Sydney Market at top - calling a severe correction in 2018-2019

[sash]

Hi All,

as per my previous posts..I am now formally calling that the Sydney market has topped out. Anyone who is getting in from this point onwards is probably not going to see much growth.

So what happens now....there will be a period where people will pay sill prices thinking the market will go higher.

People need to assess their risk and make a conscious decision whether they will stay for the long term or take profits and get out. Just don't go buying stuff now!

I am calling a severe correct by 2018-2019 in Sydney.....

Can't wait for the flurry of posts contravening my comments...

 

[Deltaberry]

Probably longer than what I expect.

 

[sash]

You need IR to rise to 7-8% for the recipe to work....expect them to head up from mid 2016...and topping out in late 2017....this equivalent of a 65-90% rise assuming one or two more cuts.

Last time it rose it had an impact it went from high 5s to mid 8s.....it rose 55%.

Probably longer than what I expect.

 

[Deltaberry]

True. It's all a function of interest rates.

I'm progressively selling B-grades at the moment which would take me debt-free. Will reassess after those to see whether I cash out some A-grades to have elephant guns ready, or just refinance them to have some smaller guns.

 

[The Falcon]

I hear you Sash and agree. Dry powder ready for an opportunistic dip into Sydney resi.

 

[DaveM]

Western Sydney goes ding

 

[hobo-jo]

I agree, think Sydney is very close to (or at) a major peak also.

I am calling a severe correct by 2018-2019 in Sydney.....

Care to put a % range on it? More severe than the 2003 peak?

Over the next couple of years we can expect to see:

- The shuttering of the car manufacturing industry.
- The winding down of the largest driver of GDP growth over last few years (mining investment).
- The popping of a fairly significant bubble (or severe correction) in Sydney.

Do you have any thoughts on how these 3 events culminating together might impact the Australian economy?

 

[sash]

Hobo

No nothing to sinister...just normal part of the cycle...

My thoughts:

1. The dollar has fallen to the point where it will support other areas of the economy...i.e. tourism, agriculture

2. China's growth rate will fall from over 10% to the new norm of 6-7%. Also..as China gets more expensive jobs will move to other lower cost countries like Vietnam, Indonesia, and the Phillipines. The Chinese workforce will feel some of this via increased unemployment. China will also be stretched in terms of caring for its aging population just as it has industrialised. Should be interesting if some of the Chinese in Australia panick as the market here drops.

...interesting times in indeed...however...I am still a fan of property....

I agree, think Sydney is very close to (or at) a major peak also.


Care to put a % range on it? More severe than the 2003 peak?

Over the next couple of years we can expect to see:

- The shuttering of the car manufacturing industry.
- The winding down of the largest driver of GDP growth over last few years (mining investment).
- The popping of a fairly significant bubble (or severe correction) in Sydney.

Do you have any thoughts on how these 3 events culminating together might impact the Australian economy?

 

[chunho01]

Should be interesting if some of the Chinese in Australia panick as the market here drops.

I fear for Melbourne too then, the current state in CBD is no joke. What in the world are the off the plan apartment buyers thinking, especially the towers in the city.

Saying 'oh, I saw another new tower just popped up opposite Melbourne Central yesterday while I was taking my dog for a walk' is not an exaggeration...

Is it just me??

 

[Deltaberry]

I agree, think Sydney is very close to (or at) a major peak also.


Care to put a % range on it? More severe than the 2003 peak?

Over the next couple of years we can expect to see:

- The shuttering of the car manufacturing industry.
- The winding down of the largest driver of GDP growth over last few years (mining investment).
- The popping of a fairly significant bubble (or severe correction) in Sydney.

Do you have any thoughts on how these 3 events culminating together might impact the Australian economy?

That's a too simplistic view.

If that were the only driver, properties actually wouldn't crash much because rates would fall further, and foreign money would flow in quicker.

You actually need a benign economic condition where employment trends stronger, GDP rises and interest rate rises.

 

[MTR]

Hi All,

I am calling a severe correct by 2018-2019 in Sydney.....

Can't wait for the flurry of posts contravening my comments...

But that means Syd has been going strong from 2013, 5 year boom, very unusual for this to happen, most go for 2 years?????

I am actually thinking correction some time in 2016, actually I reckon 28 March 2016, my birthday

 

[ZachAnSel]

Bring it on baby.. I'm currently filling my wish list while add more funds to my budget.

Sash 2018, MTR 2016. Let's meet in the middle laa, I think 2017

2016 boom will bust, trigger by interest rate go up (I got feeling multiple). And few new otp stock will finish, this will increase supply. 2017 media will start broadcast the news about property slow down, interest rate still on the way up. People will realise "crap, s***, I'm in the trouble, let's sell it now" which adding more supply. Few people make tiny profit, few didn't after paying tax, selling cost. Some lost money after selling, and there are people who can't sell it at all. They will suffer the most if they dont have buffer to ride the crash

From 2018... You know the rest.

Hey Sash, even I saying 2017. Doesnt mean I will buy 2017.
2018 looks even better timing to buy in my plan. Happy days a head!

 

[MTR]

So why would you buy again in 2018??

 

[Biz]

Rates going up? What do you think will drive that? Imported inflation?

 

[see_change]

So why would you buy again in 2018??

Ditto .

If we do have a peak somewhere around 2016 - 2018 Then the peak after that is another ten years away , so why would you buying soon after the current peak.

After the last peak in 2003 , it took six years before we had a decent correction in 2009 , which is when we started buying in Sydney so in rough reakoning we're 6-8 years away from the time I'd be looking at buying in Sydney .

Darwin and Perth are further ahead in terms of peaking and coming down and Brisbane , Adelaide , Canberra and Hobart still represent buying ops in the current cycle , let alone opportunities in regional centres such as Townsville and rocky .

We only got into investing in a serious way at around this point of the last cycle . Sydney had moved a lot with other places waking up .

LOTS OF OPS OUT THERE , without having to wait for Sydney to drop ....

Cliff

 

[beachgurl]

I think it will take a few years too. Another thing that reduces prices and increases the number of repossessions is starting a family. Couples (including investor couples) go to their bank or broker and find out their maximum borrowing capacity, but a house in the best area they can, start some renovations as they've usually bought the cheapest thing on the market to get into their target suburb. After a year or two of owning the property they fall pregnant. They lose an income, interest rates rise and they suddenly realise that they can no longer afford that property.

I saw so much of this in St Clair around 2008ish. If we weren't trying to start a family ourselves at that time we would've bought up big.

I'm looking to pull some equity out while values are high in anticipation of the next downturn.

 

[strongy1986]

I fear for Melbourne too then, the current state in CBD is no joke. What in the world are the off the plan apartment buyers thinking, especially the towers in the city.

Saying 'oh, I saw another new tower just popped up opposite Melbourne Central yesterday while I was taking my dog for a walk' is not an exaggeration...

Is it just me??

I work on these new towers and I agree,

A lot more to come, most are 60 stories plus

 

[sash]

MTR

It has a lot to do with how long before distressed sales appear..

It is almost always due to the cost of holding...with current rates the market will laze around at the top for 6-12 months. Just people start moving to suburbs which are more affordable in the Sydney market.

As I said I believe interest rates will head up next year....it take 18 months for rates to rise to say say about 8%. At this rate people would have hit distress when it went above 6.75% but they prop things up for say 6-12 months. It usually will not stay at the peak of the interest rate cycle for more than 6-12 months. At this point of the cycle you get the most amount of bargains.

Obviously...a severe economic recession may push things out earler.

So why would you buy again in 2018??

 

[strongy1986]

MTR

It has a lot to do with how long before distressed sales appear..

It is almost always due to the cost of holding...with current rates the market will laze around at the top for 6-12 months. Just people start moving to suburbs which are more affordable in the Sydney market.

As I said I believe interest rates will head up next year....it take 18 months for rates to rise to say say about 8%. At this rate people would have hit distress when it went above 6.75% but they prop things up for say 6-12 months. It usually will not stay at the peak of the interest rate cycle for more than 6-12 months. At this point of the cycle you get the most amount of bargains.

Obviously...a severe economic recession may push things out earler.

All sound reasoning but what's going to push our rates up to 8%?

 

[charlieandkath]

Hi All,

as per my previous posts..I am now formally calling that the Sydney market has topped out. Anyone who is getting in from this point onwards is probably not going to see much growth.

So what happens now....there will be a period where people will pay sill prices thinking the market will go higher.

People need to assess their risk and make a conscious decision whether they will stay for the long term or take profits and get out. Just don't go buying stuff now!

I am calling a severe correct by 2018-2019 in Sydney.....

Can't wait for the flurry of posts contravening my comments...

I'll contravene your post as believe there is a contradiction in the name of the thread. If Sydney is at top then the correction starts today - not in 18/19. This is where I disagree with you sash.

I'm looking for a median of 1.3m by 2018. Then your 10 to 20% crash for 2 years - then your stagnation for 7 or 8 years - then your buy in again in 2027/2028.

I do believe your right though by warning people to take care now but if you can afford to do it and factor in some big buffers then I still think it is worth a shot especially if you have an exit strategy of less than 2 years.