What’s stimulating our property markets and what’s not?

What’s stimulating our property markets and what’s not?

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After all, we are in the greatest performing economy on the planet. Having sailed through and mostly ahead of the global financial crisis (GFC), our property markets once again find themselves positioned at the business–end, following a term of prolonged holding patterns. Ground conditions are perfect for take–off, with clear skies ahead and very little turbulence on the radar. Although what remains unclear, is who will be playing and who will be staying? The buzz word during the GFC was stimulus and it was merchant bankers who stimulated top–end property markets. There was no better example than Mosman, which remains the most expensive municipality (not suburb) in Australia. Bankers’ bonuses have been ‘rivers of gold’ for our bricks and mortar markets (merchant bankers remain our single largest subscribers) although their market engagement appears to have peaked in early 2008.

What is acutely clear, is that households have been actively paying down debt, instead of rolling it over and taking on more. Not that long ago, real estate agents made diary notes as to when the big banks were paying bonuses, which translated into the annual game of house trap!

Property markets move in mysterious ways (remember when the GST was introduced in 2000?). We saw property developers in Mosman gradually withdraw (especially with houses) because the additional ten per cent impacted their returns on investment and this once popular vocation became academic.

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BUY PRINT

Pittwater weekenders were also very popular in the real estate indulgence markets where these properties failed the financial reconciliation of the GFC as the owners headed back home.

Another factor that needs to be considered when house values are flat, is that when additional acquisition costs (stamp duty) and selling costs are measured, vendors find themselves at breakeven. This was the norm, when purchasers were playing with additional income streams and stimulating markets with bonuses that can no longer be taken for granted. The following three graphs show the volume of stock on the market for houses and apartments in Mosman, Cremorne and Neutral Bay, with houses showing much more consistent patterns.

MOSMAN

7-09-2010 11-18-36 AM

CREMORNE

7-09-2010 11-21-14 AM

NEUTRAL BAY

7-09-2010 11-23-27 AM

The Punch guide to our rich suburbs and big houses identifies a study conducted 2003–04 and 2007–08 which identified Mosman as having the highest average income in Australia, at $131,606 (the national average is $44,402). Considering that we are now post GFC and these results are more than two years old, it will be interesting to see if there are any significant changes to Sydney’s wealthiest the richest in the land.

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Confidence has always provided the much needed oxygen to all financial markets so overseas travellers would be happy this week, to see the dollar bounces as economy worries fade. The question many are asking is ‘will confidence remain sky high’? Consumers turn cautious as outlooks clouds when the Westpac and Melbourne Institute released its index this week which showed that consumer sentiment fell 5 per cent in September to 113.2.

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The consumer sentiment must have been taken before Julia Gillard announces cabinet which is just in time as parliament resumes in two weeks. The broadband debate will be riveting given Tony Abbott picks Turnbull to ‘demolish’ Gillard’s broadband plan. I wonder if he read skills shortage threatens Gillard’s NBN pledge when it was revealed the regional rollout could face a skills shortage. “The Communications Electrical and Plumbing Union estimates around 7,000 now have the competency to work on the NBN’s construction, but 25,000 technicians will be needed each year to build and operate the network over the period of its construction.” In the meantime, The Emperor is off to the USA for a sleepover at the White House and here are the other cabinet members.

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The big banking announcement of the week was Basel III agreement announced. Global regulators are enforcing rules for banks to hold top–quality capital totalling seven per cent of their risk bearing assets (up from two per cent) to prevent any repeat of the recent international credit crisis. Australian banks are unfazed by tough new rules given they already qualify, with the ANZ sitting on 11.1 per cent, Commonwealth Bank 10.1 per cent, NAB 9.4 per cent and Westpac 8.6 per cent according to Deutsche Bank figures. Our banks are jumping back into the property market as lenders back throwing cash at buyers although our property bubble is too fit to burst. ‘A report last week from Moody’s Investor Service found that delinquency rates are still very low. For example 30+ days – past due delinquencies were 1.34 per cent in June compared to 1.39 per cent in May. That means that less than 2 per cent of loans are falling into arrears of 30 or more days past the due date’.

As stated previously, many Australian households are pre–paying their mortgages. Major banks report that over 55 per cent of mortgagees are ahead on their payment schedule, with 40 per cent, by more than a year. What a pity that U.S.A. banks were not in that position when subprime hit!

Here is a great one on one interview by our very own Steve Patrick with Glen Spratt from Mortgageport.

This video was produced by visualdomain

This week, we celebrated the 10th anniversary of the Sydney Olympic Games. Coincidentally, we celebrated the 10th birthday of Virtual Realty News. Ten years ago, when I sent out our first edition, it went to 38 subscribers (we still have a few of these originals) and look where we are today – $956,784,220 in online subscriber sales and Australia’s longest and most successful online newsletter. I am proud to say that over that time we have never missed a single edition. We have quite a few new initiatives in store and will be working very closely with visualdomain to produce fortnightly/monthly (still working that out) video editions of Virtual Realty News for those who don’t want to read them. Stay tuned for many more real estate industry firsts!

All will be revealed soon.

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

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