I guess one of the reasons for the contradiction surrounding the property markets, is that those who think they know, only pass judgement when they read something in a newspaper. The Prime Minister was to a degree, correct, when he recently told ABC radio, “people argue …. that housing is less affordable now than it was previously. Why ? It’s not because of interest rates . Interest rates are half what they were 20 years ago”. He then went on to say, “Now why is it less affordable ? Because the cost of land has gone up. Why has the cost of land gone up ? Because too little land is released”.

Well, I would argue that if we suddenly started releasing land, it would be catastrophic to an already weak market out West. Other areas of Sydney are also in recession, with property prices spiraling downwards. In an article in The Sun Herald last weekend “Homes lost as interest rates bite”. “Borrowers are losing their homes at a record rate, forced out by crippling re-payments, exhorbitant petrol prices and high personal debt. Latest NSW Supreme Court figures show re-possessions by financial institutions are approaching an annual total of 5000 – more than twice the number, three years ago.

In 2002 there were 2189 re-possessions in NSW following defaults by borrowers. That figure in the last 12 months to March, was 4873 – more than double the rate under Paul Keating’s 17 per cent interest rate regime in 1990”.

Let me suggest that back in the 90’s the banks were regulated and now, are de-regulated, so all you have to do today is fill out a form and you have money. The reality is that many people who are granted loans would not have had their application approved in 1990. Petrol prices have certainly proved in many cases to be “the straw that broke the camel’s back”.

We alluded last week to a new property portal on the horizon and the secret is now out. It is PBL! Does the property industry need another portal ? Probably not – although in fairness to PBL, I have not seen or heard anything to do with its launch. However, I do know that no other property portal that has launched (apart from domain.com.au and realestate.com.au) has been able to charge for its services. With property portals there is no third prize. So the PBL model will have to be something special given that www.domain.com.au and www.realestate.com.au do a very good job servicing our property markets. I see every online enquiry that comes in for sales and rentals so we keep a close eye on productivity.

I understand it launches in a few weeks, but will probably be overshadowed by the Fairfax launch on October 7 of its re-vamped Saturday Domain which potentially, has the ability to completely change real estate advertising. Now vendors can take 1/ 4 and 1/8 page advertisements at considerably reduced prices, so one can expect some suburbs to take up as much as four pages in advertisements. Yes – the good news is that advertising rates are on the way down which means that agents will certainly be fine tuning marketing campaigns.

As promised in last week’s edition, we launched our Google Earth http://www.rwm.com.au (please wait for page to load) to our website this week. This really is a sign of the times with feedback being that purchasers really enjoy this faster method of searching properties. See if I’m right by the number of real estate agencies that follow suit by adding this search facility to individual websites.

The landscape in real estate is constantly evolving, just that some are faster to pick up the changes! I guess better late than never – although some are fast realising that they are now too late !! Cheers ^__^

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15.09.06Robert SimeonNo Comments »

The property markets supposedly ducked a bullet this week when our retiring “Governor of Moolah” decided to leave rates at 6.00 per cent. However, since January 1990, September has only ever had two adjustments and both were actually decreases. Interest rates since January 1990 have had in total, forty two adjustments with the most popular months being May, with seven adjustments (one increase in 2006), December with six adjustments (our tip for 2006, to make it seven) and August with five (one increase in 2006). I think that this is much more than a coincidence. The other months were January (2), February (3), March (3), April (3), June (1), July (4), September (2), October (3), November (3).

Having said that and cracked the “Macfarlane Code”, you can bet that in all probability, the December increase will shift now to November! Inflation remains the greatest concern and the release yesterday of the jobs figures indicated that the total number of people in work rose by 23,400 to a record 10.3 million. The major concerns are that strong workforce figures identify a strong economy which then comes back to that “inflation” word. The October board meeting will not have the latest inflation figures to be released at the end of October, which points to a more than interesting meeting, scheduled for November 7 (Melbourne Cup Day).

The increases in interest rates this year have slowed the property markets under the $1.500 million range, but had absolutely no effect on the top–end markets. As strange as it may seem, these wealth markets are arguably at their highest price points ever, with little sign of easing. To put this into perspective, if the property is over-valued it remains un–sold, it is that simple. An even greater clue is that properties that remain unsold for a long period, sell (in the majority of cases) for a lower price eventually and sometimes the truth serum can have a sour taste.

Nice to see the Treasurer, Peter Costello, insist that the states keep their word on abolishing stamp duty in return for the GST. How ironic that NSW has actually increased stamp duty since the introduction of GST. The Queensland coalition is promising, should they win power, to cut stamp duty. One can only ponder what promises we will be offered with the state election in March 2007. GST has been a great gig for the states as it has delivered $187 billion since it was introduced in 2000. Even more interesting is, that since the introduction of GST, NSW has continued a backward slide compared to the economic growth of the other states. Perish the thought that we are awarded the “wooden spoon”.

They say “it can only happen in America”. Well it did and now Fairfax Digital trumped the Australian property portals and markets this week when it launched its Google Mapping to www.domain.com.au This is without doubt, in my opinion, one of the smartest releases that our industry has seen Domain Google Maps Now you can see all the properties listed in a suburb and it makes the search even faster. Once the page loads you start your search with a suburb map, then you can click on satellite to receive Google Earth of that suburb and the hybrid allows you get street names.

We were so impressed with this release that we will be launching our version on www.rwm.com.au on Monday. Our IT Department has been working around the clock and I think from that perspective we possibly will be the first real estate agency in the country to offer this facility. In the coming weeks we hear that we will see many new changes to our property markets. Some I believe, will completely change the traditional landscape of our property industry. Also, strong word that a third property portal is looming on the horizon and unlike the other free ones that achieve very little, you will have to pay for this one. Fairfax Digital, your timing was perfect !! Cheers ^__^

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8.09.06Robert SimeonNo Comments »

Gone are the days when the Sydney property markets moved in sync and we are discovering that today, it is a “make or break” market. In Sydney’s west and south, prices are currently in a free fall, well down from the peak in 2003. On the other hand, the traditional wealth markets are well up on 2003, which clearly identifies that the state economy is much worse off than many had anticipated. Interest rate increases have absolutely crucified the working class markets and there is plenty of blood on the letter boxes. Probably the most alarming point is that if the Sydney Morning Herald had not alerted the markets when they reported on mortgagee sales, the majority of us would still be unaware of the disparity. This was highlighted by the fact that the Mosman market is posting clearance rates around the eighty per cent mark and properties are well exceeding reserves. A home in Neutral Bay sold at auction last Saturday for $1.355 million above the reserve price with the hammer finally falling at $4.355 million (it was unrenovated).

Whilst the Federal and State governments stand toe to toe, blaming each other for the carnage – these working class markets will continue to struggle. The most intelligent dialogue came from Australian Democrats Senator Andrew Bartlett who said, “Australia needs a national housing strategy, reviewing tax measures such as negative gearing, to address the housing affordability problem.” When you have suburbs in Sydney reporting forty per cent decreases in value, I think we may need to re- define “affordability”. The problem as I see it, is that Australia’s property markets continue to fly under the radar because the powers that be have not introduced a compulsory regulation for real estate agencies to provide current returns on sales and rental data every month. This way they would get an exact positioning, instead of releasing statements months later. What makes this process even stranger is the knowledge that franchises already do this on a monthly basis. This leaves the property market further in the dark which in all probability is what the respective governments prefer, as too much knowledge can be a dangerous thing. The one thing they are sure of, is that the Pacific Highway has much more traffic heading north than it does south!

Congratulations to Steve Patrick who won the coveted Ronald H Pillinger Trophy at the Richardson & Wrench Annual Awards last Saturday night, as the number one salesperson in the network. The trophy did not travel far. He pipped Richard Simeon (last year’s winner) who came in at second place, while yours truly came in tenth! Also in sales, Marize Bellomo finished fifth and Geoff Grist made his debut in seventh position. Not a bad feat! All our salespeople finished in the top ten categories and our office finished number one in NSW and number one nationally. It is great to see that our business model and conduct continue to exceed expectations.

Whilst our property niche markets are in blitz mode – the same can also be said for the release this week of “sydneywaterfrontseast” by Tim Mooney. This book is dedicated to aerial photography from Bondi to the Bridge. It is a truly outstanding book and an absolute must for anyone who admires the beauty of Sydney Harbour. Tim’s next book will be “sydneywaterfrontsnorth” from the Bridge to Middle Harbour. You can order copies online by going to www.sydneywaterfronts.com but be quick, as I hear they are selling fast, with real estate agents ordering by the box. All the photos were taken this year and capture sensational Sydney harbour waterfrontages. If you can’t afford a waterfront get the next best thing !! Cheers ^__^

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1.09.06Robert SimeonNo Comments »

We have long argued that the property markets are nothing more than individual niche markets that more often than not, bear little resemblance to one another. This was highlighted earlier in the week when The Sydney Morning Herald published an article by property editor Jonathan Chancellor, “Housing crash puts sellers in debt crisis”. “A THREE – BEDROOM brick – veneer house in St Clair sold for just $260,000 at the weekend – down about 42 per cent from its last sale at $450,000 in 2003 in a further sign of the depressed state of the Sydney property market.” I must admit that this captured the minds of many which explains why it remained at the top of the popular www.smh.com.au all day. A sad story whereby the owners who borrowed $405,000 could no longer meet their repayments so the bank stepped in (those that keep reporting a few billion in profit each year) and sold them out. It was interesting to read on to see that the purchaser was an investor who intends to spend $40,000 on the property and rent it out for $270.00 per week. This clearly highlights the fact that the banks have learnt absolutely nothing from “the recession we had to have”. If we look today (and we did) at the properties we sold in the recession for the banks, all have either doubled or tripled in price so can someone explain why the bank, as a sign of good faith and, wait for it, “client care”, didn’t simply rent the property out and hold the asset. Forcing a sale in a market that is obviously depressed, sends a tsunami of panic through local households when it could easily have been avoided. The problem with the western Sydney property markets is that an increasing majority are migrating to Queensland and Western Australia in search of better lifestyles as Sydney has become too expensive. In return the banks give the property niche markets the financial “bird”.

The Mosman market is going from strength to strength as stock levels diminish. A quick look at www.realtor.com.au to check on Mosman house sales this year, has them at 166, still 122 down on 288 houses in 2005. Obviously the figure of 166 is not up to – date however it does identify that we will be well below the 288 house sales this year which is a far cry from the glory days in 2001 when the Mosman market posted a healthy 445 sales. What we now see is prospective sellers holding on until they find a suitable property, as against selling then looking. This is even more evident when you look at the clearance rates for the area at the moment which are running at around 80 per cent and in many cases well over reserve. When you look at the St Claire property market and compare it to Mosman, it is from one extreme to another. We have said on previous occasions that suburbs that boast a top end are only getting stronger and stronger. This is because in our case the residents wear pin striped suits and work just over the creek, with no intention of moving to Queensland or Western Australia.

The Australian Bureau of Statistics released figures this week after combining all the niche suburbs which revealed that housing prices in Australian capital cities have recorded strong growth (see how misleading this can be). Perth again leads the market with their June quarter prices up 11.9 per cent from the March quarter and overall the increase in house values over the past twelve months stand at 35.4 per cent. The Australian Bureau of Statistics said “ June quarter prices were up across all state and territory capitals, pushing the overall house price index up 3.1 per cent after a 1.1 per cent rise in the previous quarter.” Prices were up 3.6 per cent in Darwin, 2.6 per cent in Canberra, 2.3 per cent in Adelaide, 2.1 per cent in Brisbane, 2 per cent in Melbourne, and 1.4 per cent in Sydney.

Makes you wonder where all that grey matter is when you read about the heated debate for the state government to release more land out west. Saturating the market with vacant land will drive prices lower which then makes it more affordable. However, by doing so, you then lower the value of surrounding houses, as was the case at St Clair and a 40 per cent drop leads to that “recession word” in the market. A classic example in Mosman over the last five years has seen the market contracting with available houses. However, our market would resemble the western Sydney markets if nobody wanted to remain here. Keep watching the niche markets as they are much more finely tuned and there is a compelling argument that the banks should adopt a complete policy change and back the market as against destroying it. They were the ones who signed off on the respective mortgages (no doubt followed by that all too familiar hand shake). The only problem was that the unsuspecting family had a change of circumstances and made the mistake of turning their back. A sad situation when today we no longer support our own, yet send millions and millions out of this country in foreign aid. It is about time that we set a true “Future Fund” for those known as the “little Aussie battlers” !! Cheers ^__^

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25.08.06Robert SimeonNo Comments »

Real estate will always be “the” topic of conversation, as rich or poor, we all need a home and for those who own property it is usually their major capital investment. Whilst the landscape is continually changing, some things just never change! This explains why our “chameleon-like” industry can be misleading. If you cast you mind back to June 2004, our soon departing “Governor of Moolah” described the methodology of recording real estate data as “hopeless”. In his parliamentary testimony he said “There are two things wrong with information about the national property market: it’s not current and we watch median prices.” Ladies and gentlemen – two years on, nothing has changed and we are still led to believe that current data gives us an exact position of the market. Any market that has a top–end cannot, in my opinion, deliver a realistic and accurate market assessment because long settlements on properties continue to fly beneath the radar. The one thing you can be assured of, is that when quarterly results are published, there is no comparative analysis six and twelve months later when the true statistics are available. Much like “never let the facts get in the way of a good story”.

So this week it was over to the Housing Industry Authority that delivered its quarterly review of housing affordability. “Figures released today from the HIA/Commonwealth Bank Affordability Report show that affordability deteriorated again in the June 2006 quarter, dropping 5.3 per cent to be 6.1 per cent lower than Christmas last year. With the latest increase in interest rates, affordability would have taken a further hit.” It should be noted that these figures are not compiled from property sales data. Whilst it is true that interest rate increases do have an impact on housing affordability, there is another compelling argument that is missing. First home buyer numbers are falling and one of the reasons for this is increasing rents, because investors are no longer interested in investing funds in NSW. They are simply afraid that the NSW government will impose new taxes on property (to their detriment) as has been the case for years. This week, we observed in our Apartment Division, that twenty per cent of properties listed, were by investors saying goodbye to the investment market – indeed a sorry scenario! One could hardly blame them given that the budget is lying in deficit. Even more alarming is the recent discovery that the NSW government has squandered $1 billion in hand–outs to community groups and recovery of these grants is impossible, as there were no legally binding agreements. Makes one wonder why we keep pointing to interest rates when the major concern should be why investors refuse to invest in NSW. The fact that out of sixteen apartments currently listed by us, four are owned by investors, presents a pretty strong argument.

The Mosman market these days trades on a five per cent house ratio based on total numbers of homes in the municipality. Down from the ten per cent that has been the norm, this means that days on the market have reduced substantially. The process of finding homes is much quicker as property levels have dramatically reduced. The Cumberland Newspaper Group have made it easier for purchasers with the recent launch of The Mosman Daily online www.mosmandaily.com.au. Now you can read the weekly editions online which is a great initiative.

The big news item of the week was the radical and very smart upgrade by Fairfax, of their property portal www.domain.com.au. Now, when you go back into this property portal you don’t have the laborious task of entering search criteria. All you have to do, is enter Mosman in the suburb search, then click on last search and every time you log back in it takes you straight to the page you previously searched. From an IT perspective this is one of the most innovative moves we have seen and it is definitely much more user friendly. Also, all those additional advertisers that drive you mad have been relocated and it is much cleaner and easier on the eye. I have long argued that when someone goes to a property portal, they don’t necessarily want to be bombarded with offers of finance. This is just the first of a host of new releases that Fairfax will be rolling out over coming months (they have been very busy over Winter).

The real estate industry is changing and it is nice to see companies moving with the times. In the past (except for the fact that we keep paying them) many failed to understand what the industry was all about. How times change and now the key criteria is that you stay with them. Vendors are fast finding out that today, with all the resources available, there are alternate ways of selling property which is why the cost of advertising is on the way down. Forget about a few steak knives – give them the entire kitchen !! Cheers ^__^

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18.08.06Robert SimeonNo Comments »

Applying clearance rates as a reliable barometer to assess the temperature of the property market is generally fraught with danger. One cold rainy day does not, in my opinion, constitute the true reflection of a property market (as was the case last Saturday). But what the heck, when you are on a deadline and you have to file, throw in an interest rate increase and we all know what to expect. The Sydney property market was heading south on Struggle Street and for all intents and purposes the wheels were set to fall off – so (as directed in the Sunday papers) please now assume the crash landing position. It could be said of course, that the writers of such doom and gloom are not (with respect) household names when it comes to real estate.

At exactly 3.40 pm on Tuesday this week, my perception of the market changed dramatically (you may be a subscriber to Eureka?). I received an email from a respected journalist who is pretty well known in business circles. More clues … well he is a former editor of the Australian Financial Review and The Age, former business and economics editor of the 7.30 Report, former Chanticleer columnist for the Financial Review and currently columnist for The Age and the Sydney Morning Herald. A finance presenter on ABC news and host of Inside Business on ABC TV each Sunday, his name is Alan Kohler and the email contained his latest weekly edition of the Eureka Report. It is a totally independent online e-zine (electronic magazine report) where a collective combination of Australia’s most respected journalists offer their thoughts on many economic issues www.eurekareport.com.au ( enjoy a free 14 day trial). Here is what Alan Kohler had to say about Struggle Streets in NSW – a far cry from the otherwise suggested crash landing position. Alan and I have since exchanged emails (he is a subscriber to “Virtual Realty News”) and he gave us permission to use quotes from his article. Being the typical agent I decided to quote the entire article as one of Australia’s most respected journalists stepped out of his comfort zone to make such a controversial prediction (given the weekly climate). I for one, would totally support the pedigree of this reliable source. You can draw your own conclusion !! Please read with interest.

PORTFOLIO POINT: As the sharemarket cools for the next couple of years, conditions are falling into place for a property boom, which will be strongest in NSW.

The implication of the punchline of Friday’s Statement on Monetary Policy from the Reserve Bank was, I think, widely missed. Here it is, in case you were wondering: “The Bank’s current forecast is that underlying inflation over the next two years will be around 3%.”

The point is the bank is forecasting that. There was no sign in the statement that it is actually worried about 3% inflation and would do something to prevent it. Considering that its job is to deal with excessive inflation, which means anything over 3%, if the RBA is forecasting that then it is, by definition, comfortable with it.

Here’s what I think this means:

* Rates will stay where they are for 12 months and then fall.
* The economy will slow but not go into recession.
* The sharemarket will have a “Fed pause” rally soon and then produce single-digit returns for a couple of years.
* The property market will boom again from next year, led by Sydney.

The stories over the weekend that rates will go up again are, in my view, misreading Friday’s RBA statement. Unless something changes in the economy — that is, it surprises everyone by continuing to accelerate despite higher oil prices and two rate hikes in 2006 — interest rates will stay where they are for 12 months and then, when the economy begins to slow next year, the next move will be down.

This is therefore the peak of interest rates in Australia, as it is in the US and Europe (there may more rate rises in both places, but it’s close enough to the peak).

History is really no guide to what we can expect from the sharemarket at this time, so to some extent we have to ignore interest rates, or at least look beyond the short term.

For example, in 1994 the cash rate was lifted from 4.75% to 7.5% in six months and the sharemarket began to rise the moment the peak was reached (December 14, 1994). But during 2000 the cash rate was raised from 4.75% to 6.25%; the sharemarket didn’t peak until June 2001, bottomed in February 2003 and didn’t regain the 2001 peak until March 2004, none of which had much to do with Australian interest rates.

Nor has the bull market of the past three years been even slightly affected by the fact that rates have steadily increased from 4.25% at the beginning of 2002 to 6% today. That’s because the course of the rate increase has been steady and restrained: the Reserve Bank under governor Ian Macfarlane did not panic about the so-called property bubble nor has it responded to record low unemployment by jerking interest rates higher.

The result has been a glorious boom on the stockmarket caused primarily by commodity prices but also the strength of the Australian economy and consumer demand. That economic boom will now slow because inflation has finally got to the top of the RBA’s target band, but the good news is that the bank is forecasting that it won’t go any higher than that, which means rates won’t either (unless the new governor, Glenn Stevens, changes the way the RBA operates, which is very unlikely indeed).

But that doesn’t mean it is a time to sell your investments and move your money into cash — far from it. For a start, the next asset boom will be property, possibly starting about now. Property trusts have already outperformed the market by 3.5% over the past few weeks.

Second, the economic slowdown may be small enough that corporations will be able generally to hold their earnings, especially given that next year is an election year and there are likely to be more giveaways in the 2007 budget.

The key to how deep the slowdown will be is the level of household debt in Australia (now approaching $1 trillion), offset by interest-earning assets of $400 billion (and non-interest-earning assets — mainly family homes — of $5 trillion, but that’s another story).

I simply do not buy the idea that the high level of debt will, on its own, cause a crisis: there would be serious problems only if unemployment rose substantially.

The ANZ Bank’s chief economist, Saul Eslake, estimates that last week’s rate rise will cost household borrowers another net $1.5 billion per annum, in total, in higher interest payments — on top of the $1.5 billion net cost of May’s increase.

He says: “The rise in petrol prices over the past few months is costing households a further $1 billion per annum (according to Access Economics). But adding all this up still falls well short of the nearly $9 billion per annum boost to household incomes from the tax cuts that took effect on July 1, which helps explain why the May rate increase has had so little impact thus far, and provides one reason why the Reserve Bank now perceives a need to raise rates again.”

Which is why, of course, the Prime Minister’s straight-faced denial that the 2006 tax cuts had anything to do with last week’s rate hike was pure sophistry.

Anyway, it will happen again next year too and might lead to another rate hike, which will once again be swamped in its effect by the next lot of tax cuts and hand-outs.

The main risk to my scenario of a very soft landing for the economy next year is not a collapse in consumer demand caused by high debt but a drop off in business investment. As Gerard Minack of Morgan Stanley pointed out last week: “GDP growth has been supported by a huge investment boom. Over the year to March, business investment contributed 2.8 percentage points to GDP growth. In fact, business investment has, on average, added 1.7 percentage points to GDP growth in each of the past four years. The leading indicators of investment spending are now pointing to a significant slowdown.”

This suggests that the outlook for share prices looks subdued over the next couple of years, after one last rally when it becomes clear that the Fed has stopped raising interest rates. That will happen sometime in the next few months.

But by far the most interesting investment market at the moment is residential property, where conditions are emerging for another boom.

The fact is that the Australian housing market, apart from NSW, has had a very soft landing over the past few years, and continues to surge in WA and northern Australia because of the resources boom. Demand for dwellings has remained steady at about 160,000 a year and was boosted by the Federal Government’s decision last year to increase the skilled migrant intake by 20,000 a year.

After three years of rough balance between supply (approvals) and demand, housing approvals have fallen sharply lately and are now running at an annual rate of about 135,000 a year — well below underlying demand. Last week’s rate rise is likely to cause another fall in approvals.

More importantly, a rental shortage crisis is looming. The residential rental vacancy rate is now just above 2%, well below the long term trend of 3.1%.

For the past 30 years property cycles have been driven almost entirely by interest rates; the most recent one by the fact that the cash rate was below 5% between April 2001 and November 2003. But that wasn’t always the case. The property booms of the 1950s and 1960s occurred with interest rates as stable as they are now and were caused by fundamental demand factors from the baby boom and immigration.

Once again interest rates are stable, and probably peaking, there is a sort of baby boom going on and immigration is high, and demand has been added to by the first home buyer’s grant. And there is already a shortage of rental accommodation.

The best looking property market, in my view, is NSW, which has suffered most over the past couple of years. Median house prices have fallen nearly 10% from their peak and approvals have fallen 40%. According to ANZ Bank, NSW needs 46,000 new dwellings a year, yet there is currently an annual completions rate of 26,400 and already dire shortages of rental accommodation.

There is an extraordinary level of pent-up demand for housing in NSW, which I believe is likely to come to a head next year. It’s true that affordability has been a big issue in NSW, and an important reason why house prices fell, but the main reason has been the dismal performance of the state economy.

As John Edwards of HSBC remarked in my Inside Business interview with him yesterday, NSW has been in virtual stagflation lately because of its near-recessed economy and the fact that its inflation rate is the same as those states that are booming.

But net migration out of NSW has been slowing lately and employment has been picking up there.“

On the whole, I reckon that investing in NSW right now is like buying a great blue-chip stock while it’s going through a temporary bad patch … like BHP Billiton three years ago, or the banks 10 years ago. Sydney is Australia’s prime real estate market and the conditions are in place for a big recovery.

Personally, I loved the introduction “If you can see the bandwagon, it’s already too late,” said the late great global investor Sir James Goldsmith. Today Eureka Report makes a big call: property is ready to rebound. If you want to be ahead of the bandwagon, don’t miss today’s lead article.

Another classic example that sometimes we can read too much into the market – however, you should never rule out the smart authors of the market and in my humble opinion Alan Kohler is a brain that at this point in time does not warrant us to get in crash mode. Your choice and call .. plenty of cement in the property market. Cheers ^__^

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11.08.06Robert SimeonNo Comments »

With the hazy days of summer soon upon us, the burning question will be “how will the respective markets respond to this week’s rate rise” ? With just days remaining before the ‘Governor of Moolah’ hands over his head teller responsibilities to his loyal deputy, many property markets now face an uncertain future. A last minute whinge by Morrie “I’m sorry” for the Prime Minister to intervene in what many believed was a “lay down mazaire” (and they were proved correct) had no impact at all. You can throw in as many bananas as you like, but the simple fact is, that Australians are fast closing in on a trillion dollars of debt and this is what this rise was all about. We don’t expect to see much change in the Mosman market however, as again, investors will continue to bypass the apartment markets and rents will continue to spiral to record highs.

While some prefer to use interest rates as the anchor of the property markets – it is widely acknowledged that the greed of the state government with excessive property taxes, is the underlying reason why NSW is performing so badly. When there are no incentives, certain sectors of the property market fail to attract interest e.g., investors in the rental markets. With the focus on interest rate movements, many forget that the increases for those paying rent, are much more severe from an earnings perspective, than interest rate increases. Unlike interest rates that should remain in a holding pattern for the foreseeable future, rents will continue to escalate as the number of rental properties continue to fall.

The top – end of the market continues to set new records each quarter and the June quarter 2006, was the highest on record. With the recent release of The Dyson Austen top 10 prestige residential survey, the highest recorded sale was $24 million for a waterfront at 9 Wolseley Crescent Point Piper. The top seven sales were all above $10,000,000.

Confidentiality agreements make it difficult to record every sale in a quarter, but we have been reliably informed that Mosman posted three $10,000,000 plus sales. Sydney recorded for the very first time, ten $10,000,000 plus sales in a quarter. To receive the Dyson Austen reports (and they are very worthwhile) go to www.dysonausten.com.au

The online markets also performed at their absolute best over the June quarter, as the market moved away from the traditional newspaper campaigns. Our subscriber sales are now at $521,496,600!

July is usually a quiet month for real estate agencies although this was not the case for us. We posted $28,000,000 in sales for the month. No longer available are 61 Belmont Road Mosman, 24 Morella Road Clifton Gardens, 46 Spofforth Street Cremorne, 108 Ourimbah Road Mosman, 46 Wolseley Road Mosman, 20 Ryries Parade Cremorne, 128 Kurraba Road Neutral Bay, 23 Raglan Street Mosman, 4/5 Ballantyne Street Mosman, 1102/1 Watson Street Neutral Bay, 11 Ellalong Road Cremorne, 15 Shellbank Parade Cremorne and 61 Spruson Street Neutral Bay.

Many thanks to talented architect Peter Tout, who filled in for the last two weeks. The feedback from his impressive articles was fantastic. We will have more guest writers in the future, as important industry news comes to hand.

The upcoming Summer market is fast resembling a very light market in terms of stock levels. It is a hazy market indeed, with early indications that it will be far from lazy and in all probability, a little crazy. Will the top – end replicate the June quarter and post another perfect 10 ? Much will depend on whether vendors leave a few doors open to agents, although at this point in time, it is looking highly unlikely. One thing we do know is that NSW, “the state of decay” will climb further and further into deficit. The increase in rates this week will stymie the NSW economy as this state makes up one third of the nation’s population. For us, we are fortunate that the Mosman dollar remains arguably, (from a housing perspective) the strongest of all property markets. Now if we could convince investors that the state government will not rape and pillage with new taxes, they may venture back into the residential markets. Those saving to buy property would be better off too !!
Cheers ^__^

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4.08.06Robert SimeonNo Comments »

Last week I gave my top ten design suggestions to create that great family home. This week, I’ll turn to a top ten on getting the thing built.

Let’s assume the design is completed, you are excited, you are told it reasonably complies with Council controls and you can imagine yourself living there. Where do you go from here?

1. Pay for decent drawings, a good model, a well considered and presented landscape plan coloured as green as possible and a photo montage showing before and after. Ignorance is your greatest weapon. Neighbours and Councillors cannot read plans and do not understand scale but they all love a good model and can nearly understand that. Always build into your plans a secret concession that you can live with. On many occasions you might need to play that card to get an approval. Most objectors don’t want to stop you all together, they just want to extract a concession.

2. Show your neighbours and those affected, what you are doing prior to lodgement. The time taken and public relations value is priceless. Do not assume for one second you can put anything over your neighbours. They will be just as intelligent, just as well advised as you are and quite capable of making your life a misery if they wish. Let them and council know you want to bring up your family in this house and you are not a property developer trying to make a quick buck out of this project. Pregnant wives and babies add greatly to the story!

3 Do not assume you can break the planning rules, it’s just like the speed camera in McPherson St, you may not like it but there’s not a lot you can do about it. There are three critical rules in Mosman – overall height, wall height and maximum floor space ratio. They are basically there to be obeyed, those who think they can exceed them are foolhardy and if they succeed are very lucky. Note Rule 2, your neighbours will know these rules as well, if not better than you.

4. On the night of the Council meeting, you must attend. Do not leave it to your architect (or heaven forbid your lawyer). Show your face and defend your rights. If presented with a compromise solution that will give you an approval on the night, take it. Do not lose your approval that night to a further site inspection or another report, take the best that is offered, get the piece of paper approving it and then you can go back and argue any condition or detail you do not like at a second attempt. I have seen too many tragic nights when people have the approval offered to them and then lose it before they realise it, through sheer stubbornness on the height of a fence or the placement of one window.

5. Once approved, your issues have only just begun. You must get a thorough and decent set of documents prepared by your architect and engineer. This will take time and inevitably cost a lot of money. Here is where the greatest mistakes are made. It is hard to pay for ideas and drawings, much easier to pay for physical building that you can see and touch. A very good set of documents inevitably leads to a good building experience and the reverse is certainly true. A lousy set of documents is absolutely certain to lead to lousy construction. Do not skimp on attention to ground conditions, footings, retaining walls and drainage issues, so many mistakes are made here. You can always fix poor tiling and repaint walls, but you cannot readily fix leaking basements, inadequate footings and poorly framed rooves.

6. Good clients get good buildings. It sounds trite, but if you select your builder carefully, and then having chosen the right one , give him a fair go , treat him with respect and actually go about enjoying the process with him, it can be fantastic experience. It will cost more than you hope, it will take longer than you‘d hoped, but in most cases if you get it right, the reality will be far better than you imagined.

7. Good and honest builders do exist, in fact there are many. The trouble is they have more work than they can jump over. It is extremely difficult to build a luxury house on a difficult site with poor access, with a mass of conflicting materials, to an impossible deadline using thirty different sub-trades, all with their own agendas and all for a very small margin. The risk reward ratio is crazy. It’s a wonder anyone bothers to do it. So my advice (you know I am biased because I am a builder as well as an architect ) is, give the poor bloke a bit of room to move, to make the odd mistake , pay his progress claims promptly, work closely with him at site meetings and he will mostly reward you with real commitment and pride in his job. Sure there are many bad examples out there, so carefully select the right guy in the beginning, based on personal recommendations, not lowest price.

8. The contract. Too many clients do not understand or respect the contract. You must put a great deal of time and care into preparing a thorough contract that is fair to both sides and does have provisions in it for retention sums and defects period and a damages clause. Then, having executed it, put it in the drawer, lock the drawer and don’t pull it out again. The day people start referring to contractual clauses is the day things spiral into trouble. One phone call to a lawyer from either party is the beginning of the end.

9. Fixed lump sum or cost plus contract? The great debate waxes and wanes as the balance of power shifts between builder and owner. No room here for a long debate. Suffice to say a poorly prepared cost plus contract, unsupported by proper bills of quantities and documentation, is a recipe for disaster. You may as well just give the builder your cheque book! However a well prepared one, supported by excellent documents, with an owner and builder who respect each other and look forward to working together, can be the best way to build.

10. Too many clients are too nice to their builder at the start of the project and too nasty at the end! Be strong and fair and consistent from the beginning and don’t build up false expectations. Demand proper reporting, properly attended and reported site meetings and timely financial reconciliation. In fact help the builder do it, because he won’t be as good as you at doing it ( that’s why he is a builder and not at MacQuarie bank) and prepare your own spreadsheet for him to use and report on.

Good luck! If it was easy everyone would be doing it and we’d have nothing to talk about at Mosman dinner parties. Next week it’s back to Robert and “ The Governor of Moolah “

Peter Tout
Chairman Castlepeake Group
Architects Interiors Landscapes Construction Sustainability
ptout@castlepeake.com.au

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28.07.06Robert SimeonNo Comments »

What makes a great home, a home of architectural merit that will nurture your family, give you years of enjoyment and be worth a lot more on completion than the investment you will have made to create it?

The answers aren’t as difficult as some might have you believe. Here are my top ten if you like, in no real order, that will help you to create that masterpiece. I offer it to inspire a little debate on what makes a house a really wonderful place to live in, and makes you a tax free profit when Steve, Robert and their team come to sell it for you.

1. You can always change the house but you can’t change the street, the aspect or the neighbours. In other words, buy the site not the house. No matter how clever you are you cannot decide where the sun shines, where the traffic noise is, or where the cold wind blows from, but you can design a house on your site to suit the environment you find.

2. Always, I repeat always, design your living and kitchen areas to drown in winter sun. The difference between a sunny, open and well planned living space that in some way faces between north-east and north–west and a collection of cold, small rooms facing south is the difference between really living and just existing.

3. In Mosman, the value of most sites lies in the land itself and its potential. A great many poorly oriented and laid out houses, both new and old, have little or no value in them at all in the eyes of a purchaser. In fact they can be worth minus $20,000, the cost to demolish them, or $750,000 less than you think they are worth because the purchaser factors in the cost to renovate it all. So the stakes are very high and if you get it wrong you may spend a fortune and add nothing to the value of your investment or even worse, lessen it. If you get it right, the market will pay enormous sums for your property and the gap between those who get it right and those who don’t, is vast. Yes, good design does pay more than ever.

4. Yes, the market does want modern design and it will pay a great deal more for a well-crafted contemporary house with sunny open plan entertaining areas that flow seamlessly to private and sheltered outdoor living areas than a similarly scaled renovated house. However, this modern house needs warmth, soul and a sense of place, to go with all those shiny new materials and electronic wizardry, or it will never fulfil those basic human instincts for shelter and family.

5. Water and energy saving and re-use must be on your design agenda and budget. They can no longer be ignored by any responsible owner or architect. You will not have the water now and in the future to care for your garden or top up your pool unless you provide for it yourself with a sensible combination of roof water storage and grey or even black water recycling. A future where energy authorities cut the power to Mosman air conditioners on 42 degree days to preserve it for hospitals and schools is not far away. Those with sensibly designed, insulated and cross ventilated houses that do not need air conditioning, with toilets flushed with recycled water and gardens thriving on stored stormwater will be celebrated. (More on this subject in next week’s article).

6. Did I mention Rule number 2 about north aspect? Yes, but I’ll repeat it again. We tend to overstate summer in Sydney and forget the sublime midwinter days of clear blue skies where the sun penetrates all day into north facing living rooms and heats the floor, which then reradiates that heat back to you at night. That same space due to its orientation and careful design, then blocks the harsh sun all summer long. Who needs air conditioning in Mosman in a well designed house?

7. The cost of renovating now is so huge and the stakes are so high (see 3 ) that if the house does not have special features that demand retention, be they architectural quality, heritage, special memories or code advantage, then you are better off starting fresh with a new house. I don’t offer this lightly or with any satisfaction, as I love to preserve and enhance existing building stock, but the stark reality is that you pay enormous sums in labour and inefficient work methods to painstakingly pull apart a house, correct all its faults and then put it back together. That said, Mosman will always have a large stock of quality older housing that deserves and demands sensitive and imaginative renovation. Just don’t under-estimate the cost of the exercise!

8. Many houses are ruined by people trying to cram one too many elements into their plan. Err on the side of creating less but more generous spaces that naturally flow from one to the other, that benefit from flexibility of use, and avoid the temptation to fulfil your checklist down to the last room. You can so easily ruin the plan and the natural flow and rhythm of the house.

9. Concentrate less on scale and more on quality, flow and rhythm. Most houses built are too large for their sites. Focus on providing more with less, leaving more room and scope for beautiful courtyards and gardens, or outdoor rooms if you like.

10. We are an over-toileted society. No child needs an en-suite. A two storey house needs two and a half bathrooms or perhaps three if the guest toilet downstairs becomes a bathroom for guests. Why people feel the need to waste so much space and money on toileting is beyond me and in my book unnecessary. Bathrooms do nothing for the value of the house, nor the quality of life of its inhabitants.

Follow these few ideas and you won’t go too far wrong!

Peter Tout
Chairman Castlepeake Group
Architecture Landscapes Interiors Construction Sustainability
pout@castlepeake.com.au
(02) 9437-1800

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21.07.06Robert SimeonNo Comments »

Well, well, well ….. we have been reporting recently that the top-end Mosman market has been very strong with many record prices being achieved in the June quarter 2006. An article that appeared in The Australian Financial Review on July 13, 2006 titled “ Super-rich enjoy private property boom” by Mark Phillips, said “Many agents dealing in top-shelf properties have just completed record financial years thanks to high-quality offerings and competition for scarce multimillion-dollar stock.” The major players in the recent Mosman frenzy were merchant bankers, expats and a few others whose businesses over recent times have built great wealth. This is why we sometimes require a reality check, as what we are seeing in Mosman, is not necessarily being mirrored across Sydney. This yet again highlights the fact that all too often, our property markets are misrepresented, as they are a volatile mix of niche markets. You will read over the next weeks about what happened in the June quarter in property and all I will say at this juncture, is that many will be left shaking their heads in disbelief. Even more amazing is that a vast majority were cash transactions.

On the other side of the property spectrum, the Australian Bureau of Statistics announced this week that home loans in May increased five per cent, prompting interest rate speculators to suggest that we are about to get another rate increase. This will have little effect on our market, as we pointed out earlier, many transactions for properties are cash. Across the board Victoria posted the highest result with 7.9 per cent, South Australia 6.1 per cent, Queensland 4.4 per cent, the ACT 4.2 per cent, NSW just 2 per cent and Western Australia (remember last week they were asking for a rate increase to slow their economy down) 0.8 per cent. The question is, they must be on something? The Northern Territory could only manage a negative result down 5.2 per cent and Tasmania reported a 1.1 per cent decline.

Plenty of argy bargy this week, with John Howard and Peter Costello locking horns and then out came the quote of the week by Bobby ‘Dazzler’ Carr who just had to wade in with another classic comment. This is what the “Dazzler” had to offer, “The Australian economy is performing very, very, strongly because of external circumstances and a record of good management from both sides of Australian politics.” Surely, he is not implying that NSW has been performing well economically? I guess he forgot that NSW is currently in budget deficit (just a small oversight).

Still on argy bargy, there has been much discussion this week about Fairfax which came out with huge advertisements accusing FPC (who publish the Wentworth Courier, Inner-West Courier and the Sydney Weekly Courier) of anti-competitive behaviour. I can inform you that we are under no such contracts and would never ever enter into such an agreement, as in my opinion, it does not allow an agent to offer a balanced perspective on advertising options. In coming years, it will become blatantly obvious to newspaper groups, that they will need the support of agents more than ever before, as property levels will continue to decline. From 2001, Mosman house transactions are down by more than fifty per cent, which points to vendors having to spend less in advertising than in previous years. The June quarter just passed had record sales, with many recording zero advertising expenditure. Let’s hope that all can resolve this matter amicably which will be a great result for all concerned.

Well, it is that time of the year, when I am off for a few weeks to check out property prices in Thailand. This year we are introducing a new format whereby a subscriber will be writing the editions and we are pleased to announce that the next two editions will be written by well known and respected architect, Peter Tout. It will be very interesting to read his perspective on what ever he wants to write about, as the topic of discussion is entirely up to him (no anti-competitive behaviour here) I am sure that this change will be refreshing for subscribers and you will thoroughly enjoy his thoughts and predictions. Cheers ^__^

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14.07.06Robert SimeonNo Comments »

Bobby “Dazzler” Carr may no longer hold the political spotlight – however it is great to see that the W A Chamber of Commerce is still influenced by some of his economic hypotheses. In what can only be described as an extraordinary sequence of events, the “Governor of Moolah” was asked to lift interest rates this week because the WA economy is booming. Obviously, its request was denied although we would suggest to the W.A. Chamber of Commerce that next time it makes such an absurd request on behalf of fellow Australians, it annexes the latest wine review, especially those of the red variety. Our very own “Governor of Moolah” was observed last night spending considerable time at the Cremorne BSW (bottle shop) investigating the State’s appealing fermented juice of the red variety. From a distance, it appeared that the Margaret River was slightly ahead of the highly fancied Perth Hills.

The W.A. Chamber of Commerce has further contradicted itself, as dwelling approvals released this week, identified a fall in W.A. of 8.4 per cent in the month of May. South Australia posted a 34 per cent drop so we can expect its Chamber of Commerce to file for a decrease next month. Rises were recorded in Victoria, up 21.5 per cent, Queensland, up 8.5 per cent and New South Wales, up 6.1 per cent.

At the beginning of a new financial year, part of the Australian culture is to immediately take a vacation. This makes sense if you look at the latest figures from Home Price Guide which indicate that house property prices in the twelve months to July 1, 2006 in Mosman have shown a zero per cent movement. We would expect this to change soon as Mosman, in the month of June, posted an unprecedented volume of top-end sales. The average price for a Mosman house is $1,937,000 with the median price adjusted to $1,700,000. Apartments continue a slow climb, recording a four per cent increase with the average price now being $627,000 and an adjusted median price at $500,000. As we predicted (with some debate) we are of the belief that apartment prices in Mosman have bottomed.

Neutral Bay houses now have an average price of $1,030,000 and the adjusted median price is $995,000. Overall, this is a one per cent change over the twelve month period. Apartments in Neutral Bay fell three per cent with the average now at $520,000 and an adjusted median price of $496,000.

Cremorne appears to be a touch more volatile with the median price dropping eight per cent for the twelve months. The average price for a house in Cremorne is $1,299,000 with an adjusted median of $1,034,000. Apartments, in Cremorne increased by three per cent over the twelve month period with the average now coming in at $606,000 and the median at $509,000.

Last but not least, Cammeray recorded an average house price of $955,000 with an adjusted median of $878,000 which is up three per cent over the twelve month period. Apartments now average $546,000 and the median price is $494,000 which also represents a three per cent gain. These results are pleasing and all but confirm that prices are in a holding pattern and a rise in interest rates would have little to no effect on our property markets. Rather, our markets are more sensitive to merchant bank bonuses which are what prompted the bullish run last month. The key to our market will forever be based on market supply and in Mosman, sales are rapidly declining (compared to activity in previous years). Mosman prices are much like a fine red wine. They get better with age !! Cheers ^__^

7.07.06Richard SimeonNo Comments »