It has long been said that Aussies as a nation, would punt on “two flies climbing up a wall”. The annual game of “two-up” on ANZAC Day where not everyone becomes a winner – but hey! This cultural celebration that defines our national spirit is somewhat contagious and as we know, Aussies love a punt! Definitely not a case of ‘last bets’ but a very strong possibility for those niche share market punters who keep riding profit after profit – with a ‘no fear’ mentality.

The benefit of hindsight identifies how quickly times can change. It won’t be interest rates that prompt the sale of some top-end properties, but betting equity in the family home on the share market. The Australian share market peaked on November 1, 2007 and today, it is approximately twenty five per cent down. It would be not unreasonable to suggest that the next six months will not produce nor see any recovery in the share market.

Enter that word ‘sub-prime’, the first credit crunch speed bump where this borrowing phenomenon created in the United States has spread faster than the bird – flu virus. Just that the bird-flu virus has been contained and sub-prime continues to run amok with the cost of money rising, as long as one keeps borrowing. To put this into greater perspective, it is unknown exactly how many have borrowed against the family home to punt on the share market.

This sub-prime metaphor whilst gaining momentum, lacks significant bite in that its presence in the property market, is highly unlikely to be the sole driver to bring our property values down. Much like recent tsunami warnings where nothing happened – yet the warnings generate serious concerns for very obvious reasons. The information highway (better known as the Internet) consistently sends out informative, but often misleading positioning, where innuendo becomes fact.

As Warren Buffett once said “It’s only when the tide goes out that you discover who’s been swimming naked.” This is actually the response from our office, to those who predict significant declines in top-end markets. We (at this point) have not seen a single vendor who is selling as a direct result of share market losses. It would be reasonable therefore, to suggest that at this juncture, the tides are definitely not turning. Yes, this could change, but it should be noted that sales for houses and apartments in the March Quarter 2008, clearly identify that Mosman listings have declined not increased. I rest my case.

More recently, the modern daily betting arena was contested within the share market confines where up to November 1, 2007 everybody was a winner. The impetus was significantly increased again with Internet access and modern day masters of these markets borrowing against fixed assets to have a punt. Today, this money- making game has turned (for some) from very sweet to somewhat sour. Sweet, if you have no borrowings against your punt which is often the case in Mosman. Sour if you punted on the new credit card called “OPM”. Otherwise known (today) as “Other People’s Money”, with punters paying to stay in the game.

Whilst some remain perplexed that Australian shares have fallen much more than US shares, it cannot be forgotten that our markets have “much smaller fish to fry”. A game of numbers driven by financial gains – highlighted when financial markets are running hot. United Kingdom and Canada shares are down 17 per cent, United States shares have fallen 19 per cent, Europe down 23 per cent with Australia and Asia down 25 per cent (northern hemispheres lower with southern hemispheres higher). Bear in mind that our share prices have been watered down where the professional punters (hedge funds) have ‘coined’ and developed an entirely new share market currency. Many thought a ‘short’ was a coffee that was consumed before commencing daily 10.00am market trades. Times can change radically for ‘some’ – not to be construed as ‘many’.

In these murky waters, it should be remembered that professional fisherman secure ninety per cent of the catch in ten per cent of the time. ‘Leisure’ fishermen, take ninety per cent of their time to secure ten per cent of the catch. This ethos today, resonates throughout the share market – yet it bears no resemblance to the Mosman real estate market (from our perspective) for apartments and houses, with residents staying, not leaving. They are ‘unbaited’ – a case of too much line and sinker and no hook!

Without a doubt, the litmus test for apartments and houses in the 2088 postcode, will be the comparisons from the March Quarter 2007 to the March Quarter 2008. After consultation with Australian Property Monitors, we have agreed (given that the quarter finishes next Monday) to hold off publishing these results until next week’s edition. We can assure you that this data will be on properties that have exchanged – not settled.

Many real estate agencies will be most reluctant to conduct such a comparative analysis given that for the vast majority, these results will identify a negative result. We have looked at our results and here they are.

Apartments Sales – March Quarter 2007 to March Quarter 2008
Up 5.80 per cent

Apartment Sales Volume (Selling Price) – March Quarter
2007 to March Quarter 2008
Up 27.60 per cent

House Sales – March Quarter 2007 to March Quarter 2008
Down 5.78 per cent

House Sales Volume (Selling Price) – March Quarter 2007 to
March Quarter 2008
Up 46.65 per cent

From our perspective, a great result, given that we continue to navigate and ‘negotiate’ difficult international markets. Although we did get a chuckle from this video called “Negotiating with the dentist.” In real estate terms this is so true – you get what you pay for – although I’ll bet his other half would have negotiated a much lower fee for him. Cheers ^__^ (Turn the speakers up to hear this one.)

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