The bubble, the bureaucracy, bungles and no vision

The bubble, the bureaucracy, bungles and no vision

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Yes, an apt description for our property markets on the east coast of Australia today. We keep reading about Australia’s housing affordability crisis, the almighty property bubble together with our massive household debt with very little said as to what caused this and how do you fix it? A subject our politicians refuse to discuss in any detail despite being complicit in causing the problems that we see today.

The problem at the moment being that Australia has approximately 10,000,0000 dwellings with a value nearing $6.000 trillion with the majority wanting to live on the east coast of Australia. To try to add some perspective nobody was talking about housing affordability eight years ago when we were battling the Global Financial Crisis (GFC) where home values fell 30 per cent and unemployment was the market enemy. The cash rate was sitting around 7.25 per cent where today as a result of the GFC it now sits at 1.50 per cent and headed lower.

According to the Australian Bureau of Statistics (ABS) – at 30 June 2009, the estimated resident population of New South Wales (NSW) reached 7.13 million people, representing about a third of Australia’s population. NSW experienced the largest population growth of all Australian states and territories, with an increase of 119,500 people since June 2008. The NSW growth rate of 1.7% in 2008-09 was higher than the average annual growth rate of 1.2% for the five years to June 2009.

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SYDNEY AERIAL PHOTOGRAPHY

Now fast forward to 2016 where the population of Sydney will hit 6.00 million people with pretty much the same traffic infrastructure when we look back to 2008. This would probably explain why our elected politicians make real estate a no go territory.

There are two significant markets in Sydney – the traditional place of residence and the investment/negative gearing/off – the – plan/foreign buyer markets. Now we need to add some perspective to these markets in that the investment/negative gearing/off – the – plan/foreign buyer market is now into over supply territory. The good news from that is that rents will significantly come down in the areas of oversupply. The bad news is that values will also come down as this is historically what happens when supply far exceeds demand.

Now when we look at the traditional markets which are in historic under-supply, if we take Mosman for example where in total there are approximately 16,905 properties and 106 properties on the market today, three years ago there were 190 properties on the market. Mosman has 5,813 houses with just 59 available for sale and 9,075 apartments with 47 available for sale according to RP Data. You can’t have values going down when you have an under-supply together with steady employment. It has been well documented that rising unemployment and an oversupply of stock are the drivers for price corrections.

Across Sydney today we are watching house prices spiraling upwards to levels never seen before due to record low stock levels. So why record low stock levels with a record low 1.50 per cent cash rate? Well that’s because stamp duty is now at record highs and households are refusing to pay $200,000, $300,000, $400,000 etc, house fines in the form of stamp duty. Instead opting for Plan B which is to renovate the existing house.

So there are two alternatives;
1. Significantly reduce the stamp duty formula and we know that won’t happen even though this tax was supposed to be removed when the GST was introduced in 2000.
2. Embark on a massive unprecedented transport infrastructure spend for Sydney and we know that won’t happen either as governments are crying poor. With money at the cheapest levels ever it would make sense to get Sydney moving by linking Newcastle/Gosford with a very fast train to Sydney and Wollongong and the Southern Highlands to Sydney as well as the Hunter Valley.

I find it quite embarrassing that Australia’s elected politicians have no answers nor vision. Rest assured this will happen one day when an opposition party starts talking infrastructure on a massive scale.

In the meantime, traditional property prices in Sydney won’t be coming down any time soon.

MOSMAN – 2088

Number of houses on the market this time last year – 64
Number of houses on the market last week – 54
Number of houses on the market this week – 59
Number of apartments on the market this time last year – 60
Number of apartments on the market last week – 40
Number of apartments on the market this week – 47

CREMORNE – 2090

Number of houses on the market this time last year – 10
Number of houses on the market last week – 8
Number of houses on the market this week – 9
Number of apartments on the market this time last year – 22
Number of apartments on the market last week – 17
Number of apartments on the market this week – 16

NEUTRAL BAY – 2089

Number of houses on the market this time last year – 10
Number of houses on the market last week – 10
Number of houses on the market this week – 9
Number of apartments on the market this time last year – 33
Number of apartments on the market last week – 25
Number of apartments on the market this week – 24

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

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For this week’s open for inspections

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Source: pricefinder

One Response to “The bubble, the bureaucracy, bungles and no vision”

  • Ann says:

    Yes Robert you are correct. They keep building two lane partially connected “Freeways”and then we are up for 5 x the cost (and massive disruption) to make them 3 lanes later, when they should be 4 lanes from the start. With very fast trains been around and getting better for many many years and great tunneling technology its a no brainier. Coastal shipping with roll on roll off, is another solution to trucks clogging roads. Then having synchronised traffic lights…..

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