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Sydney Turning into Millionaires’ Den

construction sectorIn an article for the website Smart Property Investment, Jeremy Fisher talks about the phenomenal upsurge in the prices of Sydney’s properties and says that it may frighten buyers even as it offers unprecedented opportunities to the investors.

Sydney canters into the millionaires’ den

What do you call a place which shows more than 15% capital growth in the first 6 months and exhibits a $million median price for at least 25% of its suburbs? Fisher decides to call it a “millionaires’ den” and we can only be in agreement that Sydney is turning out that way.

Most of the Sydney suburbs doing well

Camperdown, Earlwood, Lilyfield, Petersham are only a few names in the Inner West that have given investors some real sniff of dollars and the west and the coast are doing almost as well if not equally well.

Important to answer the question of affordability in the light of real growth

Fisher reminds buyers to think of inflation and ‘real’ price growth when thinking of the price hike in property prices. He also probes the affordability question and argues that a loan is only suitable to undertake if you are rock sure on your ability to repay it.

You can read the original article here.

The error of reading too much into nominal growth

I have always believed we need seers in the property market, those who can read short-term trends but not get swept off by anything but that which stays true over the long-term time horizons. If we look in terms of nominal growth, we will feel the prices of properties are becoming really unaffordable; what with them getting at least 10 times costlier in a matter of decades. However, this is where I beg for caution.

We have to think in terms of real growth. If prices have increased, so have our wages and this means that our ability to repay has also increased equally. If we make the mistake of assuming we can get a hamburger for the price we could get it a decade ago, we will only be fooling ourselves.

Do you think low cash rate will soon pressurize inflation?