Why clearance rates aren’t clear

Why clearance rates aren’t clear

I’ve always liked the saying “It isn’t difficult to make a mountain out of a molehill – just add dirt.” The focus on clearance rates by some commentators is plain ridiculous especially when they insert the word “Sydney” into the clearance rate debate. As we all know Sydney is made up of some 700 suburbs – where some are still performing above expectations and some are caught in a downward spiral. This is not an historic first as we have seen this pattern on many occasions previously with the areas of western Sydney, north – west Sydney, Canterbury Bankstown and surrounding areas the hardest hit. These areas coincidentally have been the engine room for the Sydney property boom so they were always going to break – down. This is not a collapse rather a correction.

If you take the areas within a 5 to 10 kilometre radius of the Sydney CBD they are still performing with gusto – here is my point. Although it should also be noted that quite a few properties are withdrawn from public auction which go unreported. Properties that are passed in and sold an hour or two later are reported as sold – at – auction.

When I do a Domain search for properties in Greater Sydney that are on the market I see all up there are presently 12,922 properties, which isn’t a lot on the grand scale of things. The estimated Sydney population in 2015 is 4,840,000. What is interesting is that approximately one – third of these properties would be set down for public auction. So why the focus on clearance rates?

The_Spit_Sydney_aerial_Photography

SYDNEY AERIAL PHOTOGRAPHY

What I find even more interesting is why all the properties are bundled together? Well that’s easy to explain as most of the commentators are connected to some media organisations in some shape or form. If they were to list areas where clearance rates are identifying a nose – dive then nobody would advertise in those local newspapers, so it’s commentary by self-preservation.

Yes the call for concern is well justified with Sydney posting an annual growth of 12.8 per cent and Melbourne even higher at 15.6 per cent. To put this into some sort of perspective Auckland is presently running away at 27 per cent annual capital growth – which is scary.

There are two game – breakers in property markets; interest rates and unemployment. The Australian Bureau of Statistics have just released its labour force survey for October which recorded that the seasonally – adjusted unemployment rate fell to 5.9 per cent, down 0.3 points from September. We live in a funny society where some sections were desperately hoping that the unemployment figure would rise.

Now the interest rate scenario is even more interesting as we need to take into account that the Sydney property market has experienced a massive change to its normal landscape. We need to factor in the new significant buyer – investors. They have been driving the markets to levels never seen before, so we need to pay particular attention to yields. Sydney 12 months ago was recording 3.7 per cent, today it has dropped back to 3.3 per cent. Melbourne 12 months ago was 3.3 per cent, today it is 3.0 per cent. Brisbane 12 months ago was 4.5 per cent, today it’s 4.4 per cent. Adelaide has seen no change and sits at 4.2 per cent and Perth has gone from 4.1 per cent to 4.0 per cent. (Source: Core Logic RP Data)

From these figures the two biggest investor markets, Sydney and Melbourne, are not surprisingly recording the highest downward corrections. Yields in 2016 will command special interest especially in the Sydney and Melbourne property markets. The cash rate debate is anyone’s guess where if the Reserve Bank of Australia decided to cut the cash rate there are absolutely no guarantees that the banks will pass that cut on after their last decision to increase interest rates.

Yes I have no doubt that we will see some interesting corrections in 2016 where I predict the areas that have experienced massive infrastructure expenditure to suffer the most. This is not anything new as it’s happened plenty of times previously, although some areas of Sydney have not seen any infrastructure expenditure in over fifty years. Take the northern beaches for example where their last significant expenditure was that dumb Spit Bridge in 1959.

If one was to sit back and collate all the stamp duty paid from Palm Beach to Seaforth over the last 56 years you would come up with a near nil return for infrastructure expenditure. Still the state government insists on thousands and thousands more high density housing developments with no proposals to build new transport plans aside from double – decker buses.

Maybe stamp duty rates should be determined by infrastructure expenditure within a particular region?

MOSMAN – 2088

• Number of houses on the market this time last year – 114

• Number of houses on the market last week – 75

• Number of houses on the market this week – 74

• Number of apartments on the market this time last year – 76

• Number of apartments on the market last week – 60

• Number of apartments on the market this week – 61

CREMORNE – 2090

• Number of houses on the market this time last year – 13

• Number of houses on the market last week – 12

• Number of houses on the market this week – 13

• Number of apartments on the market this time last year – 36

• 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 – 6

•Number of houses on the market this week – 5

• Number of apartments on the market this time last year– 34

• Number of apartments on the market last week – 30

*Number of apartments on the market this week – 36

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Source: APM Price Finder

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