes walk to train station, bus stop just around the corner and 5 - 10 minute walk to major shopping village. Can't go wrong really.

Once the proposed tunnel goes in, it will lift values more I feel as the commute into the city should (in theory) be cut almost in half.

Note that the particular property I purchased was found via a two line ad in the Courier Mail - it hadn't even been advertised on any of the real estate sites online. Speaking to the agent, he mentioned that an offer (higher than mine) had been rejected by the vendor, but that must have been the only one they got, as mine was accepted only a few hours after I put it in (hence the reason I'm spewing I didn't put in a lower offer).

Mark