THE HEAT IS ON – IN MORE WAYS THAN ONE!

THE HEAT IS ON – IN MORE WAYS THAN ONE!

With our “Governor of Moolah” realising his use–by date this week, there was plenty of back slapping as he headed to the elevator (which resembles the property markets with some up and plenty down). An article appeared last Sunday in The Sun-Herald, “2003: Bought for $262,500 LAST WEEK: Sold for $95,000. Prices plummet in west as more lenders repossess homes.” This anecdotal market information would have been totally lost to the central bank had in not appeared in a newspaper, which further demonstrates how broken the system is when recording current market data.

The market can be described in many fashionable ways however, when there is consistent evidence that home prices in some areas are thirty to forty per cent down, those markets are in recession. What we don’t hear is the central bank commenting on these property markets where the recent increases in rates, combined with high petrol prices, have led to market collapses. Certainly a case of Hear no Evil, See no Evil and Speak no Evil. Although, I did find it interesting that an article in the Financial Review last Friday, “HOW THE TRICK WAS DONE” – John Edwards asks Ian Macfarlane to account for 15 years of uninterrupted economic growth. I loved this piece “Of the RBA’s six governors only Macfarlane has not had a recession on his watch. In his 10 years as governor the economic expansion which began in 1991 has extended through 15 years and will in a few weeks begin its 16th year. Over that time income per head for Australians has increased by substantially more than Canadians, Americans, Britons or New Zealanders. Unemployment has fallen to the lowest rate in 30 years, output has increased by two fifths, and household wealth has nearly doubled.” Looks to me (like the other residents that live out West) as very much a case of not in my backyard. I guess the fact that the Australian Prudential Regulation Authority figures identify an increase in the number of loans across Sydney in default, is simply a phase that the markets are going through.

It is always interesting to read the releases by the Commercial Economic Advisory Service of Australia (this is the Company that tracks media ad spending). In the six months to June 2006 the total advertising market grew 3.8 per cent to $4.9 billion (yes billion). The Internet ad revenue shot up 60.1 per cent to $421 million. Newspapers recorded an overall loss in ad income of 2.4 per cent ($1.8 billion). This to me comes as little surprise, as when you compare the two, they are in distinct contrast. The online businesses are in a constant state of renovation, developing initiatives to further improve the relationships with consumers. Take Google Maps, RWM, this week www.realestate.com.au launched its Google Maps. These roll–outs cost money which is why most agencies won’t offer this new search facility. They simply can’t afford it, or they are not sufficiently advanced technically, to appreciate the value of this facility. Whilst the online ad spend is up substantially, so are production costs, which take some time to recover. This sudden move would explain why Fairfax is just weeks away from launching its new and aggressive, renovated Saturday Domain, which by all accounts will see a significant shift in advertising. This in turn will lead to increased revenues. With the landscape of online evolving/changing, the newspapers are fast realizing that they too must be proactive, to ensure their very own viability and like everything today, it comes at a cost. This explains why, for some considerable time, we have argued that the cost of advertising would come down and that is exactly what we are now seeing.

September has again proved to be a strong month in sales and we will report on that next week. Yes, the apartment market is holding its own and the house market is going from strength to strength. The October market will see an increase in stock levels and it will be interesting to see where and how the agents decide to advertise them. This then comes back to expenditure, which explains why Fairfax is somewhat confident and some in the real estate industry are placing bets that the renovated Saturday Domain book, will be broken with demand. Very interesting times with offline and online – the heat is certainly on !! Cheers ^__^

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