Markets move in mysterious ways and the mystery in the Mosman market is the increasing volume of off–market sales. Already this year Mosman has posted two $8,000,000 plus sales and this week we set a new suburb record with another off–market sale (and it was not Balmoral). At this early juncture in the market, it is well documented that property volumes of houses are well down on previous years. What happens in these markets is that agents adopt a ‘chip and chase’ mentality where they bait unsuspecting vendors with offers they can’t refuse. By closely examining the double digit sales ($10,000,000 +) you will see that a certain pattern is evolving which all but confirms the strength of the market. We stated just weeks ago, that property niche markets that are fortunate enough to possess a top end, should enjoy continuing success in 2006. Mosman has posted eleven top–end sales, the first being in 2001 when a Hopetoun Avenue property sold at $15.500 million and still holds the record (RWM sale). The second double digit sale took place in 2003 when a Middle Harbour waterfront took membership of this exclusive club (we posted the first two sales). In 2004 there were four more debutants and in 2005 another four sales which coincidently were the 2nd, 3rd,4th and 5th highest sales ever recorded. It is interesting to note that out of the eleven double digit sales in Mosman, four have been sold quietly without advertising. At the end of this quarter, we expect a few more residences to join this exclusive club.

It came as little surprise that figures recently released, indicated that new building works are decreasing, with the market posting the biggest decline since June 2003. The interesting point is that thus far, nobody has attempted to shed any light as to why. We believe new building works continue to decline for two reasons. Firstly, the property markets have been moving steadily since 1995 and if you take a suburb like Mosman you would observe that over that time the vast majority of homes have changed hands. Renovations have taken place and now property owners are enjoying their new abodes. This is highlighted by the fact that house volumes continue to decline, and the advertising budgets for the leading agencies are down on this time last year. Secondly, the cost of construction has doubled in recent years and today in Mosman, developers are doing their figures at around $7,000.00 per square metre (ouch). It was only a few years ago that $3,500.00 was the benchmark. Fewer new homes are entering the marketplace and this is due entirely, to exaggerated transaction costs, combined with building costs.

The rise of building costs will definitely see rents spiral and for those who are renting, the future is bleak. The Sydney Morning Herald ran a story last Saturday “Ten tenants to a home – rental market turns into a scrum”. “ The number of vacant properties fell to a five–year low this month, and real estate experts warn that the drought will continue until the property market picks up”. The rental market is fast resembling Warragamba Dam and until we see a greater dominance of investors in the market the trend simply won’t change. Houses will become rare, given that in Mosman annual land tax can equate to twenty two per cent of the gross rent. Figures released this week, reveal that NSW has the country’s worst annual growth rate of just two per cent. It is now abundantly clear that when you run a state that offers the residents the highest taxes, you see a mass exodus of skilled labour. Another reason why building costs are so high is that a vast number of tradespeople have moved their families north to that place, “Beautiful one day – perfect the next”.

Whilst Mosman’s one hundred per cent auction clearance rates were not mirrored this week, overall we found the markets to be cash positive. No longer available are 4 Methuen Avenue Balmoral (sold prior to auction), 144 Cowles Road Mosman, that mystery record breaking home and 2/6 Mosman Street Mosman. As we now commence the final run before Easter, this week we have signed up eleven new houses and Marize has signed up eight new apartments. Currently, five apartments have offer and acceptance and this market is very much rejuvenated following the ‘Carr Curse’ with his ill fated Vendor Exit Tax. One wonders how these guys would go if they ran a small business. Many would correctly argue that NSW, once a big business, is today, a small business. So I guess that answers the question. At least we can’t go any lower than last. Cheers ^__^

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