They say “if you burn the candle at both ends you are not as bright as you think” which is exactly what we are seeing with the Sydney property market. The top – end market is now at a level never seen before and at the other end, home loan defaults are increasing at an alarming speed. In simple terms, those now suffering, should never have had finance approved in the first place.

Interest rates have remained on hold all year with economic growth well and truly in accelerator mode. The jobless rate remains at its lowest since November 1974 prompting speculation of an interest rate increase in July. This could very well happen given that the economy is growing at its fastest pace in three years. Today we are seeing labour supply increases without significant wage increases so inflation remains at contained levels.

The Australian Bureau of Statistics revealed this week that first quarter gross domestic product (GDP) grew by 1.6 per cent. This was the most robust since December 2003 when the GDP grew by 2 per cent. It is interesting to note that in 2003 the Reserve Bank of Australia (RBA) applied two rate increases in November and December of +0.25 per cent to see interest rates climb to 5.25 per cent. Many suggest that the present rate of 6.25 per cent is comfortable although the economy has many second guessing as to the likely (alternate) scenarios.

The top – end property market appears to be following the Australian dollar which hit a 17 – year high this week as it threatens to break the 85 US cent mark. The Australian dollar last traded this high on August 24 1990. Great news if you are playing in this market. If you are not, housing affordability hit a 23 – year low. On a weekly basis, it becomes more and more obvious that many in rental properties face uncertain futures. Yes, investors have made a welcome return to the property market however supply is not even close to meeting demand.

Australia is currently in its sixteenth year of economic expansion – yes sixteen years since “the recession we had to have”. We keep reading about low inflation, low interest rates and strong corporate profits yet we have so many leaving the state of NSW. Even Australia’s birth rate in 2006 was the highest figure in 35 years although in NSW this figure fell by 1.6 per cent. The pattern continues where yet again NSW had 25,300 people leave for other states, the largest exodus of any state. To put this into greater perspective, Victoria lost just 1,000. There is a distinct possibility in coming years that electricians, plumbers and carpenters will be on merchant banker’s rates as at this rate, NSW won’t have any. The vast majority of our skilled workers are bound for Western Australia where jobs are in abundance.

In the peak of 2003/04 Australians spent close to $28 billion on home renovations and today this still remains the all time record- spend as it equates to 46 per cent of all housing expenditure. It is expected that by the end of this decade annual spending will be beyond the $29 billion mark although given the exodus of tradespeople, one would seriously have to ask, who is going to do the work? How do you have a recovery in new construction work in NSW when the vacancy sign is up in lights. In NSW, we have an all time record per square metre for building costs, while in Queensland, you could build three houses for the cost of one in NSW. What NSW needs is someone to hit the nail on the head. Cheers ^__^

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