The 2008 residential property market will be very interesting, with property voyeurs divided in their opinions. Our opinion is that it will be the most intriguing property market that has no beginning and for that matter, no end. For all intents and purposes, markets will (predominantly) be defined by the moment, given recent global events beyond our control. Whilst the Mosman market will in no shape or form mirror the recent events of the shock market, it is clear that our superannuation market (the fourth largest on the planet) is quite sensitive in light of recent events. This was evidenced when the shock market demonstrated its worst losing streak in 26 years.

When we sent out our last edition in 2007 the buzz word was “sub-prime” and in 2008 it is “recession”. I have read with amazement, many articles that suggest enormous corrections in stocks, real estate, commodities, art etc. etc. As 2007 drew to an end, the Australian economy celebrated its 17th year of uninterrupted expansion and a change of Federal government. More importantly, were concerns on the outlook of global growth. This then led to several central banks easing growing monetary pressures by altering their previous positions and reducing interest rates. We expect the Reserve Bank of Australia (RBA) will fight inflation with yet another rate rise and probably another increase in August/September this year.

When Paul Keating delivered the “recession we had to have” back in the early nineties, one key ingredient that was missing then, yet prevails in our economy today, is the Internet. Depending on economic conditions, businesses today are now in a position (if they invested in the right technologies) to use this facility to communicate with markets.

Inflation rose by more than one per cent in the fourth quarter of 2007 (bankers prefer to call this period 2007Q4) where annual inflation sat at 3.6 per cent. It has been well documented that the RBA has a mandate to (preferably) keep inflation between two and three per cent.

Historically, we can expect a credit squeeze in 2008 and when this happens, lenders will change previous trains of thought. They will now insist that clients sell before they buy as against the previous trend, where home buyers purchased before they sold. When financial markets are volatile, lenders don’t like carrying debt – simple, but true. Initially, the proverbial property fence will require some reinforcement, although we expect the blue – ribbon property markets to continue where they left off in 2007. Mosman last year, broke all the records but that is another story which we will cover in next week’s edition. Our property market is very important to us and our subscribers and we will publish weekly editions all the way through to December 12, 2008. This probably explains why we have in excess of 9,500 subscribers.

So back to inflation – which (like in 2007), is fast proving to be the curse of many property markets. Again, when you look at this graph for the December quarter you will notice the same serial offenders appearing – housing and petrol. Inflation in Australia is indeed volatile!

Now enter Kevin Rudd who has transformed himself from “Kev – 07” to “Kev Fudd”, when he recently warned homeowners of “tough times ahead”. “Kev Fudd” announced last week, that “any interest rate rises in coming months would be a legacy of the Howard – Costello Government”. Not exactly true when you consider respective state Labor governments who, through greed and mismanagement, chased property investors out of the investment markets. It will be compelling viewing in coming months to see if mum and dad investors re-visit these markets again given the recent shock market events which have reduced their net wealth.

Cast your minds back to 2000 when the Howard Government introduced GST to the Australian economy under the guise of reduced state taxes. On the contrary – taxes have actually been increased! The “Dilemma Government” in NSW approved increases in land valuations for 2008 by an average of 4 per cent in Sydney and 5 per cent in regional NSW. It did however reduce its land tax rate from 1.7 per cent to 1.6 per cent (whoopee) then in the same breath, increased their non – taxable threshold to $359,000. In Sydney, you have a vacancy rate fast tracking one per cent when (in a perfect world) it should be close to three per cent.

Every quarter, the accelerants to inflation will be housing and petrol – what remains to be seen is how “Kev Fudd” addresses his political state bruvvers.

We predict that in 2008, 450 homes will be sold in Mosman and when you consider the number of prospective purchasers in this area, it is obvious that demand will always exceed supply. The wonderful thing about our property market is that the numbers have it. In the worst case scenario, we have the Internet and we just happen to have the greatest Internet business in Mosman. By the way subscriber sales have climbed to $709,646,000 – you can be the judge. Cheers ^_^

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