Sydney Silliness Warnings 2015

funny how things go full circle... I recall pre GFC endless research about under supplied housing markets, fundamentals etc etc.

here's one scenario, Australia enters a recession. Not so much a scenario as a trajectory IMO. Or affordability just gets tapped out. Or or or.

The good news is markets overshoot both up and down. You can still make a lot of money even at the tail end of these sorts of booms. Flipping would seem like a good past time ATM
 
current market

We have seen it all before the hotter the market the more people want to buy in.

I think there are a lot of danger signs. The rest of the economy is slowing, interest rates are at record lows. I was looking at developments sites in Brisbane 18 months ago. We were missing out because developers were buying these sites and all the profit was gone. In other words developers were buying these sites hoping that values would go up.

I do think we will see falls in the apartment markets in most of our major cities especially small apartments in large blocks. Many of these apartments have been sold into asia for well over their value.

Do your due diligence carefully.
 
abdoug said:
Could someone please explain how the prices are in a bubble if there are no external (non directly supply/demand related) factors involved? For example in the US there was a lot of "******** credit" and a bit of fraud, etc involved with loans that banks were writing.

If Sydney has a high demand, low supply situation, then wouldn't there be only a few scenarios that would be able to pop it? You'd essentially have to increase the supply because demand seems like it will be remaining strong as people compete to come live in a (residentially) "congested" Sydney. Two main boosters of supply I can think of is owners being pressured into selling (interest rises, etc) or a huge surplus of new residential homes swamping a market that can not absorb it. If prices drop, they won't be going back in time 5+ years like they did in the US!
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The same as it has always been---------Fear and Greed
 
There seems to be a lot of discussion about Sydney in general but lets look at Coogee specifically to identify potential for a short term reno now:

- Are the majority of buyers owner occupiers?
- Is the demographic in the 30-50 age bracket (highest wage earners)?
- Is the demographic made up of highly paid people?

This is a lifestyle suburb and if the answers are yes to all of the above then your market is likely an emotial buyers market with lots of cash.

If you buy the right place, with emotional appeal, and there is unlikely to be much new stock coming onto the market for the same style of housing (ie 1 bedroom apartment) which is highly unlikely given Coogee is pretty much completely in fill these days then you have good prospects to make some cash...

Now, if the market cools off you need to be mindful that the likelyhood of prices dropping significantly is quite low given the lack of housing at the cheaper end of the spectrum (600 now is pretty cheap for coogee)...

So - In my opinion, Coogee wouldnt be a bad option so long as you purchase smart, and complete a smart reno...if the market falls in terms of price, the rental return in that area would still be strong enough to hold onto it until prices rise again if that fits your strategy which mitigates some of your risk.
 
abdoug said:
Two main boosters of supply I can think of is owners being pressured into selling (interest rises, etc) or a huge surplus of new residential homes swamping a market that can not absorb it. If prices drop, they won't be going back in time 5+ years like they did in the US!
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Is that possible here in Sydney ?

I thought the banks has been made aware since the GFC by tightening the lending practice.
 
JohnHenry said:
Is that possible here in Sydney ?

I thought the banks has been made aware since the GFC by tightening the lending practice.
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It has nothing to do with lending practice. It is all to do with supply & demand. If the demand isn't there, for whatever reason, then the prices will adjust down.

The reason prices are as high as they are right now is because there is an increase in demand. As long as that demand is there, the prices will keep growing.
 
skater said:
It has nothing to do with lending practice. It is all to do with supply & demand. If the demand isn't there, for whatever reason, then the prices will adjust down.

The reason prices are as high as they are right now is because there is an increase in demand. As long as that demand is there, the prices will keep growing.
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Ah yes, thanks for the clarification Sk8ter :)
 
skater said:
It has nothing to do with lending practice. It is all to do with supply & demand. If the demand isn't there, for whatever reason, then the prices will adjust down.

The reason prices are as high as they are right now is because there is an increase in demand. As long as that demand is there, the prices will keep growing.
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Don't you think though, that if the lending criteria is tightened up, and hence a number of folks suddenly find themselves unable to qualify for loans, this will decrease the volume of potential buyers, and hence the demand?

I remember just after the GFC, I was having a chat with my MB, and he had explained that the Banks had effectively "downgraded" their customers' DSR and LVR levels, and he was experiencing still a good deal of inquiry, but a number of folks couldn't get finance.
 
BayView said:
Don't you think though, that if the lending criteria is tightened up, and hence a number of folks suddenly find themselves unable to qualify for loans, this will decrease the volume of potential buyers, and hence the demand?

I remember just after the GFC, I was having a chat with my MB, and he had explained that the Banks had effectively "downgraded" their customers' DSR and LVR levels, and he was experiencing still a good deal of inquiry, but a number of folks couldn't get finance.
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While I see it could be a problem for some , I wonder whether the people making enquiries with their MB are in the more aggressive group of investors , who watch the market constantly and are always looking for the next buy .

You know those people , they're on somersoft .;)

So given that most people don't own multiple IP's and don't borrow over 90 % I wonder whether it will have the impact that some on somersoft think it will have . I'm working on that assumption .

We've been talking with our MB , and my take away message is that we're likely to be able to borrow what we want and that any limits imposed will be self imposed and that's always been the case in the past

At no time in our investing career have we stretched our serviceability / LVR to the point where a bank said no .

Cliff
 
see_change said:
While I see it could be a problem for some , I wonder whether the people making enquiries with their MB are in the more aggressive group of investors , who watch the market constantly and are always looking for the next buy .
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There are many MB's here, would be good to get updates from them on how things are going out there.
 
There are a couple of threads under finance regarding tightening of finance.

It will impact on everyone actually because lending criteria/serviceability will tighten, criteria for example for living expenses may change from $14K pa to $25K?? which will equate to more income required. I am not an expert in this area but just giving an example from conversations I have had with various people on SS.

But there will always be other options, if you are an aggressive investor there are other avenues ie low doc lenders, there are a few around which do provide excellent rates, and low fees.

Be interesting to see how this all pans out.

Certainly not as dramatic as the changes made when banks basically got rid of low doc/no doc overnight, this really hurt, cut investors at the knees. I think what we are seeing is mild in comparison today, just my thoughts

MTR:)
 
see_change said:
While I see it could be a problem for some , I wonder whether the people making enquiries with their MB are in the more aggressive group of investors , who watch the market constantly and are always looking for the next buy .

You know those people , they're on somersoft .;)

So given that most people don't own multiple IP's and don't borrow over 90 % I wonder whether it will have the impact that some on somersoft think it will have . I'm working on that assumption .

We've been talking with our MB , and my take away message is that we're likely to be able to borrow what we want and that any limits imposed will be self imposed and that's always been the case in the past

At no time in our investing career have we stretched our serviceability / LVR to the point where a bank said no .

Cliff
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I was thinking more along the lines of everyone across the board - PPoR buyers included.

Any likelihood of the post-GFC squeeze reoccurring for that lot?
 
If I held Sydney real estate now I would be having a real hard time deciding what to do, liquidate and run or keep hanging on. Would probably price it 10-15% above what it is now so that I could grab some of the remaining upside, then go flip a couple for a bit of extra icing
 
Not sure if it will affect the market or not. But personally the clamping down on finance has been dramatic in our case. A few months ago broker said we could borrow 600k, now we cannot borrow anything- limit reached.
Very annoying, I love somersoft, I love looking for deals....now need to focus on other things abd wait for credit to loosen up.
 
eyespy said:
Not sure if it will affect the market or not. But personally the clamping down on finance has been dramatic in our case. A few months ago broker said we could borrow 600k, now we cannot borrow anything- limit reached.
Very annoying, I love somersoft, I love looking for deals....now need to focus on other things abd wait for credit to loosen up.
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That's a pretty big drop, how big is your existing portfolio? Who did your broker say the original $600k was with?
 
eyespy said:
Not sure if it will affect the market or not. But personally the clamping down on finance has been dramatic in our case. A few months ago broker said we could borrow 600k, now we cannot borrow anything- limit reached.
Very annoying, I love somersoft, I love looking for deals....now need to focus on other things abd wait for credit to loosen up.
Click to expand...

Phone RAMS and ask for low doc, could be a very different story, I would have thrown in the towel years ago if I let a little thing like this get in the way, just have to work harder, move on and find other options, there are always solutions just have to work it:)
 
We have 1 ppor and 6 ips. Original 600 k was just an estimate, no specific lender was mentioned.
Yes we could sell a sydney property and take profit, will see what the market Is like in spring and consider it.
 
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