Western Sydney

[Jonathan]

Hi everyone,

We've all seen the recent news articles of the mortagee sales happening in Western Sydney over the past few months. It seems the prices have certainly dropped in some areas, so I'm sure there are some good bargains out there. (I've noticed many houses for sale in Blacktown and Seven Hills for under 300k)

Just wanted to get some opinions on investing in the western suburbs of Sydney.

In particular:

1. Which suburbs do you think are undervalued?
2. Which suburbs do you think will have long term growth?
3. Which suburbs would you avoid?
4. Do you think it has bottomed out yet?
5. Do you think some suburbs will just always be cheap?

Thanks,
Jonathan

 

[twobobsworth]

Hi,

I like quakers hill & glenwood.

All are near norwest business park which is constantly expanding, the new busway has gone in and the shopping centre being built at rouse hill will be one of the biggest in the southern-hemisphere.

 

[alexlee]

Just wanted to get some opinions on investing in the western suburbs of Sydney.

In particular:

1. Which suburbs do you think are undervalued?
2. Which suburbs do you think will have long term growth?
3. Which suburbs would you avoid?
4. Do you think it has bottomed out yet?
5. Do you think some suburbs will just always be cheap?

No, I don't think it has bottomed out yet. Personally, though, I think that whole swath from Parramatta to Blacktown has a lot of potential, especially as development blocks for duplexes later on. So yes, I think they will have long term growth as Sydney's population increases.

Will some suburbs always be cheap? Yes, but only on a relative basis. e.g. I don't think you will ever have a suburb that doesn't move while the rest of the city doubles. What's more likely is that Blacktown, say, will always be cheaper than, say, Epping. So it's $300k in Blacktown v $600k in Epping, and in 10 years it might be $600k in Blacktown v $1.2m in Epping. Blacktown might always be cheaper than Epping, but as long as you buy at roughly market price, you don't care because you're making gains ON YOUR PURCHASE PRICE.

You can't say a suburb is more expensive and therefore a better investment than a cheaper suburb, because you have to include purchase price.
Alex

 

[BV]

Hi Jonathan,

All Western Sydney is very good value atm but it won't be for long.
Innerwest, Eastern and Northern suburbs have started to move again
so everything will follow soon.

Have a read of the following threads, you could get some ideas.

http://www.somersoft.com/forums/showthread.php?t=30298

http://www.somersoft.com/forums/showthread.php?p=284112#post284112


cheers

 

[BV]

No, I don't think it has bottomed out yet. Alex

Alex,
What area are you talking about?
Cheers

 

[see_change]

One question I'm asking , is the current upturn the start of something more prolonged or more of a dead cat bounce. There are obvious quiet a few well thought of forumites who are expecting a recession , though no one know when.

historically we shoud have a recession .... IF we do I'd expect prices in the Mt Druitt area ( which is the area I know best to drop considerably on what they are now) Probably 240-270 was peak of the market , currently the sales I've found out about have occured around 170-180 but there are still active investors looking for bargins and that seem to be the price they'll buy at.

In the last cycle prices roughly halved from the peak to the trough . Peak 100-120 , trough properties selling around 50-60 . These are the ones that ended selling for 240 about 4-5 years later , so as you can see there is great potential to make money but also potential to loose money depending if you get you timing right or wrong.

If I saw sales of passable houses around 120 - 140 I seriously think of buying regardless of overall market conditions , I might buy in at hight if I was convinced the market was moving.

Cliff

 

[BV]

Cliff,

I am guessing that it's a dead cat bounce and it's probably well timed
ahead of a likely stock market correction which could affect properties nationwide.

In any case IMO a market upturn is likely to also affect prices in the west.
I would expect to see prices move up in the west as a result and not to drop.

I would have thought that the majority of the repossesions would have been completed by now.

IMO Western Sydney is likely to be largely uneffected by a stock market crash as the cashed up Sydney investors who could be affected haven't bought there.
They have either bought in the Northern/ Easter Subs & innerwest or in SE QLD.
They are the ones likely to hurt the most and could possibly be forced to sell some of their assets.

Remember that in a recession we are likely to see interest rates go down
and I personally don't have anything to worry about.
I am well prepared and ready for more acquisitions.

Bill

 

[traveller]

Good points Bill, Cliff.

However, i will say that stock markets crash will have a ripple effect which will effect almost all areas. Maybe some to a lesser extent at the best.

Also regarding the repossesions, i think more are on the way as people come out of their fixed periods and honeymoon periods to higher variable interest rate environment. And interest rates are expected to rise even more...

thanks-

 

[alexlee]

Alex,
What area are you talking about?
Cheers

Remember I'm expecting a share market correction and subsequent recession, so I think Sydney is going to fall first before it gets another boom. No specific area: I think it will be city-wide.

I believe that a recession will still hit the cheaper Western suburbs, though on a % basis not as much as the expensive areas (since the expensive areas have been growing even more out of proportion for the last 3 years).

A sharemarket correction will definitely hit the expensive areas which depend more on dividends, executive salaries and options, fund returns, etc. But if a recession results (as it usually does) then we're going to lose more jobs, and the West will be hit again.

Thinking about it, if people in the West are losing their homes because they bought too much house, with employment at historical highs, what will happen when people really start losing jobs?

However, also remember that given current RBA thinking (this thinking has only been around for maybe 30 years?) they are going to cut rates if a recession hits. That will be a great opportunity for investors to get cheap loans. Why do I think the RBA will cut rates? Because it has worked so far (esp with the US one in 2001). Central banks tend to cling to a strategy until it no longer works.

As an aside, the prevailing central bank thinking during the Great Depression was to cut spending and generally tighten belts. That didn't work, so they changed their tune for the next one.
Alex

 

[BV]

Alex,

I am not so sure that we will see that many job losses.
Unemployment is Sydney is very low and employment here unlike QLD and WA
is not resources driven so it's unlikely that we will see unemployment going up.
Also, our companies these days operate with minimum staff
any less staff and they close shop.

Cheers
Bill

 

[traveller]

Alex,

I am not so sure that we will see that many job losses.
Unemployment is Sydney is very low and employment here unlike QLD and WA
is not resources driven so it's unlikely that we will see unemployment going up.
Also, our companies these days operate with minimum staff
any less staff and they close shop.

Cheers
Bill

I disagree Bill. When recession hits and budgets are cut even things that make sense long term get put on hold or defered. I have seen the whole departments merging or disappearing at cost cutting time...

Remember, its not only customer facing staff that we are talking about here.

As an interesting point here, i will also add the role of offshoring in bad economic times. Offshoring tends to pick up speed and that in turn does improve the bottomline making base for the next upturn. In the last downturn we saw offshoring for mainly call centers etc but i think this time it will tend to be for jobs at the higher end of the scale as well.

my 2c. thanks-

 

[BV]

Hi Jonathan
Below you will find some answers to your questions.
Cheers
Bill

Hi everyone,

Just wanted to get some opinions on investing in the western suburbs of Sydney.

In particular:

1. Which suburbs do you think are undervalued?
A: I THINK THAT SUBURBS SUCH AS QUAKERS HILL, KINGS LANGLEY ROUSE HILL GLENWOOD, STANHOPE GARDENS ETC PRESENT GOOD VALUE. SOME SUBURBS ARE BETTER VALUE THAN OTHERS. FOR EXAMPLE FROM ALL OF THE ABOVE, I THINK THE NEW SIDE OF QUAKERS HILL IS GOOD VALUE BECAUSE OF THE FOLLOWING REASONS.
REASONABLY PRICED, NICE LEAFY AREA, MANY PARKS & SPORTS GROUNDS, PROXIMITY TO THE MOTORWAY. OWN TRAIN STATION WITH PUBLIC PARKING SO YOU CAN PARK YOUR CAR AND CATCH THE TRAIN TO THE CITY, POLICE STATION WITH PATROL CARS SO BREAKING AND ENTERINGS ARE RARE. GOOD SCHOOLS & SENIOR HIGH, TAFE & UNI.

IMHO SUBURBS SUCH AS THE ONE ABOVE ARE LIKE STEPPING STONES.
A LOT OF PEOPLE BUY THEIR FIRST HOME THERE BECAUSE THEY ARE NICE AREAS TO BRING KIDS UP AND A FEW YEARS LATER WHEN THEY ARE FINANCES HAVE IMPROVED THEY MOVE CLOSER INTO TOWN.

2. Which suburbs do you think will have long term growth?
A: IF YOU LOOK AT LONG TERM STATISTICS IT DOESN'T MATTER WHERE YOU BUY, PRICES GO UP IRRESPECTIVE OF WHERE YOU BUY.
PRICES IN SOME SUBURBS WILL GO UP FASTER THAN OTHERS, BUT AS SOON AS SUBURB A GOES UP IT DOESN'T TAKE LONG FOR SUBURB B TO FOLLOW.
3. Which suburbs would you avoid?
A: I GENERALLY AVOID SUBURBS WITH HOUSING COMMISION PRESENCE BECAUSE GOOD TENANTS USUALLY AVOID THEM. THIS DOESN'T MEAN THAT THERE ARE NO POCKETS WITH GOOD VALUE IN SUCH SUBURBS.
4. Do you think it has bottomed out yet?
A: YES I BELIEVE THAT IT HAS.
5. Do you think some suburbs will just always be cheap?
A: THIS IS NOT TRUE.
I THINK THAT IN THE LONG RUN PROPERTY PRICES BETWEEN SUBURBS WILL COME CLOSER TOGETHER.
AT PRESENT SUBURBS IN THE WEST OFFER BETTER YIELDS THAN PROPERTIES IN MORE EXPENSIVE AREAS OR SUBURBS CLOSER TO THE CITY.
REMEMBER THAT SYDNEY IS ONE OF THE MOST POPULAR CITIES IN THE WORLD.
IT'S POPULATION IS INCREASING. THERE ARE NOT ENOUGH HOUSES BUILT TO HOUSE THE PEOPLE WHO WANT TO LIVE HERE.
SYDNEY DOES HAVE IT'S INFRASTRUCTURE PROBLEMS (THE MAIN ONE IS TRANSPORT) BUT TIME AND MONEY FIXES EVERYTHING THESE ANNOYING LITTLE PROBLEMS WILL BE RESOLVED SOONER OR LATER. PROPERTY WILL GO UP IN VALUE BUT IT CAN BE QUICK OR IT CAN TAKE TIME SO IT'S IMPORTANT TO HAVE LOW HOLDING COSTS.
IF YOU BUY SOMETHING AND WITH NEGATIVE GEARING AND DEPRECIATION IT'S ONLY COSTING YOU $50/WEEK TO HOLD, I THINK IT'S A NO BRAINER. IF YOU BUY A $300K PROPERTY, A COUPLE OF YEARS DOWN THE TRACK WHEN THE RENTS HAVE INCREASED IT WILL COST YOU NOTHING TO HOLD. IN THOSE FIRST COUPLE OF YEARS YOU WILL NEED TO SEE A CAPITAL GAIN OF MORE THAN 1% PER YEAR TO RECOVER YOUR $50/WEEK.
WILL THE PROPERTY VALUE GO UP BY 1% PER ANNUM?
OFCOURCE IT WILL.
GOOD LUCK

 

[trendsta]

Just to add to the points above regarding recession..

A recession will also slow down immigration, as witnessed in previous recessions (check ABS site for a chart.. sorry i cant remeber what the link is). As a result this will reduce first homeowner demand .. thus a recession will lead to drop in investor and first home owner demand. As to when it will happen, its anybodys guess... I wonder if there are some leading indicators for a recession out there??

 

[lowb]

Good points Bill, Cliff.

However, i will say that stock markets crash will have a ripple effect which will effect almost all areas. Maybe some to a lesser extent at the best.

Also regarding the repossesions, i think more are on the way as people come out of their fixed periods and honeymoon periods to higher variable interest rate environment. And interest rates are expected to rise even more...

thanks-

After a share market crash, then if the see-saw effect holds (property up, shares down, shares up property down) then does the property market get driven up (as investors are scared of the ASX and move their funds to the stabler property market?)