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When it comes to real estate in Australia there is no better saying than, “if you want to make a mountain out a molehill – just keep adding dirt.” 
So when we were conveniently advised this week that Sydney house prices rose 5% for the three months to the end of August, resulting in a 16% year-on-year growth, my immediate thought was: what a complete load of rubbish.
Here’s why this figure is misleading and a complete distortion of the truth.
So this week I called one of Sydney’s leading auctioneers and asked, “if we break down the Sydney housing market into municipalities, given there are actually 38, which are the peak performers?” His response was “Sutherland, Hurstville, Bankstown, Marrickville, Holroyd, Parramatta, Blacktown, Fairfield, Liverpool and Canterbury are my stand – out performers.” 
On a scale of one to ten they would easily be an eight plus and of the remaining 28 municipalities some would struggle to reach a five and the rest somewhere from five to seven. The only reason why all 38 municipalities are not listed individually is that there would be no headline.
So I placed a call to Jonathan Chancellor, editor at large of <a href="https://www.propertyobserver.com.au/" target="_blank" title="Property Observer">Property Observer</a>, whom I have been in regular contact with for the past thirty years. We recalled an article that was published in The Sydney Morning Herald  back on October 18, 2008 where Sydney was fighting the global financial crisis (GFC). It needs to be mentioned that at the time when the article was written the Reserve Bank of Australia (RBA) had its cash rate at 7.00%, although the real damage started back on December 5, 2001 when the Reserve Bank of Australia dropped the cash rate to 4.25% which was the lowest in RBA history. 
So back to the story where I was quoted as saying, “Everyone is pulling in their belts a bit, but we haven’t got the tourniquet out yet. Out west it’s tourniquet time.”
Another interesting observation back then: “What the Sydney property market is telling us that while the economic turmoil is driving property prices down almost everywhere, it is the tale of two cities: the top end of the market is faring much better than the bottom.” 
A real estate agent from the west commented: “It’s not uncommon for us to sell a property for 40% less than what somebody bought it for five years ago. I have a lot of people who bought in the 2002 boom period and basically they come back to us asking for opinions. Nine times out of 10, they are looking at a loss.”
“So why are the poor being hammered so much more than the rich?”
<a href="https://www.rwm.com.au/files/2014/09/2-09-2014-2-22-30-PM.jpg"><img class="aligncenter size-full wp-image-134060" src="https://www.rwm.com.au/files/2014/09/2-09-2014-2-22-30-PM.jpg" alt="2-09-2014 2-22-30 PM" width="701" height="394"></a>
“Experts say the most important factors are location, supply, interest rates, social circumstances, infrastructure and the fact a seller can only charge what a buyer can afford to pay. Perhaps the easiest factor to understand is location.” 
To add more to this 2008 piece, Brian Redican, a senior economist with Macquarie Bank said: “There has been a tendency for banks to be much more cautious in lending in those suburban areas. So instead of getting a loan of 80 per cent of the property’s price, you can only get a loan for 60 per cent of the price. The seller then has to drop his price to match what people can pay. Prices fall, so banks become more cautious and so it goes on.”
Banks are picky, too, about which mortgage defaulters they target. It will surprise few that there is one rule for the rich and another for the poor.
<a href="https://www.rwm.com.au/files/2014/09/4-09-2014-10-57-55-AM.jpg"><img class="aligncenter size-full wp-image-134062" src="https://www.rwm.com.au/files/2014/09/4-09-2014-10-57-55-AM.jpg" alt="4-09-2014 10-57-55 AM" width="635" height="408"></a>
<a href="https://www.rwm.com.au/files/2014/09/4-09-2014-10-56-58-AM.jpg"><img class="aligncenter size-full wp-image-134063" src="https://www.rwm.com.au/files/2014/09/4-09-2014-10-56-58-AM.jpg" alt="4-09-2014 10-56-58 AM" width="638" height="411"></a>
What’s also missing in this is just how much the investors are driving the market which we wrote about last week. From Roy Morgan Research: "Over the last four years, the number of investment loans in Australia has grown by 37% compared to an increase of only 4% in the number of owner occupier loans."
 This week I went back to Roy Morgan Research to look at superannuation performance, which just so happens to be at the highest level since the GFC.
<a href="https://www.rwm.com.au/files/2014/09/2-09-2014-9-45-00-AM.jpg"><img class="aligncenter size-full wp-image-134065" src="https://www.rwm.com.au/files/2014/09/2-09-2014-9-45-00-AM.jpg" alt="2-09-2014 9-45-00 AM" width="630" height="451"></a>
Satisfaction with the financial performance of superannuation in the six months to July 2014 was 55.7% up 6.9% since July 2013.
 Self-managed Super Funds (77.9%) remain the clear leader, followed by Industry Funds (56.2%) and Retail Funds (54.2%). These are the latest findings from the Roy Morgan Research ‘Superannuation Satisfaction’ report based on over 30,000 interviews with people per annum with Superannuation.
It’s common knowledge that the Self-managed Super Funds are driving the property investment market, which further distorts the figures pertaining to Sydney house prices. We would all get a much better perspective about exactly where house prices were if Australian Property Monitors and RP Data broke down the mountain into 38 molehills – which is exactly what they should be doing.
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robertsimeon-hRNTwJyXkQ

For my next trick: A mountain out of a molehill

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I’m struggling to find a time when the bureaucrats and politicians struggled as much as they presently are when trying to define what exactly is happening to the Sydney property markets – please note that I have used plural as against the popular and misrepresented singular definition.
Australia’s head cashier Joe Hockey is having an absolute shocker given he hails from a family that has a rich real estate heritage. For example, last week he stated that more houses were needed to fix the home affordability issue. “I like many others, if you have a home, if you’re already there with a mortgage; you wonder how your children are going to get into it.” Well Joe, for starters I would immediately slash the foreign buying policy where you allow 100% of all new housing developments to be sold offshore to foreign buyers.
Then one week later announced that he “totally understands” housing in Sydney and Melbourne is expensive and advised first home buyers to “get a good job that pays good money. ”If you go back 10 years first home buyers represented 10% of the overall market – today they are struggling to record a 5% market participation. The Sydney and Melbourne property markets are overwhelmingly being driven by property investors and foreign buyers.
The real truth of the matter is that the Coalition and ALP don’t care about the buyers, or where they come from for that matter, this is all about strengthening the economy where real estate is now doing all the heavy lifting. The crux of the matter is that the property sector now contributes more to Australian gross domestic product (GDP) than mining. The property sector is estimated to generate 11.5% of GDP, employs 1.1 million Australians and pays $72.1 billion in state, federal and local real estate taxes each year.
Then we have Australia’s head teller Glenn Stevens pointing at another rate cut due to a weak economy given that the Australian economy is now weaker than forecast two years ago. In 2013 the projection was that the economy would be growing at a rate of 2.5% to 4% although by mid-2015 it will be lucky to post a growth rate of 2.5%. Stevens also commented this week that he is concerned about Sydney’s booming house prices – you see he used the term house although houses in certain parts of Sydney are not doing that well when compared to apartments.
Our research division has been recording some interesting Mosman ‘house’ sales.
<ul>
<li>Stanley Avenue Mosman sold in 2010 for $12.000 and resold in 2015 for $12.300</li>
<li>Coronation Avenue Mosman sold in 2012 for $4.200 and resold in 2015 for $4.125</li>
<li>Botanic Road Mosman sold in 2013 for $2.750 and resold in 2014 for $2.550</li>
<li>Parriwi Road (apartment) sold in 2010 for $1.050 and resold in 2014 for $1.010</li>
<li>Parriwi Road (apartment) sold in 2010 for $2.250 and resold in 2014 for $2.150</li>
<li>Bradleys Head Road sold in 2007 for $5.400 and resold in 2015 for $5.100</li>
<li>Raglan Street Mosman sold in 2006 for $4.500 and resold in 2015 for $4.750</li>
</ul>
The problem is purely that house prices are bundled as against separating houses from apartments and investors from owner occupiers. Let’s not start on what part the foreign buyers play in this equation given nobody has really bothered to measure this participation rate but I would add that it’s huge and much, much higher than the federal government ever envisaged (when they do get around to looking).
Glenn Stevens was using the HSBC research that found Australian house prices had risen 24 per cent in the past three years, though the gains had been mostly confined to Sydney and Melbourne – so why then call this Australian house prices? Sydney had jumped 39 per cent and Melbourne prices were up 22 per cent bringing the average price growth for the rest of the country at 10 per cent.
The real problem Australia is facing is getting the economy stimulated and thus far all the monetary measures have been a dismal failure. Yet again, the problem is contained directly in Canberra and the refusal to implement reform so on that basis I can see where Glenn Stevens is coming from.
Cast your mind back to 2008 when Ken Henry presented the Henry Tax Review (the Rudd government held on to it until 2010) – we need to remember what Ken Henry said at the time “Ken Henry warns of looming taxation crisis”, and said that need to change is urgent. In 2014, he warned that the Abbott government urgently needs a tax and welfare package to head off an imminent budget crisis.
Well we have a budget crisis and no tax reform and as Ken Henry put it “there will be a day of reckoning.” One only has to ask a simple question – where would the Australian economy be today had the Henry Tax Review been implemented?
So what we have is politicians only interested in re – election so any thought of reform is immediately removed until we get hit with a major economic downturn. The Henry Tax Review was designed to drive the economy and therefore minimise the likelihood of another economic downturn as experienced with the Global Financial Crisis. Governments don’t pay payroll tax however if you asked businesses what they would do with the savings if it were to be abolished – you would see a much different Australian economy than we are seeing presently.
<h5>MOSMAN – 2088</h5>
• Number of houses on the market this time last year – 85
• Number of houses on the market last week – 61
• Number of houses on the market this week – 55
• Number of apartments on the market this time last year – 66
• Number of apartments on the market last week – 38
• Number of apartments on the market this week – 41
<h5>CREMORNE – 2090</h5>
• Number of houses on the market this time last year – 8
• Number of houses on the market last week – 6
• Number of houses on the market this week – 7
• Number of apartments on the market this time last year – 9
• Number of apartments on the market last week – 13
• Number of apartments on the market this week – 11
<h5>NEUTRAL BAY – 2089</h5>
* Number of houses on the market this time last year – 5
• Number of houses on the market last week – 5
• Number of houses on the market this week – 3
• Number of apartments on the market this time last year– 46
• Number of apartments on the market last week – 23
• Number of apartments on the market this week – 29
 
ROBERT SIMEON is a director of <a href="https://www.rwm.com.au/" target="_blank" title="RWM" rel="nofollow">Richardson Wrench Mosman and Neutral Bay</a> and has been selling residential real estate in Sydney since 1985.  He has also been writing real estate blog <a href="https://www.rwm.com.au/news/" target="_blank" title="Virtual Realty News" rel="nofollow">Virtual Realty News</a> since 2000. 
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It’s about the economy not the property buyers: Robert Simeon

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<h2 class="post_title"> </h2>
Every year, as Sydney hits winter we can expect the inevitable property market predictions to come in thick and fast. Now before we get into the nitty gritty of these predictions there are a few observations that I made when I read these somewhat bizarre predictions.
Let’s look at some facts – the Australian Bureau of Statistics (ABS) released their latest data on Residential Property Prices in March 2015 which showed that the total value of Australia’s 9.500 million residential dwellings had increased to $5.500 trillion. At the end of the March quarter 2015 the ABS also advised that household net worth was $8,090.9 billion so we are talking big numbers here.
Researcher BIS Shrapnel noted that house prices (I assume this includes the investor apartment market too) have soared by 45% since 2012 – and they don’t expect a correction to arrive until 2017. Because in 2017 they are expecting the cash rate to start increasing – which I don’t agree with as I expect we will have a low cash rate for quite a few years to come.
A recent PwC study found that more than one – third of Australia was enduring recession conditions as the economy is increasingly driven by a small group of regions. The PwC analysis found about 20% of the national income was now produced in just 10 out of 2,214 locations across Australia, with Sydney, Melbourne and WA’s iron ore belt in the Pilbara among the dominant areas. 
It is also worth noting that Queensland and NSW are on a massive infrastructure spend with Victoria not that far behind.
For those intently following the Sydney infrastructure model, I suggest that you read<a href="https://www.strategy.planning.nsw.gov.au/sydney/the-plan/#section-224&amp;265" target="_blank"> Your Future Sydney</a> – “The Government must accelerate the delivery of new housing in Sydney to meet the needs of a bigger population and to satisfy a growing demand for different types of housing. Making sure that Sydney will have adequate shelter for its future population is a high priority of this Plan.
Over the next 20 years, the population in Sydney will grow much faster than in the last 20 years. Projections indicate that Sydney will need around 664,000 additional homes over the next 20 years. 1 – New housing will be needed in Greenfield locations and the established urban area. Providing housing in a variety of sizes, types and locations will be essential to meeting Sydney’s future housing need. Increasing housing supply will boost economic activity and generate viable infrastructure and business investment opportunities.
Sydney’s house prices are high compared with other Australian capital cities, 2 – and while house prices are the result of consumer demand, governments can help to put downward pressure on prices. Accelerating the supply and the variety of housing across Sydney, such as apartments and townhouses, will make it easier for people to find homes to suit their lifestyle and budget.”
It is also worth noting that the 664,000 additional new homes will be of the strata title variety with many high density subdivisions of air space to be contained mainly on the transport corridors. The Baird Government is well aware that NSW has fallen well behind where present reports have Sydney at approximately 140,000 new homes short of where it needs to be.
When these huge infrastructure models come to fruition which one would assume we will find ourselves somewhere around the 2017 mark – so it makes plenty of sense that investors will be watching this massive construction phase with great interest. By then the councils will have been merged into the new larger councils and we will see major high density subdivisions being rolled out across Sydney.
I have been reliably advised that the Abbott Government will not be changing the foreign ownership laws so foreign buyers can acquire 100% of all new developments – and we need to know that there are plenty of foreign buyers wanting to invest in Sydney, Melbourne, Brisbane and regional areas.
Mosman house levels are now down over 50% on recent years where this week we hit 36 houses on the market which is the lowest in living memory – so no correction happening here as is also the case in the vast majority of suburbs across Sydney.
At the end of the day despite what some may predict the Sydney real estate market is all about that old mathematical equation supply V demand. With the easing of foreign ownership rules the Australian property market is now an international market and that’s where the demand is coming from.
<h4>MOSMAN – 2088</h4>
• Number of houses on the market this time last year – 62
• Number of houses on the market last week – 43
• Number of houses on the market this week – 36
• Number of apartments on the market this time last year – 56
• Number of apartments on the market last week – 39
• Number of apartments on the market this week – 43
<h4>CREMORNE – 2090</h4>
• Number of houses on the market this time last year – 5
• Number of houses on the market last week – 4
• Number of houses on the market this week – 3
• Number of apartments on the market this time last year – 12
• Number of apartments on the market last week – 12
• Number of apartments on the market this week – 16
<h4>NEUTRAL BAY – 2089</h4>
• Number of houses on the market this time last year – 3
• Number of houses on the market last week – 2
• Number of houses on the market this week – 2
• Number of apartments on the market this time last year– 42
• Number of apartments on the market last week – 39
• Number of apartments on the market this week – 25
ROBERT SIMEON is a director of <a href="https://www.rwm.com.au/" target="_blank" title="RWM" rel="nofollow">Richardson Wrench Mosman and Neutral Bay</a> and has been selling residential real estate in Sydney since 1985.  He has also been writing real estate blog <a href="https://www.rwm.com.au/news/" target="_blank" title="Virtual Realty News" rel="nofollow">Virtual Realty News</a> since 2000. 
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Property is just a simple mathematical equation: Robert Simeon

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I've always liked the saying "can't see the forest for the trees".
It appropriately sums up so much of the distorted self-indoctrinated bias of opinion pertaining to real estate in Australia.
The debate has never been so fierce – especially when it comes to the definition of that 'bubble'. I am of the firm belief that it is those who are actual historians of the Australian property markets who are the ones with the greatest ability to call the exact path and outcomes.
If you want to end the 'bubble' debate simply ask the question: "So when do you see this bubble bursting?"
It's always the fastest way to draw the debate to a fast halt. History has shown when you closely analyse the property market machinations through the Reserve Bank of Australia (RBA) – Cash Rate Target interest rate changes only then can we see the significant market changes.
That being when the RBA increases the cash rate twice (not once) we are starting to see a new course being charted. Then it takes another two to four years for the affects to be seen given that is when households start to come out of their fixed mortgage periods into the higher mortgage agreements.
Given we are the best part of at least 12 months away from the first cash rate increase – which should send the alarm bells ringing – then depending on the next increase we won't start seeing any noticeable market price corrections until 2016 to 2019.
We also need to bear in mind that when the cash rate increases so does the exchange rate as that goes up in unison, which is the last thing the RBA wants to see given it's presently trying to get the exchange rate down.
We should consider that the RBA is well down the track to introducing its new macroprudential tools as well as waiting to receive (then implement) the findings from the Murray Financial System Inquiry.
No doubt the RBA would be very much looking forward to tinkering the markets with these tools so that (for the very first time) other than increasing the cash rate  it may just be able to manipulate the markets in a way never seen before. For the first time ever (as many would not be aware) we are witnessing history with these new real estate market initiatives.
Again, history will show whether or not they were effective. However, it will be fascinating to watch the outcomes.
So back to those fools on the hill who following this week's RBA decision to leave the cash rate on hold at 2.50% – they even managed to get that wrong. No it was not a record (as some declared). Even though 14 straight months is getting up there, the actual record is 17, not 16 as some would believe. Furthermore, you can only apply consecutive meetings as the RBA doesn't meet in January.
Having said that, when you go back through the history of the cash rate movements at the RBA we start to see fascinating stories evolve.
I have conducted my research on instances where the cash rate remained on hold for 10 or more consecutive meetings:
The first period of RBA cash rate holds started on 30 July 1993 when the cash rate was moved from 5.25% to 4.75%, where it remained until 27 July 1994 – in total 12 holds. Then on 17 August it was bumped up 1.25% to 5.50%.
The next run of holds, which is the equal record 17 holds, happened on 14 December 1994 when the cash rate increased from 6.50% to 7.50%, where it remained until 3 July 1996.
Then it fell to 7.00%. So we are seeing long holds followed by increases and decreases.
On 30 July 1997 we saw another 16 consecutive holds at 5.00%, to then see it drop to 4.75%.
On 5 June 2002 we saw 16 holds at 4.75%, to then see it increased to 5.25% in November 2003.
On 4 February 2004 we saw thirteen holds at 5.25%. When the cash rate was increased to 5.50% in March 2005, that was followed by another twelve holds that was followed by an increase to 5.75%.
Then on 8 December 2011 we had another ten holds at 4.75%, then saw the rate dropped to 4.25%.
We are now in the current hold pattern after fourteen meetings, so based on history it's anyone's guess what or when the next movement might be. I predict the current rate will be set for the longest period in RBA history as it will go well into the twenty something meetings.
So when you see the arguments mounting that many commentators were disappointed that the RBA hardly mentioned that ''bubble" following this week's decision – history clearly shows that the board members may not be that concerned about that "bubble".
Maybe they are more concerned as to why investors have steered clear of the stock market which, by the way, had a few massive corrections this week – although, wait a minute, nothing much was written about that either.
It all depends on what you are looking at – the forest or the trees?
As to be expected stock levels increased significantly this week – so now we finally get to see firsthand just how strong the markets really are.
Watching these numbers will be telling over the period leading up to Christmas, although I don't believe we will see anything that even resembles that imaginary 'bubble'. Time will tell!
 
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Want to know when the market will change? Keep an eye on interest rates

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A question I have been asked on more than a few occasions: What are some of the real game changers that I have seen in my time selling real estate?
My first response is the obvious: how long have we got?
The greatest innovation for me was when the newly elected Labor government back in 2007 required the Reserve Bank of Australia (RBA) to be transparent (for the first time) by publishing the minutes immediately following their last meeting.
What we seem to forget (all too quickly) is that prior to this, all the RBA would do was advise that the cash rate had either remained the same, increased or decreased. That was it – so we were left to draw our own conclusions about the state of the Australian economy.
This greatly assisted the Australian economy, given just a few months later we were drawn into the Global Financial Crisis (GFC). It was an opportune time during this period of uncertainty to read the thoughts of Australia's central bank.
What has mostly managed to fly under the radar, until recently, is that Australian investors then decided that the best investment in Australia was 'bricks and mortar'.
This decision was certainly greatly assisted by the fact that the Australian government also provides the most generous tax relief via negative gearing.
This week, we heard RBA assistant governor Guy Debelle issue a stern warning that financial markets face a "violent" and rapidly escalating sell-off. This is otherwise known a crash.
Few would remember Black Monday, which also went on (for a brief period) to decimate property prices as many share market investors were wiped out. It's interesting to note that now the RBA is firing warning signs across the bows of the Australian economy – which again goes back to transparency.
It's interesting to note that the apartment market sales barely changed during the GFC, as investors went on a quiet rampage acquiring nearly everything that came on the market. The standout performers were those apartments within a ten kilometre radius of the Sydney CBD.
Nothing has changed since then, as investors keep marching on. However, we are now for the very first time in decades starting to witness a change in this property landscape.
In March this year the vacancy rate in the Sydney CBD area fell to 1.4%, which is at emergency levels – although since then they have been gradually increasing and now sit at 1.8% and climbing higher. It will be a fabulous result when the vacancy rate hits 2.0% and then hopefully 2.5% – although some will say what about the investors as rents are not increasing?
The latest Rental Report from Australian Property Monitors shows that Sydney recorded an annual growth of 2% for houses and 3.1% for apartments. The reality being  that property investors are interested in two things – a sound tenant who can pay their rent and long term capital appreciation.
They are simply insulating themselves from a global stock market crash and a piece of paper (share script) that is now worth next to nothing.
By moving back to 'bricks and mortar' during the GFC, these investors are now streets ahead, with many reinvesting back in, given Australia's property markets are now global. The National Australia Bank's latest residential property survey identified that foreign buyers are flocking to buy Australian property, with one in every six new home sales going to foreign buyers.
Based on these statistics this would make residential real estate apartments the number one investment buy in Australia – although this has easily been the case for the last seven years or so.
The reality that this market is now global simply reinforces the argument, given rents for the first time in decades are easing which then takes immense pressure of those renting who now have a greater opportunity to save more so that eventually they too can buy into the market.
No doubt there will be many who disagree with this, and are of the belief that a 'bubble' does exist and prices will be decimated. In the meantime, we can expect a monumental correction in the share market and property prices will continue to register modest gains.
Yes – you're right – I did say modest. Sydney is made up of 38 municipalities so when you look at each individually you will see that recorded capital appreciation has been modest to average based on previous years.
I guess the best way to settle the argument is to ask: Where would you want your investment capital at the moment?
Following this month's RBA meeting, property hardly rated a mention in the minutes, although the same can't be said for the stock market.
The most notable difference that we see today is differentiating where the safe money is – which explains why investors are all over real estate.
 
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Bricks and mortar are a safe bet for investors

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Now more than ever I’m totally convinced that the vast majority of property commentators subscribe to the theory of inductive reasoning when they want to get their points across pertaining to the Australian residential property markets.  
Wikipedia describes “inductive reasoning (as opposed to deductive reasoning or abductive reasoning) is reasoning in which the premises seek to supply strong evidence for (not absolute proof of) the truth of the conclusion. While the conclusion of a deductive argument is certain, the truth of the conclusion of an inductive argument is probable, based upon the evidence given.”
Now here is the dilemma that the prime minister faces with the Australian property markets and whilst nobody talks about this I’d be letting you down if I didn’t tackle this highly controversial topic of conversation.
Now the problem was created by Kevin Rudd when he was prime minister and for some strange reason (and I mean strange) his actions have not been corrected given these actions lie at the heart of Australia’s ongoing property boom – in my opinion this is disastrous policy.
In December 2008 property developers were restricted where only 50% of a new development could be sold off the plan to foreign investors. Kevin Rudd then changed the ratio to 100% and that figure is still in place today. Just as strange is that nobody is debating this figure where given the strength of the real estate markets today I would be happier to see these developments restricted to say 25% or even lower.
Even stranger was when in 2008 – 09 Kevin Rudd removed all foreign ownership rules meaning that foreign buyers could acquire pre – existing property which was shut down again in late 2010. I would argue that this opened the door to foreigners buying pre – existing properties and this still continues today given that everyone is only too well aware that the federal government does not track real estate transactions.
The sad reality is that today nobody knows just how many properties have been illegally acquired given the government is doing absolutely nothing about this. They will say that they are using inductive reasoning to solve this almighty mess. The question that really needs to be asked is why does the Australian government still allow 100% of off – the – plan sales to go offshore which is driving the prices up, given foreign buyers will always pay a premium price to secure Australian residential real estate?
An obvious response from property developers would be that they would stop developing given overseas buyers are the strongest peak market for new residential properties. No doubt they would be in all probability active in political donations too. Property developers are posting record profits thanks to 100% of off the plan sales being allowed by the Australian government to be sent offshore. This also explains why Chinese developers are now buying up the majority of development sites given an entire development can be sold in just a matter of hours. This of course is the major ingredient that is driving property prices for new properties to record highs – yet the federal government is saying and more importantly doing nothing to correct this 2008 – 09 horrific property policy.
Recently I touched on<a href="robert-simeon/42509-may-6-observer-lots-of-positives-from-discussing-negative-policies-robert-simeon" target="_blank"> Lots of positives from discussing negative policies</a> although nothing happens in Canberra. The NSW government is in the process of merging councils, given they stand in the way of new developments when today we have a massive housing shortage. The Mike Baird government has embarked on a plan that will see 664,000 new homes built by 2031 – developers know full well that the vast majority will be sold offshore given the absurd 100% rule permits this.
Making matters worse is that the Abbott government constantly dismisses the need for their government to have a housing minister.
The Property Council of Australia announced this week that the property sector now contributes more to Australian gross domestic product than mining. The property sector is estimated to generate 11.5% of GDP, employs 1.1 million Australians and pays $72.1 billion in state, federal and local real estate taxes each year.
Of course the inductive reasoning argument from Canberra will be along the lines of Infrastructure Australia predicts Sydney’s population will reach 6.1 million in 2031. In 2015 the population estimates come in at around the 4.9 million which is an extra 1.2 million people which works out at 80,000 per year. 
Maybe we should add to that statistic that all the landlords will be foreign buyers living overseas – or is that inductive reasoning? Whatever the reasoning the question needs to be asked just why the 100% ratio has not been wound back? 
We all know that this is disastrous policy unless you’re a property developer (and real estate agent of course.)
 
 MOSMAN – 2088
• Number of houses on the market this time last year – 85
• Number of houses on the market last week – 65
• Number of houses on the market this week – 68
• Number of apartments on the market this time last year – 64
• Number of apartments on the market last week – 47
• Number of apartments on the market this week – 46
 
CREMORNE – 2090
• Number of houses on the market this time last year – 8
• Number of houses on the market last week – 5
• Number of houses on the market this week – 8
• Number of apartments on the market this time last year – 16
• Number of apartments on the market last week – 10
• Number of apartments on the market this week – 13
 
NEUTRAL BAY – 2089
* Number of houses on the market this time last year – 4
• Number of houses on the market last week – 6
• Number of houses on the market this week – 7
• Number of apartments on the market this time last year– 44
• Number of apartments on the market last week – 29
• Number of apartments on the market this week – 26
Robert Simeon is a director of <a href="https://www.rwm.com.au/" target="_blank" title="RWM" rel="nofollow">Richardson Wrench Mosman and Neutral Bay</a> and has been selling residential real estate in Sydney since 1985.  He has also been writing real estate blog <a href="https://www.rwm.com.au/news/" target="_blank" title="Virtual Realty News" rel="nofollow">Virtual Realty News</a> since 2000. 
<a href="https://www.rwm.com.au/2015/05/29/burning-property-question-tony-abbott-must-answer/" target="_blank"> </a>
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The burning property question Tony Abbott must answer: Robert Simeon

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Every time the Australian economy delivers a lacklustre growth data just like clockwork we start hearing that we can expect another correction in real estate prices as we are now fast tracking an inevitable recession – all a distinct possibility.
How quickly some forget that Australia has now successfully completed a record 24 years of consecutive economic growth. As is the case in Australia where real wages are down this is a global problem where I foresee that the household sector will struggle with the declining weak wage results. This is further evident with the data release this week identifying GDP growth for 2014/15 came in at 2.4% and nominal GDP growth at 1.8% for the 2014/15 financial year, which is the weakest growth in nominal GDP since 1961/62.
As a result of the wages decline what is even more alarming is when one examines stock levels we are witnessing the lowest ever levels despite a record low cash rate. For example, Mosman has 5,890 houses with just 63 on the market today which represents 1.069% of properties on the market and which is also quite common for the vast majority of Sydney suburbs.
Too many are sugar – coating the Sydney property market by focusing on the Sydney median house price, which keeps increasing, and not looking at the grass – roots property market by analysing individual niche market performances which paints an entirely different proposition. When you have individual property markets posting record low stock levels it’s hardly likely we will see significant price growth which is exactly what we are seeing today.
The reality being in Mosman is that presently we have 1.069% of vendors on the market with the remaining 98.931% of property owners not wanting to sell despite a record low cash rate that will almost certainly go lower in 2016. Much of the problem relates solely to job security where individual households are refusing to take on more debt which then has the markets flatlining.
Going on past market corrections which were brought about by unprecedented high turnover of properties by households which has not been the case in the majority of instances. We have seen unusual high turnover of properties by investors to the extent that we are now seeing parity being reached between tenants and investors in terms of rent. That’s good news for those renting given it appears that rental growth has peaked in Sydney where in some cases we are now seeing an oversupply of properties for rent.
This is a positive for the economy given the general rule of thumb is one – third rent, the next third own with a mortgage and the final third own with no mortgage. So it appears now that the Sydney investor market has peaked and we can now expect to see some tapering of prices as investors chase new market opportunities. Brisbane is the stand – out so we expect to see investors jumping all over that market from here on. In the perfect property world this is exactly how investor machinations should operate with Sydney and Melbourne peaking and entering re – calibration mode.
Another interesting thing to look out for is the Sydney vacancy rate which we expect to see grow significantly given the enormous investor movements across Sydney. We can also expect to see some investors flipping investment properties by taking their profits and then re – investing in the new growth markets where depending on when they bought into the market there have been very strong capital appreciation generated.
When the Australian economy produces a poor report card this then forces our elected politicians to concentrate on the much needed reforms that must be implemented as we are now twelve months out from the next Federal Election.
<h5>MOSMAN – 2088</h5>
• Number of houses on the market this time last year – 80
• Number of houses on the market last week – 65
• Number of houses on the market this week – 66
• Number of apartments on the market this time last year – 61
• Number of apartments on the market last week – 42
• Number of apartments on the market this week – 49
<h5>CREMORNE – 2090</h5>
• Number of houses on the market this time last year – 5
• Number of houses on the market last week – 4
• Number of houses on the market this week – 4
• Number of apartments on the market this time last year – 15
• Number of apartments on the market last week – 18
• Number of apartments on the market this week – 19
<h5>NEUTRAL BAY – 2089</h5>
• Number of houses on the market this time last year – 10
• Number of houses on the market last week – 2
•Number of houses on the market this week – 5
• Number of apartments on the market this time last year– 29
• Number of apartments on the market last week – 30
• Number of apartments on the market this week – 35
For this week’s sales in Cremorne real estate, Cremorne Point real estate, Mosman real estate, Beauty Point real estate, Clifton Gardens real estate, Balmoral real estate, Neutral Bay real estate, Cammeray real estate.
ROBERT SIMEON is a director of <a href="https://www.rwm.com.au/" target="_blank" title="RWM" rel="nofollow">Richardson Wrench Mosman and Neutral Bay</a> and has been selling residential real estate in Sydney since 1985.  He has also been writing real estate blog <a href="https://www.rwm.com.au/news/" target="_blank" title="Virtual Realty News" rel="nofollow">Virtual Realty News</a> since 2000. 
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Why property markets just got a lot more interesting: Robert Simeon

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Some of you may remember a television advertisement that appeared many years ago that went like this – “So you think you’re a good driver? Try this quick quiz.”
In many ways this applies to the real estate industry and what some of us apply to working out just where our markets are headed. Just like a motor vehicle we constantly check the fuel gauge to see how much fuel is in the tank.
You can’t rely on many of the commentators given at best their analysis is weak and lacks clarity and confirmation, given a large proportion is at best guess work. So how do some real estate agents try to better understand how and where the market is headed? Simply we go straight to a major information data source that being the dominant home loan companies who finance the property markets.
This week, I spoke with Alex Nochar who is Managing Director of Shore Financial who are one of the biggest lenders in our market demographic. First question – how many millions of dollars of housing loans do you presently have on your books that are pre – approved and actively looking to buy? The answer just over $270 million. Second question – what is the pre – approved value for Mosman and the adjoining areas? That number is just over $80 million.
That does not include the many applications that are awaiting approval and being processed although what we do take from this is that this is just one individual lender and does not include the big banks and or private banks. We will be attempting in coming weeks to find out just how many millions of dollars there are in pre – approved loans for Mosman real estate.
This tells us that there is still plenty of growth in our markets although it is quite surprising that one never hears of this method of better understanding our property markets. Can you imagine what the figure would be for the total Sydney area and how interesting this would be if the total numbers for each real estate demographic market were published on a weekly basis?
There is no clear patterns emerging across Sydney given some are experiencing strong stock levels and many others weak stock levels. For example, over the last four years we are seeing housing stock numbers declining in Mosman. This week there are 56 houses on the market, this time last years there were 65 houses on the market, the same week in 2013 there were 77 houses on the market and the same week in 2012 there were 120 houses on the market. In 2012 Mosman recorded 33 weeks with more than one hundred houses on the market. In 2015 it is looking like we won’t crack one hundred houses on the market once – the highest number this year so far has been 84 back in March.
With interest we should be watching the stock market in China which has lost approximately 40 per cent in the last three months, where when we see stock market corrections money is then diverted into real estate. The latest Foreign Investment Review Board (FIRB) annual report showed that the total value of investment proposals in 2013/14 soared to $167.4 billion which is an increase of 23.4 per cent. No surprises to note that China is now the biggest player foreign based buyer of Australian real estate with foreign investment in commercial and residential real estate doubling from $37.5 billion to $74.6 billion.
Recently a research paper was released that Chinese purchases totaled just 2 per cent of all transactions in 2014 according to data from the FIRB. Well that’s interesting although the real story is what the Australian Taxation Office reveals once they have completed their forensic investigation into illegal overseas acquisitions. Those who acquired property illegally have until 1 November 2015 to come forward and avoid prosecution. It will be very interesting to see how many are prosecuted and the numbers of apartments and houses that come back onto the market. I’m predicting that this number will be significant and illegal purchases will be much higher than first envisaged. Watch this space!
I wouldn’t be overly concerned with the recent use of that ‘recession’ word given it’s hard to see this happening anytime soon. We know that to technically be in recession the next two quarters in real GDP will need to return two quarters of negative growth in GDP. The next quarter’s GDP results are out on December 2 and the next on March 2 – so let’s wait until then before we start using that “R” word.
<h5>MOSMAN – 2088</h5>
• Number of houses on the market this time last year – 65
• Number of houses on the market last week – 66
• Number of houses on the market this week – 56
• Number of apartments on the market this time last year – 47
• Number of apartments on the market last week – 47
• Number of apartments on the market this week – 49
<h5>CREMORNE – 2090</h5>
• Number of houses on the market this time last year –10
• Number of houses on the market last week – 4
• Number of houses on the market this week – 6
• Number of apartments on the market this time last year – 15
• Number of apartments on the market last week – 19
• Number of apartments on the market this week – 20
<h5>NEUTRAL BAY – 2089</h5>
• Number of houses on the market this time last year – 7
• Number of houses on the market last week – 5
•Number of houses on the market this week – 2
• Number of apartments on the market this time last year– 33
• Number of apartments on the market last week – 35
• Number of apartments on the market this week – 37
 
ROBERT SIMEON is a director of <a href="https://www.rwm.com.au/" target="_blank" title="RWM" rel="nofollow">Richardson Wrench Mosman and Neutral Bay</a> and has been selling residential real estate in Sydney since 1985.  He has also been writing real estate blog <a href="https://www.rwm.com.au/news/" target="_blank" title="Virtual Realty News" rel="nofollow">Virtual Realty News</a> since 2000. 
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Property markets need more truth, less dare: Robert Simeon

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As the Sydney real estate markets start drawing the curtains on what has been a highly entertaining 2015 year it’s interesting to note some are framing 2016 as the recession year. 
However before we start nailing that coffin we need to look at what possibly may cause a recession and then look for what may avert a recession. Naturally there are many that opt for the let’s wait and see option although I’m of the opinion that we won’t see a technical recession.
Yes in some areas property prices are falling and in many other areas property prices are still performing well. Just last week we set (nearly doubled) the all-time record price for a <a href="/expert-insights/buying/48771-cammeray-harbourfront-record-price-doubles" target="_blank">Cammeray waterfront</a>.  This week a developer released Chatswood Place, a $300 million boutique style development, and in just three hours set a new suburb record as well as securing $160 million in off the plan sales. This is the very same investment market which many were believing was well and truly finished.
Last week the Australian Bureau of Statistics (ABS) revealed that business investment spending in the September quarter had fallen 9.2 %. This quarterly result was the worst in the 28 year history of the survey of business investment. The ABS also released the GDP growth which identified growth of 0.9 % thanks to the highest exports in 15 years, an increase in consumer spending and of course the much publicised housing boom more particularly in apartment construction.
We also need to note that Treasury has cut the nation’s potential economic growth rate to 2.75 % down from 3.25 %. This follows three consecutive years of below – trend economic growth where the elephant in the room is the decline in mining.
Now for that beaming light at the end of this tunnel of misery – enter the very cashed – up NSW government. Unlike the vast majority of state and territory governments NSW has an overflow of coin and it’s all going into the biggest infrastructure spend in the state’s history. Over the next four years the NSW government has allocated a staggering $70 billion infrastructure spend which is unprecedented. This in itself will singularly underpin the Sydney housing market given nothing stimulates the markets and consumer confidence like a massive infrastructure spend.
The breakdown is $38 billion to be spent on new transport projects which will also include the second harbour tunnel, North West rail link, South East Light rail, Sydney CBD and WestConnex. The Transgrid lease which brought in a record $10,258 billion is still to be allocated although it has been confirmed that these monies will also be directed into new infrastructure projects.
Following the federal government crackdown on illegal foreign real estate acquisitions in Australia the Significant and Premium Investor Visas have been running at full – speed. It will be very interesting to see the next set of figures and whether there has been a significant spike in applications since the crackdown. The low Australian dollar is also enticing many offshore purchasers and expats and this is now a very strong emerging market within the Sydney real estate markets.
So when one takes the time to actually look at what is going on I find myself (as do many others) not too worried about this so called recession. The last recession was 25 years ago and they aren’t very nice but when you have a state government pouring $70 billion into the NSW economy it would appear that NSW has more Zoom than Gloom. 
To further highlight this the NSW government just appointed Lucy Turnbull (the PM’s wife) as chair of the NSW government’s newly created Greater Sydney Commission. The sole purpose of the Greater Sydney Commission is to stop the infighting at local councils and to speed up developments across the city although I still see councils incompetency as an on – going hurdle.  I’m reliably informed that the premier will hand his greater Sydney Commission special powers and the councils will not like what’s in-store.
Of course not everybody will be convinced but then again, that all adds to the theatre of debate. When the 2016 property markets kick off I’m of the view that the areas within a 15 kilometre radius of the CBD will do very well. But expect more than a few to tell a different tale.
MOSMAN – 2088
• Number of houses on the market this time last year – 103
• Number of houses on the market last week – 65
• Number of houses on the market this week – 55
• Number of apartments on the market this time last year – 66
• Number of apartments on the market last week – 60
• Number of apartments on the market this week – 51
CREMORNE – 2090
• Number of houses on the market this time last year – 13
• Number of houses on the market last week – 15
• Number of houses on the market this week – 11
• Number of apartments on the market this time last year – 25
• Number of apartments on the market last week – 18
• Number of apartments on the market this week – 17
NEUTRAL BAY – 2089
• Number of houses on the market this time last year – 10
• Number of houses on the market last week – 8
• Number of houses on the market this week – 8
• Number of apartments on the market this time last year– 42
• Number of apartments on the market last week – 33
*Number of apartments on the market this week – 30
 
ROBERT SIMEON is a director of <a href="https://www.rwm.com.au/" target="_blank" title="RWM" rel="nofollow">Richardson Wrench Mosman and Neutral Bay</a> and has been selling residential real estate in Sydney since 1985.  He has also been writing real estate blog <a href="https://www.rwm.com.au/news/" target="_blank" title="Virtual Realty News" rel="nofollow">Virtual Realty News</a> since 2000. 
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Some framing 2016 as the recession year: Robert Simeon

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If you thought the election debate on negative gearing was interesting watch the new property debates get a whole lot hotter with the Australian Taxation Office’s (ATO’s) latest bombshell announcement which guaranteed will send shockwaves through property markets. 
No doubt this is just the next step following the ATO being handed total ownership of the Australian property transaction register in mid – 2015, a role they had been champing at the bit to control for quite some time.
From Friday July 1 2016 (the day before the federal election) all sellers of residential and commercial property worth in excess of $2 million will be deemed as an overseas investor unless they can attain a special tax clearance. Failure to attain the special tax clearance certificate means the seller must deduct ten (10) percent from the purchase price which is immediately paid to the ATO.
No doubt lawyers, accountants and conveyancers would be rejoicing at these newly discovered revenue streams although what has not been announced is when a seller receives their compliant special tax clearance are the associated costs in receiving the compliance tax deductible?
This is all aimed at closing loopholes solely aimed at the leakage of tax revenues. Australian residents will get their tax clearance so long as they are up to date with tax returns, proving that they acquired the property within their declared earnings – which I see as a very good move.
When the ATO took over the property reins they quickly started extrapolating all property transactions back to 1985, so it will take a while to complete the register. This new legislation is simply closing the door on those who acquired property illegally either from proceeds of crime or as non – residents.
For the last five years foreign investors have been running amok buying Australian real estate. The federal governments have laid out the welcome mat when they raised off – the – plan purchase restrictions in 2008 from 50 percent to 100 percent.
This week Fitch Ratings warned that Australia clearly has a significant ‘hidden’ offshore property buyers risk. Andrea Jaehne, a director at Fitch Ratings, stated that she was shocked by the increase of foreign buyers since 2010, where the Foreign Investment Review Board experienced an eightfold increase in approvals up to 2015. She said that it was difficult to know the true number of properties being sold offshore because foreign investment rules did not require an approval for foreigners buying apartments off the plan.
The question that needs to now be asked is (with the recent property frenzy which conveniently replaced the mining boom) with all these new measures what will happen to property prices? Well foreign buyers will almost certainly now hold back and watch what happens to the Australian markets particularly Melbourne and Sydney – we can expect some big corrections in these investment markets.
With a further 250,000 apartments to hit the domestic markets within the next two years it is very difficult to see a happy outcome for these markets – more particularly as we have more evidence that these markets are significantly slowing. Then throw in the latest Australian Bureau of Statistics data which shows that Australian wages are growing at the slowest rate for at least 18 years.
Furthermore, we are now hearing that market analysts are now coming to the conclusion that low interest rates actually cause more damage to the economy. As one commentator said this week “very low interest rates around the world are inhibiting economic recovery rather than encouraging it.”
Australia is now just 44 days away from getting a clearer indication of what will happen to the markets more particularly with negative gearing. Now is not the time to start tinkering with investors clearly preferring existing properties. Agents will tell you that when an existing apartment comes onto the market the ratio of home buyers to investors inspecting is generally 50/50. Take away half the market and of course prices will come down – which in turn will drive rents up.
Of course the opposition treasurer could produce his modelling to show otherwise, however this has not been forthcoming so one can then conclude that no modelling is in existence.
With all that’s happening on the Australian property landscape the timing is a potential disaster. In the meantime, watch how many vendors try and offload their properties before the new ATO legislation comes into effect. No doubt the ATO will be watching too.
 
MOSMAN – 2088
Number of houses on the market this time last year – 65
Number of houses on the market last week – 55 
Number of houses on the market this week – 55 
Number of apartments on the market this time last year – 47
Number of apartments on the market last week – 50
Number of apartments on the market this week – 50
 
CREMORNE – 2090
Number of houses on the market this time last year – 5
Number of houses on the market last week – 7 
Number of houses on the market this week – 11 
Number of apartments on the market this time last year – 10
Number of apartments on the market last week – 23 
Number of apartments on the market this week – 22
 
NEUTRAL BAY – 2089 
Number of houses on the market this time last year – 6
Number of houses on the market last week – 8
Number of houses on the market this week – 8 
Number of apartments on the market this time last year – 29 
Number of apartments on the market last week – 21
Number of apartments on the market this week – 22
 
ROBERT SIMEON is a director of <a href="https://www.rwm.com.au/" target="_blank" title="RWM" rel="nofollow">Richardson Wrench Mosman and Neutral Bay</a> and has been selling residential real estate in Sydney since 1985.  He has also been writing real estate blog <a href="https://www.rwm.com.au/news/" target="_blank" title="Virtual Realty News" rel="nofollow">Virtual Realty News</a> since 2000.
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Robert Simeon

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