NOT EXACTLY EARTH SHATTERING!

NOT EXACTLY EARTH SHATTERING!

What a difference a week makes. This time last week, we were left pondering “seismic shifts” to the world financial markets. We then saw Australian shares jump 4.6 per cent last Monday, to record the biggest one day jump in nearly a decade. Yes, the US Federal Reserve injected some financial Viagra into their markets which then resonated across the globe and left many journalists eating a considerable amount of humble pie. The next time we see a correction, the proven method of taking three deep breaths, would be a much smarter approach. The flow on effect of sub-prime (high risk) debt in Australia, has now been estimated at approximately 1 per cent exposure which now brings the mountain back to a mole hill.

As we pointed out last week following these “seismic shifts”, the Sydney auction clearance rate strengthened over the weekend and recorded a healthy 68.5 per cent. This was up on the previous week’s clearance rate of 64.7 per cent. Last weekend it recorded an even higher clearance rate of 69 per cent with the Eastern Suburbs and North Shore leading the way. I doubt that clearance rates will go much higher than this as now we can expect to see human error (better known as agents over-valuing) coming to the fore. When this happens (and we are seeing signs of this) the purchasers who today come to the property markets very well educated, will retreat and take a more conservative positioning. This is better known as “restoring some calm to the market place” – exactly what we witnessed this week with the financial markets.

It will be most interesting to watch the coming week’s results with more than a few purchasers commenting that a number of properties have re-positioned price expectations at lesser figures than when they originally hit the market.
The housing affordability debate now, is about as popular as a Paris Hilton story with nearly everyone offering a cure to the problem. I believe we have to address the rental spiral first, by encouraging more investor-participation in the property markets. Naturally that three letter word tax always comes into the equation when politicians review suggestions for a cure. Aussie Home Loans, John Symond, suggested tax cuts for first home buyers as the best way to solve the problem. Then our esteemed treasurer, Peter Costello, announced that he did not want to bring taxes into the system. “If you bring them into the system for deductibility purposes, they are going to be in the tax system for capital gains tax purposes and I don’t think Australians would want capital gains to apply to [their residence].” Who said anything about capital gains tax ? The suggestion was for tax breaks, which is not to be confused with additional taxes.

I guess the treasurer has his eyes on monitoring the 220 million electronic transactions that occurred over the past year for investment properties and shares nationwide. In the year to June 2007 investors returned to the markets with statistics identifying a 26.6 per cent increase. Housing Finance figures recently released by the Australian Bureau of Statistics (ABS) identified that lending to buy investment housing rose by 14.8 per cent in June 2007. Obviously investors are not that perturbed by the recent announcement by the Australian Tax Office that it will cross-reference every investment property transaction with revenue and land titles records in each state.

In the 2004-2005 financial year taxpayers declared $23.5 billion worth of capital gains. A staggering $9.2 billion was sourced from property deals and $9.7 billion from share transactions. This would probably explain the treasurer’s insatiable appetite (when discussing property) for any type of additional tax for the Canberra coffers. Investors want to deduct it and Canberra wants to collect it. So it is amazing that today, we see investors back in the market after a lengthy time on the sidelines. So why did the investors depart in the first place ? Because governments taxed them out !!

On a more positive note, last Saturday night we celebrated our annual awards night for the Richardson & Wrench network. For NSW we maintained our position as the number one office and nationally we dropped a place to come in at number 2. Congratulations to Richardson & Wrench Noosa Heads, who pipped us and are deserving winners.

Individually, Stephen Patrick was number one for NSW and number two principal, nationally. Close behind was Richard Simeon as number two for NSW and number three nationally. I came in at number ten in NSW and twelve nationally. Marize Bellomo was number seven for sales people in NSW and number eight nationally. None of this could have been achieved without the brilliant support that our collective sales team receives as it is a team effort. Huge thanks to Jacqui, Belinda, Gillian, Anna, Pip, Judith, Mitch and Lynn. Now that is something to cheer about. Cheers ^__^

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