REPORT CARD – BUSINESSES “A” AND GOVERNMENTS “F”!

REPORT CARD – BUSINESSES “A” AND GOVERNMENTS “F”!

It has been well documented that businesses over the last ten years have been the star performers (well most anyway) and governments at all levels have struggled to properly manage their respective portfolios. Despite concerns with global financial markets which were evidenced when the share market finished in negative territory yesterday – we are now just one more edition away from another interest rate rise. This week we witnessed commodity prices drive the Aussie dollar to a 23 year high of 94.50 which is the highest since March 1984. The economy continues to grow at a startling rate with increasing output results based on stronger demand where capital spending increased 5.1 per cent in Quarter 4 – 2007. If interest rates are increased at next week’s meeting this will equate to just over a 1 per cent interest rate increase in eight months.

This is businesses driving the economy, not governments. Australian housing affordability actually deteriorated in Quarter 4 – 2007. With further interest rate increases on the horizon we will soon see that 40 per cent of a family’s income will be spent on an average home loan. In the September quarter of 2007 it rose from 36.6% to 37.4% which is the highest rate since the Real Estate Institute of Australia began measuring affordability 22 years ago. This will have a serious impact on the third of Australian households with mortgages. The other third who rent, have little to smile about given that families outlaid 23.9% of their median family income in Quarter 4 – 2007. In Quarter 3 – 2007 it was 23.3% and 22.4% a year earlier. The alarm bells on housing affordability have been ringing now for the last five years as elected governments at all levels continue to apply a selective hearing approach. This has led to unprecedented demand for inner city residences and little demand for outer city residences.

The Daily Telegraph on Friday February 22 hit the nail on the head when the Editor wrote “Government an embarrassment. Of all the travesties and abominations presently being endured in NSW courtesy of what is most assuredly the worst government in a generation, possibly even in the state’s history, one stands out above all others.” They went on to say, “ Consider this catalogue of headline – producing “accomplishments” – the Cross City Tunnel, the public hospital system, the management of the Department of Community Services, the ferry service, the $90 million T – Card fiasco, the power sell – off. Is there one area of administration that can be entrusted to this wretched Government?”

The NSW Government this week sacked the Port Macquarie – Hastings Council when the cost of a $6 million cultural and entertainment centre blew out to $41 million. Local Government Minister Paul Lynch came up with this pearler. “The council wasn’t broke, but it’s heading that way. The problem is you wouldn’t trust them, they’ve been so irresponsible in what they’ve done so far.” I refer you back to The Daily Telegraph commentary – obviously no mirrors in Macquarie Street.

As promised here are the figures we compiled from Australian Property Monitors for apartments sales from 2002 to 2007.

MOSMAN APARTMENT SALES IN 2002 – TWO INTEREST RATE INCREASES OF +0.25 PER CENT
Total number of apartment sales – 743
Median Apartment – $465,000
Total Value Sold – $413,728,503
Average Mosman Apartment Price – $591,040

MOSMAN APARTMENT SALES IN 2003 – TWO INTEREST RATE INCREASES 0F +0.25 PER CENT
Total number of apartment sales – 600
Median Apartment – $480,000
Total Value Sold $394,685,800
Mosman Average Apartment Price – $696,094

MOSMAN APARTMENT SALES IN 2004 – NO INTEREST RATE INCREASES
Total number of apartment sales – 521
Median Apartment – $480,000
Total Value Sold – $328,459,928
Average Mosman Apartment Price $658,236

MOSMAN APARTMENT SALES IN 2005 – ONE INTEREST RATE INCREASE OF +0.25 PER CENT
Total number of apartment sales – 474
Median Apartment – $550,000
Total Value Sold – $343,633,815
Average Mosman Apartment Price – $770,479

MOSMAN APARTMENT SALES IN 2006 – THREE INTEREST RATE INCREASES OF +0.25 PER CENT
Total number of apartment sales – 502
Median Apartment – $519,000
Total Value Sold – $358,139,292
Mosman Average Apartment Price – $758,769

MOSMAN APARTMENT SALES IN 2007 – TWO INTEREST RATE INCREASES OF +0.25 PER CENT
Total number of apartment sales – 618
Median Apartment – $525,000
Total Value Sold $458,654,112
Mosman Average Apartment Price – $792,148

The distinct difference in apartment sales in 2007 was highlighted by the return of investors who are in pursuit of high rental returns. With residential vacancy rates at record lows, rents will continue to increase and there are schools of thought that investors are taking an unfair advantage of the rental crisis. It should also be noted that each year the NSW Government increases Land Tax contributions.

I did get a laugh this week when we were contacted by the Australian Government – Australian Communications and Media Authority. We were advised that someone had registered our phone number on the Do Not Call Register. Amazing what lengths competing agencies will go to. Cheers ^__^

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