The holiday is over for the indulgent property markets!

The holiday is over for the indulgent property markets!

.

Fascinating times for property voyeurs across Australia where many once upon a time boom markets, have fast become gloom markets with property prices in free–fall.  Earlier this week, I attended the Richardson & Wrench 2011 Conference in Surfers Paradise which is today in a scary market collapse as investors bail out from a once thriving economy. Property portals in Surfers Paradise show approximately 5,000 apartments for sale although a local agent told me that the correct figure would be closer to 10,000. Gold Coast ‘dead’, says developer as projects and properties are now falling into the hands of receivers.

Prior to the Global Financial Crisis (GFC), Perth was on track to surpass Sydney as Australia’s most expensive real estate market.  How quickly things can change. WA’s property slump is now the worst in 20 years the latest government figures reveal. Activity in the housing market has fallen 15 per cent in just twelve months and more than one third since the height of the boom in 2005 – 06. North of Sydney we are seeing a low tide for prices where hundreds of thousands of dollars are being wiped off Central Coast properties. Sydney’s most indulgent holiday markets, the hallowed addresses of Palm Beach and Whale Beach, whilst they may decline in value, appear to be holding up.  Although sales are down massively, on previous years.

BUY PRINT

Just like the stock (shock) market when investors are spooked, the very same rationale applies to the property markets. Investors are bailing due to a personal over-commitment which in turn, relates to their respective outlook on the Australian economy, combined with their own financial positioning. The trend we are witnessing at the moment is investors selling investment properties, not to be confused with the family home.  Hence my suggestion, that the holiday is over!

Here are statistics I downloaded this week from our most popular real estate portal – Domain

MOSMAN – 2088

  • Number of houses currently on the market: 120
  • Number of apartments currently on the market: 101

CREMORNE – 2090

  • Number of houses currently on the market: 21
  • Number of apartments currently on the market: 35

NEUTRAL BAY – 2089

  • Number of houses currently on the market: 13
  • Number of apartments currently on the market: 60

Now that data confirms a solid market with no panic selling, we will continue to monitor this data on  weekly basis in Virtual Realty News. One thing for sure is that the investors who sell (at a loss) will try to recover significant amounts of their losses via their tax returns. I wonder if Wayne Swan factored this into his return to a budget surplus.  I doubt it. The Budget is a triumph of hope over experience where a Galaxy poll revealed just 28 per cent of voters believe it will be good for the economy. I always enjoy my weekly Alan Kohler read No surplus of ambition: Swan’s biggest plus although the polls keep telling us unpopular government, unpopular budget.

Source: The Australian- order Bill Leak’s print

Everybody (well most anyway) have a theory as to why so many indulgence markets are collapsing across Australia. I classify indulgence markets as properties purchased outside the family residence which takes us to Australia’s miracle economy: fact or fiction? For me it is quite simple. Under the Howard Government, Australia frolicked as it celebrated an unprecedented seventeen years of economic growth. Money was not the object – lifestyle was.  This is evidenced by the Australian GDP Annual Growth Rate from the early 1990’s to 2008 where today we are witnessing the clean up after Australia’s longest economic party – evidenced by this graph from Trading Economics.

Post GFC, what we are now seeing is human behaviour nearly identical to what we witnessed in the recession of the early 1990’s. This is evidenced in this graph as borrowings (leveraged debt) became an obsessive disorder. Fort Fumble did the same during the GFC which explains why it too, is having difficulty returning a once healthy budget back to surplus. Look at this graph.

I am dumbfounded as to why Julia Gillard’s Fort Fumble is spending $36 Billion (+ blow outs) on a NBN Co investment strategy so that Australian’s can have faster access to read how core markets are going broke. The decision to embark on Australia’s most expensive taxpayer investment (the NBN) was made before the GFC, yet Fort Fumble believes nothing has changed since then?

Budget, interest rate rise worries dent consumer confidence in May which is placing enormous pressure on Australian small businesses facing ‘uphill battle’ amid rents, dollar, internet competition. From an economic perspective, the demise of the ‘holiday’ property markets is driving the negativity in our property markets generally, given the real estate slump will leave banks in pain, too. This then resonates through property markets where there is no better example than – home loans drop to 10 – year low. On top of that is the reality that Reserve rate rise a question of when, not if which takes us to the inevitable as households on edge over interest rates. This roll on effect saw Moody’s downgrades ratings for big four banks to Aa2 from Aa1.

Now to the Gillard Carbon Tax debacle – electricity sector faces $6.5 billion debt refinancing “the debt challenge facing the electricity sector came as a report compiled for the federal government warned that uncertainty over the price of carbon in Australia posed a significant threat to investment in the sector. “ So we have a market capitalisation of $30 billion for the electricity sector in Australia yet $240 billion will have to be spent by 2030 and that is without a Carbon Tax.

The Deputy Prime Minister of Australia (Bobby Brown) has spoken – Greens leader Bob Brown vows to take on the media to shore up carbon tax push. Obviously an advocate of free speech, hugging trees and with a knowledge of economics that could only  be understood in a Parliamentary Economic Play School, Brownie, has decided to attack the media.

Senator Bobby Brown described newspapers’ front pages as unbalanced, opinionated and “not news in terms of having both sides.”  I believe he just described Virtual Realty News.

Cheers ^__^

This week’s sales 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

8 Responses to “The holiday is over for the indulgent property markets!”

  • Ryan O'Grady says:

    Nice summary of the current market conditions Robert. It is always refreshing to see an agent speak truthfully about the market.

  • Hotly Spiced says:

    Even without a crystal ball I know there won’t be a budget surplus. Under this Government every State election is ousting Labor and now the Premier of WA has overnight, wiped $2B off Swan’s projected tiny surplus. This Government’s outrageous policies cannot find co-operation or confidence from any sector. The question should not be, ‘will he or won’t he return the budget to surplus’, it should be ‘how big will the deficit be’.

  • Great edition. Interesting stats about low numbers of properties currently on the market in our immediate area. The truth shall set you free.

  • Gordon says:

    More interest rate rises in our two-speed economy will be a burden for many people. The Reserve Bank hasn’t got much option, with big unions taking full advantage of industrial laws they “bought” with their anti-WorkChoices campaign in the 2007 election. These changes are driving big wage and cost increases in key industries, which feed straight into inflation.

    But most of the economy isn’t in this cashed up hot spot, so coming rate rises will hit home buyers and most businesses very hard indeed. Thanks to various dumb policies over the last four years, Fort Fumble has ensured that “working families” will be “moving ahead” to some pretty bleak times.

  • Ann says:

    Thanks Robert, great read, but not great news…….

  • Ann says:

    Robert, its seems like todays papers agree with your real estate outlook.

  • Ann,

    Thanks and I agree 🙂

    A vast majority of property journalists do subscribe to VRN so I enjoy the challenges periodically by offering a different outlook. There are discrepancies in property reporting were more often all the data is bundled in without closer scrutiny.

    Just happy to have an online voice 🙂

  • Good artical last week. The truth in the local market is that there is a low supply of property (as you state) and not an over supply, as many buyer perceive. Their mistake is that when they search a price range on domain.com.au for say $4m, they receive all properties where the listing agent has specified a price range including $4m. EG: If a property is for sale at $3m and the agent has specified a price range of say $2.5m to $4m in the Domain search criteria, then this property will be included in their search for $4m properties. 120 properties currently on the market in Mosman is a low figure and I’m talking to buyers desperate for more choice.

Leave a Reply

Your email address will not be published. Required fields are marked *