YOU CAN BANK ON IT!

YOU CAN BANK ON IT!

We have long argued that the property markets are nothing more than individual niche markets that more often than not, bear little resemblance to one another. This was highlighted earlier in the week when The Sydney Morning Herald published an article by property editor Jonathan Chancellor, “Housing crash puts sellers in debt crisis”. “A THREE – BEDROOM brick – veneer house in St Clair sold for just $260,000 at the weekend – down about 42 per cent from its last sale at $450,000 in 2003 in a further sign of the depressed state of the Sydney property market.” I must admit that this captured the minds of many which explains why it remained at the top of the popular www.smh.com.au all day. A sad story whereby the owners who borrowed $405,000 could no longer meet their repayments so the bank stepped in (those that keep reporting a few billion in profit each year) and sold them out. It was interesting to read on to see that the purchaser was an investor who intends to spend $40,000 on the property and rent it out for $270.00 per week. This clearly highlights the fact that the banks have learnt absolutely nothing from “the recession we had to have”. If we look today (and we did) at the properties we sold in the recession for the banks, all have either doubled or tripled in price so can someone explain why the bank, as a sign of good faith and, wait for it, “client care”, didn’t simply rent the property out and hold the asset. Forcing a sale in a market that is obviously depressed, sends a tsunami of panic through local households when it could easily have been avoided. The problem with the western Sydney property markets is that an increasing majority are migrating to Queensland and Western Australia in search of better lifestyles as Sydney has become too expensive. In return the banks give the property niche markets the financial “bird”.

The Mosman market is going from strength to strength as stock levels diminish. A quick look at www.realtor.com.au to check on Mosman house sales this year, has them at 166, still 122 down on 288 houses in 2005. Obviously the figure of 166 is not up to – date however it does identify that we will be well below the 288 house sales this year which is a far cry from the glory days in 2001 when the Mosman market posted a healthy 445 sales. What we now see is prospective sellers holding on until they find a suitable property, as against selling then looking. This is even more evident when you look at the clearance rates for the area at the moment which are running at around 80 per cent and in many cases well over reserve. When you look at the St Claire property market and compare it to Mosman, it is from one extreme to another. We have said on previous occasions that suburbs that boast a top end are only getting stronger and stronger. This is because in our case the residents wear pin striped suits and work just over the creek, with no intention of moving to Queensland or Western Australia.

The Australian Bureau of Statistics released figures this week after combining all the niche suburbs which revealed that housing prices in Australian capital cities have recorded strong growth (see how misleading this can be). Perth again leads the market with their June quarter prices up 11.9 per cent from the March quarter and overall the increase in house values over the past twelve months stand at 35.4 per cent. The Australian Bureau of Statistics said “ June quarter prices were up across all state and territory capitals, pushing the overall house price index up 3.1 per cent after a 1.1 per cent rise in the previous quarter.” Prices were up 3.6 per cent in Darwin, 2.6 per cent in Canberra, 2.3 per cent in Adelaide, 2.1 per cent in Brisbane, 2 per cent in Melbourne, and 1.4 per cent in Sydney.

Makes you wonder where all that grey matter is when you read about the heated debate for the state government to release more land out west. Saturating the market with vacant land will drive prices lower which then makes it more affordable. However, by doing so, you then lower the value of surrounding houses, as was the case at St Clair and a 40 per cent drop leads to that “recession word” in the market. A classic example in Mosman over the last five years has seen the market contracting with available houses. However, our market would resemble the western Sydney markets if nobody wanted to remain here. Keep watching the niche markets as they are much more finely tuned and there is a compelling argument that the banks should adopt a complete policy change and back the market as against destroying it. They were the ones who signed off on the respective mortgages (no doubt followed by that all too familiar hand shake). The only problem was that the unsuspecting family had a change of circumstances and made the mistake of turning their back. A sad situation when today we no longer support our own, yet send millions and millions out of this country in foreign aid. It is about time that we set a true “Future Fund” for those known as the “little Aussie battlers” !! Cheers ^__^

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