Recent reports of a collapsing property market in Sydney’s west and south/west, prompted the Reserve Bank to publish a report offering its slant on the reasons for the current carnage. Naturally, its “rose coloured” glasses put the main blame on a glut of new investors who entered the market at the worst possible time – just before the peak. In an article that appeared this week in “How the housing bust went west”, it draws some interesting conclusions. However in my opinion, the graph published below provides a more telling tale.

Source: Reserve Bank of Australia

Until recently, television stations bombarded viewers with property reality auction stories which today, appear to have been ‘boned’. In 2001 the Reserve Bank started reducing interest rates with five rate reductions that allowed home owners to “keep up with the Joneses”. At a rate of 4.25 per cent it made great sense to buy a piece of Australia as television stations attempted to brainwash the viewers on a weekly basis.

“But this Sydney property story began a decade ago in a very different part of town. The Reserve Bank’s figures show that between 1996 and 1998 the most expensive fifth of Sydney houses – mostly in the north and east – rocketed 50 per cent in value while the cheapest fifth hardly moved. But as the boom matured, more and more suburbs were swept up in the frenzy.

Between 2001 and 2003 (please refer to the graph that I guess I was not supposed to show) the cost of Sydney’s cheapest housing was rising as quickly as that of waterfront mansions. In those heady years, the lowest fifth of Sydney properties doubled in value. Even as prices for homes near the harbour and on the northern beaches started to come off the boil, prices in the least expensive suburbs kept rising”.

Many would suggest that 2001 was a year that fuelled the property markets with low interest rates as the markets continued to gain momentum. More and more started to play a game of real life monopoly with the dream of ending up on Park Lane or Mayfair. It seems that the Reserve Bank may, quite simply, have forgotten that they were the ones actually rolling the dice.

“In 2003 nearly half of all housing loans went to investors and the Reserve Bank’s figures show a big proportion of them lived in western and south/western Sydney”. What a coincidence! Michael Caton spent most of his time in these very same areas!

It seems for the moment, that the days of Mosman’s seventy five to eighty per cent auction clearance rates have disappeared. This is due mainly, to agents who (to get listings) over-value properties as the competition intensifies, due to acute shortages. Whatever the market, purchasers are well-educated, hence the drop in clearance rates this week, by nearly fifty per cent.

It will be a very interesting Summer, and it won’t just be property prices that everyone will be watching. Fairfax launch its much awaited renovated Saturday Domain this weekend to be followed by some very smart online initiatives. What remains to be seen is will it become a best seller and change the path of real estate advertising expenditure? Nothing ventured – nothing gained !! Cheers ^__^

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