Forget The Short – Term Markets Go Long

Forget The Short – Term Markets Go Long

.Another classic week where the long markets went cruising along and the short markets were in mayhem again. When the Reserve Bank of Australia (RBA) met and decided to leave the cash rate at 2.75 per cent – Subdued but increased demand for finance: RBA Governor’s July meeting statement. When the governor Glenn Steven commented about the decision to leave the cash rate on hold – “deliberated for a very long time” this sent the Australian dollar tumbling. Just goes to show how fickle our short term markets are. A preoccupation with global economies, currencies and politics – none of which to be resolved (it would appear) in the near – term.

Hard to fathom why these markets are so skittish given the availability and ease of accessing so much data with big data storage expected to hit eight zettabytes (ZB) by 2015. One ZB =1 000 000 000 000 000 000 000 bytes = 1000 7 bytes = 10 21 bytes = 1000 exabytes = 1 billion terabytes. As at April 2012, no storage system had achieved one zettabyte of information. So with so much information available it is quite clear that human panic still remains the determining factor for the short markets.

The long markets (real estate) are doing very well both locally and overseas – finally we are seeing a recovery in US home prices with a jump of 12.2 per cent in May , the highest recorded over the past seven years. A built in bonanza for house prices – According to the Knight Frank global house price index, Australian house prices over the year to March 31 have risen 2.6 per cent while the US house prices have risen by 10.2 per cent. But the Australian dollar has fallen by almost 15 per cent – we have taken part of the value correction on the currency’s chin.

Manly_Beach-Sydeny-Aerial-Photography

SYDNEY AERIAL PHOTOGRAPHY                                                    BUY PRINT

It is not very often that I find myself agreeing with House grants a ‘’poisoned chalice” that create bubbles and leave buyers worse off: Steve Keen. When you look at the First Home Owners Grant (FHOG) this scheme was introduced on 1 July 2000 to offset the effect of the GST on home ownership. It is a national scheme funded by the states and territories and administered under their own legislation. When you have record low interest rates and record high rents of course consumers are enticed to make the big switch, although what many confuse is that owning real estate is a long term hold and rates will go higher (much higher) as global economies recover. Just look at what is happening to US property prices at the moment.

The positive is that we can expect strong capital growth over the next three years so those struggling will be selling in a positive market as against a declining market. I was interested this week to see this graph “Individual’s interest in rental properties”.

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Interesting to see what happened to Mosman houses for the period 1 January 2013 to 30 June 2013 then compare the results to the same period in 2012.

MOSMAN HOUSE SALES TO 30 JUNE 2013

  • Total Number of Sales – 131
  • Total Value Sold – $358,891,500*
  • Median Price – $2,280,000*
  • Average Price – $2,739,630*
  • Auction Clearance Rate – 46%
  • Adjusted Clearance Rate – 40%

MOSMAN HOUSE SALES TO 30 JUNE 2012

  • Total Number of Sales – 143
  • Total Value Sold – $393,237,200
  • Median Price – $2,080,000
  • Average Price – $2,749,910
  • Auction Clearance Rate – 24%
  • Adjusted Clearance Rate – 19%

*Denotes this figure will increase as Confidential Prices are recorded.

Next week we will do the apartment sales.

The most significant change I can note from this data for houses is that when the economy is booming Mosman historically trades ten per cent of the total number of houses which is approximately 500 sales per year. Since the GFC volume levels have been down on average approximately 40 per cent per annum. In the boom years the Total Volume Sold averages $1,000,000,000, yet since the GFC we see it averaging $800,000,000 which represents a 20 per cent change.

This week we see the number of houses in Mosman for sale drop to 68 which is the lowest number we have ever recorded (since we started collecting this data). We expect this number to remain low until mid – August although it would certainly help all the markets if Kevin Rudd would put his ego to one side and announce the federal election date.

Source: Australian Property Monitors

MOSMAN – 2088

• Number of houses on the market this time 2012 – 80
• Number of houses on the market last week – 71
.Number of houses on the market this week – 68
• Number of apartments on the market this time 2012 – 89
• Number of apartments on the market last week – 56
.Number of apartments on the market this week – 52

CREMORNE – 2090

• Number of houses on the market this time 2012 – 11
• Number of houses on the market last week – 7
.Number of houses on the market this week – 9
• Number of apartments on the market this time 2012 – 19
• Number of apartments on the market last week – 7
.Number of apartments on the market this week – 9

NEUTRAL BAY – 2089

• Number of houses on the market this time 2012 – 15
• Number of houses on the market last week – 9
.Number of houses on the market this week – 12
• Number of apartments on the market this time 2012 – 51
• Number of apartments on the market last week – 33
• Number of apartments on the market this week – 33

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

For this week’s opens for inspection
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Surging Sydney to lead “uneven” recovery in residential property market over next three years: BIS Shrapnel – The Sydney median house price is expected to rise by an average of more than 6% per annum. Given we have record low interest rates it would be quite surprising to see prices only go up – it should also be noted that the strongest growth in property prices is recorded under Liberal governments.

It would be nice to think that the next government will place a high emphasis on infrastructure and housing more new dwelling needed but we’re still “lucky”: Glenn Stevens. Australia needs to build more houses and apartments than it has done in the past as population growth picks up, interest rates remain low and dwellings remain more affordable. Instead of propping up an ailing manufacturing industry the government of the day would be much better served incentivising our building industry. This is further explained by Infrastructure Australia which is about to release a seven – point plan to reform more than $100 billion in federal infrastructure spending intended to make Australia more competitive in Asia.

With China slowing down there needs to be a greater concentrated effort on developing our ‘home grown’ economy which has now been dormant for way too long. Australians these days prefer overseas made cars yet it is impossible to have overseas made houses. So why is the government so confused on this no brainer?

Cheers ^__^

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