Economy,  Investing,  Real Estate

Sydney Property Boom Times

Reading Time: 2 Minutes

Strewth! What a few days it’s been.

I hope everyone’s been staying safe and under cover during these intense rainstorms.

Yours truly was caught out when I went to grab some Vietnamese beef noodles for MrsFrugalSamurai – because she “wanted it, so there”.

Lucky I know how to swim. The things we do for love.

Speaking of, Sydneysiders love for all things property seems to be back in vogue.

I read this morning that our property market is absolutely dominating right now.

I read this too.

Or at least auction clearance rates are, with this weekend marking the 7th in a row where the clearance rate has been above 80% (traditionally 80% is known as a seller’s market or more commonly known as a “hot market”).

What’s going on?

I put it down to the reasons outlined in my earlier post (Australian Housing Tipped To Rise?)

Mainly due to the government stimulus measures and the artificially low interest rates implemented by the RBA.

Now the experts are tipping anywhere upwards of 20% growth for Sydney in the next year or so.

To be honest, these kind of media articles tick me off.

Not because they will fuel the FOMO boom – but because they will fuel the FOMO boom.

Wha?

Let me explain.

Typically the media’s chief intention is to sell eyeballs, as in to capture viewers attentions – not engage in facial vasectomy.

Hilarious.

This is why a market, ANY market at polar ends of the cycle is AMAZING for big media.

Unfortunately, too many people get caught up in the spin – and as a result, base their buying and investment decisions on what the media is saying.

As a result, like it or not – boom time articles do have an impact on market psychology.

Which makes me so ANGRY, because if we just ignore the media – and base our decisions on the cold, hard, irrefutable FACTS…

You would see that investing really isn’t that hard.

You don’t have to score the ten baggers and moon rockets with each and every transaction.

Just buy when you can afford to, for an asset than you can afford to lose on, which you have enough cashflow to support in.

If you buy into any half-decent asset, be it shares, property, crypto, whatever – give it enough time, and apply the above rules – then you should do OK at the end of it.

But of course, media articles which trumpets sensationalist headlines start turning heads.

Oh dear.

And these heads start talking.

At the BBQ.

At the water cooler.

At the investment forums.

And before you know it, your best friend’s uncle’s neighbour’s cousin’s daughter Janet has made $150k in equity in a month on their recently bought first home.

Which ticks you off.

Cos you know Janet.

She married your wife’s father’s cousin’s son’s friend’s aunt’s step-son Harley.

And Harley REALLY ticks you off.

And nothing you hate more than to lose to Harley (and by association, Janet).

So you want to get in the market and make $200k double quick time. That’ll show ’em.

Which you do.

And your purchase decision moves the dial ever so slightly.

Multiply by this enough times – hey presto! We have FOMO.

Sorry sorry, I have a wicked sense of black humour.

But this makes me FANGRY as well.

Cos FOMO and moving the dial doesn’t help people like me.

Who only become mentally (not physically) aroused during a market downturn.

You see, even though I am invested in the property market already, I still want the market to crash.

This is because I have a multi-decade investment horizon and damnit if I don’t want to buy more.

However, you make money when you buy – and at high prices, it’s a more risky decision than if prices were depressed.

Sigh.

I guess the one good news for those of you looking to buy is that I’ve learnt long ago that the property market is like an oil tanker.

It takes a very long time to get going, and a very long time to stop.

Which means there’s still time to get in, if you can afford to!

As for me?

I’m happy to let this FOMO pass thanks.


P.S I may sound like I am in a bad mood, but that’s because I survived a river crossing infested with crocodiles in order to deliver precious beef noodles for MrsFrugalSamurai.

She scoffs when I tell her my perilous journey, and claims it was “only UberEats” but then she’s also friends with Harley.

The things we do for love.

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6 Comments

  • Aussie Minimalist Doc

    Thanks Frugal Samurai. I, too, am watching the property frenzy. More out of morbid curiosity to see when and how hard it will crash. My friend Schadenfreude is a complex being…

    You’re right. There’s nothing wrong with buying now if it’s the right time, right train, right investment but there’ll always be another train and another opportunity. So chill guys, don’t be jelly of your wife’s father’s cousin’s son’s friend’s aunt’s step-son Harley.. or Janet 🖖

    • The Frugal Samurai

      You really think it will crash? It looks to just be ramping up in the short-term, that’s the impression that I’m getting. My biggest question is – where do people get all this MOONAY. Some of the sums being thrown around is just ridiculous.

  • Aussie Minimalist Doc

    Is this a bubble, is it not? Will Aussie housing behave like the US? We’ll only know with the benefit of hindsight. All I know is this level of over-valuation is not sustainable. Like you said, where is the money coming from? Compare it to average household income, even if you remove the low-income households, the numbers just do not add up. A 25 to 34yo couple on average Sydney incomes will need to save for 6.5 years for a 20% deposit on an entry-level house or 5 years and seven months for an entry-level unit (based on old data), potentially longer now post-pandemic era. So my question isn’t where the moonay is coming from but, WHO (which cohort) is cashed up enough now to afford it?

    • The Frugal Samurai

      This bubble has been frothing away for many years now, and I would wager it will froth some more. You make valid points, you always make valid points. BUT I would counter and say yes, I agree with everything that you are saying (it’s mainly cos of low rates and cheap/easy credit) and there will be a comeuppance one day – however when? That is the question. It could be tomorrow, it could be next year, it could be in 10 years – no one knows. Unfortunately that is the price of living in Sydney. Nothing devalues a million dollars like Sydney (or Melbourne) housing.

  • Aussie Minimalist Doc

    When indeed! Then the adage of living within your means will always apply, plus being prepped for the worst scenario. So that when *that* day comes, we’re not caught unawares, having to couch surf at Harley and Janet’s.

    I’ll be watching keenly for the short to long-term sequelae of ending JobKeeper and whether it would have a significant impact on housing.

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