Ripple effect investment strategies

[mgs4]

Has anyone recently focused an investment strategy on properties/suburbs that are beneficiaries of the ripple effect. Where a certain suburb has run up substantially, and neighbouring suburbs are slowly playing catch up.

Has anyone had a look at this around Parramatta? Neighbouring areas around Parramatta look interest eg Harris Park, Rydalmere etc.

 

[WattleIdo]

Harris Park is doing really well this time around. I wanted to buy more there but I think it might be getting a bit crazy now. Unit prices seem to be going up K10 a week at the moment - that can't go on much longer, surely ??

 

[mgs4]

But the current yields are still reasonable right, and the discount to parramatta is still significant isn't it?

 

[WattleIdo]

Yeah it's much cheaper in Harris Park than in Parramatta.

Actually, even though HP has the same postcode as Parra, if you want to find out how it's doing on SQM, it's better to go by the 2142 postcode - which is Rosehill and Granville.

Parramatta is about K100 more, I think.

The whole area is going off at the moment. Not sure about yields. The vacancy rate is higher than it has been for a while 2.7-2.9. I think that might be OK for Sydney right now. But if you want good tenants, you can't be asking for top dollar.

That's my theory anyway. I'm a good tenant and I like value for money.

Rents will no doubt continue to rise once all the buying and selling frenzy is over but they're not going up now.

What do you think is a fair rent for a 2-bedder at the moment?

 

[The Dark Knight]

I used the ripple effect as I was(getting old ) a young investor back in the day and needed equity to keep expanding. It works but it can take time but if you have time on your side than its the cheapest way to gain equity/profit without using your own money. I wouldn't recommend it for regional areas but in outer suburbs around major cities it does work if you do your research correctly.

 

[FelixL]

Ripple effect is kind of crystal balling, it may not be always able to predict where the ripple goes, or worse stopped rippling altogether

My strategy is the epicentre strategy focusing on areas that had massive drop over the last 5 yields

 

[mgs4]

Yeah it's much cheaper in Harris Park than in Parramatta.

Actually, even though HP has the same postcode as Parra, if you want to find out how it's doing on SQM, it's better to go by the 2142 postcode - which is Rosehill and Granville.

Parramatta is about K100 more, I think.

The whole area is going off at the moment. Not sure about yields. The vacancy rate is higher than it has been for a while 2.7-2.9. I think that might be OK for Sydney right now. But if you want good tenants, you can't be asking for top dollar.

That's my theory anyway. I'm a good tenant and I like value for money.

Rents will no doubt continue to rise once all the buying and selling frenzy is over but they're not going up now.

What do you think is a fair rent for a 2-bedder at the moment?

From what I've seen rents for 2 bed units seem to be about $370. Yields seem better than average Sydney suburb. How do you think Rosehill/Rydalmere compare?

 

[WattleIdo]

I reckon Harris Park and Rosehill are really one and the same. Rosehill has Woolies and HP has the little village and the station.

Granville is just that little further down the hill. An even better kept secret than HP. Lots of good people needing a convenient place to live.

When I first moved into HP in 2007 renovations were unheard of. Now there are a lot more presentable places around in HP. I think Granville remains unreno'd at this stage.

Not sure about Rydalmere - I think mostly houses there and they've done well lately.

The Dark Knight - thanks for the tip. I'm no spring chook but slow and steady and anything else is a bonus. I know where I've got my eye on for next time.

 

[devank]

I'm not sure if the traditional 'ripple effect' is still happening in this information age. May be time to look at Doppler effect

 

[WattleIdo]

aah can you elaborate please devank?

 

[impala67]

I'm not sure if the traditional 'ripple effect' is still happening in this information age. May be time to look at Doppler effect

I think it is. However, everything is relative to the observer and their interpretation of the statistics/facts - or in the case of many non-SS'ers, what the media tells them to think.

 

[devank]

aah can you elaborate please devank?

Traditionally, booms start in the CBD areas and radiate outwards. Then to the middle-ring and then outer-ring. I think that is because the 'information' travelled slow and people didn't know much about factors other than closeness to CBD/work. For example, areas around Sydney and northern suburbs boomed first. Them areas like Strathfield & Hornsby and then Penrith, Newcastle and so on.

However, now, I think Newcastle/Hunter moves on its own. Inner Sydney moved independently. Western Sydney actually boomed. North-shore is slowly picking up. Employment centers are spread around like Parramatta, North Ryde, Liverpool & Penrith.

As soon as an area becomes attractive, that area booms. Nearby areas also picks up speed but it doesn't travel far. That is kind of Doppler effect

 

[WattleIdo]

well, OK. I agree with you.

I think it's because of the size of Sydney now. Parramatta is far enough away that it's like it's own little CBD with it's own innercity suburbs (much smaller scale of course). Same with Liverpool.

Not only that: the make-up of our society has affected certain areas. People of certain ethnic backgrounds like to live near each other for obvious reasons - food, religion, family, languauge, survival. These hubs are very affordable and attract people of simialar backgrounds to them; and when they do so, their cultural influence starts to become attractive to the open-minded young and singles who also like the affordability, then becomes fashionable and finally becomes high mainstream - like Leichhardt.

As for the western suburbs, that's been going on since before the last boom 2003. It just slowed down for a while in 2011-12. People who couldn't afford to buy in the east or inner west went out to Penrith and raved about it. Then Blacktown.

In 2009-10 it became really popular and now affordability is questionable.

The stigma associated with the west is ancient history. Young people and single professionals have been moving out that way for years now. Unless you got in before or during the last boom, west is best.

The pollies know it too

 

[T.G]

How would you measure this ? Let me give you an example of what I mean. Lets take Kings Langley, how would you predict what Kings Langley will go up by compared to say Quakers Hill. Both aren't too far from Baulkham Hills and should see increased prices due to the North West Rail Link but how would you predict suburb price growth so you can know which suburb is the better to buy in.

 

[impala67]

...Both aren't too far from Baulkham Hills and should see increased prices due to the North West Rail Link but how would you predict suburb price growth so you can know which suburb is the better to buy in.

If it was easy, then everyone would do it.

 

[Ajax]

Has someone got views on flow on effects to other capital cities. Sydney prices are up at least 15% over the last year. Will this flow on to other capital cities (even where Sydney prices might begin to plateau)?

I recall Steve Navra explainng this back in a seminar at Chatswood in 2001. Melbourne house prices could be in for a bit of a jump then Brisbane etc...Hobart usually the last to fire. I have an IP in Darwin. Im' convinced Darwin is counter-cyclical. It fires when the rest of the market is down. Canberra does comparatively better than other cities in recessions (hard to sack public servants).

 

[impala67]

...I have an IP in Darwin. Im' convinced Darwin is counter-cyclical. It fires when the rest of the market is down...

I thought Darwin was like it's weather. Hot all the time, and sometimes it's hot with rain. Would love to have a Darwin IP.

 

[WattleIdo]

T.G

How would you measure this ? Let me give you an example of what I mean. Lets take Kings Langley, how would you predict what Kings Langley will go up by compared to say Quakers Hill. Both aren't too far from Baulkham Hills and should see increased prices due to the North West Rail Link but how would you predict suburb price growth so you can know which suburb is the better to buy in.

I am certainly no expert. But if comparing these two places:
station vs no station
less glamorous vs more established
spicier vs garden suburb

But I wouldn't go to either of these places. From now on, I'm looking at places that other people haven't heard of much and people label as 'not a very nice place' despite high tenant demand. That's worked for me so far.