PROPERTY MARKETS WITH MUCH GREATER INTEREST – FIGURATIVELY SPEAKING THAT IS!

PROPERTY MARKETS WITH MUCH GREATER INTEREST – FIGURATIVELY SPEAKING THAT IS!

The Reserve Bank of Australia (RBA) issued a grim forecast this week when it raised inflation predictions for 2008, which are now getting out of control. Having raised the official cash rate last week by 25 basis points to seven per cent, we anticipate much more aggression by the RBA in coming months. The news this week just gets worse and there is simply no other alternative but to fight” fire with fire”. When the Board meets next month, the rumour is that the next official cash rate will have a minimum 50 basis point increase.

With unemployment at a 34 year low, the RBA faces the near impossible task of curtailing inflation which will remain high and raising interest rates just decimates property markets, already in a downward spiral. Top-end property markets continue to climb to all time record levels as we have identified with the Mosman market in this edition. Rent remains one of inflation’s greatest accelerants and in 2008 increases of 12 per cent are already being factored in. According to data released last week by the Real Estate Institute of NSW, Sydney city vacancy rates came in at 1.2 per cent in January. This is the 18th month in a row that available accommodation has fallen below 2 per cent. Whilst we have seen investors return to our markets to correct this we need a torrent not a trickle.

Residential vacancy rates Sydney Inner (0 – 10 km from CBD
January 2008 – 1.3 per cent
November 2007 – 1.1 per cent
October 2007 – 0.8 per cent (critically ill)
September 2007 – 1.2 per cent
August 2007 – 1.5 per cent

Rents on apartments rose 5.2 per cent in Sydney in the last quarter of 2007, while house rents rose by 3.91 per cent. Some industry sources are predicting that house rents in these areas will rise by 10 – 12 per cent in 2008. Figures released by the NSW Department of Lands show that land values grew an average 4 per cent across Sydney to July 2007.

Mosman was a star performer. We have compared houses and apartments (next week’s edition) in Mosman from 2002 to 2007 and the results clearly identify that these markets continue to grow to such an extent, that in 2008, we will see even stronger results. Why? It is a property market that trades – within itself. Approximately 75 per cent of house sales are negotiated with owners residing in the 2088 postcode. The other 25 per cent come from expats returning, international buyers taking up residency and families moving into the district from other Sydney suburbs.

Here are the figures we compiled from Australian Property Monitors – don’t call them as they never return phone calls. Even to businesses like ours that actually pay them and provide data free of charge which they then sell. We can quickly change that by cutting off supply – and we are a major supplier.

MOSMAN HOUSE SALES 2002 – TWO INTEREST RATE INCREASES OF + 0.25 PER CENT
Total number of house sales – 490
Median House $1,692,500
Total Value Sold (figure unavailable)
Average Mosman House Price (figure unavailable)

MOSMAN HOUSE SALES 2003 – TWO INTEREST RATE INCREASES OF + 0.25 PER CENT
Total number of house sales – 423
Median House $1,720,000
Total Value Sold $790,337,432
Average Mosman House Price $2,195,381 (new record)

MOSMAN HOUSE SALES 2004 – NO INTEREST RATE INCREASES
Total number of house sales – 340
Median House $1,645,000
Total Value Sold $625,460,122
Average Mosman House Price $2,057,434

MOSMAN HOUSE SALES IN 2005 – ONE INTEREST RATE INCREASE OF + 0.25 PER CENT
Total number of house sales – 368
Median House $1,850,000
Total Value Sold $757,823,565
Average Mosman House Price $2,289,497 (new record)

MOSMAN HOUSE SALES IN 2006 – THREE INTEREST RATE INCREASES OF + 0.25 PER CENT
Total number of house sales – 445
Median House $1,910,000
Total Value Sold $1,046,131,930 (first time it breaks one billion in sales)
Average Mosman House Price $2,496,734 (new record)

MOSMAN HOUSE SALES IN 2007 – TWO INTEREST RATE INCREASES OF + 0.25 PER CENT
Total number of house sales – 462 (and climbing)
Median House $2,212,500,000
Total Value Sold $1,101,088,920 (second time it breaks one billion in sales)
Average Mosman House Price $2,725,467 (new record)

We predicted in October 2007 that total value sales in Mosman would come in at around $1,250,000,000 and we still stand by this prediction. As many double – digit sales (including the Mosman record) are yet to be recorded. We negotiated three in December, one in Cremorne (new waterfront record) and two in Mosman which are yet to be recorded.

At Richardson & Wrench Mosman & Neutral Bay (RWM) we scrutinise our market closer than any competitor as it is imperative that we provide vendors and purchasers with exact market positioning. It is very hard to argue against these figures given that our economy continues to grow and interest rate increases have little to no effect on our house prices.

In 2002, Mosman had 490 house sales with a median house price of $1,692,500 yet in 2007 the market delivered (at this point) 462 house sales with a median house price of $2,212,500. We predict that the average house price will not break $3,000,000 in 2008 however, it will go very close. Also, we predict the total value sold to be in the vicinity of $1,500,000,000.

Next week, we will provide a comparative analysis for Mosman apartment sales – which is most revealing.

For those interested in suburbs outside Mosman, this Sunday the “2008 – Sydney Property Guide” will be published in The Sun – Herald which covers Greater Sydney. Great news for some and quite disturbing for others given that never before have these property markets been placed under such scrutiny. This annual guide which many consider to be the property bible details property statistics for over 700 Sydney suburbs. The results are compiled from Australian Property Monitors so the data is accurate (just don’t call them).

For those outside Australia and inter-state you can view this data on www.domain.com.au (who return phone calls). Cheers ^__^

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