I was recently asked by a client where do I see the value of properties in Sydney go from here? Surely this incredible bull market must come to an end?
This question reminded of a similar conversation I’ve had with a friend back in 2012, and a similar one back in 2014, and again in 2016 and 2017.
Guess what, people have been calling the Sydney property price a bubble since the beginning.
And these sentiments are not just shared by average Joes. In Late 2014 Robert Kiyosaki the author of Rich Dad Poor Dad created a media frenzy by predicting a bubble in our real estate.
Now this is no knock on Robert, his book was revolutionary and formed an integral part of how I approach my personal investments. But those who heed his advice would have missed out on a 11.5% average growth in 2015, a 15.5% average growth in 2016, before somewhat stabilising in 2017 after multiple rounds of out of sync mortgage rate rises and policy changes making it harder for property investors (Talk to us now about how to maximise your borrowing capacity).
The above example goes to show, no one can predict the future, no matter how many times the sentiment is repeated in the media.
Personally, I sit somewhere in the middle between the doomsayers and the eternal optimists aka property spruikers.
Just like the economy, properties are cyclical, I have no doubt at some point the prices will stagnant or even decline to some extent. However I believe there will not be any sharp falls in the property price for as long as Sydney remains an attractive place for some 70,000+migrants that choose to come here every year.
Not only do they increase our talent pool of skilled employees and curb the aging population, they also bring with them demand for quality real estate that is in close proximity to transportation, good school catchments and near hospitals and shopping centres.
Furthermore, the government is doing their bit in continuing to improve our infrastructure, and create new business hubs (Parramatta and Liverpool).
Sydney has one other important geographic advantage (or disadvantage depending on your point of view) going for it - it is land locked. There are not more undeveloped areas within 50km of the city, if you want to build new pieces of real estate you either have to knock down existing or sprawl out. Astute investors who have brought houses with sizable pieces of land 10 years ago near major transport hubs have all reaped the benefits of council rezoning by auctioning their properties for 2 to 3 times the price to the highest property developer.
I think there is never a wrong time to start investing in properties, only the wrong strategy or location. Furthermore, property investing is a long term game, so as long as your strategy is to buy and hold, even if you overpay by 5 or even 10%, you will have more than enough time to ride through multiple property cycles to reap the benefits.