Beware of Sydney unit oversupply in some sectors: Pete Wargent
Terry Ryder of Hotspotting and I don't always sing from the same hymn-sheet, but his article on Tuesday was spot on.
While there is a lot of talk of the Sydney housing market taking off - and I believe that it will continue to do so through 2014 - you certainly can't just buy any property in today's expensive Sydney market and expect to see a happy outcome.
In particular, Ryder highlights the risk of an oversupply of units in the Sydney Central Business District, which is often a risk of CBDs, and particularly at this stage of a property cycle when developers are becoming more active.
Perhaps even more concerning is how the mainstream media is trying to get 'ahead of the curve' by highlighting the inner south as the new hotspot to replace the inner west.
Inner west exuberance
As I've always said, the inner west has been where the key action would be since 2008 and 2009 when I was buying there myself.
The best suburbs of the inner west have benefited from being located close to the city without the eastern suburbs price tags, and there has never been any such risk of oversupply in the key suburbs.
However, if you try to buy in the inner west today you will likely find yourself up against a dozen other investors and become involved in a dreaded bidding frenzy.
The inner west ship has mostly now set sail and there are better alternatives in other parts of the city, particularly to the north of the coathanger.
Inner south risks
What the mainstream media has got wrong about units in the inner south is a classic mistake - confusing high levels of dwelling approvals, new developments under construction and an increasing volume of sales with what actually makes a good investment.
What makes for a good investment is very high demand and scarcity value.
We might see some demand in the inner south, particularly from the immigrant population, but if you are buying an apartment, scarcity value will likely be...scarce.
Just as in early 2004 we saw investors suckered into paying too much for the wrong type of property (and still seeing no gains a decade on), so it might be for many who buy in certain developments in these sectors in 2014.
Caveat emptor.
Pete Wargent is the co-founder of AllenWargent property buyers (London, Sydney) and a best-selling author and blogger.
His new book 'Four Green Houses and a Red Hotel' was released on 1 September 2013.
