2012 – How Low Can They Go?

2012 – How Low Can They Go?

 

Welcome back to Mosman’s number one real estate blog and it just happens to be our twelfth year of market critiquing and reporting!   It is imperative to note that as an agency we don’t deal the cards – we play the hands that we are dealt.

With so much happening, it is somewhat difficult to know where to start unpopularity contest has Abbott as winner with Julia Gillard and Tony Abbott neck- and–neck as Australia’s most unpopular leader. Will Julia Gillard survive the year? Unlikely !  My guess is that she’ll be out by June 30 which  mirrors the image of NSW Labor who played ‘pass the leader’ before the March 2011 annihilation.

Two economic lunatics unleashed their opinions Jordan Wirsz: Bloodbath to hit Australian real estate when he predicted Australian property could crash by more than 60 per cent. This was quickly followed up by perennial house cellar dweller property prices to fall 20% by 2013 year’s end: Steve Keen. I will get onto these two later: suffice to say they are not the only ones who have absolutely no idea.

Enter the “World’s Greatest Treasurer”, Wayne Swan, who constantly contradicts economic common sense to the extent that he is embarrassing every time he adds a commentary.  Stephen Bartholomeusz summed it up quite eloquently when he wrote on Business SpectatorSwan’s blind bank bashing “already a chorus of like-minded bashers is forming behind him and taking pre – emptive pot shots at the banks even before there is a anything to shoot at.”

BUY PRINT

Welcome back -Mr Mooney at his brilliant best again – 2012 will be a cocktail of sunny skies and inclement business/consumer sentiment. I see more skies of blue for the Mosman markets and in our opinion prices have well and truly bottomed.

The Reserve Bank of Australia (RBA) is well aware that the funding by Australian banks is under great pressure as a result of the global financial crisis. Wayne Swan obviously believes that money grows on trees Bartholomeusz wrote “while the majority have, with the help of risk – averse depositors, done a very credible job since the onset of the global financial crisis of reducing their dependence on offshore sources of funds, and short term funding from offshore in particular, they still have an offshore term funding requirement of about $100 billion this year. About 20 per cent of their overall funding is sourced offshore.”

So how low will the RBA cash rate go in 2012? My tip? Three rate reductions that will see the cash rate sit at 3.25 per cent by the end of the year.  On April 9 2009, the RBA dropped the cash rate to 3.00 per cent so I can’t see it dropping below that. We need to remember that in Australia, approximately one third of households rent, the other third have a mortgage and the final third own without a mortgage.

So let’s look at what interest rates are doing in the USA and the United Kingdom – the answer is simple zero.

I laughed when I read Jordan Wirsz’ critique of the Australian real estate market which predicted a 60 per cent home value capitulation.  It just can’t happen (unless we have a nuclear war). Three years ago the American property market was so weak, the US Federal Reserve cut the official interest rate to zero. This week it announced that it plans to keep interest rates at near zero until the end of 2014.

Then we have the United Kingdom which will host the 2012 Olympics. It should be noted that every country that hosts an Olympics goes into recession. The exceptions to the rule have been Atlanta, USA, Sydney, Australia and Beijing, China.  I can’t see the United Kingdom joining this elite club when it too, has a zero interest rate and even more debt thanks to an Olympics. Barcelona, Spain and Greece have never recovered from when they hosted the Olympics.

At this juncture, I have Steve Keen and Jordan Wirsz leading the Australian real estate markets Dumb and Dumber Award and this is just our first edition for 2012. Nothing more than a cry for attention.

So how did the Mosman market fare in 2011? We will cover that in next week’s edition.

Source: Domain Property Monitors

MOSMAN – 2088

• Number of houses on the market December– 107
• Number of houses on the market this week – 102
• Number of apartments on the market December – 100
• Number of apartments on the market this week – 112

CREMORNE – 2090

• Number of houses on the market December – 15
• Number of houses on the market this week – 18
• Number of apartments on the market December – 20
• Number of apartments on the market this week – 17

NEUTRAL BAY – 2089

• Number of houses on the market December – 12
• Number of houses on the market this week – 13
• Number of apartments on the market December – 79
• Number of apartments on the market this week – 66

Over the break the number of Mosman houses on the market dropped to 83 and peaked on November 10 with 168. We don’t expect to see the number of houses on the market go much higher than 120 in February – it will be a very tight trading market in the first quarter of 2012.

For this week’s sales in Mosman real estate, Beauty Point real estate, Clifton Gardens real estate, Balmoral real estate, Cremorne real estate, Cremorne Point real estate, Neutral Bay real estate, Cammeray real estate – Click Here

For this week’s open for inspections – Click Here

Dysfunctional politicians will share the limelight in 2012.  As well, we have a Carbon and Mining Tax being introduced from July 1. The Poker Machine pre-commitment has been axed which should not come as any great surprise.  It was never going to see the light of day!

The polls will be fascinating, with many wondering just how low the Prime Minister’s approval rating can fall.   I’ll have a go and tip 24!

Great to be back and we’ll  go all the way to December 14.  Thanks for joining us again.

Cheers ^__^

 

5 Responses to “2012 – How Low Can They Go?”

  • Robbie Mac says:

    Happy New Year to all!

    2011 was very much a year in a holding pattern, but already I see signs 2012 will have more energy, thankfully.

    Two things that I note with interest:

    US property. Signs of life, and people starting to think the worst is over, which means opportunity for those with some cash and an appetite for risk, coming from both US based and foreign investors. I think we’ll hear a lot more about this throughout the year; and

    Local housing supply. By all measures, Australia has a housing shortage. Certainly, the geographical demand doesn’t always match supply, but overall this demand is one of the reasons why it is reasonable to expect a floor under prices, before even taking into account other factors such as desirability and quality of life. However, the supply side is messy, with government policy confusing and conflicting, developers struggling, and house builders operating in a fragmented market, unlike similar foreign markets. However, and this is where it gets interesting, there is movement behind the scenes not only in the provision of more land, but releasing that land, AND being able to build sustainable, well designed homes on that land quickly and with scale. Stay tuned.

    As to the political landscape, and its effect on real estate, it’s really more of the same isn’t it? State politics has settled, so the next milestone is the QLD election, with the result of that possibly having consequences at a federal level. Until then, more of the same.

  • Thanks Robbie – I agree one hundred percent. You left out Steve Keen and his predictions which like all those before get a big X and that’s a cross not a kiss 🙂

  • Hotly Spiced says:

    Great to have you back from an extended break Robert. I think Gillard’s days are numbered too and I’ll be glad to see her go because I don’t think Sydney has seen a day of sunshine since she moved her belongings into Kirribilli house.

  • Ann says:

    Hi Robert, welcome back.

    Yes, you give her to June 30, I would say April 30. They may wait until after the Queensland elections.

    Interesting that the DOW is within 10% of its all time highs, and 93% of its GFC low.

    The Australian market has inbuilt soverign issues.

  • Ann says:

    Interesting that 2011 was the worst years for jobs growth in Australia since Keating in 1992. So much for the Swan “stimulus”.

Leave a Reply

Your email address will not be published. Required fields are marked *