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Hola everyone!
What weird and whacky weather we have been having recently!
I went from being baked and sweaty in 40c on Wednesday to being sticky and sweaty in 20c on Friday.
CAN SOMEONE MAKE UP THEIR MIND PUH-LEAZE.
It’s mad enough to make one hot and sweaty inside…
Sigh, although I spose you guys didn’t stop here to hear me rant about the Sydney weather did ya.
No siree, it was the oh so catchy headline innit?
Well, that headline actually came from Channel 9.
Or rather, one of their media articles from FB:
In this article, it’s claimed that apartments in some suburbs are seeing an almost 20% price drop:
The main reasons for the decrease is a combination of new apartments being built “too numerous in number… are quite small… have a small footprint… no natural light and constructed when costs were kept incredibly low”.
In other words, these new builds are shit quality, shoebox size dungeons in which no one wants to buy.
And because no one wants to buy them, prices start falling.
Fair enough.
My personal investment philosophy has always steered away from new builds because honestly, they really don’t build them like they used to.
Furthermore, if you look at the locations in that graphic, and if you know Sydney well – you would realize that these locations are rife with densely packed lego-land towers which were built in double quick time.
So is it any wonder prices would drop?
Still, does that mean the whole of Sydney is in trouble?
Well, kinda but not really.
I mean, if we zoom out just a lil bit, we can see that yes the overall Sydney market is weaker, but not by much.
Take this pic courtesy of the monthly Corelogic Home Value Index (thanks also to my mate Bavin for first sending it through):
Off this, you can see that Sydney is still posting OK numbers from an annualized basis.
Although a point to note is:
“The -0.1% fall in Sydney home values was the first monthly decline since January 2023… weaker conditions have been led by the most expensive areas of the market, with a -0.6% fall in upper quartile house values over the month and a -1.1% drop over the past three months. In comparison, Sydney’s lower quartile house and unit values both recorded a half a percent rise in values in October”.
Hmmm.
So it does look like the property ship might be slowing down finally for Sydney – which is healthy considering the crazy numbers it’s posted since COVID:
In fact, if you keep things in perspective – every single capital city market has posted substantial gains, considering the median capital growth for Australian property over the last 20-30 years has been about 6-7% p.a. compounded.
From the table above, Sydney has performed broadly in line with that measure, with some monster gains in other locations such as Brisvegas, Perth and Radelaide.
Oh and don’t forget that with leverage, the cash-on-cash return on your money would be far greater than those nominal values – in fact, your returns would be vastly… leveraged.
Only poor Melbourne has lagged the indicator (I wrote about Melbourne earlier), which might flash a buy signal if you take a counter-cyclical approach?
As for Sydney, and those tiddlywinkle markets which channel 9 so kindly highlighted above, all I have to say is this.
Investing in property really isn’t that hard – if you can buy something with a bit of land content in one of the major cities, a house, perhaps a townhouse, or an oversized unit – built like a fking brick (with double bricks), has plenty of natural light, close to transport and shops, where people want to live, and you leverage the shit out of it yet can still afford the repayments if rates go up the whazoo – well that’s about it really.
Oh and be patient, really be patient – the big moves are never overnight.
Yeah yeah, easier said than done I know.
Orrrrrr…
You could lowball the beejeebers outta those new builds in those areas mentioned above, find something with a twist (perhaps a study which can be turned into another bedroom?) and then try and flip it or wait until the market recovers (if it ever does?)
Otherwise just do what I’m doing, bide your time, build up those cash reserves, and pick the right moment to strike in Mel… I mean other places which are significantly “undervalued”.
It’s so damn unpredictable right!
Just like the bloody weather.
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P.S. Every post is the personal opinion of yours truly, please seek your own personal financial advice regarding your own personal circumstances.
