Should you still buy Sydney property? - August 2018
I get asked a lot of questions about real estate... and I mean a lot.
I love this industry and all the joys and challenges it brings, but my life is sometimes akin to a perpetual version of that old TV series Mastermind where my special subject is real estate.
It’s like a handyman asked to fix a wonky gate, a hairdresser roped in for a quick backyard makeover or literally anyone who owns a ute and is always assisting a mate move. People love free help or advice.
Whether I’m at a barbeque or making small talk in the supermarket checkout line, potential investors are always curious to pick my brain.
But regardless of their background or ambitions, there’s one query that comes up time and again:
Is now the right time to buy?
And lately, there’s only one city people are asking about. Yep, you guessed it – Sydney.
The softening of prices added to plenty of doom and gloom in the media from analysts have people spooked and questioning whether parking their money in the Harbour City is a good idea.
There’s an old investment philosophy that you should buy when everyone else is fearful. Put simply, when the market slows, there are tasty opportunities ripe for the picking.
Is that the case for Sydney in 2018? Let’s take a look.
What’s happening on the ground?
Home prices in Sydney fell against last month, down another 0.6 per cent. All up, values have slumped 5.4 per cent over the past year. Rents have also softened while vacancy rates have lifted.
Depending on who you ask, the outlook varies from moderately good to moderately bad news.
With the Royal Commission shining a light on banking practices and lenders pulling their socks up to avoid further embarrassment. The criteria for getting a loan is as tough as ever. It’s a punishing time for borrowers – particularly investors who’ve become sacrificial lambs for some financier’s sins.
All of this combined with would-be buyers feeling on edge about low wage growth, a patchy economic outlook and political instability, means those price drop headlines aren’t helping matters.
Market forces are driving the softening, for sure, but they’re being whipped along by one emotion in particular… fear.
Well – haven’t I painted a grey pallor on the argument? Cheer up – there’s good news among these dire straits.
It shouldn’t matter
If you’re the type of investor who wants to buy a decent house in a good area, do nothing to it and turn around in a year and make six figures in equity gains, then I’m sorry sailor but that ship has left the dock.
Stories like that are pretty much over in Sydney for the time being.
Frankly, most ‘clever’ investor patting themselves on the back about their ability to pick a suburb with rising real estate values in Sydney post-2012 were one thing – just plain lucky.
Markets move in cycles. There’s a rhythm to house price fluctuations. When plotted on a chart of Value vs. Time, they form a waved line where some breaks are bigger than others.
But the swell is always rising and falling. The key to a successfully ride comes down to one thing – longevity.
There is no doubt when it comes to the property process, time in the market is the great leveller, so if you want to be a real estate winner, be prepared to stay the long haul.
You should be willing and able to hold on until your investment delivers a return. Successful investors are those who establish a portfolio that allows them to buy when they have the means and opportunity, and sell when the timing is right.
Of course, they’re also very savvy about what they purchase thanks to thorough research, an intimate understanding of their financial situation and an excellent team of expert advisors like a good finance broker, a smart lawyer and a switched on, well-connected buyers’ agent.
So, Rich, should I buy now?
In the short-term, Sydney will probably continue a slow downhill ride. But in the medium and long-term, the signs are very positive. Picking the bottom of the cycle is tricky – but also the best time to buy as vendors are more negotiable and competition lower.
Sydney’s economy is strong and will continue to grow, population is projected to continue its sharp upwards trajectory, construction rates have slowed and there are a number of infrastructure projects with flow on benefits too.
We have a well-earned reputation as an international capital envied the world over. Sydney is held in the same esteem as the likes of New York, London, Singapore and Tokyo among the transient professionals looking to expand their horizons.
While our markets can run to extraordinary peaks, our troughs tend to be much flatter than expected by pessimistic observers.
When markets have dipped in the past, they’ve eventually swung back up because lower prices encourage new crops of buyers.
In the wake of the Global Financial Crisis, when markets slumped and everyone else around the globe was shell-shocked, first homebuyer levels in Sydney soared. Buoyed by this, investors began their return. The momentum built as buyers rode the emotion and recognised opportunities were there for those brave enough to make the leap.
In physics, what goes up must always come down, but in real estate, what goes down eventually comes back.
So, is Sydney a great place to invest? Absolutely – you can mark my words.
It’s just a matter of being patient, staying informed and relying of independent professionals to help guide your way to success.
If you’d like a helping hand to crack the hidden market and relieve the house hunting stress, please contact my friendly team of Buyers Agents who would be glad to lend a hand. Tell us your property brief or call us on 1300 655 615 today.