Mosman — A Running Market that Can’t Hide!

Mosman — A Running Market that Can’t Hide!

Not since the early nineties has the Mosman residential market been under such close scrutiny. Divided perceptions simply add to the intrigue and the coming months will reveal all. Quite simple really – property prices will either

A – Fall
B – Rise
C – Remain Constant
D – All of the above

Stock levels have been somewhat constrained thus far in 2008 with top end sales (and listings) sparse, compared to previous years. Should the Mosman market (in coming months) remain constrained, the clear message is that despite difficult economic markets, this market is one of the most resilient in Australia. Whilst compared to and identified incorrectly as an indulgence market, it (so far) bears absolutely no resemblance to the northern beaches real estate market, or prestige motor vehicle and boating markets that currently are being decimated.

Example, for anyone who acquired an Aston Martin in 2007, emergency exit deals are currently being negotiated at as much as 50 per cent less than the agreed purchase price. These markets where once ‘everything was available at a price’ have now been replaced with ‘everything is available for a buyer’. Cash is King for these markets given the urgency exits. This mindset resonates with Mosman property prices given perceptions that many vendors are in “Struggle Street” although at this point in time we remain unconvinced. Probably our most interesting observation has been vendors cancelling marketing campaigns. They are reluctant to enter the market until they are convinced that a market actually exists and their reluctance is based solely on restricted supply so far in 2008 (a good sign).

Better known today – as the Mosman residential real estate “Ring of Confidence” where the shadows of the US sub – prime crisis are diminishing within our economy. The Reserve Bank of Australia (RBA) received the F (Fail) mark with their reading of the economy given that 12 – year high interest rates are now taking their toll on the economy. No surprises that this week it suggested a back – flip where cash rates will very soon reduce. This is more like a “belly – flop” with its economic strategies or better still, its misunderstanding of the machinations of our economy. An emphasis on controlling (oops fighting) inflation has today been identified as beyond the control of Australian’s, trying to cope with the cost of living in 2008.

Households are not responsible for the accelerating cost of living – food, petrol, rents and mortgages, yet this institution keeps applying speeding fines (rate increases). It is blatantly obvious today that it is beyond the control of “the household”. Just as interesting is that the Federal Government has embarked on a mission as bank busters (a perception of winning votes) despite the reality that these institutions have the government in “ignore mode”.

Despite the fact that the big banks have upgraded shareholder returns by adding approximately 60 basis points above the RBA official cash rate – we will see weight loss with interest rates. With petrol prices reducing, consumer confidence is now increasing not decreasing.

With the benefit of hindsight it would be reasonable to suggest that the RBA would have played its cards much more moderately instead of applying aggressive rate increases which are now considered an historical error. Punishing households to combat inflation is today, an absolute no-brainer.

Even worse, was the announcement this week by Federal Infrastructure Minister Anthony Albanese that the latest Rudd Government initiative is to establish a group (chaired by Frank Sartor) to tackle housing affordability. Given that the NSW Government was single handedly responsible for the investor exodus in NSW which resulted in lowest ever vacancy rates and highest ever weekly rents – the greatest inflation accelerant today – fear not!

At the end of the day just like inflation – the households will cop the blame for that too!

The leading residential suburbs will remain the strong performers given that there are no alternatives. The problem with governments is their collective struggle with the basic understanding of ‘know’ and ‘no’! Cheers ^__^

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