Few believed that Sydney house prices would fall but it has because...
Written on the 5 November 2017 by James Cagney
(A three minute read)
The latest Property Clock published by Herron Todd White (HTW) shows that Sydney house prices are starting to decline. That is because of a few simple principles:
In my property updates this year I have concentrated mostly on the New South Wales & Victoria property markets. There is a reason for this - these were the hot markets that have been worth investing into during 2016/17.
I have written extensively about this in the past. Most experts get this wrong because they follow the traditional linear curve below. It does not work like this because people are emotional beings and often logic goes out the window. Most people buy property when the market is in the "Excitement" "Thrill" and "Euphoria" phase. To understand how this works and how emotions control every phase go to >>>>PROPCYCLES .
SUPPLY & DEMAND
The November report from HTW covers rentals in the Sydney market. The fall in rental yields is one of the reasons why the house prices are falling. Many suburbs in Sydney are yielding less than 3% these days and investors simply can't afford the shortfall so they are investing elsewhere. However Sydney market is complex and not all suburbs in the city will suffer the same fate. What will happen is the high growth of the past will rapidly decline. For an in-depth look at the Sydney market go to >>> SYDMKT .
The HTW property report has Melbourne approaching the peak of the market so the present high yields will not last . For more information about the hottest suburbs in Melbourne click >>> MELPROP .
Many investors are mistakingly only interested in the capital cities and miss the opportunities available in regional areas. Go to >>> REGNSW to see why the regional areas have great potential. Look carefully at Melbourne which has better yields at present.
THE "HERD" MENTALITY
Investors in a market mostly follow the "Herd". That is why markets fall - because everyone is on the same bandwagon. The problem is that it takes time for the property prices to go through the "Correction" and "Stablisation" phases and the lack of equity in the investment may prevent investors from re-investing. You need to own multiple investments to make property work for you. To discover the secrets of property investment download my FREE eBook >>> "The 7 Secrets to Profitable Property Investment".
THE SOCIO-ECONOMIC DEMOGRAPHICS IN SYDNEY ARE CHANGING
I have written extensively on the socio-economic factors that have a major affect on property prices. Sydney's demographics are changing and many suburbs still present a good opportunity for investors. To discover why socio-economic factors make such an impact on property prices go to >>> S.E.FACTORS .
POLITICIANS ARE FOOLS WHO NEVER LEARN FROM PAST MISTAKES
In an attempt to control house prices in Australia politicians gave the Australian prudential Regulation Authority (APRA) a free hand to regulate lending to investors. APRA newly acquired power of course went to the management's head and they have imposed draconian measures on investors. This has cooled the increase in investment lending by the banks. So management at APRA can pat each other on the back for a job well done. Well this is going to come back and bite them on them on the butt and their cushy days at APRA are numbered. For more details about this click >>> FIRETHEM .
Ronald Reagan, one of the past presidents of the United States, was an unusual choice. He had a great sense of humour and he had this to say " Government's view of the economy could be summed up in a few short phrases; If it moves tax it. If it keeps on moving , regulate it. And if it stops moving, subsidise it." If you look at how Governments' have tried to control property markets and failed you can see why Ronald Reagan was a smart man.
The Coalition does have an escape clause from leaving APRA in charge of the property market - They can FIRE the APRA management. Go to >>> FIRE to see how the Coalition will come out squeaky clean from the mess they have initiated. The State governments' are heavily subsidising first home buyers but that is not going to work in the overpriced market of Sydney and to a lessor extent Melbourne. The reason for this is the threshold they have placed on the restrictions on maximum property prices in order to qualify for the First Home Owners Grant and to the concessions they give on stamp duty. The NSW and VIC politicians have lost touch with reality because their price restrictions rule out most of Sydney and Melbourne and more imporatntly where first home buyers want to live.
For more information about any of the property markets above and property investments advice give James Cagney a call on +61 416 137 645OR click >>> HERE.
This is not financial advice. You should not act solely on the basis of the material contained in this article for your investment strategies. Changes in government and legislation occur frequently and without prior notice and financial markets are unpredictable.
This information was written and compiled by James Cagney. The opinions expressed herein do not necessarily represent the views and opinions of his associates including Asset Finance Pty Ltd.
Thank you to the resources of Terry Ryder, Property Observer, The ABS, BIS Shrapnel, Michael Matusik, Property Monitors, Colliers, On the House, Corelogic, RP Data, Residex, SQM, Herron Todd White, NAB Residential Property Survey, Australian Bureau of Statistics, Peter Wargent, Port Phillip Publishing, Economy & Markets, Harry S. Dent and the many others for the material discussed above and attached.
Author: James Cagney