The Market is Onwards, Not Upwards!

The Market is Onwards, Not Upwards!

The only real way to actually pass judgement on the state of play within the property market, is to access the previous quarters. The September quarter figures announced this week will certainly raise more than a few eyebrows. Whilst the NSW property market performed well in the September quarter, it was considerably down compared to previous quarters, which clearly indicates that the property market is in cruise-mode. However, it is interesting to note that it is good news for the Mosman market and bad news for the real estate agents. Woollahra, recorded the highest median price of $1,560,000 for Local Government Areas with a 12.9% increase. This is the first time in quite a while that Mosman has dropped to number two position, with a median price of $1,535,000. This is a -1.76 reduction from the previous quarter. This clearly indicates that the volume of properties for sale in Mosman is reducing. Given that we only have some 5,900 houses, the vast majority of those sold are now going into home-renovation mode. Another significant factor contributing to the lack of houses on the market is the Stamp Duty. Many now have decided to renovate as in some cases the cost of moving, equates to the cost of renovation. I would anticipate over the next few years that the volume of sales in our area will continue to diminish, which will all but guarantee property values in the area will not show any significant decreases.

Whilst the volume of property sales in Mosman is down, it is alarming to see that the growth areas are Illawarra with 11.5 per cent growth and the Hunter region which recorded its highest annual growth since September 1995. What has not been determined is what proportion of these sales actually went to investors from Sydney as against their own domestic market, which is not renowned for being a high trading market. Moving back to Sydney, again the Campbelltown area is highlighted with just a 2.8 per cent quarter increase and 17.1 per cent overall for the year. With regard to the highest turnover areas, again, it is the Western Suburbs leading the way with Blacktown first and Penrith and Baulkham Hills following close behind. What is interesting to note is that this September quarter did not have the .25 per cent rate increase, so many will be eagerly awaiting the results of the December quarter. The home unit market for the September quarter was thirty per cent down from the previous September quarter, so I am sure that the ‘Governor of Moolah’ will be very happy with these statistics. Also great news was that the residential vacancy rate dropped to 3.7 per cent for the quarter, which is well down on the 4.4 per cent for the same period last year.

One of the most insightful articles to appear in the print media was one written by Alan Kohler for The Sydney Morning Herald. It was titled, “It’s not property on fire, it’s debt, silly” and it was one very intelligent and brilliant interpretation of the property market. As a few have been saying all year, Mr Kohler is right on the money!!” The Reserve Bank is trying to target a debt/property binge with an increase in the interest rate, probably in the order of 1 percentage point by the middle of next year. It wants us to stop borrowing so much and start saving, so it has put up the price of money. Kohler then went on to say that, “but pretty soon, possibly within 12 months, it will have to turn around and cut rates again to prevent the slowdown becoming a recession.” There is plenty of talk that the rates may hit six per cent. All this will do, is send the market into a ‘holding-pattern’ mentality which many will see as a positive step.What many forget is that the cash rate target on May 3, 2000 was six per cent which is hardly a long time ago and I am sure that the investors will encourage this as an increase only highlights the advantages of negative gearing. The last thing the ‘Governor of Moolah’ wants to see is more investor money being driven back to the investment unit sector.

There is absolutely no doubting that the property market is becoming a science, as at this time every year we record the lowest clearance rates. The December quarter is historically, the only quarter of the year where the purchasers have a greater control over the market, as was evidenced at this exact time last year. The interesting outcome was that the buyers united to sit-out the quarter and see what happened in the January quarter of this year. The result was a twenty per cent hike in prices from the December quarter! What remains to be seen is which of the purchasers will execute contracts in this quarter or take a punt for the January quarter. May I offer this little bit of advice – “a bird in the hand, is worth two in the bush”.

From our perspective the intensity of the market has eased. We are still trading, however and this week we exchanged eight properties with a value of $7,680,000. This figure accounted for three houses and five apartments, so it is still most encouraging to see balance in the property market. We at RWM continue to read a totally different market to many of our colleagues in the industry who are having trouble coming to terms with ‘increased intensity’ to secure the sale. As we keep saying here in the office, “it’s easier to open the door of opportunity after you have a key position”. Simply, it is all about which key one selects to ignite their market!! Cheers and clink…^__^

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