Freeze frame – Australian businesses (not to be confused with governments) continue to report vibrant trading conditions. Throw in record profits, confident forecasts and all time low unemployment. Why the consistent reporting about housing affordability? Businesses are run by business-minded people. When governments with little business acumen, intervene by way of taxes, we begin to see the answers to the problem. Put simply, lack of ability.
Take the introduction of GST as a classic example whereby since its introduction in 2000 the platform of reduced taxes has only seen taxes increase. Since the introduction of GST, tax payers have been ripped off big-time. In NSW, (just one example) Stamp Duty since the introduction of GST has seen the rate increase from five (5) per cent to seven (7) per cent for a residential property acquisition in excess of $3,000,000. The introduction of GST has identified itself as the scam of the century – the perfect 10 for governments.

Alas – tax payers are now faced with state government privatisation where once again, ability comes to the fore. The NSW government is looking at sell-offs in energy, forestry, gambling and transport. So business minded people then acquire these assets because our state government does not have the ability to successfully manage these businesses.

It is not as simple as releasing more land and as the Australian Bureau of Statistics (ABS) revealed this week, we remain in a downward spiral by building fewer homes for consumption. Just 29,300 homes and apartments were constructed in the last financial year. BIS Shrapnel economist Rob Mellor said “ NSW ’s residential construction downturn gets worse and worse. It’s the fourth year of decline, and the fifth in downturn. We think the figures are the lowest since 1958 and 1959. They are diabolically low.” When we build fewer homes – prices have to increase. Dwelling commencements in the June quarter fell by four (4) per cent to 36,512 units. This represents a twenty per cent decline in housing starts. Just why are builders/ developers of the collective opinion that these markets no longer offer the ability to make money? These building starts are now at the lowest level ever recorded with NSW leading the decline. The median house price in Sydney is now at $530,000, compared to $185,000 in 1990. Obviously a taxing questions for respective governments.

Rental markets remain hostile because vacancy rates have now recorded a one year anniversary of less than two (2) per cent vacancy rates, which are unsustainable. In NSW the vacancy rate hit rock bottom in June when it recorded a rate of 1.3 per cent. In August, the vacancy rate increased to 1.5 per cent thanks to increased investor confidence which had nothing to do with the ability of governments who played no part in this turnaround. We now have schools of thought that suggest vacancy rates will fall below one per cent next year. Should this happen rents will skyrocket. This would explain why apartments are having a run at the moment with investors second guessing yields that are almost guaranteed to improve dramatically.

As we are now entering our Spring-selling season, we thought you may find the following data of interest as it clearly identifies the strength in our house and apartment markets throughout 2007. Now these markets have plenty of ability.
Source: Australian Property Monitors – 1 January 2007 to 8 September 2007

House sales – 250
Clearance rate – 75 per cent
Total Value – $646,395,000
Average sale price – $2,585,580.00
Apartment sales – 390
Clearance rate – 85 per cent
Total value – $312,834,000
Average sale price – $802,138.40

House sales – 60
Clearance rate – 77 per cent
Total Value – $127,137,000
Average sale price – $2,118,950.00
Apartment sales – 285
Clearance rate – 85 per cent
Total value – $192,498,000
Average sale price – $675,431.57

House sales – 49
Clearance rate – 63 per cent
Total value – $68,323,000
Average sale price – $1,394,346.93
Apartment sales – 217
Clearance rate – 77 per cent
Total value – $142,070,000
Average sale price – $654,700.46

We expect results to be even stronger over Spring and Summer.

The only positive to come out of APEC was the Fairfax Media decision to insert Saturday Domain in last Friday’s edition of The Sydney Morning Herald. The feedback from purchasers was excellent as it allowed them time to plan their Saturday inspections, a day ahead. Hopefully, they will trial this smart initiative as it has plenty of upside for all concerned. Cheers ^__^

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