ECONOMISTS, AGREE TO DISAGREE!

ECONOMISTS, AGREE TO DISAGREE!

As they say, “the easiest way to start an argument these days is to get two economists together”. ‘The Economist’ ran an interesting story last week predicting a global fall in property prices, based on the theory of “I know boats”!! Once again, we see the supposed property bubble being blown up or blown out of total proportion again. The simple truth is that nobody can predict the future, so I will offer this little one about the property market, ‘it has to rain, before we see another rainbow’.

The Sydney Morning Herald journalist Stephen Bartholomeusz, gets a gold star for his interpretation on this latest AOMD = Article of Mass Destruction. Mr Bartholomeusz correctly identified that many ingredients make up the property industry, and the only sector of the market that could cause concern is that of the investment market. Given that the ‘Governor of Moolah’ has decided to leave the cash rate target at the same level for twelve months, it appears that our economy is trading well au naturel!!

We have always grown up looking at statistics, personally when I was a kid I was only concerned about Racquel Welch and her vital statistics. If you look at the statistics published this the week, you will see that the average price for a home in Mosman for the twelve months to April was $1,776,001. This figure is down by a life threatening $9348 from the previous month where it peaked at $1,785,349. Does this mean that the value of a home is easing back? It certainly does not! It means that more, less expensive homes were sold during this period, and this does not include private treaty sales. On the other hand, The Mosman Daily excelled itself again this week, when they ran a story headed “Mosman Slips in Price”. One does not have be a brain surgeon, to identify that in 2003 the market has been tight with properties, hence 49 properties were sold in the Mosman area with an average price of $1.19 million. Now here is the funny part, they are comparing it to the December quarter, which recorded 56 homes sold for an average of $1.5 million. Nothing ever happens in January, and these figures do not include private treaty sales, nor those where the vendors place a confidentiality statement on the sale price. In this period we sold a home in Burran Avenue for $9.5 million, and another in Hopetoun for $6.00 million, neither were used in the calculation!! Also, that does not include another six homes we sold greater than $2m that escaped the system. Great to see the asylum is still running true to form. Even more amazing is that some agents believe these figures, and some are telling vendors to cash in now before it is too late.

We won’t see a market like 1991-1993. I well remember when I watched “60 Minutes” some years ago, a National Party Senator in Queensland said, the definition of recession is when your neighbour loses his job. The definition of depression is when you lose your job, and the definition of recovery is when Paul Keating loses his job. The property industry is so much smarter today, and the property dynamics are changing right before our eyes. What is evolving is that we are seeing certain months where campaigns will not be run, due to public holidays and school holidays. April was a classic example with Easter, Anzac and school holidays taking up most of the month. July has school holidays from the 5th to 20th, so that month would also not be recommended as a great month to run a campaign. What we will see is more private treaty and Internet marketing of properties, and again this week, we proved the power of our Internet business. We listed a property at 123 Middle Head Road, which was a failed auction with another agency and what they could not do in eight weeks, we managed to do it in 48 hours!! So you can guess how happy the vendors are.

We are more concerned about working the property market, as against those who are fraudulently using statistics to bring the market down. Afterall, “an economist is a man who figures out tomorrow why the things he predicted yesterday, didn’t happen today”. The property market today is transparent, however some never let the facts get in the way of a good story. Statisticians prefer to work with confusion, as against conclusion, and Raquel Welch never looked better!! Cheers and clink… ^__^

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