A bitter pill! Or a case of money to make in the thrill?

A bitter pill! Or a case of money to make in the thrill?

It has been some considerable time since businesses had to closely scrutinise their respective market positioning. Despite all the doom and gloom, many hi-tech real estate agencies view the current landscape with excitement given the strong possibilities that previous marketing initiatives may require modification if consumer spending continues to decline. The Westpac – Melbourne Institute consumer sentiment index dropped again to 6.7 per cent this week, which is the lowest level recorded since January 1992.

In the past year, consumer sentiment has fallen 34.6 per cent and is now being compared to 1990 (yes, the recession). On a brighter note however, in 1990 our economy was totally reliant on paper and 18 years later, although we still use paper, we have ‘online’ too. In a month (or two) we will be rolling out what we consider to be the most innovative online business because when markets start to change so do business strategies. It is imperative that businesses move with the times and with the focus on consumer eyeballs, this includes paper and online.

The latest data relating to new mortgages identified that just 52,006 people signed on the dotted line in May – the lowest number since October 2004 (the fourth consecutive monthly drop). The negative commentaries overall, are not a bad thing because the markets need to consolidate and this is exactly what we are seeing with property. Mid-August will define the property markets and it will be compelling viewing all the way through to Christmas.

Just as interesting are the many vendors who boast that they purchased their property in the last recession and over the last 18 years, have watched their asset double, triple and then quadruple in value. We certainly don’t expect in the near future that property prices will halve in price as they did in 1990 – 1993 and only a very brave person would forecast 50 per cent declines for our demographic markets.

Our prediction through to June 30 is no capital appreciation with the potential of five to ten per cent swings both up and down, depending on market sentiment and data reporting. Obviously a key indicator will be the volume of property available (currently declining) and we don’t foresee a mass exodus in the upcoming Spring/Summer markets.

RP Data and Rismark International recently revealed that property prices have defied expectations through to the March quarter of 2008. Just as interesting is that our sales evidence through to the June quarter of 2008 identified that our market was well balanced with no significant declines recorded – hence our confidence in our markets. RP Data and Rismark International in their Capital Snapshots said that house values in Sydney have dipped 1 per cent so far this year, and units are down 1.5 per cent. But RP Data said the market is volatile, with values down one month and up the next. RP Data is predicting affluent areas in Sydney will turn around quite strongly by Spring next year, and prices in Western and South Western Sydney are not likely to fall much further.

Obviously, our chronic housing shortage is playing a major role in this equation while building approvals continue to decline. The Australian Industry Group – Housing Industry Association performance of construction index rose 3.4 index points in June (the good news). For the fourth month in a row, the index remained below the key 50 – point level which separates expansion from contraction (the bad news).

So building construction remains on the decline and our economy is experiencing record immigration. This simply identifies that property prices will hold their own and rents will continue to skyrocket.

Petrol, food and rents are (collectively) keeping inflation at record highs and the Federal Government is conveniently hiding behind the distraction of the carbon emissions trading scheme. Whilst this is important, there is a very strong argument that addressing consumer confidence and inflation are significant issues that require immediate attention.

Throw in the decline of building construction, record immigration and population growth and the silence is yet another golden moment in leadership direction or, a glowing lack thereof. Cheers ^__^

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