A common theme in business is judgement by individual results that resonate within the public gallery of observation and real estate markets worldwide have a massive number of adjudicators, both negative and positive.

One month ago I wrote, that in our opinion, the Mosman market had bottomed. Today, this coincides with another problem that highlights the shortage of new properties.

Tim Mooney Photography – Taronga Zoo, Mosman

www.timmooneyphotography.com

For those real estate addicts there are always interesting blogs concerning the Australian real estate industry on www.business2.com.au. There are plenty of inside real estate commentaries and debates are often heated – well worth a subscription and it’s free!

In the 2009 Mosman market (thus far), distressed vendor volumes have not eventuated, despite ongoing critical evaluations from many in the public gallery. The banking fraternity has now dismissed speculation (and expectations for that matter) that this financial crisis was a storm that simply could not weathered. How wrong was that theory?

With the passage of time, we are now starting to see our property markets stabilise and indentify upward price growth.

We publish every sale we execute http://www.rwm.com.au/sales-list/sold_listing/. Others ‘invent’ sales and make media announcements with no evidence to support such claims. Hey Presto or Pinocchio’s property announcements? Without clarification such claims remain on the nose!

Our subscriber sales climbed this week to $876,114,019 (up $17,020,020 from last week). Over the past two weeks, we have executed $27,320,009 in sales to subscribers of Virtual Realty News only. We don’t include our other sales where vendors/purchasers are not subscribers – see our recent sales pages.

It would be reckless in our opinion, for real estate agents in Mosman to suggest to vendors that prices will only get lower. Rather be on the market than just in it and for the record, RWM has transacted the highest volume of Mosman house sales in 2009 – more than any other local real estate agency.

What many forget is the simple market philosophy of meet and greet. As a vendor, you can’t greet the market if one refuses to meet it. Our recent sales successes have evolved because we found the competition instead of blaming the dark cloud of the Global Financial Recession.

This analogy also applies to advertising where ‘online’ in 2009 is the peak performer. Print media, formerly a print meat market, has lost vendor appeal. It now has to compete with the ever evolving online markets where interactive social networking is the preferred option of consumers.

They say in rugby circles “use it or lose it” and the best advice I can offer to print publications is, “if you can’t beat ‘em – join ‘em”. There is still a vital role for print to play in real estate. I believe however, that the answer is classified advertising used as a directory to point consumers to more advanced and informative online presentations.

Rupert Murdoch announced this week that he believes that within a decade (I think three – five years) that the majority of newspapers will be delivered electronically. Mr Murdoch said, “If you’ve got a newspaper with a great name and great reputation, and you are trusted, the people in that community are going to need access to your source of news.”Mr Murdoch said, “This can all be served digitally and much more cheaply than it is now in a newspaper.” In an average week RWM would send up to 100,000 (sales and rentals) emails to clients on our database.

The Westpac – Melbourne Institute index of consumer sentiment rose 12.7 per cent to 100.1 points in June as a result of the strong economic growth figures recorded in the March quarter 2009. In May, the index recorded 88.8 points so a recorded index above 100 points has happened for the first time in seventeen months. As the mature markets rebound, a large proportion of this growth can be attributed to first – home buyers who could be called ‘the crash test babies’.

There is a clear message in the following graph which identities that the average first-home loan in NSW has increased by more than $50,000 (market competition). In just over a year, the average loan has increased to $300,000, thanks to record low interest rates and government hand-outs. The cheapest home loan currently available is with the Commonwealth Bank (CBA) at 5.64 per cent. The long – term cost of funding is increasing, which explains why (since January 2008) the CBA has held on to 0.82 per cent of net official Reserve Bank of Australia cash rate reductions.

In April 2009, home loans to first – home buyers reached a 14 month high as the dash for cash handouts from Federal and State Governments reached fever-pitch. The numbers taking out first time home loans jumped to 28 per cent in April – the highest share to first home buyers since the Australian Bureau of Statistics commenced recording in 1991.

Overall, home loan approvals have risen consecutively for the last seven months. Oh dear…. artificially inseminating property markets with the probability of an early election will equate to carnage for enthusiastic and naive property market debutants.

Ross Greenwood wrote a brilliant article on Money News. “Right now the Federal Government is at pains to tell everyone – including us the mug – punters to the International Monetary Fund that it will not exceed its own, self – imposed, borrowing limits. How much? $200 billion. And here’s a worry. If you work in a bank’s money market operation; or if you are a politician; the millions turn into billions and it rolls off the tip of the tongue a bit too easily.

But every dollar that is borrowed, some time, has to be repaid. By you, by me and by the rest of the country.

Just after 5 o’clock tonight I did a bit of maths for Jason Morrison. But it’s so staggering its worth repeating now. First though … here’s what Chairman Rudd has been saying about – what he calls – these temporary borrowings. Remember those words … temporary deficit … but the total Government debt could end up around $200 billion.

So here’s a very basic calculation … I used a home loan calculator to work it out … it’s that simple.
$200 billion is $200 million. The current 10 year Government bond rate is 4.67 per cent. I worked the loan out over a period of twenty years.

Now here’s where it gets scary … really scary.

The repayments on $200 billion come to more than one and a quarter billion dollars – every month – for 20 years. It works out we – as taxpayers – will be repaying $15.4 billion in interest and principal every year … $733 for every man woman and child – every year.

The total interest bill over the 20 years is – get this – $108 billion.

And remember, this is a Government that just 18 months ago had NO debt … NO debt. In fact it had enough money to create the Future Fund to pay the future liabilities of public servants superannuation … and it had enough to stick $20 billion into the Building Australia Fund last year …” Oh dear …

The Australian Bureau of Statistics reported this week, that unemployment in Australia was up to 5.7 per cent. NSW lead the country in May, with 6.4 per cent. Of greatest concern is that with first home buyers, Ruddy Fantastic has been shaking his sauce bottle for an election party of mammoth proportions that will see heads spinning with an almighty hangover. Much like Nation Building which is being watched closely – with interest!

Then again, why do people find interest on debt interesting?

Cheers ^__^

For this week’s recorded Mosman real estate, Cremorne real estate, Neutral Bay real estate and Cammeray real estate sales http://www.rwm.com.au/news/

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Such revelations have not been popular with some real estate agencies who will now have to invest (their cash) in costly online upgrades and blogs (we believe we were the first ) to allow subscribers to voice their opinions.

Time heals all markets and this time around (with the benefit of hindsight) on an economies of scale basis, the future looks very bright indeed. One only needs to look at mobile phone technologies to see where we are headed. The race is on to provide consumers with interactive property alerts and I’m not talking SMS either – which failed the consumer test of functionality and appreciation for that matter. Hosting individual media website platforms will be the next initiative for our industry which is fast becoming much more interactive. In time, print expenditure will be reduced with vendors moving to hi-tech video broadcasting that is already much more affordable.

We certainly don’t speak for other businesses, that currently challenge the good, bad and ugly side of the GFR and I believe that the March quarter 2009 will be the worst on our constantly monitored business dashboard. There are signs that real estate markets are getting stronger due to the fact that available stock levels remain tight. Currently, all the buyer action is in the lower price ranges but this action will eventually move to the middle and eventually the top-end markets. Having said that, we believe the top-end properties will identify a capped reduction from fifteen (15) to twenty-five (25) per cent based on 2007 valuations. (It will be interesting to read subscribers’ thoughts on this week’s blog).

Australian Property Monitors (owned by Fairfax Media) revealed that in the March quarter 2009, the number of properties sold in Sydney at auction, fell dramatically. The average price for properties sold at auction in Sydney during the March quarter was $616,237. In the 2008 quarter, it was $786,682. Sales in 2009 were 1,742 compared to 2,230 in 2008.

All things considered, this is not a bad result given that the Westpac Bank – Melbourne Institute leading index of economic activity fell -5.1 per cent in February. A further decline from January which recorded -4.8 per cent, the weakest outcome since 1982. This index has been in negative mode since October 2008 and in all probability, a turnaround could be just months away.

To put this into greater perspective, figures compiled by Treasury identified that the average Australian lost $25,000 in wealth in the past year. Australian residential real estate fell just three (3) per cent in 2008 compared to the United States and United Kingdom where prices fell by as much as twenty (20) per cent. The reason why Australia fared so much better was again, a lack of supply.

Aside from escalating unemployment, a key performance indicator for global recovery, is a strong banking sector and it is well documented that our very own Australian banks are currently positioned as the strongest in the global economy – so why are they delaying our economic recovery?

An analysis by Fujitsu Consulting identified that our banks have increased profit margin on home loans over the past two years. Fujitsu Consulting identified that the major banks are now making at least $450.00 a year more on the average mortgage. Two years ago, which just happened to be the peak of the economic boom – the cash rate was 7.25 per cent. Today it is 3.00 per cent and last week’s Reserve Bank of Australia (RBA) cash rate reductions identified ANZ, Commonwealth and Westpac, cut mortgage rates by 0.1 per cent and the NAB refused to pass on any reduction.

Last week, I mentioned that banks still charge interest rates on credit cards at eighteen (18) to nineteen (19) per cent. This week, the RBA announced that outstanding balances on Australian credit cards presently sit at an all time Australian record of $45.4 billion (multiply that by 18.5 per cent).

Ruddy Fantastic and his government remain tight lipped on this statistic which is understandable given he no doubt read the article published this week by the Member for Higgins – Peter Costello on www.smh.com.au

How immoral, to hold wrong views.

“ I’ve been feeling sorry for Belinda Neal, you will recall, is the Labor MP who let fly at a waiter when asked to move tables at Iguana Joe’s a restaurant/night spot on the NSW Central Coast. “Don’t you know who I am?” she demanded.

Soon all of Australia knew who she was. Kevin Rudd stepped in, reprimanded her and ordered her to undergo anger management consulting.

I’ve never been to this sort of counselling, but I can imagine how it operates. A therapist gives you a tricky case and questions you on how to respond. The idea is to keep your anger under control.

Here’s a case study for Neal. You are flying on your private jet when the flight attendant brings you the wrong meal. Do you (a) eat it anyway; (b) point out you ordered something else and ask for an alternative; or (c) shout at the flight attendant and reduce her to tears?”

Our banks are reducing many to tears and I don’t hear Ruddy Fantastic shouting at them. Obviously they are not on his economic menu. As our headline states, businesses want answers not questions and you can bank on that.

Cheers ^_-^

See you on our blogs – our most popular this week.

1. http://www.rwm.com.au/2009/04/the-power-of-social-networking-on-the-internet/

2. http://www.rwm.com.au/2009/04/it%e2%80%99s-all-about-position-position-position-and-i%e2%80%99m-not-talking-real-estate/

3. http://www.rwm.com.au/2009/04/in-the-business-world-transactions-speak-louder-than-words/

For this week’s recorded Mosman real estate, Cremorne real estate, Neutral Bay real estate and Cammeray real estate sales http://www.rwm.com.au/news/

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Reserve Bank of Australia (RBA) Deputy Governor Ric Battellino, advised this week that the Australian economy is likely to shrink for a few more quarters and if we read between the lines, this means for the rest of 2009. Battellino said “These measures will go a long way to offsetting the negative influences on the economy coming from abroad, but the reality is that we can’t fully insulate ourselves from what is happening elsewhere in the world.” The RBA is in all probability our best barometer in the current environment given its independence in the Australian market place.

Alan Kohler wrote this week on his popular business site www.businessspectator.com.au “Wake up and smell the downturn” (always thought provoking) “Australia has so far been cocooned by political and economic insouciance and prettied up by well – targeted government mascara: the bank deposit guarantee, and state government debt guarantees, the short selling ban on financials, the first home buyers grant, the 30 per cent extra tax deduction for business investment until June 30 and of course the huge fiscal stimulus, and especially the cash handouts.”

The jury is still out as to whether Ruddy Fantastic’s December “cash splash” worked although this week’s announcement that February retail sales slumped by the greatest margin in nine years identifies a stark and different spin. Unemployment continues to over shadow our economy and employment prospects are worsening. RBA board member Roger Corbett, did add some perspective when he said “our retail figures would be the envy of other countries in the OECD.”

Next week’s meeting of our RBA will be most interesting. Will the cash rate be reduced further? The standard variable mortgage rate has already fallen by 375 basis points in the past six months. In Mosman, property transactions are reducing and so too are prices although we are now starting to see some clarity in the situation.

A home was auctioned last week at 11 Cyprian Street Mosman (mortgagee-in-possession) the first in 2009. We sold the property on 1 July 2005 for $4,725,000 and it has just sold for $4,000,000 a drop of 18 per cent. An excellent example of a recorded transaction speaking much louder than words that were talking a 30 per cent drop. So I went to RP Data to look at recorded transaction volumes for Mosman houses and apartments since 2000. Bear in mind that because of confidentiality restraints, a few 2009 house sales are yet to be recorded.

MOSMAN HOUSES

• 2009 – 24 sales. Averaging 8 sales per month with a median sale price of $1,425,000
• 2008 – 264 sales. Averaging 22 sales per month with a median sale price of $2,200,000
• 2007 – 409 sales. Averaging 34 sales per month with a median sale price of $2,230,000
• 2006 – 396 sales. Averaging 33 sales per month with a median sale price of $1,900,000
• 2005 – 293 sales. Averaging 24 sales per month with a median sale price of $1,850,000
• 2004 – 310 sales. Averaging 26 sales per month with a median sale price of $1,637,500
• 2003 – 376 sales. Averaging 31 sales per month with a median sale price of $1,699,500
• 2002 – 392 sales. Averaging 33 sales per month with a median sale price of $1,690,000
• 2001 – 446 sales. Averaging 37 sales per month with a median sale price of $1,250,000
• 2000 – 349 sales. Averaging 29 sales per month with a median sale price of $1,150,000

Source: RP Data

If you look closely at these figures you will note that since 2000 to 2008 the total number of houses sold in Mosman was 3235. The total number of houses in Mosman is 4,900 so this equates to 66 per cent of the market sold over this period. The average trade percentage per annum is 7.3 per cent.

Beware of agents quoting absurd sales results without revealing their source. One Mosman agency has fellow agents shaking their heads in total disbelief at the rubbish they are sending out. We are in the midst of a property market that requires truthful analysis, not distorted results – otherwise known as false advertising.

MOSMAN APARTMENTS – STRATA TITLE

• 2009 – 44 sales. Averaging 4 sales per month with a median sale price of $520,000
• 2008 – 494 sales. Averaging 41 sales per month with a median sale price of $526,000
• 2007 – 637 sales. Averaging 53 sales per month with a median sale price of $525,000
• 2006 – 456 sales. Averaging 38 sales per month with a median sale price of $501,000
• 2005 – 484 sales. Averaging 40 sales per month with a median sale price of $522,500
• 2004 – 474 sales. Averaging 40 sales per month with a median sale price of $473,500
• 2003 – 570 sales. Averaging 48 sales per month with a median sale price of $475,000
• 2002 – 725 sales. Averaging 60 sales per month with a median sale price of $452,000
• 2001 – 679 sales. Averaging 56 sales per month with a median sale price of $410,000
• 2000 – 415 sales. Averaging 35 sales per month with a median sale price of $390,000

Source: RP Data

Richardson & Wrench Mosman & Neutral Bay (RWM) have ten house sales yet to be recorded at RP Data – the total sales value $47,440,000. Our average house sale this year is $4,744,000.

There is anecdotal evidence that our top-end markets are struggling despite significant price reductions and in the last six months (we calculate) there were just eight house sales in excess of $5,000,000.

We at RWM believe the $5,000,000 + market is not far off an upward run given record low interest rates. Historically, this market since 2001, has been Mosman’s most volatile. Financial losses have been extreme, even though in Australia, the principal place of residence is tax free (unlike nearly every other country).

Why do I refer to 2001? Well in June 2001 RWM posted Mosman’s first ever double digit sale with the sale of a Hopetoun Avenue property for $15.500 million. Scroll back up and have a close look at what happened to median house prices from 2001 – 2008. Median house prices doubled yet the apartment median only recorded a 35 per cent increase. The reason why – Mosman apartments don’t have a strong top-end as against Mosman houses which historically are prolific performers. Properties are valued from the top-end down and the top – end has the greatest capital gains – tax free.

These statistics have me intrigued so next week I will extrapolate all the $5,000,000 + house sales since 2000 and see what that reveals (I am already seeing an interesting pattern).

The blog fired up last week and I was accused of writing ‘dribble’ (drivel). The Word Smith Award was easily won by Patricia.

Cheers ^__^

For this week’s recorded Mosman real estate, Cremorne real estate, Neutral Bay real estate and Cammeray real estate sales http://www.rwm.com.au/news/

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