Would you buy a house now in Sydney?

HillFarmer

Hi all,

I'm here now over 2 years and realy enjoying Sydney and Australia.
I have a young family and we are considering buying a house in the Hills district.

We've been saving hard for the last few years and are now in a position to buy. We're not 100% we are staying long term but wil definitely be here for at least 5 more years.

I don't like renting given the uncertainty but at the same time buying in this market could be fraught with danger.

Any guys in the know in Banking or Construction if this is a bubble and if it will Pop?

mandrake04

You need to do your home work but it all depends on what your expectations are ie. how long you are going to be there and can the property sustain housing your family in the long term.

I sold my last property and pocketed $300K profit over a 4 year period and then bought again in the Hills in January but this time its not as long term a plan but more of a short project which I don't expect to mature for 6 to 12 months but I am confident in the immediate area and that's all I'm saying at the moment.

The key is money, patience and picking the right property for the future, if you can buy outright or nearly outright then you avoid paying interest and can save more money for a rainy day. In this scenario even if you did take a hit on property values you what you lose on capital you will probably save on interest repayments.

The real danger is borrowing a huge loan and then once the interest rates go up which they will at some stage in the future then you are stuffed and so is a lot of other people and that's when you see property values going down.

catbear

mandrake04 wrote: »

I sold my last property and pocketed $300K profit over a 4 year period

Without knowing your house but assuming it's an average house then that kind of capital gain sounds bubblelicous.

At least the media mentions possible bubble trouble more often now.

"When you look at the housing price bubble evidence, it's unequivocally the case in Sydney – unequivocal," Mr Fraser told Senate estimates last week.

"It does worry me that the historically low level of interest rates are encouraging people to perhaps over-invest in housing."

Reserve Bank assistant governor Malcolm Edey​ also told senators: "We agree that this is a situation where the market is strong. It's over-heated – it's a risky situation. Some people call that a bubble."

http://www.theage.com.au/federal-politics/political-news/rising-house-prices-causing-social-harm-as-property-bubble-debate-continues-20150607-ghiihi.html

"some people call that a bubble":rolleyes:

mandrake04

catbear wrote: »

Without knowing your house but assuming it's an average house then that kind of capital gain sounds bubblelicous

It wast even an average house but it was the location which is still going be worth something 10 years from now bubble busting or not.

Here is an example

http://www.realestate.com.au/property-house-nsw-castle+hill-119559399


then compare it with this house which is 1km up the road (and $500K cheaper)

http://www.realestate.com.au/property-house-nsw-castle+hill-119498299


or you look at these 5 houses combined went for $20.5m
http://www.realestate.com.au/property-house-nsw-castle+hill-118026795


or these 11 houses $42m
http://www.realcommercial.com.au/property-land+development-nsw-castle+hill-501443187

Its because you can stick a bunch of off the plan apartments and sell them to Chinese thats how your $700K house can sell for $4m.

In saying that bubbles are not to be feared if you know how to handle them, I have jointly owned property in Louth for the last 15 years and the bubble didn't effect me or my brother and if it did we didn't notice it.

rightyabe

Wasn't Joe Hockey on the news tonight stopping foreign investors from buying property?

mandrake04

rightyabe wrote: »

Wasn't Joe Hockey on the news tonight stopping foreign investors from buying property?

Nope, only going after those who break the rules.

Foreign investors are only allowed to buy new off-the plan, older houses especially prestige waterfront mansions are off limits except for Citizens and PRs. But there are those who flouted these rules and the are being reeled in, it is reported that Hockey himself dobbed in one of his own neighbors.

The Chinese are continuing to buy property in Sydney because they consider it safer than their own economy, and there's probably more millionaires in China than the rest of the world put together.

jackbhoy

HillFarmer wrote: »

Any guys in the know in Banking or Construction if this is a bubble and if it will Pop?

:eek::

Because they did such a good job of spotting bubbles in other countries? I would not seek the advice of people with a vested interest in maintaining a bubble for advice on whether said bubble even exists!

My advice is be careful who you take advice from (ironic, I know). I pulled out of buying a house in Dublin in 2006 after weeks and months of painful research of the market, and ignoring the advice of every friend, builder and banker to "get on the ladder". Best decision I ever made but even if I turned out to wrong I could say it was my own decision so I can wear the consequences. I wasn't forced into action by herd mentality or sense of not being left out.

One very interesting stat for me is investors now make up more than owner occupiers 52% vs 48%. To me that would set off alarm bells. Looks like a lot of people chasing easy money fuelled by negative gearing. No one knows when a house of cards like this could collapse, in meantime people will continue to get in and out before that happens and make some money. Need to think about the risk you can accept if it all goes t1ts up and what effect that would have on your quality of life.

I place my investments elsewhere and rent. Happy to do that as generally coming out on top vs property investors I know.

http://www.abs.gov.au/ausstats/abs@.nsf/mf/5609.0

brandnewaward

renting a unit in Mosman and my LL is a manager with ST George and he told me if i ever went to an auction and saw Chinese bidders there , I may as well turn around and walk out.Given the obsession to own property and the money the chinese can spend over the asking price of a property , im going up the central coast in a few years.

mandrake04

jackbhoy wrote: »

:eek::

Because they did such a good job of spotting bubbles in other countries? I would not seek the advice of people with a vested interest in maintaining a bubble for advice on whether said bubble even exists!

My advice is be careful who you take advice from (ironic, I know). I pulled out of buying a house in Dublin in 2006 after weeks and months of painful research of the market, and ignoring the advice of every friend, builder and banker to "get on the ladder". Best decision I ever made but even if I turned out to wrong I could say it was my own decision so I can wear the consequences. I wasn't forced into action by herd mentality or sense of not being left out.

One very interesting stat for me is investors now make up more than owner occupiers 52% vs 48%. To me that would set off alarm bells. Looks like a lot of people chasing easy money fuelled by negative gearing. No one knows when a house of cards like this could collapse, in meantime people will continue to get in and out before that happens and make some money. Need to think about the risk you can accept if it all goes t1ts up and what effect that would have on your quality of life.

I place my investments elsewhere and rent. Happy to do that as generally coming out on top vs property investors I know.

http://www.abs.gov.au/ausstats/abs@.nsf/mf/5609.0

Yep I agree, be careful who you take advice from. I have been asked by friends for advice and been very reluctant to do so as everyone's situation is different and it's hard to advise especially when the stakes are so high.

As in life pick and choose your battles on the basis of the ones you can win or at least likely to win.

Renting and have a mortgaged house is the same thing, the bank manager is really your land lord. The difference is the with house ownership the bond is far greater to lose but at least there is also a chance of a return.

If you buy a house at least buy a house you are happy to stay in for a long period in case you get trapped, if you take a loan make sure you are happy with the monthly repayments if they were 8 or 9% rather than 4.5%. The money from the difference put into the loan anyway and get yourself well ahead in you home loan.

A house is Primarily a home so be content with that, if you make some money from it that's a bonus.

If you can own at least 75% of a house and are content with it in the long term then there is nothing to fear unless you have to sell the house unexpectedly for various reasons ie. divorce, disablement, death or legal reasons. Owning a trophy house outright is living the dream. It is still very possible.

mandrake04

brandnewaward wrote: »

renting a unit in Mosman and my LL is a manager with ST George and he told me if i ever went to an auction and saw Chinese bidders there , I may as well turn around and walk out.Given the obsession to own property and the money the chinese can spend over the asking price of a property , im going up the central coast in a few years.

Yep but Chinese won't buy a house containing the number 4, ie. 4,14,24,34 and definitely not 44 etc. they won't buy on the 4th floor of apartments.

To Chinese 4 is very unlucky.

Where as 8 is lucky especially 888.

Also oversea investors can only buy off the plan, those who are buying older houses at auctions are either PRs or more likely shelf companies.

That the whole hoohaa Joe Hockey is on about those buying through shelf companies illegally.

There is a housing shortage in parts of Sydney, my area is getting a new $8.3b train line. To justify that the population in the area is expected to increase from 400k to 600k over the next 20 years. That 10K per year or 200 per week.

On the state plan anything within 800m of a railway station is rezoned over the next 20 years. Older houses being demolished to make way for high density come hell or high water. Bubble busting or not the government wants apartments beside public transport and that's what will happen. The old Chinese love public transport.

The council produced it own plan which is a 20% of the state plan which it will implement and complete before the first train running in 2018. It will then redevelop 20% sections of the next 20 years in 4 year stints.

Currently anything rezoned for 18 floors is selling for $10-$14k per m2, prices are getting ridiculous now because everyone is catching on and developers are knocking doors.

This throws the rest of the area out of whack people are walking away with $4m in the bank.... imagine going to Auction against them.

jank

There has also been stories where Chinese have been turning up at real estate agencies with suitcases full of cash wanting to buy property. There is billions of funny money flowing around in China and much of it is trying to find it way to a safe home and property in Sydney is seen as that by many. Who cares if it costs $1 million to buy a 2 bedroom unit so long as there are many winners along the way. I thought it was pretty bad 5 years ago when I arrived and its even worse now. Watch what happens in China, that will be the trigger to a correction. There has been some crazy happenings in the Chinese stock market this year with off the wall evaluations. This will be imo the canary in the gold mine.

Goat Paddock

If only the world could figure out a way for most people to be happy without reliance on economic growth and population growth etc needed.

But with just the sheer number of Asians investing maybe the prices will just keep going up in Sydney Melbourne etc. Its not like millions of Europeans wanted to buy property in Ireland before the crash here.

minzabud

mandrake04 wrote: »

Yep but Chinese won't buy a house containing the number 4, ie. 4,14,24,34 and definitely not 44 etc. they won't buy on the 4th floor of apartments.

To Chinese 4 is very unlucky.

Where as 8 is lucky especially 888.

I'm working on the construction of over 400 apartments which all sold off the plans in a few hours and can confirm their is no level 4!

Goat Paddock

minzabud wrote: »

I'm working on the construction of over 400 apartments which all sold off the plans in a few hours and can confirm their is no level 4!

Yes but over 400 apartments? Surely they should have built 399 or 500 to avoid the nr 4?

Tigerandahalf

Would the Chinese be getting loans in Oz based on an existing property they own there?

mandrake04

minzabud wrote: »

I'm working on the construction of over 400 apartments which all sold off the plans in a few hours and can confirm their is no level 4!

Yep in China hotels and buildings have no level 4, although first time I heard of that in Australia. Interested what suburb?

Also I just remembered I have seen real estate signs in Chinese on a proposed site on windsor road and at 08:30 in morning seen an entire bus load of Chinese taking pictures of the site.

Here is the website http://www.hghau.com/our-business/property-development/

Which reminds me of an article in today's paper http://www.dailytelegraph.com.au/news/national/chinese-language-signs-urge-buyers-to-buy-into-sydney-real-estate/story-fnpn0zn5-1227390326116


Also this place sold an apartment every 3 minutes on the opening day and has sold 70%

http://atmospherecastlehill.com.au/

mandrake04

Tigerandahalf wrote: »

Would the Chinese be getting loans in Oz based on an existing property they own there?

That's the whole point, they are buying cash because they don't trust putting their money in Chinese banks. Why would multi millionaires borrow money to buy a house in Australia?

minzabud

It's hurstville so no great surprise I'm sure, I think it's 440 actually, maybe the architect had a sense of humour!

While it does sound odd the whole 4 Craic it's not really much different than 131 for 2013 cars in Ireland.

mandrake04

minzabud wrote: »

It's hurstville so no great surprise I'm sure, I think it's 440 actually, maybe the architect had a sense of humour!

While it does sound odd the whole 4 Craic it's not really much different than 131 for 2013 cars in Ireland.

Yep a lot of Chinese around there and high density tall buildings, I'm sure you noticed it has a large train station. See the similarity.

Tigerandahalf

mandrake04 wrote: »

That's the whole point, they are buying cash because they don't trust Chinese banks. Why would multi millionaires borrow money to buy a house in Australia?

There seems to be a similar problem in London with overseas investors hoovering up decent properties leaving ordinary workers struggling to get a decent home. At some stage these homes will have to be sold or maybe you will have a larger rental market. If a lot of them seek to sell at once it would drop prices.

mandrake04

Tigerandahalf wrote: »

There seems to be a similar problem in London with overseas investors hoovering up decent properties leaving ordinary workers struggling to get a decent home. At some stage these homes will have to be sold or maybe you will have a larger rental market. If a lot of them seek to sell at once it would drop prices.

Yep I seen on TV that they are buying houses in London and just leaving them vacant and I'm sure there is many in Sydney that are vacant too. No need to rent out...... if you have no loan to service just let them sit there growing capital at roughly 13% per year. At the end of the day they view property in London & Sydney similar to a hard currency like gold it might go up or down but as long as its not in China is main thing.

Since the Chinese can only buy off the plan they are the ones driving the new housing, the government is making a killing in stamp duty, taxes and developer levies. In turn the government is increasing infrastructure and that's why NSW is in the driving seat.

The Aus$ is a lot weaker against the us$ so for the Chinese who tend to deal in the greenback they currently get more for their buck which means its driving it even harder.

True if for some reason a lot of the Chinese decided to sell at once it would drive down prices. That might happen if the Chinese economy went south and they needed their millions back but at the same time that might spur them on to try and get more of their money out of the China... who knows.

AngryHippie

mandrake04 wrote: »

True if for some reason a lot of the Chinese decided to sell at once it would drive down prices.

Which could be a national security issue in itself.

It's not heading in a particularly clever direction at the moment imo.

Shy Ted

Don't worry about the rising cost of property.
Joe Hockey says all you need to do is get a good job that pays good money. Simples :rolleyes:

punk_one82

Shy Ted wrote: »

Don't worry about the rising cost of property.
Joe Hockey says all you need to do is get a good job that pays good money. Simples :rolleyes:

Must be easy saying that while going home to a 5.5 million dollar house

catbear

Tigerandahalf

That is a crazy income/mortgage ratio. It wasn't that bad in pre bust Ireland.
Edit: it does say price/ratio.
What deposit is required to buy a house and is there an income/loan limit?

So the average house price has increased nearly 13 times its then price while the average wage has increased just under 4 times.
No longer the lucky country.
The oz dollar could see a major crash in its value.

catbear

Tigerandahalf wrote: »

That is a crazy income/mortgage ratio. It wasn't that bad in pre bust Ireland.
Edit: it does say price/ratio.
What deposit is required to buy a house and is there an income/loan limit?

Don't know but at the height of the madness I think the Dublin average was 10 times average income. I wonder if like in what happened in Ireland people borrow their deposit?
I read that in 2006 nearly 60% of first time buyers in Dublin had a parent go guarantor.

Tigerandahalf

Very possible. I wonder how many parents have remortgaged the house to help out the kids and maybe go on that holiday the neighbours went on.
I wouldn't like to have a lot of savings in oz money or waiting on a pension lump sum/retirement package in the next 5 years.

http://mobile.news.com.au/finance/real-estate/will-housing-bubble-pop-in-2017/story-fndban6l-1227365483287

catbear

Tigerandahalf wrote: »

Very possible. I wonder how many parents have remortgaged the house to help out the kids and maybe go on that holiday the neighbours went on.
I wouldn't like to have a lot of savings in oz money or waiting on a pension lump sum/retirement package in the next 5 years.

http://mobile.news.com.au/finance/real-estate/will-housing-bubble-pop-in-2017/story-fndban6l-1227365483287

Yikes,that link is scary reading.
Can confirm that one of my Irish pensions (it's a small one from a job I did for a few years) actually went negative in 08 and only last year it worth more than what I'd paid into it!
Does this sound like Australia?

'The danger with the residential market is that, if you have a blip, the banks will move in so you have a domino effect that would create problems for people, particularly investors. However, the equity in the housing market is still very strong, which is a positive. The commercial market is very bullish. There is a wall of money out there chasing investment so the outlook is very positive. The immigration impact will have a softening effect on the market. Banks need to be mature, and not overreact to exacerbate the problem - 5 per cent of non-performing loans is no big deal."

Tigerandahalf

Reading the comments on that article is interesting. Some say it is only a matter of time. Others saying we heard this 5 years ago.
One guy's comment makes sense when he says it will all continue on as long as peole are in employment and interest rates don't go up.
Already there are signs that unemployment is creeping up and how much employment in Sydney must be based on construction and services around it.
If the Chinese sense an oz dollar collapse there would be a flood of property on the market.

catbear

Their superstition about property numbers certainly portends a mass movement out of oz if they get spooked.

mandrake04

Tigerandahalf wrote: »

Reading the comments on that article is interesting. Some say it is only a matter of time. Others saying we heard this 5 years ago.
One guy's comment makes sense when he says it will all continue on as long as peole are in employment and interest rates don't go up.
Already there are signs that unemployment is creeping up and how much employment in Sydney must be based on construction and services around it.
If the Chinese sense an oz dollar collapse there would be a flood of property on the market.

Also factor in the supply, there's about 13,000 new apartments due to be completed in inner Sydney around the same time around Christmas this will soften rental market in those areas and prices in the unit market. Same if there is an over supply will drive prices down.

I definitely can see some faltering in some markets in the medium to near future

mandrake04

Tigerandahalf wrote: »

That is a crazy income/mortgage ratio. It wasn't that bad in pre bust Ireland.
Edit: it does say price/ratio.
What deposit is required to buy a house and is there an income/loan limit?

So the average house price has increased nearly 13 times its then price while the average wage has increased just under 4 times.

You need 20% deposit to avoid mortgage insurance otherwise 10%. You can borrow up 3.5 your household income.

Also a lot of people already own property outright, I think Australians tend to have smaller families and more properties. Baby boomers downsizing from large houses to a few smaller houses/units living in one renting the other one out to fund retirement.

Mellor

Goat Paddock wrote: »

Yes but over 400 apartments? Surely they should have built 399 or 500 to avoid the nr 4?

mandrake04 wrote: »

You need 20% deposit to avoid mortgage insurance otherwise 10%. You can borrow up 3.5 your household income.

Some lenders are going below 10% now.
95% mortgages possible, with various additional conditions

catbear

There were hopes the 12 square metre fingernail of land would fetch $50,000, which not that long ago would have elicited guffaws from incredulous residents. By the time bidding stopped, however, the former lucky owner had collected a cool $120,000.

That's not the record either. A couple of weeks back, a Potts Point car space fetched $260,000.

.......... but that didn't help our banks in 2008. The laughable myth in the aftermath of the financial crisis was that Australian banks sailed through the storm in tip top shape. Nothing could be further from the truth.

When the crunch came, they couldn't refinance their huge offshore debts. And it was the Rudd government that rode to the rescue, extending the nation's AAA credit rating that allowed them to limp through.

http://www.abc.net.au/news/2015-06-15/verrender--a-ponzi-scheme-that-could-ruin-us/6545316

ceekay74

Tigerandahalf wrote: »

Very possible. I wonder how many parents have remortgaged the house to help out the kids and maybe go on that holiday the neighbours went on.
I wouldn't like to have a lot of savings in oz money or waiting on a pension lump sum/retirement package in the next 5 years.

http://mobile.news.com.au/finance/real-estate/will-housing-bubble-pop-in-2017/story-fndban6l-1227365483287

F**cking hell. Have a read of the comments sections after the article. Sounds exactly like Irish people about 8 years ago. Unbelieveable!

catbear

'The influence of immigrants on the Irish house market cannot be underestimated. We are taking in about 60,000 immigrants each year, who will go on the rental ladder, then get the "Irish bug" and buy. It takes two years for non-nationals to get approval for a mortgage. More and more, this is an important element in the city market."
http://www.irishtimes.com/life-and-style/homes-and-property/2007-the-property-pundits-predict-1.1035209
December 2007, Irish Times opinion pieces about the future of the Irish property. Does any of resonate with Sydney-siders?