Property Is Now Properly Positioned!
Observers of financial markets may have been fascinated by the mayhem over the past week only to see the ASX200 rebound above the 4100 level. However, it has come at a cost. Investors have moved cash from the ‘shock’ market into bank deposits, where twenty nine banks have slashed term deposit rates since our last edition. Deposit rates fall amid global jitters where Australian Prudential Regulation Authority data showed that banks at the end of June held just under $500 billion of cash deposits which is up seven percent from a year ago. That was June, so one would well imagine that this figure is now much higher given the events of the past few weeks.
If history is any indication, this means that real estate markets can now expect a consumer rejuvenation. This is already happening in Mosman real estate (albeit in prices up to $5,000,000) where we can now say with confidence, that prices have bottomed. Yes, I have the statistics to prove it.
Despite what is happening in the US and Europe if things go bad, we have wriggle room which explains why the global turmoil led to rates pause: RBA. The movement by investors back into bank deposits is all about maintaining a tight ship the best strategy to survive market mayhem so don’t bet your house on a rate cut. The current mayhem no repeat of global crisis given Australian banks are not faced with a liquidity freeze, considering that they are now drowning in a consumer and business saving tsunami. The biggest challenge facing the Reserve Bank of Australia (RBA) is to keep consumers spending where more importantly we must be careful not to save ourselves into a recession.
The latest survey by Boston Consulting revealed that one in two Australians plan to reduce discretionary spending over the next twelve months. Aussie housing market outperforms shares, with significantly less risk where we observed no better example of this than the “shock market” last week which led investors back to the safe sanctuary of bank deposits. A natural response when investors seek to protect their nest eggs in times of uncertainty.
As a result I spent some time in our RWM Research Department this week where we extrapolated sales data for Mosman house/semi house sales from 2001 to 2011. Our findings were fascinating.
Source: Domain Property Data
From 2001 to 2011 not once has the Mosman house/semi adjusted clearance rate for auctions broken 50 per cent.
- 2001 – 229 auctioned, 121 sold with an adjusted clearance rate of 47%
- 2002 – 201 auctioned, 104 sold with an adjusted clearance rate of 46%
- 2003 – 204 auctioned, 80 sold with an adjusted clearance rate of 34%
- 2004 – 122 auctioned, 30 sold with an adjusted clearance rate of 18%
- 2005 – 137 auctioned, 45 sold with an adjusted clearance rate of 26%
- 2006 – 140 auctioned, 51 sold with an adjusted clearance rate of 27%
- 2007 – 126 auctioned, 63 sold with an adjusted clearance rate of 39%
- 2008 – 122 auctioned, 35 sold with an adjusted clearance rate of 19%
- 2009 – 73 auctioned, 34 sold with an adjusted clearance rate of 21%
- 2010 – 105 auctioned, 37 sold with an adjusted clearance rate of 26%
- 2011 – 69 auctioned, 24 sold with an adjusted clearance rate of 24%
Which brings me to why I believe that the Mosman house/semi market to $5,000,000 has bottomed and its now capital appreciation time. In 2011 Mosman has recorded 148 house/semi sales thus far – with 98 sales recorded under $5,000,000, 10 sales above $5,000,000 and another 40 sales yet to record a sale price. The highest price recorded thus far in 2011 is $15,250,000 and bear in mind that only 10 properties sold this year above $5,000,000. So let’s look at what RWM Research Department found is happening to average prices from 2001 to 2011 for houses/semis.
- 2001 – Average price $1,724,390 with a total value sold $738,039,118
- 2002 – Problems with the data as the average price $7,339,508?
- 2003 – Average price $2,229,044 with a total value sold $818,059,432
- 2004 – Average price $2,107,566 with a total value sold $655,453,257
- 2005 – Average price $2,332,095 with a total value sold $699,628,500
- 2006 – Average price $2,509,087 with a total value sold $1,003,635,130
- 2007 – Average price $2,823,931 with a total value sold $1,169,107,720
- 2008 – Average price $2,721,844 with a total value sold $724,010,612
- 2009 – Average price $2,582,570 with a total value sold $813,509,751
- 2010 – Average price $2,740,500 with a total value sold $920,808,149
- 2011 – Average price $2,865,692 with a total value sold $298,032,000
More on the home front Mosmanites playing property pick a box with caution and Mosman Bridgepoint shopping centre sells to Chinese investor.
MOSMAN – 2088
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• Number of houses on the market July 13 – 88
• Number of houses on the market this week – 103
• Number of apartments on the market July 13 – 95
• Number of apartments on the market this week – 98
CREMORNE – 2090
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• Number of houses on the market July 13 – 15
• Number of houses on the market this week – 17
• Number of apartments on the market July 13 – 25
• Number of apartments on the market this week – 26
NEUTRAL BAY – 2089
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• Number of houses on the market July 13 – 6
• Number of houses on the market this week – 9
• Number of apartments on the market July 13 – 65
• Number of apartments on the market this week – 70
On July 13, Mosman recorded its lowest number of available houses when that week it recorded just 80 houses this week it broke the 100 mark for the first time since June 16 when it recorded 104 so we can expect to see available volumes for house now increase through to Christmas. Bearing in mind that Mosman has one of the lowest delinquency rates in Australia it should come as very little surprise that vendors decided that their respective front gates will remain shut until they see anecdotal evidence that property prices were well on the road to recovery. I must admit that they have played a very smart hand indeed.
For this week’s sales in Mosman real estate, Beauty Point real estate, Clifton Gardens real estate, Balmoral real estate, Cremorne real estate, Cremorne Point real estate, Neutral Bay real estate, Cammeray real estate Click Here
Cheers ^__^
The road to recovery is still under construction!
We transacted $61,238,200 in sales (houses and apartments) last month. Fantastic, but we are still aware of the caution that needs to be exercised in the current financial and property markets. Certainly a strong contributing factor was the announcement that in the March quarter 2009, the economy grew 0.4 per cent which saw Australia avoid a technical recession. Economic growth forecasts from the Reserve Bank of Australia (RBA) May Statement of Monetary Policy, predicted that the March quarter would contract by 0.4 per cent and this would then be mirrored in the June quarter 2009. Our subscriber sales broke a new barrier last week and now sit on $909,716,219.
All eyes will obviously be on the June quarter economic growth figures which (if positive) will lead to stronger market sentiment. The Irish economy shrank by 8.5 per cent in the March quarter 2009. The road to recovery will be re- built on small steps, not leaps and bounds.
South Head – Sydney Harbour www.timmooneyphotography.com
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Whilst property prices dropped, it was interesting to see vendors using the cheaper, electronic form of marketing. When this happens, the real estate agencies running hi-tech online models lead the markets simply because they have stronger lines of communication and larger audiences. Just as interesting, is the ever-increasing number of subscribers to Virtual Realty News. Of course this is no surprise, given the growth of social online networking and real estate has an enormous online audience of property voyeurs – a sign of the times.
Did you notice in the aerial photograph, that the Eastern Suburbs has a red tint in its foundations? Well actually, it’s not just the East, but all markets. Australian households have lost a staggering 36 per cent of their financial wealth since the impact of the global financial crisis (GFC). We can now expect the worm to turn, (although very cautiously) based on the report from the Australian Bureau of Statistics (ABS) that the combined wealth of households at the end of March 2009, was $787 billion. In September 2007, household wealth was $1.246 billion. What remains to be seen is when and where cash and bank deposits re-emerge in financial and property markets.
The general “rule of thumb” in property is that one third rent, the second third own with a mortgage and the final third own, without a mortgage. Now it gets interesting as we attempt to track these monetary circular flows of income.
Rent
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The most dangerous demographic, which in recent times has displayed multiple personalities – to rent or become a First Home Buyer. In May 2009 – 7,300 (double 2008 levels) took advantage of government grants in NSW. Australia wide, 19,607 jumped into property and the total thus far is just over 97,000 (anyone else thinking of the subprime model?).
This is a false economy for a number of reasons given that rents continue to climb. New home sales slumped nationwide last month and sales contracted by 5.7 per cent in May. Building approvals fell 12.5 per cent to 9,953 units in May, seasonally adjusted, from a downwardly revised 11,374 units according to the ABS. In the year to May, building approvals fell 22.4 per cent.
The Real Estate Institute of NSW reported this week, that the Sydney rental vacancy rate fell to just one per cent in May 2009 (the lowest recording in twelve months). In a healthy market, the rate should sit anywhere between 2.5 to 3.5 per cent. Alarm bells should be (but are not) ringing as those in rental accommodation are buying (97,000+) which takes us now to those with mortgages.
Home owners with mortgages
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Another tight-rope market given that property prices are recovering (the market has bottomed) and interest rates are at 49 year lows. The RBA is caught between a rock and hard place. It can lower the cash rate further however this decision is based on economic outlook and unemployment – which look on the positive side. The major banks are dealing the cards as they want to increase rates citing higher borrowing costs. The RBA cash rate currently sits on 3.00 per cent which remains unchanged for the last two months. The CPI Inflation Rate year to March 2009 presently is 2.5 per cent.
With Australia’s unemployment rate at 5.7 per cent in May it is highly unlikely that the RBA would drop the cash rate below 2.5 per cent. The lowest cash rate was recorded back in January 1960 at 2.89 per cent. Should the RBA drop the cash rate further, there is no guarantee that the major banks will follow suit.
Home owners without mortgages
These are the main game players given the importance of where they invest their monies. Many moved out of the property markets simply because the incompetent NSW government taxed them out of the financial equation. Despite attractive rental returns, their cash and bank deposits will in all probability head back to the share market. Boston Consulting Group recently announced that Australian companies are some of the world’s best in creating wealth value for shareholders. Their research identified that in the five years to the end of 2008, the Top 100 companies listed on the ASX generated shareholder returns of 6 per cent. Europe (0 per cent), United States (-2 per cent) and Japan (-3 per cent).
Now think of inflation and Ruddy Fantastic’s Fort Fumble (Federal government) where inflation was ballooning way beyond the RBA’s comfort zones due to the three inflation accelerants – rent, food and petrol.
Unlike our business (RWM) Kevin Rudd and Wayne Swan have an online problem and Fuel Watch and Grocery Watch (election promises) which have failed miserably, are nothing more than embarrassing failures.
So what we have now, are banks controlling interest rates, petrol companies running amok (again), and Coles and Woolworths setting food prices! Hardly Nation Building – yet Ruddy Fantastic flagged the possibility of taking ownership of state public hospitals. This week he stated “I was absolutely clear cut about that possibility at the last election.”
No doubt he has plans to implement a Hospital Watch website too!
Australian businesses are doing well, on the road to recovery. Fort Crumble (NSW government) conducted an internal poll and concluded that the majority of its members would not be returned at the next election – shock horror!
Keep an eye out for rental vacancies, interest rates, petrol and food prices and hope that the road to recovery does not become the long and winding road.
Cheers ^__^
For this week’s recorded Mosman real estate, Cremorne real estate, Neutral Bay real estate and Cammeray real estate sales www.rwm.com.au/news/
