A TAD OVER RATED!!!

A TAD OVER RATED!!!

Week after week we hear that residential real estate is too expensive and the dream of owning a home is no longer a reality for some. Then throw in an interest rate increase and revelations that in many areas property prices will fall. Hello – we all know that the cash rate target is not fixed. We also know that each month economists debate the likelihood of further increases or decreases (the last being -0.25 on December 5, 2001). So it should not come as a significant shock that that we have had nine increases over the last six years. It would also be fair to suggest that the majority of home owners have done exceptionally well from real real estate over the last six years – one should remember to never let the facts get in the way of a good story.

In real estate we tend to shoot first then start asking questions. Warren Buffet once said that when the tide goes out, you find out who has been swimming naked. Only in some isolated areas are we actually seeing any skin. In the June quarter 2007 the Australian Bureau of Statistics (ABS) revealed that Australian house prices actually rose by 3.2 per cent. In the year to June 2007 the actual house index increased by 9.2 per cent (we had two +0.25 rate increases over this period). While there is speculation that some economists believe that the latest rate increase will dampen house price growth in the coming months, one should remember that real estate is actually a long term hold.

The ANZ Australian Property Outlook was released this week and the report identified that our housing market is in “crisis point”. The report identified that house price growth is accelerating again with rental growth continuing to climb and new building continuing to remain on anti-depressants. The reasons being, that local and state governments have complicated and excessively taxed these markets to such a degree that they are simply no longer a viable proposition. Already this year we have seen that major companies have moved out of the residential markets in pursuit of commercial markets which remain a star attraction for superannuation funds.

Sydney’s residential vacancy rate still remains tight with July posting just 1.4 per cent availability according to the latest figures released by the Real Estate Institute of NSW. However, we are starting to see investors return to our markets, acquiring property for their superannuation funds. This is a strong sign, however if we are not building any new projects these markets will continue to remain stagnant. Of course governments at all levels, refuse to accept any blame for this even though the buck ($$) stops with them. They are the very reason why these residential markets are no longer seen as financially viable.

So now we commence the peak trading run for our residential housing markets (to Christmas) and if previous months are anything to go by, we can expect to see Mosman houses surge further ahead. According to Home Price Guide, for the period 1 January 2007 to 9 August 2007, Mosman has recorded 255 house transactions. This indicates that the markets are powering ahead with a figure anywhere near 500, pointing to a boom. So far this year the highest recorded sale in Mosman was a Julian Street waterfrontage for $12.300 million and the public auction clearance rate is 76 per cent. In total there have been recorded sales of $574,069,000 so definitely not a market for the faint-hearted. We predict that Summer will identify even stronger markets (especially at the top end) given the amazing amount of money still being offered across the market places. Just this week, an Eastern Suburbs waterfront sold for $28 (something) million which is a new Australian record. In Mosman already this year, a vendor rejected a $50 (something) million offer for his/her home. This identifies just the beginning of these staggering property acquisitions. It will only be a matter of time before the Australian residential record for a home is smashed beyond comprehension.

Many thanks to Peter Tout for filling in over the past few weeks and with great feedback. It is always interesting to read a different perspective. Cheers ^__^

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