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Brutal truth required: Sydney and Melbourne

Brutal truth required: Sydney and Melbourne
March 19, 2019 Simon Pressley

Sometimes in life, for one to be kind the brutal truth is required. That’s certainly the case when it comes to Sydney and Melbourne property markets right now, so I’ll get straight to the point.

It makes zero sense to invest in Sydney or Melbourne right now, or at any time in the next few years!

According to official data, the Sydney property market peaked in July 2017 and Melbourne’s peaked four months later. Since then, median values have declined by 15 per cent and 12 per cent, respectively.

For the record, property markets are quite strong in large parts of the rest of Australia.

 

Related article: The Class of 2018 – Australia’s best property markets

 

While the downturn continues to unfold in Australia’s two largest cities, we continually see people coming up with justifications for why people should still consider investing in Sydney and Melbourne at the moment. Such encouragement includes:

  • It’s bargain buying time,
  • It’s not that bad right across the city, ‘there’s markets within markets’,
  • The ‘blue chip’ suburbs are always good,
  • It depends what ‘strategy’ you use,
  • You’ll do well if you stick to A-grade properties,
  • It’s all about the long-term,
  • But over the last 15 or 20 years, blah blah blah.

That’s all rubbish!

To the residents of both Sydney and Melbourne who might be contemplating investing there now, be honest with yourself. Be acutely conscious of your confirmation bias.

 

Related article: ‘Blue-chip’ is BS

 

If any other location in Australia had recently come out of a boom, had already shed circa 15 per cent in value, vacancy rates were rising, the supply pipeline was still chockers, and downward momentum was growing, you’d be admitting the obvious. You’d be saying “don’t touch it, look elsewhere.” Don’t kid yourself, folks!

Buying the family home is a completely different set of decision-making considerations than buying an investment property. But, any real estate business that is currently using any form of justification to invest in Sydney or Melbourne at the moment clearly has a significant vested interest to be saying it and / or has an unhealthy set-in-their-ways mindset.

Will a property purchased in Sydney or Melbourne today be worth much more in 20-years’ time? Absolutely it will. As will literally every other property in Australia.

Of the 183 individual Australian cities and towns that each have a population of more than 10,000 people, is investing in Sydney or Melbourne right now the best decision one could possibly make? No way! Delusional!

If one is ever going to invest in any location, it’s paramount to understand market cycles. It is likely to be several years before the cycle is ripe to invest in Sydney and Melbourne.

Sydney and Melbourne are just as vulnerable to ups and downs as every other location. Anyone who doubts that has never studied the historical evidence.

It’s ALWAYS a good time to invest. But no one market is ALWAYS worth investing in.

Australia is a huge country; blind Freddy can see that there are (literally) dozens of other cities and towns that have far superior fundamentals than Sydney and Melbourne for the foreseeable future.

Remove the blinkers!

 

Propertyology is Australia’s premier property market analyst and award-winning buyer’s agency. Every capital city, every non-capital city, we analyse fundamentals in every market, every day. We use this valuable research to help everyday Aussies to invest in strategically-chosen locations (literally) all over Australia. Like to know more? Contact us here.

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