Don’t Worry, Be Happy – 2012 Is Looking Good!

Don’t Worry, Be Happy – 2012 Is Looking Good!

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2011 has been a year of ‘follow the bouncing ball’ and for some it has become an obsession. Our fixation and theories on things beyond our control has lead to short term paralysis! As a result, our long-term judgment is clouded. Our economy continues to track well with miners and households drive recovery as GDP growth exceeds Treasury forecasts. It actually grew 1 per cent in the September quarter and is recording near Asian rates of economic growth on the back of massive resource projects and strong household spending.

This week, we also had valid arguments as to why the Reserve Bank of Australia (RBA) should not cut rates although it makes better sense to read the October RBA – Monetary Policy Decision where the cash rate remained unchanged at 4.75 per cent. Next read the December RBA – Monetary Policy Decision where the cash rate was lowered another 25 basis points from November to now sit at 4.25 per cent. It is quite amusing that the RBA announced it would be effective from 7 December 2011. A bit of trivia: since December 18 1990 – the RBA has cut the cash rate five times and increased it four times at its December meetings.

Silence from our four big banks was deafening until one day after the effective date of 7 December NAB joins ANZ in matching RBA rate cut when (reluctantly) Westpac and the CBA brought up the tail. The reason why? It’s simple: by delaying the announcement to pass on the full interest rate cut, they receive an extra $5.6 million in pre–tax profit for every day of silence. A purely commercial decision (albeit short term) that gives journalists and social media a field day of ‘bank bashing’ that over time, can cause customer revolt.

BUY PRINT

It would not be a complete edition of Virtual Realty News unless we were spoilt by the brilliance of Tim Mooney who is in my opinion one of this country’s greatest photographers. He has made soaring through our skies and capturing amazing photographic images, an art form.

Australia is suffering from shark alarm syndrome. The alarm sounds and swimmers leave the water! The next day they are back swimming without a care. The difference with the economy is that the daily shark alarms are based on assumptions, not sightings.

ANZ shifts to monthly rates review where they are now set to sever the long–standing link between official interest rates set by the RBA and the rates customers pay on their mortgage. This decision questions the relevance of the RBA, if banks are to decide independently, what their cash rate will be. This has the potential to become very ugly and I see ‘bank bashing’ alive and well in 2012. On the one hand we will have bank advertising campaigns of those warm and fuzzy happy family moments and on the other, journalists and social media beating the living daylights out of their reputations. The latter will win hands down!

Funniest online fight of the week goes to Business Spectator when Alan Kohler wrote – Wake up and smell a budget stinker which brought on a reply by the ‘World’s Greatest Treasurer’ Not a shocker, not bozos. The conclusion I drew, is that what Wayne Swan says, bears absolutely no resemblance to what he writes. So Treasury must have written the response. I still believe Alan Kohler is on the money.

So let’s review the Mosman housing market for 2011 as compared to previous years. How do believe it performed, given all the adverse economic commentary. Before you read on, do you think it was up or down?

Source: Domain Property Monitors

    Mosman House Results 2010

  • Total Number Offered – 289
  • Total Number Sold – 233
  • Total Value Sold – $499,283,500
  • Private Treaty – 193
  • Auction – 40
  • Clearance Rate – 25 per cent
  • Mosman House Results 2011

  • Total Number Offered – 307*
  • Total Number Sold – 248*
  • Total Value Sold – $515,676,000
  • Private Treaty – 198
  • Auction – 50
  • Clearance Rate – 29 per cent

*many sales yet to be recorded/registered so this will increase

Let’s now look at the median and average prices.

  • 2010 Mosman House Median Price – $2,250,000
  • 2011 Mosman House Median Price – $2,240,000
  • 2010 Mosman Average House Price – $2,684,319
  • 2011 Mosman Average House Price – $2,658,123

If we go back to the RBA December Monetary Policy Decision, the Governor Glenn Stevens, said “Growth in the global economy has moderated this year after a strong performance in 2010.” So it is interesting to read the Economic and housing predictions for 2012: Craig James. “With the benefit of hindsight it is clear that our economic and financial forecasts were overly optimistic. “ That may be the case however it is not reflective in the 2011 Mosman house sales results.

I can’t emphasise enough that the pulse of our property markets is best defined by weekly sales activity and this week, twenty properties in Mosman found new owners. In mathematical terms, that equates to just 2.2 per cent of Mosman’s 4,900 (approx) houses on the market and that number is reducing on a weekly basis.

Source: Domain Property Monitors

    MOSMAN – 2088

    • Number of houses on the market last week – 118
    • Number of houses on the market this week – 107
    • Number of apartments on the market last week – 111
    • Number of apartments on the market this week – 106

    CREMORNE – 2090

    • Number of houses on the market last week – 14
    • Number of houses on the market this week – 14
    • Number of apartments on the market last week – 30
    • Number of apartments on the market this week – 25

    NEUTRAL BAY – 2089

    • Number of houses on the market last week – 14
    • Number of houses on the market this week – 13
    • Number of apartments on the market last week – 93
    • Number of apartments on the market this week – 89

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

For this week’s open for inspections – Click Here

Steve, Rich, I and our brilliant RWM team, thank you for your fantastic patronage to our Richardson & Wrench Mosman & Neutral Bay (RWM) business model. Our subscriber sales sit on $1,024,767,720, the Australian record for real estate online sales. It has been our absolute pleasure to have you join us each week, in what has been a most turbulent year.

However, I don’t believe our property market can compete with the expected turbulence in Canberra in 2012, with Julia Gillard and her totally incompetent government at the forefront. Kevin Rudd will challenge, so expect some amazing theatrics where self-preservation will come to the fore!

2012 will be our twelfth year of Virtual Realty News.

Have a relaxed and fantastic Christmas and New Year.

Merry-Christmas

My final Virtual Realty News thought for 2011. What a pity our economy doesn’t grow as fast as our children!

Virtual Realty News will return on January 20, 2012.

Cheers ^__^

13 Responses to “Don’t Worry, Be Happy – 2012 Is Looking Good!”

  • Ann says:

    Robert & Team,

    Merry Christmas and Happy New Year. Thank you for your outstanding synopsis of what is happening each week.

    Hope you have a great break in your Honorary Mayoral role in Thailand!!

  • Ann says:

    I do hope we get some changes and then stability in Canberra, so consumer confidence can rise. We are having a good year, but its not steady, up and flat like a yo-yo!!

  • Warwick Kent says:

    Robert – sorry you seem keen on supporting the bank bashing mob. Suggest you have a look at the Business Section in today’s Australian, particularly Matthew Stevens’ commentary. The ANZ media release and attachments (http://phx.corporate-ir.net/External.File?item=UGFyZW50SUQ9MTE3OTY3fENoaWxkSUQ9LTF8VHlwZT0z&t=1 ) also explain the problems facing the major banks. The minnows don’t have to face the issue because they are not dependent on offshore wholesale funding which is where the problem lies. If that source is cut off, lending will dry up and so will housing sales.

  • Gordon says:

    Good point, Warwick. Interest rates are important in the residential property market, and a 25 basis point cut makes some difference.

    But an economically more significant measure is the business borrowing rate delivered by the retail banks, and here they have made up most of the interest margin they partly surrendered on house loans as the cost of funds increased.

    The banks have been able to get away with high business interest rates almost unnoticed by the media and the politicians, whose attention is solely on the headline home loan rate. Needless to say, high rates strangle the ability of businesses to be competitive and expand during a time of slowing employment.

  • Hotly Spiced says:

    But where’s the Christmas video with Elvis and the out-of-time dancers???

  • You would also notice that credit card rates are not up for revision until February 2012. I hear what Warwick and Gordon are saying and I agree 100 per cent. The problem facing the Big 4 – is their inabilityto respond to a RBA decision within an acceptable time frame. I have never before witnessed such aggressive (and damaging) *bank bashing* as was witnessed last week on Twitter.

    Whilst it bears no resemblance to the Kyle Sandilands (Vile Kyle) trending on Twitter this constant public bashing brought about all the sponsors on the show withdrawing their support on his show.

    The public now know very well aware that aggressive social media campaigns on Twitter do get results as the banks monitor these aggressive trends – this was also a contributing factor for the banks to follow – suit and drop their rates by 0.25 per cent (after days of fence sitting.)

    They knew their position well before last Tuesday yet it took 48 hours to act? In short they were assessing what the public forums were saying and that (based on previous decisions) was an absolute no brainer!

    This consumer sentiment won’t change in 2012 either – the banks very much need to improve their social skills.

  • Robbie Mac says:

    Dear All

    A very safe, happy and festive season to you all.

    The ANZ’s move to manage their interest rate announcements on the second Friday of every month is one of the smartest moves from our banking industry in many a long day. For way too long the general public has linked the RBA’s behaviour with the actions of their retail bankers. There is certainly a relationship, but it is not a perfect correlation by any means, and this association is largely of the retail banks own doing. So, smart move by the ANZ. They have achieved many things with this move:
    No commentary on the unknown timing of announcements – that is now certain;
    They were the first to do it, so they gain kudos for breaking from the perceived banking oligopoly;
    Even if the others follow, the ANZ will be seen to be the leader, and so long as they are smart, this will be good for their brand, and in turn, their business; and
    It breaks the nexus with the RBA’s announcement, thereby giving themselves scope to market on their own terms.

    It would appear to be the first step in a strategy to move the general public’s discussion from the interest rate margin to the real interest rate itself. I reckon most people would be aware of the 25 basis point cut, but very few could nominate which bank of the big four has the lowest standard variable rate. It also means that at their rate announcement, ANZ can also swing the discussion to other interest rates, such as credit cards and business rates, which currently have very low visibility. Again, they are setting the agenda. It will be fascinating to watch how it plays out.

    As to the market – more of the same really. Real estate largely flat (which I think was my prediction earlier in the year when the question was asked), so no surprises there (despite the doomsdayers). Growth and sentiment both patchy, with clear data at the macro level but mixed messages at the micro level. The Fairfax development of a Wellbeing Index could also be very timely, as it may reflect some of these subtle differences.

    2011 has been a challenging year, and I look forward to seeing the back of it. All the best for 2012 – may it be bigger and better!

    Regards

    Robbie Mac

  • Ann says:

    Hotly Spiced,

    I think the Christmas Video got culled, by the Grinch!

  • Ann says:

    Looking forward to VRN return TODAY!!!!

  • Not today – next Friday 🙂

  • Ann says:

    Thats an extra 7 sleeps to wait……… You have a heap to write on this week, so next week better be a bumper edition and come out on Australia Day!!

  • Ann says:

    Now next Friday. Robert, this is like Swan’s surplus – next year, no the one after!!

  • Ann says:

    Has to be a BUMPER issue next week. So much to talk about, not enough space.

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