? Thinking of Investing in the Central Coast? Stop! Don’t do anything until you watch this… esp. if you’re serious about investing for your future ?

Over the last few months as we’ve been helping people find investment properties in great growth locations where the rent covers the mortgage and where the property is really easy to get rented, I often get asked,

“Niro, what about the Central Coast? Is that a good place to buy in because after all, prices in most parts of Central Coast are far cheaper than Sydney?”

And there’s no doubt that’s true but the question to ask yourself is, “Is buying in the Central Coast a great prospect for future capital growth?”

And one of the things that I look at is I look at what do Valuers think about a particular area?

First of all, what’s a valuer? Well, when you go for a bank loan, the bank will approve a loan subject to a bank valuation. And then they send out the bank valuers to determine if the price that you’re paying, the price that you’ve agreed to pay, is the property worth that price?

So, it’s well worth watching what Valuers think about an area because ultimately, they’re the ones who are determining the price of a property at least from a bank perspective when you’re going to get a loan.

In the latest Herron Todd White residential report they express a lot of concerns about the Central Coast market. In particular, they call out a couple of areas like Woy Woy and Umina Beach which have both dropped between 10 to 15 percent.

Gosford prices have dropped there as well. In fact there’s a lot of concern about the unit market especially close to the CBD in Gosford although we don’t expect there to be a lot of oversupply. Even according to SQM Research, the market in Gosford is not in oversupply but prices have dropped.

I’ve had a number of people reach out to me over the last few months who said, “Niro, we’ve bought this Off The Plan unit for say $600,000 and now that it’s getting close to completion and the bank has to value the property, the bank is saying sorry we don’t think it’s worth $600,000 anymore. It’s only now with say $550,000.”

So, what does then the buyer have to do? They’ve either got to come up with the difference between the bank valuation of $550,000 and the purchase price of $600,000 or they’ve got to forego and give up their 10 percent deposit or $60,000 in this case. So it’s a scary prospect for someone who wants to invest to get ahead and all of a sudden they find that their investment decision is going to set them behind financially.

And if you think about it, Gosford and most parts of the Central Coast, they follow Sydney’s price trend. So over the last couple of years we know that prices in Sydney have dropped like a stone. Thankfully as a result of the recent rate drops that rate of price dropping has slowed significantly. Many suburbs are going flat and some suburbs are showing a bit of an uptick in price.

However, when that happens and when prices have dropped so much, the question is, “Well why would the price in the Central Coast rise in value? Because after all, the vast majority of jobs are in Sydney. So most people who are moving out to the Central Coast are doing so for affordability but that commute back can be very rough.
So as long as all the jobs are still in Sydney and with prices now being a lot more affordable, I think what you’ll see is that, the number of people moving to the Central Coast is going to reduce.

I’m not saying people won’t necessarily move to the Central Coast but the numbers will reduce. The demand for property up there relative to supply will actually be less so there’ll be less demand than supply. So I’m not expecting a lot of price growth in and around the Central Coast for the next few years.

What you’ll need to wait and see is when does Sydney grow in value? When Sydney prices start growing in value, when Sydney property starts to again become unaffordable for the average person in Sydney, I mean they still are fairly unaffordable but we’re talking about it becoming even more unaffordable, when you start seeing a lot more people start moving to the Central Coast, that’s really when you’ll start to see the prices rise.

Unless of course there’s a change in New South Wales Government policy, unless they start putting a lot more jobs up there, I don’t expect lot of Central Coast property price growth in the coming few years.

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