Any fool can criticise, make predictions and claim to have knowledge about the state of the property market. If you look closely at the vast array of property niche markets, you can see that the property markets in NSW are wounded and it will be contagious for all participants. We have been calling the property market for five years (Virtual Realty News) and for the record, most agree that we have been pretty close on the money. However now, it is profitability and survival that pose the greatest concerns as we are now seeing significant demographic changes. The property industry is by far the largest employer in Australia, when one considers the wide ranging occupations and businesses that have relied and gained benefit from the continued momentum. However, we now face two very significant hurdles (and for the moment) casualties will be high. The property market has changed as a direct result of greedy government policies. The property industry is expected to continually fund a mismanaged state government, that is devoid of offers as incentives to constituents. This once ‘financial reservoir’, is now on a fast track of evaporation. Many businesses that can no longer compete on an uneven playing field, will also disappear. And we are not just talking about real estate agencies!

Memo: Bobby Dazzler
Subject: Tax Reforms

Ten years ago, on average, a Mosman house sold every seven years. Today, we are seeing anecdotal evidence that these houses sell every twelve to fourteen years due to the high costs of acquisition taxes (Stamp Duty over $3,000,000 is now seven per cent of the purchase price). The Australian Bureau of Statistics has identified that house sales in Mosman are on a rapid decline.

1995 434 house sales
1996 421 house sales
1997 398 house sales
1998 349 house sales
1999 429 house sales
2000 340 house sales
2001 407 house sales
2002 361 house sales
2003 354 house sales
2004 278 house sales
2005 30 house sales (this figure is obviously not up to date)

This pattern is cause for alarm as in 2005 we predict it will identify fewer sales than in 2004. The contagious cocktail of higher taxes and fewer sales, will guarantee that home values remain constant. Fewer sales and a near doubling of home occupancy, will have a severe impact on the economy. The circular flow of income that comes directly from the property industry will continue to decline at alarming levels.

Secondly, with the majority of developers now moving their infrastructure to Queensland to avoid the Vendor Exit Tax, it seriously impacts on the markets i.e, NSW no longer attracts investors. It came as no surprise that Queensland announced a $934 million budget surplus this week. NSW is now allowing property activity to erode, simply by maintaining a tax that everyone (except Bobby Dazzler) acknowledges is a market hindrance that is severely impacting on many businesses today. Turning a negative into a positive, in many ways this is an exciting time for us as now one is forced into (if you haven’t already) implementing new business strategies. All businesses that draw an income from the property industry will have to give serious thought to how they are going to implement new strategies. The past will provide little market intelligence given that the markets have now changed. The 2003/2004 business models will bear no resemblance to what we will see in 2006/2007. Those in denial will be the first casualties and it will be a terminal illness!

This is happening already and as we predicted last year, the cost of advertising rates is in serious reduction mode. Cumberland Newspaper Group announced this week that with effect from July 4, the cost of a full colour page advertisement in The Mosman Daily, will be reduced from $2,390.00 to $1,820,000. Fairfax, has been making strong in-roads since it launched Domain East and Domain North newspapers. The fact that it remains a ‘thorn in the side’ of its competitors, clearly identifies that the Company must deliver a real deal. (We predict that advertising rates will fall further). Despite what some say, it is the vendors who decide where they will spend their advertising monies. For the record, our vendors love dominant 10 x 2 advertisements in Saturday’s Domain.

So what happened in our world this week ? We recorded seven exchanges with a combined value of $9,190,500, including a house at 36 Central Avenue and one at 10 Prince Albert Street Mosman. Our Apartment Division recorded five sales with an apartment in Milson Road, Cremorne Point selling for $1,220,000, after just three days on the market. What I liked the most was the fact that our unique Internet business posted $6,759,500 of the $9,190,500 in sales. Our total subscriber sales have now jumped to $316,082,000. Many agents and agencies today, just simply refuse to identify the Internet as an integral part of their business longevity.

The Australian Bureau of Statistics has revealed that in March 2005, Australian consumers spent $617 million shopping online. The figures show that approximately 5.700 million people are now online (we believe this figure to be much higher). The number of broadband subscribers increased 51 per cent for the twelve months to September 2004. The significant point here is that consumers want faster delivery of information. Dial-up connections today are now recognised as a dinosaur.

With Mirvac this week announcing a profit downgrade, maybe BIS Shrapnel will offer a rate downgrade as the ‘Governor of Moolah’ left rates again this week at 5.50 per cent. Last week, we had thirty-six months for rates to hit the predicted nine per cent. Today, we have thirty-five months. Given the changing demographics in the property market, one could conclude that they have shot themselves in the foot !! See you next week, cheers ^__^

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