Frothy Sydney prices
Sydney’s crazily high house prices seem to have become a staple topic at barbecues and sausage sizzles across the harbour city these days.
With prices seemingly at or close the peak of the market cycle, should you even try to buy today, assuming you can afford the high entry prices?
There’s no 'one size fits all' answer to that question, but here are a few important considerations...
With the jobs market more fluid than ever before, we are changing jobs, locations, and even careers far more frequently today than was the case for generations past.
With stamp duty levies on Sydney purchases now so high, it may only make sense to buy a home if you are reasonably confident that you will be in Sydney for at least a few years, and ideally longer.
The transaction costs of buying a property can sometimes be up to 5 to 6 per cent of the purchase price, and there are further costs to account for when you come to sell.
First homebuyer incentives
The New South Wales State Government has recognised this hurdle facing first homebuyers and from 1 July 2017 has abolished stamp duty on all homes bought by first homebuyers up to $650,000, while offering stamp duty relief for homes priced up to $800,000.
The NSW Government’s comprehensive package included other measures to promote affordability too (albeit they aren't really designed to lower prices).
Given the above, it may not be a bad time to purchase for first homebuyers, provided you have a reasonable time horizon.
At least historically, waiting for prices to crash in the most populous cities has not been a fruitful strategy for those aiming to get onto the housing ladder.
Record building boom
The above having been said, there are presently more than 82,000 new dwellings under construction across the state, the highest figure on record, so some areas are at a greater risk of falling prices than others.
These areas typically include the suburbs where most new dwellings are built, such as blocks of land on the city fringe, and high-rise apartments in some of the suburban construction hotspots.
With the uncertainty surrounding Sydney’s expensive housing market, more young aspiring homeowners are choosing to rent where they want to live, while buying an investment property elsewhere to get a toehold on the housing ladder.
If well planned and executed this can be an effective strategy. There’s even a new name for it: ‘rentvesting’.
What do you think? Keen to hear your thoughts!
Come to our Money for Life workshop on Saturday 7 October 2017, for straight-talking, no nonsense financial education (click image for details).