Would you buy in Sydney now?

[WinstonWolfe]

In a market like this, efficient market theory would dictate that people bid to pay the highest rent.

This would do two things:
-make households more cost effective by pressuring renters to have an occupant in every bedroom.
-increase rental returns and thereby support construction of new supply.

After WWII, many families had a border (bachelor soldier) living with them. I don't see people prepared to do that yet. Too much of an imposition on their 'lifestyle'.....or maybe just a sign of the greater variability in life values, cultural heritage, and plain manners these days.

 

[eastside]

Dear Winston,
I am not sure where you are located, but I know quite a few people who are doing just that. Several of my colleagues (people earning over 100k) have taken in Japanese students, we have a guy who overnights in our spare sunroom (he commutes from the Gold Coast). I notice the ones who have boarders are being questioned by the ones who don't about how to go about it, so maybe things are changing.

 

[WinstonWolfe]

Dear Winston,
I am not sure where you are located, but I know quite a few people who are doing just that. Several of my colleagues (people earning over 100k) have taken in Japanese students, we have a guy who overnights in our spare sunroom (he commutes from the Gold Coast). I notice the ones who have boarders are being questioned by the ones who don't about how to go about it, so maybe things are changing.

good stuff Eastside. sounds like a convenient arrangement to have an out of towner with you during the week...and weekends free.

I am in Brisbane. Demographers are saying there's a rising demand for 1 occupant dwellings, and many developers are doing 1/1/1s. But I think this is inefficient, and we'd be better off living in larger dwellings with more bedrooms. To take the example to an extreme, a boarding house with 10 bedrooms would be more space and cost effective than 10 single room dwellings.

The curve ball is how well groups of people can get on. And that's a sociocultural issue. Plus I don't people have to live like this forever. If it was for 2-3 years so they could minimize outgoings and save for a deposit, that would be a bit more tolerable.

At the end of the day though, I think it is up to govt and big business to lead the way by moving jobs out of cbd's and into regional towns or metro satellite hubs.

Anyway, keep it in mind that if you can get more people under the one roof, then you might be better buying a bigger house than a smaller unit. Councils up here are relaxing the rules about granny flats too.

 

[eastside]

Dear Winston,
We have approached our employer a couple of times through our unions to have our workcentre relocated to the country (in return for paycuts) but they have not come to the party, and are now losing experienced staff who are fed up with Sydney housing issues.
If I wait another 6 months I can maybe buy an extra bedroom, and fit in another overnighter. I had heard of the granny flat idea, I think Iemma promised to drop land tax on granny flats, but then a few days later the Sydney morning Herald headline is a story about some poor sod who has been hit with landtax even though it was supposed to be land tax free and now has to go to court to fight it as state government (surprise) has not kept word. My personal opinion is that the state government has just ripped off NSW into oblivion. A friend got a call from her landlord saying the landtax on the semi she rented off him had gone up by over $6000 in one assessment and he was selling as could not keep it or justify the rental increase to cover it. So now she has to find a new place as well. It is just pointless ripping landlords off to this extent, because you effectively disable the workforce from living near their work and thereby disable the economy.

 

[WinstonWolfe]

Just having a closer look at Sydney fundamentals.
Seems the problem is being most caused by local government not getting zoning right and trying to pull too much revenue from property, ergo less housing starts.

I've had a view that household income has not increased enough to cover all the warm fuzzy 'green' town planning and construction ideas of greenie public servants. For instance, in Brisbane, a new dwelling has to have an expensive but ridiculously small water tank (with expensive plumbing). Why? because state and local govts don't have intelligent long term planning...

 

[WinstonWolfe]

Dear Winston,
We have approached our employer a couple of times through our unions to have our workcentre relocated to the country (in return for paycuts) but they have not come to the party, and are now losing experienced staff who are fed up with Sydney housing issues.

I have a friend who is a hotshot with Allianz Insurance. A lot of their national operations are based in Brisbane, and they have just moved a significant amount of that to Adelaide. It makes a lot of sense because wages are lower there...and property prices. A regional town didn't offer the security in the form of labour or infrastructure to house that labour, nor the skill set.

 

[sash]

Winston,

The Labour govt in NSW are absolute clowns...these guys are thinking that by keeping high land tax rates and infrastructure charges on development they can fund their budget shortfalls. Maybe they need to look at how the VIC govt has provided affordable housing.

The clowns in NSW have got a couple of whammys that will take about a decade to fix, these include:

1. Economics growth in NSW is non existent because housing typically contributes about 30% of the state GDP. We ain't building alot in NSW.

2. Rental vacancy is now at a ridiculous rate and people are paying ridiculous amounts of rents. But house prices are still moving down or sideways in most parts of the state.

3. The public transport infrastructure is till the same as 1990s but have have grown by almost 800,000 people.

4. Our infrastructure is not coping...why would then companies invest in this state.

Cheers
Sash

Seems the problem is being most caused by local government not getting zoning right and trying to pull too much revenue from property, ergo less housing starts.

I've had a view that household income has not increased enough to cover all the warm fuzzy 'green' town planning and construction ideas of greenie public servants. For instance, in Brisbane, a new dwelling has to have an expensive but ridiculously small water tank (with expensive plumbing). Why? because state and local govts don't have intelligent long term planning...

 

[WinstonWolfe]

4. Our infrastructure is not coping...why would then companies invest in this state.

Cheers
Sash

and its possible the fed govt doesn't want to help.

Ian MacFarlane's (previous RBA head) solution to Sydney's housing problem was to encourage young people to move away (seriously). hahahaha. Suppose he thinks everyone can get work in the mines.

Another thought....a lot of the Sydney population increase is due to immigration (80% of NSW population increase for 12 mths to mar08). 99% of migrants come from a poorer quality of life (hence the motivation to migrate....with 65% from third world and former eastern soviet bloc)........You could argue Sydney's quality of life is being pulled down to a level these people are used to.

If migrants came from a higher standard of living, they'd find Sydney intolerable and move to Brisbane, Adelaide, etc. It is probably a case of migrants trying to balance secure job opportunities against lifestyle. Their ignorance of job markets outside Sydney (on arrival), and their attraction to ethnic enclaves will keep Sydney their preferred home.

Meanwhile, young multigenerational Sydneysiders seeking a better std of living are moving to Qld.

 

[eastside]

Totally agree with Sahs's comments -the state government thinks it can cling on by keeping stamp duty and land tax so high but all they are doing is killing the place.
And as for Winston's comment about the migrants, that is so true! I was sitting in a pub having a drink with some friends, whining about rental open house inspections. Most of the friends are from overseas, and I said to them 'I don't know why you would want to come here, it is terrible the rental market'. To which they replied 'it's worse back home!'. So the original Sydneysiders are reeling in horror, but the migrants are going, ''hey guys this place is cool'. That is probably part of the reason it continues as is, because people are happy to put up with it, because it is still better than home, which means we get dragged down. Interesting.

 

[boomtown]

2. Rental vacancy is now at a ridiculous rate and people are paying ridiculous amounts of rents. But house prices are still moving down or sideways in most parts of the state.

Cmon mate its not that bad - how much CF+ is there really around. Not much yet.

 

[Maverik]

The frustrating thing is that the political problems and lack of forward planning in many ways leads to pressure on housing afford ability.

I would much prefer to see a balance on supply/demand; however it does not seem likely for a while.

So much fantastic land on the outskirts that could be used with decent transport options.

PS Winston, good point on buying a house instead of a unit and letting a room or granny flat. I think this is a great way to get a house and have a significant help on cash flow. It does not have to be long term necessarily.

I have done this for years and there has always been such strong demand that i have had hardly any issue's.(i like to think i am a good judge of character!)

 

[eastside]

Just to comment on Boomtown querying the rent incerases -we went from paying $450 a week in one house to having to move and could not find anything anywhere near that price range. We are now paying $750 per week, for exactly the same suburb and exacty the same number of bedrooms. You don't call that a massive rent increase? last time I searched, the cheapest house available was $950 per week. I'm sure it's not that bad everywhere, but people are certainly feeling it.

 

[WinstonWolfe]

Cmon mate its not that bad - how much CF+ is there really around. Not much yet.

come on boomer....(like the use of 'mate' though....you have assimilated well since arriving from Canada ) .......50% of the population is on less than 52kpa. and most don't have the security of permanent employment.

work out what % of after tax income a guy on 45k pa is paying when rent is $300pw.

never mind, I'll do it for you. 47.6%
makes it hard for the working class to breed.

 

[boomtown]

Point taken.




Although given that my partner and I are delaying having kids solely to build our portfolios I dont have a lot of sympathy for people that have kids early and then complain that they are broke.

 

[eastside]

Good point. I know quite a few people who have given up totally on having kids, it's pretty hard to get financially secure and have kids, especially if you have parents on the pension who rent and need lots of support as well. You can't really afford to have them.

 

[Maverik]

Good point. I know quite a few people who have given up totally on having kids, it's pretty hard to get financially secure and have kids, especially if you have parents on the pension who rent and need lots of support as well. You can't really afford to have them.

...the parents or the kids!!!

or you could get the parents to mind the kids a few days a week so that allows you to make a bit more $$ to manage with kids?

Or have 2 kids and sell one? (just kidding!!, i miss my dog after 1 day away from her!)

 

[eastside]

One colleagfue recently converted house to granny flat capable and now does lots of overtime with live in child care at home; another colleague bought an acreage and has built cabins for both sets of parents down the back of the block....Don't laugh, it's true!

 

[see_change]

I'd buy in sydney today if I find something that is close to cash flow neutral in a good area or an " incredible bargain " .

Only just started looking in last two weeks.

A property that's 20-40 % peak valuation out west doesn't do that for me .
They were over valued at the peak and they're probably still going to be cash flow negative at that price.

Western sydney will move well after the rest of sydney ( years later ) so you don't need to buy out there yet.

Talking to property managers 1 bed room units are the easiest to rent because they're not as common and many people don't want the hassels of sharing with some one else whio impinges on their person space ( Interesting point I thought ) . Most of the new units being built are 2 bedders. One agent said there are some good bargains floating around in one bedders because they're cheap and attracted a lot of newbie investors who over committed and now find themselves in impending trouble...

I found the agents I was talking to more than willing to discuss which properties had distressed owners .... Didn't find that last time we were buying in Sydney . At that stage trying to get info was like drawing blood from a stone.

Cliff

 

[KJL]

Agents discussing which properties have 'distressed' owners is awful behaviour - it goes without saying that it's not acting in the owners best interests....

 

[see_change]

Agents discussing which properties have 'distressed' owners is awful behaviour - it goes without saying that it's not acting in the owners best interests....

Not necessarily

If there property is going to sit there unsold while they're distressed , they'll get more distressed.

Cliff