DOCTOR DOCTOR – GIVE ME THE NEWS !!

DOCTOR DOCTOR – GIVE ME THE NEWS !!

Many remain dumbfounded by the Reserve Bank of Australia’s (RBA’s) decision to increase the cash rate to its highest level since 1996. It appears that the Australian economy is running in a different direction to the rest of the world. This is the eleventh consecutive interest rate increase by the RBA and combined with last month’s independent rate increase by the banks, many property markets now face an explosive time in terms of foreclosures. Mosman on the contrary, is moving in a totally different direction with house sales in 2007 returning the highest ever average prices.

At this point in time it would appear that the RBA is more focussed on the curtailing of spending in our economy, otherwise known as tightening monetary policy. Just as intriguing, while the central bank is tightening the purse strings, the recently elected Rudd government intends to flood the economy with $30 billion plus in the form of tax cuts. A classic case of one foot on the brake and the other on the accelerator (adjust your seat belt). The US Fed is busily reducing interest rates based on global growth rates (which currently are in reduction mode) and these financial markets today, are as volatile as they have been for quite some time.

The RBA recognizes the critical condition of inflation which needs urgent surgery, despite the fact that our economy is bathing in its 17th year of economic growth. The JP Morgan/Fujitsu report which is due for publication next month, estimates that 750,000 homeowners will be diagnosed (Dr. Bank) as suffering from acute mortgage stress in the early part of 2008, with 35 per cent of their income being channelled to their respective mortgages. The Real Estate Institute of Australia (REIA) announced that Australians spent 37 per cent of their family income to cover their property loan in the September quarter of 2007. This was the highest ever recorded increase since the REIA started measuring housing affordability 22 years ago. Of the 750,000, it believes that as many as 300,000 are in critical condition. The prognosis of (Dr Bank) is that they are inoperable and mortgagee-in-possession sales could reach a staggering 6,000 per week. With property markets today we have the good, bad and ugly. Mosman remains one of the strongest performers in the good – category.

The latest Census data revealed that in the twelve month period to August 2006, just five per cent of interstate migrants 65 and over moved to Queensland. However, 23 per cent of interstate migrants to Queensland were aged between 25-34 years, compared to 13 per cent of the incumbent population. Interstate migration added 623,378 people to Queensland’s population in the two decades to 2006/2007. Of the new white shoe brigade, NSW accounted for a staggering 58.1 per cent of those headed north of the border. It would be fair to suggest that a large percentage of those migrating, have moved from the struggling property markets in Sydney’s South West.

This week, the Australian Bureau of Statistics announced that building approvals fell by 16 per cent in December. In simple terms, as our population increases we are building fewer properties which confirms that the strongest accelerant of inflation (being rents) will play a major role in 2008. What resonates day in and day out is that investors have been taxed out of property markets.

It is early days to get an exact position on the Mosman property market in 2008, but we remain very optimistic, considering that the first two open house inspections in 2008 saw 63 couples inspect one home and another 36 couples inspect the other. No doubt the announcement by Macquarie Bank that its profit for the year ending in March would be at least $1.8 billion (up 23 per cent from the previous year) will bring a smile to the faces of many Mosman vendors given that a majority of the “factory” workers reside in Mosman.

With that type of news, the Mosman post code has plenty to cheer about ^__^

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