Housing markets are not exactly “Home Sweet Home”

Housing markets are not exactly “Home Sweet Home”

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There is no way to sugar coat our Australian markets at the moment unless you’re involved in the mining industry!  Even the “World’s Greatest Treasurer” is finally realising that it is pointless to compare our economy with the rest of the world, especially as we have plenty of problems that require urgent attention. All budget bets are off by Alan Kohler over at Business Spectator wrote “If a line in Treasury Secretary Martin Parkinson’s speech a few days ago is to be taken at face value, all the arguments about tax cuts is academic. Tax increases are needed.”

“Parkinson said in the tax to GDP ratio had fallen by 4 percentage points since the GFC and “is not expected to recover to its pre – crisis level for many years to come”. The tax to GDP ratio in 2007 – 08 was 23.7 per cent, which implies that it’s now 19.7 per cent of GDP, or $308.7 billion. However in the mid – year economic and fiscal outlook statement last November, produced by Parkinson’s department, the ratio was 22.3 per cent, or $349.2 billion.”

“That suggests the final outcome for 2011 – 12 will be a much larger deficit than $37.1 billion: perhaps not $77 billion, because there will be savings and fiddles, but certainly more than predicted in November. So the question to both Wayne Swan and the alternative treasurer, Joe Hockey, is: how, exactly, will you produce a surplus in 2012 – 13 if economic growth is below previous forecasts and tax revenue is $40 billion short?”

BUY PRINT

Last night I was reading the Goldman Sachs Afternoon Market Report Thursday, March 15,2012 4:22PM which made some very interesting observations as well as some inaccurate ones about our property industry. Some of the interesting points raised:

  • Things are tough out there in the Eastern Suburbs of Sydney – real estate agents telling me that they are seeing a huge amount of properties coming onto the market and a large number coming from bankers.
  • As we know, in the last bonus rounds across the industry, many bankers were given their bonuses with caps of around $100,000 in cash (which translates to $50,000 after tax) and the balance paid in scrip, over 3 to 5 years.
  • I have also heard stories that Mosman is in a huge state of distress (don’t forget many properties there are not advertised for sale – but are for sale if a buyer appears. Many Mosman owners say that for every 10 properties for sale in their street – just one is advertised). One agent recently said that houses selling for $2.2m a year ago are now back to $1.8m, a -18% fall in a year.
  • ********
  • What I can say to that is complete bull#$&*! Mosman presently has exactly 144 houses on the market today Source: Domain which out of 4,900 houses, represents 2.93 per cent. If you apply the multiple factor (stated above) that would equate too approximately 1,444 houses being available for sale which is 29.46 per cent as against the current precise number of 2.93 per cent.  If the number of houses for sale in Mosman was anyway near 30 per cent, prices would collapse by more than 50 + per cent.

    House sales over $1,000,000 make up just 5 per cent of national house sales.  Over the GFC and beyond, Mosman posted one of the lowest delinquency rates in Australia – fact! No houses in Mosman in 2010 sold for less than $1,000,000 where 278 houses sold for a total value of $697,998,792 with an average sale price of $2,748,026

  • In the last recession (1990 to 1992), unemployment rose from 5.6% and hit a high of 10.9% but interestingly, house prices still managed to rise +2% each year in 1990,1991 and 1992. So those looking to short the banks, thinking it’s an across the board collapse in property prices, should think again.

      MOSMAN – 2088

      • Number of houses on the market last week– 144
      • Number of houses on the market this week – 144
      • Number of apartments on the market last week – 115
      • Number of apartments on the market this week – 114

      CREMORNE – 2090

      • Number of houses on the market last week– 19
      • Number of houses on the market this week – 17
      • Number of apartments on the market last week – 25
      • Number of apartments on the market this week – 24

      NEUTRAL BAY – 2089

      • Number of houses on the market last week – 20
      • Number of houses on the market this week – 19
      • Number of apartments on the market last week – 65
      • Number of apartments on the market this week – 64

  • This is why I predicted in the last edition, that when the Reserve Bank of Australia (RBA) meets next month I expect to see a 0.50 per cent reduction in the cash rate. Exporters, manufacturing, retail, small business, farmers and financial markets are all hurting.  One would need to have their head  in  the  sand if they honestly believed that our economy is not in a bad place.

    Source: Domain Property Monitors

    Mosman house listings continue to hover around the 144 (not 1,444) this week, although well below the spring 2011 peak of 168 house offerings. Interesting to note that Mosman houses at 144 remained constant and every other market declined in number (albeit by small increments). Next week it will be interesting to see if this trend continues.

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

    For this week’s open for inspections – Click Here

    We all know it’s tough out there at the moment cut rates to create jobs. A former senior Treasury official, Ed Shann, has become the latest expert to question Australia’s handling of the resources boom. He went on to say in a paper prepared for the Mineral Council of Australia,that higher interest rates were holding back as much as 80 per cent of the economy.

    In October 2009 the cash rate was 3.00 per cent – today it is 4.25 per cent. Housing Credit Growth keeps slowing where it is now down 6 per cent to its lowest level in 35 years (records began in 1976).

    Many predicted our economy would double–dip, with our strong Australian dollar adding to a steeper second dip. Consumers are spending less so it’s time to bite the bullet with our cash rate.  After all, our RBA (unlike other central banks) has plenty of room to move.

    Cheers ^__^

6 Responses to “Housing markets are not exactly “Home Sweet Home””

  • Ann says:

    Thanks Robert

    I wonder if it will finally dawn on Wayne Swan and the RBA. What more evidence do they need?

  • John says:

    Rob,
    Is the RBA’s primary responsibiity to manage price stability. i.e inflation? If so, some insight into the latest trends in CPI/RPI by sector might give an indication as to their room to move the cash rate.

  • John

    Good point, although we keep hearing different schools of thought.

    Some sections suggest that our economy needs to feel pain so that this will bring about the required business model changes – (this would mean the unemployment rate would sky rocket.)

    Then you have those who suggest a gradual trimming of the sails (not to be confused with sales) on the good ship RBA. Personally, I believe that unless we see some aggressive rate cuts – we had better “batten down them hatches.”

    Something is about to break and we are not that far off – I would take consumer confidence well before inflation given nobody is spending so, how can inflation rise?

    Glass half full or half empty?

  • The number of Mosman houses on Domain.com.au has just dropped from 144 last Friday to 135 – now what does that tell you? 🙂

    It can be embarrassing to talk about subjects one knows totally nothing about. My evidence was anecdotal whereas Goldman Sachs based theirs on here say.

  • Ann says:

    The “World’s Greatest Treasurer” Swan was thrown out of Parliament today.

    Has a Federal Treasurer or Deputy Prime Minister ever been thrown out of an Australian Parliament before?

  • Ann says:

    Found out the last time Federal Treasurer or Deputy Prime Minister was thrown out of Federal Parliament was 111 years ago.

    1901 Federation year.

    Well done Swan. They he tweets and adds to his embarrassment.

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