FROM THE SUBLIME (NOT TO BE CONFUSED WITH SUBPRIME) TO THE ABSOLUTELY RIDICULOUS !

FROM THE SUBLIME (NOT TO BE CONFUSED WITH SUBPRIME) TO THE ABSOLUTELY RIDICULOUS !

We are witnessing fascinating times with the vast majority of stock market investors now opting to baby-sit their wealth for the time being. I believe that these funds will sit stagnant in bank accounts for the short term whilst this state of confusion attempts to remedy itself. There is always panic at the beginning then, after taking three deep breaths, the worst case scenarios more often than not fail to become a reality. For those carrying high debt ratios, this is not an opportune time to be taking calls from bank managers as banks will most definitely be heading in the direction of debt-reduction mode over coming months. Last weekend the newspapers were hardcore following Friday’s share market investor departures although the reporting actually had no effect on the property market’s performance. The Sydney auction clearance rate strengthened over the weekend posting a 68.5 per cent clearance of public auction properties which was up on the previous week’s clearance rate of 64.7 per cent. It will be most interesting to see if we get an over- supply of property in coming weeks (which I seriously doubt) given that our markets enjoy strong followings that have continued to post positive results.

The National Australia Bank (NAB) business survey for July identified that conditions for July 2007 rose by four points to be the highest level since 1997. The report said “The clear message from the July survey is that business conditions remain very strong and appear to have strengthened further in July. It should be said at the outset, that the survey was in the field between 25 July and 2 August – with the first large falls in Australian equity markets on July 27.”

Not to be outdone the ANZ Bank’s latest Australian Property Outlook pointed out that the NSW economy has been firmly stuck in reverse for the past five quarters – better known as a recession! South Australia and Tasmania have now joined NSW, having experienced mild recessions over the past year. One thing you can’t take away from NSW is that it remains consistent as the report identified that to fall into a technical recession, it is necessary to have two consecutive quarters of negative growth. No need for concern despite fifteen consecutive months of negative growth for NSW because all you have to do is ask anyone in our state government and you will be told that we “are heading in the right direction.”

Whilst on direction, the plot thickens for those contemplating total liquidity and renting, given the recent “seismic” shifts with global financial markets.

Urban Affairs reporter for The Sydney Morning Herald Sunanda Creagh raised some interesting points although I struggle with the statistic that all Mosman dwellings as compared to this time last year decreased by 9.9 per cent. The article “Prices fall, but no joy for renters” states “Sydney’s average house prices fell 5.7 per cent in the last quarter and new figures (which would actually be incomplete) show median rents in some suburbs have risen more than 50 per cent since last year.” A pity these suburbs were not identified as this would have investors clambering to get a piece of this action. Mosman posted the largest increase for median rents in Sydney with a 14.8 per cent increase for a two bedroom dwelling compared to same time last year. We are experiencing the return of investors to our markets which is a natural progression, given record low vacancy rates. Again, investors have opted to take three deep breaths before purchasing.

Whilst our stock market is experiencing one of the largest falls in seven years, it should be remembered that this is not a collapse, but investors cashing in and taking a more conservative positioning by banking profits. Otherwise known as taking three deep breaths.

It is said that the difference between a mountain and a mole hill depends on the amount of dirt you throw on it and dirt still remains cheap, compared to this time last year. Cheers ^__^

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