Little to cheer? For some markets, a case of no fear!

Little to cheer? For some markets, a case of no fear!

I am totally mystified as to why our stock market reflects the previous night’s results on Wall Street, which represent completely different markets.

Falling property prices in Bellaire have no effect on Mosman, any more than the Beverly Hills market dictates the Double Bay market, or Malibu determines market sentiment in Palm Beach. In the share market melt-down, the biggest falls in 26 years have been recorded and in 2007-08, nearly $400 billion has been wiped from investor funds. Some suggest that as a direct result of these capitulations, we are headed for recession. What many forget is that the smart investors sold out last year and today, remain cashed up. In the current market environment if you carry debt you are not exactly a safe bet and there are always casualties.

Recent figures identified that new motor vehicle sales remain at record levels. In June, 106,541 new cars and trucks were sold – a 1.4 per cent increase on the same month last year. The results put sales for the first half of 2008 up 3.5 per cent to 542,695 and on track to top one million for the full year. Does a population explosion ring any bells?

July (the coldest month) is the slowest month in the calendar year for property transactions and with school holidays, the majority go in search of the “S” word that being “sun, surf and snow.” Mosman has just over 4,900 houses and currently, 90 are available for sale which hardly identifies a market in distress.

We can confirm that presently we are in “mortgage recession” where mortgage sales continue to decline. Australia’s biggest mortgage broker, Australian Finance Group, has identified that purchasers are currently sitting on that proverbial property fence. Over the year, June sales fell 22 per cent, building on a 31.5 per cent fall in May.

This is why I predict that we can expect to see the Mosman real estate market continue to show capital appreciation not depreciation.

Macquarie Research Economics identified that –

  • Over 2007, population increased at the fastest pace since the late 1980’s fuelled by an influx of overseas migrants.
  • Australia’s population rose by 331,900 people or 1.6 per cent in the year to December 2007. This is the fastest rate since 1988.
  • Overseas migration accounted for 184,400 people with a natural increase accounting for the remainder of the total increase in population. Most of these migrants are still choosing to settle in NSW (54,163) and Victoria (49,006) but they are also increasingly settling in Queensland (35,806) and WA (28,866).

A million new homes need to be built over the next five years to cope with our booming population. Interest rates remained on hold when the Reserve Bank of Australia met this week. Data released this month identitied that despite a fast growing population, new residential homes being built in the March quarter, fell by 3.3 per cent. This can be attributed to developers being taxed out of these markets and delivers a very subtle reminder that residential rents will continue to rise for some considerable time.

The ANZ Bank announced this week that the growing housing shortage is setting Australia up for the “mother of all” housing booms citing rent and price explosions and slumping building approvals which identify a chronic shortage of housing. The Australian Bureau of Statistics announced this week that new apartment approvals fell 18.2 per cent in May which is 4.2 per cent down over the past twelve months. New house approvals were also down 1.2 per cent for the same period. Whilst some suggest that interest rates need to start falling and buyers need to see prices rising to coax them back into the market – I don’t agree with this theory. Just apply supply versus demand and work out where the opportunities lie.

The ninety something houses in Mosman for sale at present supports our theory that we are currently in a market of opportunity otherwise known as a “Buy” recommendation. Real estate markets bear absolutely no resemblance to the stock market where one is holding its own and the other, nobody wants to own.

Institutions play the stock market and they don’t play the residential real estate markets … maybe another clue! On the flip side, if we heading for a recession there is a notable difference from the last one – in the 1991 – 1993 recession, we did not have the Internet. We had to wait until 1995 for that … yet another clue!

This explains why RWM email alerts remain our number one priority and we have now notched up $767,442,000 worth of sales to “Virtual Realty News” subscribers. After the 1991 – 1993 recession (that being “the one we had to have”) we were the first real estate agency to establish an online business model, to ensure that RWM remains recession proof. Cheers ^__^

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