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

[C-mac]

Just to add I also would argue it is the good old 'supply to demand ratio' that will see Sydney possibly weaken in the next 3 years. During DD on a number of suburb areas throughout the greater Sydney area in recent months, I quickly became shocked at the town planning for so many suburbs for the coming 5-10 years, and dually shocked by approvals for high rises too. Sure, we have a 'housing crisis' as the mainstream media continue to report it, in Sydney, but the volumes that are coming on, seem to be far outstripping not only current latent demand, but also the annualised population projection grow the expected for Sydney, YOY for the next few years. No council wants to say no to any shoebox-tower being proposed/shoved in their faces right now. Deducting manufacturing and mining, construction is kinda all we got, right now, so councils are saying yes to absolutely every monstrosity being proposed their way, lately!

All this could add up to a massive oversupply issue in 24-36 months time, when mass I completions occur.

 

[wombat777]

I just don't see the largess and silliness yet for us to be in a boom. To me a boom is where there is so much money in the economy eg share prices at ridiculous prices, top end property breaking through ridiculous barriers, bankers on massive bonuses, commodities at high prices. I am not seeing any of this yet. In fact quite the opposite - share prices are not booming, top end property is just starting to revive, commodities are almost at their lows. Interest rates are at lows to try and get us going.

For the above reasons and others such as supply and demand I still believe a further 30% this cycle in Sydney which say at a median now of 1 million takes us to 1.3 million.

I think i agree in principle with this after seeing Dr Wilson's presentation yesterday (although maybe not to 1.3). There is still room to move from an affordability perspective. Mortgage repayments are apparently not at the levels they were previously at as a proportion of income. Low interest rates are significantly helping. I understand they are at record low levels for Australia. It would take a big jump in rates in a short time for the housing market to start being affected.

The current view seems to be that there will be another 0.25 point drop soon. Any rise in the remainder of this year is unlikely (if other unexpected factors don't come into play).

 

[hobo-jo]

I just don't see the largess and silliness yet for us to be in a boom. To me a boom is where there is so much money in the economy eg share prices at ridiculous prices, top end property breaking through ridiculous barriers, bankers on massive bonuses, commodities at high prices. I am not seeing any of this yet. In fact quite the opposite - share prices are not booming, top end property is just starting to revive, commodities are almost at their lows. Interest rates are at lows to try and get us going.

There's been plenty of stories over the last 6 months of buyers paying excessive prices... http://news.domain.com.au/domain/re...-11-million-over-reserve-20150314-143zsh.html But like any bubble (or boom, whatever you want to call it) there's no measurable way to call an exact peak, it's just a guessing game.

Why must every boom look exactly the same and align exactly with the cycle in commodities?

Given below trend economic growth (locally and internationally) and record low wage growth (amongst other negative factors) it wouldn't be surprising to see the boom peak in this environment at a lower level and without the same characteristics as some we've seen in the past.

 

[windyzz]

Just to add I also would argue it is the good old 'supply to demand ratio' that will see Sydney possibly weaken in the next 3 years. During DD on a number of suburb areas throughout the greater Sydney area in recent months, I quickly became shocked at the town planning for so many suburbs for the coming 5-10 years, and dually shocked by approvals for high rises too. Sure, we have a 'housing crisis' as the mainstream media continue to report it, in Sydney, but the volumes that are coming on, seem to be far outstripping not only current latent demand, but also the annualised population projection grow the expected for Sydney, YOY for the next few years. No council wants to say no to any shoebox-tower being proposed/shoved in their faces right now. Deducting manufacturing and mining, construction is kinda all we got, right now, so councils are saying yes to absolutely every monstrosity being proposed their way, lately!

All this could add up to a massive oversupply issue in 24-36 months time, when mass I completions occur.

I really have a different view... Sydney in particular is lagging in term of building new dwelling. Take an example of the following suburb, five dock, erkensville, Newtown, camperdown, glebe . I haven't notice much change in term of development in 10 years.....

Same old road same old houses... Yet I don't know how many more people are introduced in that 10 years... also look at the stock available in each suburb for house or apartment... It's super low at the moment. Currently if you look at domain there are 7 units for sale in the whole Newtown, 22 in the whole camperdown, 11 in erskinville, etc.

I know some suburb will be experiencing over supply (i.e. zetland, Waterloo, and mascot) but seriously I don't see any over supply issue in the whole Sydney.

Compare the stock in Melbourne ( south Yarra, dockland) and you'll see 200-300 apartment for sale at one point in time.

I spent few hours studying a lot of Sydney suburb, and come to a conclusion how chronically our supply is in Sydney.

Just recently been active at studying and investigat ing suburb in the west for Westmead... Been to open house for the past few months.. every open house there at least 50 people on the inspection. And there several groups putting an offer including myself. Yet alone there are Only about 10-15 2 bed unit available for a given weeks or months... Prices has gone up 20-50k in just a few months... There's no plan or any new development around the area too....

 

[Jaguar Driver]

There's been plenty of stories over the last 6 months of buyers paying excessive prices... http://news.domain.com.au/domain/re...-11-million-over-reserve-20150314-143zsh.html But like any bubble (or boom, whatever you want to call it) there's no measurable way to call an exact peak, it's just a guessing game.

Why must every boom look exactly the same and align exactly with the cycle in commodities?

Given below trend economic growth (locally and internationally) and record low wage growth (amongst other negative factors) it wouldn't be surprising to see the boom peak in this environment at a lower level and without the same characteristics as some we've seen in the past.

I think what you will see is properties like the link above and other nonsense properties getting huge sums simply wont happen once interest rates rise.
The cream will continue to hold its value however. The cr@p wont. For a given amount of money, id buy cream in other areas - perhaps even other capitals- rather than crap in Sydney.

 

[SeafordSunshine]

Passed in...

Sydney 2k from CBD

Yesterday afternoon , attended an auction, 30 people on the street, re built terrace house, passed in with no bids.
asking 1.85 mil, adjusted to 1.95 mil during the course of the campaign.

I know that one 'passed in' does not make a downturn, but given the level of advertising , advertorial, no one wanted to buy this 4 br terrace with 3 parking spaces.

Cheers.

 

[monalisa]

Sydney 2k from CBD

Yesterday afternoon , attended an auction, 30 people on the street, re built terrace house, passed in with no bids.
asking 1.85 mil, adjusted to 1.95 mil during the course of the campaign.

I know that one 'passed in' does not make a downturn, but given the level of advertising , advertorial, no one wanted to buy this 4 br terrace with 3 parking spaces.

Cheers.

I think this one got a mention in the SMH today.

 

[Deltaberry]

You won't see interest rates at 8% again for as long as I have a hole in my ar$e

That's a pretty ambitious statement.

Did you predict the current 4% mortgage rates when they were 7?

 

[Deltaberry]

Reality is real estate prices are purely driven by affordability and income. Assuming income is flat, if interest rates rise, affordability falls. All predictions are for a 1% interest in IRs in 2016. Only time will tell. People who make predictions get it wrong all the time, but let's say they got it right, make sure you're not overly cashflow negative.

In the long run, Sydney and Melbourne will continue to outshine the world because each year, its population is increasing by around 100,000 people. That's half a million in 5 years. 10 years, both cities have another 1 million people. Try finding shelter for them.

 

[aaronjod]

Just recently been active at studying and investigat ing suburb in the west for Westmead... Been to open house for the past few months.. every open house there at least 50 people on the inspection. And there several groups putting an offer including myself. Yet alone there are Only about 10-15 2 bed unit available for a given weeks or months... Prices has gone up 20-50k in just a few months... There's no plan or any new development around the area too....

Go take a look towards Wentworthville along the rail line. I was working in that street a few weeks ago and saw plenty of proposed unit blocks.

Although I do hope this boom gets a little more out of the run, being in property accumulation phase with property in the area and plenty of time to burn...

 

[chunho01]

Been to open house for the past few months.. every open house there at least 50 people on the inspection. And there several groups putting an offer including myself.

It is alarming only when every other regular folks are out there buying. What you described is the perfect seller's market, however, this may/may not translate to an eventual bear market.

 

[windyzz]

Yes there are a new development proposed along WWentworthville area. But this is not Westmead. And these are not a high rise development. with the amount of projected population growth of additional 1 million people in greater Parramatta by 2025... I don't think the additional development in Wentworthville can be affected at all.

I do believed Parramatta can be risk of an over supply as altitude tower by meriton with 50+ level, v crown and aspire development with 90+ floor

+ knowing that all 7000 Cba employees will be moved to Parramatta from Olympic park and the new campus of university of western Sydney will be complete in the end of 2016 which will hold over 10 000 students. This will put more pressure on house price and rent in that surrounding area.

Note the current vacancies rate in Sydney is already lower than 2%. Last I heard from century 21 sky news. Sydney is currently in 1.5% vacancies

 

[windyzz]

Reality is real estate prices are purely driven by affordability and income. Assuming income is flat, if interest rates rise, affordability falls. All predictions are for a 1% interest in IRs in 2016. Only time will tell. People who make predictions get it wrong all the time, but let's say they got it right, make sure you're not overly cashflow negative.

In the long run, Sydney and Melbourne will continue to outshine the world because each year, its population is increasing by around 100,000 people. That's half a million in 5 years. 10 years, both cities have another 1 million people. Try finding shelter for them.

you're correct. You'll see Sydney and Melbourne becoming the most expensive real estate in the world if our government ain't fixing supply and infrastructure for transport.

all the young generation wanted to live in a cool suburb with lots cafes and close to work... Everyone is pushing their limits to get into these suburb. And with our crazy population growth It's not going to help.....

 

[norwoodman]

In the long run, Sydney and Melbourne will continue to outshine the world because each year, its population is increasing by around 100,000 people. That's half a million in 5 years. 10 years, both cities have another 1 million people. Try finding shelter for them.

Source? I'm sure Melbourne and Sydney weren't growing quite that quickly last time I checked.

 

[sash]

Hmmmm...you might lose you hole in the process.

You won't see interest rates at 8% again for as long as I have a hole in my ar$e

 

[windyzz]

Source? I'm sure Melbourne and Sydney weren't growing quite that quickly last time I checked.

http://www.macrobusiness.com.au/2015/03/towards-huge-australia/

http://www.abs.gov.au/ausstats/[email protected]/Web+Pages/Population+Clock?opendocument

"This projection is based on the estimated resident population at 30 June 2014 and assumes growth since then of:
one birth every 1 minute and 45 seconds,
one death every 3 minutes and 32 seconds ,
a net gain of one international migration every 2 minutes and 05 seconds, leading to
an overall total population increase of one person every 1 minute and 18 seconds."

Some expert believed this calculation is pretty conservative.

 

[ndonnelly]

I am no economist, but IR rise in an attempt to cool and overheating economy. I am yet to see any reason that we are anywhere near taking that step. Its the opposite. 8%? What could possibly be on the horizon that could lead to this scenario in the short-medium term?
There were high IR pre-GFC and property prices did not fall because the economy was booming. I just can't see the economy being in a situation with rising IR in conjunction with a slowing economy, weak growth and rising unemployment. I know for sure that does not make economic sense.

 

[bumskins]

I really have a different view... Sydney in particular is lagging in term of building new dwelling. Take an example of the following suburb, five dock, erkensville, Newtown, camperdown, glebe . I haven't notice much change in term of development in 10 years.....

Same old road same old houses... Yet I don't know how many more people are introduced in that 10 years... also look at the stock available in each suburb for house or apartment... It's super low at the moment. Currently if you look at domain there are 7 units for sale in the whole Newtown, 22 in the whole camperdown, 11 in erskinville, etc.

The Mirvac Harold Park development is pretty much Glebe, which will be 1250 townhouses/Aparments when complete.

Ashmore Precinct which is considered part of Erskinville is planned for about 3000 residences. Very early stage but I believe some land holdings in the area have already changed hands.

They are like mini versions of your Green Square Development.

There is also talk of the Bay's Precinct, which would encompass a lot more accomodation around your Glebe/Annandale area if it ever gets up.

Inner West has been fairly similar in terms of no large scale development upto this point. But there are some large scale developments under-way in some suburbs now.

That's the thing with a lot of this infill development, the projects are so big that they get planned/debated for years, but when they do actually happen it has a flooding effect.

On their own I think there is probably that much latent demand that they would get gobbled up, but with more and more getting built concurrently its hard to keep track.

The major factor with the lack of development has been who is government/council.

 

[sash]

Well said...this is the risk....people jumping in on what seems to be bluechip suburbs...through the inevitable IR increase with the cycle...and bang...you have a downward spiral.

My fear is a lot of naysayers have not witnessed this...I totally agree about your assessment about Green Square/Waterloo/Zetland. In the next 3-4 years...about 8000 units will come onto the market. I expect to go shopping when the newbies who borrowed can't get the valued amount and it ends up on the market.

The Mirvac Harold Park development is pretty much Glebe, which will be 1250 townhouses/Aparments when complete.

Ashmore Precinct which is considered part of Erskinville is planned for about 3000 residences. Very early stage but I believe some land holdings in the area have already changed hands.

They are like mini versions of your Green Square Development.

There is also talk of the Bay's Precinct, which would encompass a lot more accomodation around your Glebe/Annandale area if it ever gets up.

Inner West has been fairly similar in terms of no large scale development upto this point. But there are some large scale developments under-way in some suburbs now.

That's the thing with a lot of this infill development, the projects are so big that they get planned/debated for years, but when they do actually happen it has a flooding effect.

On their own I think there is probably that much latent demand that they would get gobbled up, but with more and more getting built concurrently its hard to keep track.

The major factor with the lack of development has been who is government/council.

 

[C-mac]

Agreed actually. I'll likely begin buying again in Sydney in 2017-18; when conditions are better. And if by some miracle in those years the Sydney market does nothing but continue to skyrocket, I'll look elsewhere.