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Sydney property bargains for the picking

Written on the 24 November 2017 by James Cagney

(a four minute read) 

If you have not  visited my website at www.jamescagney.com.au you may not know my story. I will be brief - I arrived in Australia in April 1998 from South Africa. Happy to report that my five children and my grandchildren are all happily settled in Australia. When I hear immigrants complain about things in Australia I get really angry and I bluntly say to these wingers they should go back to where they come from if they do not appreciate what Australia has to offer.  Democracy for many immigrants means to complain incessantly about everything! Of course Australia is not perfect but what country is?

Shortly arriving in Australia I bought a business. Wrong choice for a new migrant who know very little about the diverse culture, the market,  the ethics and the business climate and I lost a lot of the money I was able to take out of South Africa. For those who are unaware South Africa has stringent exchange control laws which limits the amount of money taken out of the country . Most of us know that trying to borrow money when you are running a business at a loss is virtually impossible. Banks are notorious for lending you an umbrella when it's sunny and take it back when it's raining.  

Fortunately for me in 2002 the Sydney property market had entered the "Correction' phase and property developers were getting desperate to move their stock. It is vital that you understand the "Property Cycle and the Cycle of Market Emotions" to give yourself the upper hand when you negotiate with property developers builders and real estate agents. Go to >>> PROPCYC for more details and know how to negotiate smart. My wife and I managed to buy a completed house in a new development in Cherrybrook in Sydney in the low $400's in 2002 which in 2017 is worth close to $1.5 million.

This is what is going to happen to the Sydney property market over the next two to three years:

  • Developers  going to keep building in the outer suburbs. Developers can't stop building roads and infrastructure because they are committed to councils and the banks to complete projects.If they did stop because the market goes into "Correction" and they could not sell their land most would likely go bankrupt. This is what happened in the 2008 to 2010 during the Global Financial Crises (GFC) when many including  the large publicly listed developers went bankrupt because the banks called in billions of dollars of loans whilst giving developers unrealistic deadlines. To avoid insolvency watch developers offload land at reduced prices over the next three years.
  • Builders need to build to pay their bills and they need make a living. Margins will be squeezed as they compete for business and property buyers will be the beneficiaries. Unfortunately those builders who cannot survive the reduced margins will go to the wall and many will be forced to go back to working in a trade. This creates an abundance of trades people people in a already tight employment market and many inexperienced trades people will be laid off as these experienced tradies take the few remaining jobs for far less than they are used to earning. 
  • Contractors and sub-contractors are the people who will suffer the most as developers and builders go bankrupt and contractors are left high and dry. Contractors most often get paid pittance in the dollar for their hard work and material costs in an administration's claim. If you are one of these contractors who might suffer in this coming "Correction" phase please contact me and I will give you an opportunity for new business opportunities to take advantage of and survive until the next "Rapid Growth" phase in the construction market.

Many of you might say that these developers, builders and trades-people will simply go to another area or state to work. Please tell me where so I can advise trade-people and investors.

Queensland is in the doldrums. (please see an extract from property commentator and researcher Michael Matusik below) ;  Perth is still a basket case; Melbourne is a difficult market to enter for out of state developers and builders;  and, what is left  - Canberra, Adelaide, Darwin and Hobart?  Well please forgive me if I lack enthusiasm about the growth prospects in these property markets in the medium to long term. If you would like to know why I think this way and discuss alternatives please call me on +61 416 137 645 or click >>> HERE.

I will touch on Queensland because I have not commented on the property market in this region for some time. As you well know the property market is tied to the hip of the rental market. If people have no jobs or limited hourly work in an area and they cannot pay the bills they move to where the work is or move to country areas where rent is cheap and they may be able to survive on the Dole and New Start (government unemployment benefits).  The outlook for Central and North Queensland is bleak. This is what Michael Matusik reported this week 

"Some 40,000 people are unemployed across the eleven major Queensland regions, which equates to a 7.2% unemployment rate (according to the regular ABS labour force survey), and just 1,200 new jobs have been created across these eleven areas over the last five years.

Many of these renters and property owners who could not find work moved down to South East Queensland (SEQ) to look for work. This created a surge in the demand for rental properties and subsequent investment opportunity for investors who took advantage of increasing rents. This is what Michael Matusik had to report about the SEQ property market.

"In contrast, whilst about 100,000 people are unemployed across south east Queensland, the average unemployment rate is 5.8% and some 86,500 new jobs were created across SEQld over the past five years."

However, this growth in the SEQ property market is an unsustainable because you cannot build an economy on the construction industry alone - because it is heavily reliant on "supply and demand". Supply will inevitably reach demand in SEQ and then where do these construction workers go?

Maybe the Adani Mining Project will get off the ground and people will return to Central Queensland - but who knows what the Labour party and Greens have up their sleeves to delay the project once again. This Queensland State election this weekend of the 25th & 26th November will be the acid test for the Adani Project and I hope the electorate express their frustration about continuous broken promises from politicians  -  who all have well paid jobs, whilst the electorate have no jobs and no money over  this Christmas season.

What are these unemployed people going to tell their children this Christmas - whilst these politicians and the philanthropists endow their children with expensive gifts? Here's a thought let the politicians and philanthropist  buy gifts for the unemployed this Christmas and let their kids go without for a change!  What a worthy cause that would be, which unfortunately I doubt will ever happen.

Back to the property market. Sydney will offer investors and home buyers good opportunities over the next few years. For more information on the current state and opportunities in the the Sydney property market click >>> SYDPROP .

You need to be ready because "Opportunities do not happen to those who wait - they only happen for those who dare to attack". Please call James Cagney on +61 416 137 645 or click >>> HERE to contact him to take advantage.

DISCLAIMER

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.
Please note that the information herein is of a general nature only and is not intended as specific advice for any particular person or entity.

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.

ACKNOWLEDGMENTS:

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 Bereau of Statistics, Peter Wargent, Port Phillip Publishing, Economy & Markets, Harry S. Dent and the many others for the material discussed above.


Author: James Cagney
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