Sydney top end sales skewing median price: Robert Simeon
At the start of every New Year the first things we see for some strange reason are predictions.
Even stranger when it comes to property there are only two possible outcomes: boom or crash. What exactly happened to the glass half full or half empty philosophy?
So my prediction for 2015 is that the Australian property markets will see some half full and others half empty movements. One would have thought that many real estate commentators were embarrassed and fooled by the Australian property markets in 2014 given their out of control ‘bubble’ declarations, only to find out it was investors driving the market not households (as they incorrectly reported).
So let’s move to the nitty gritty facing 2015 – a record low cash rate, low inflation and low GDP. This means again that investors will be faced with just the two alternate options; equities or the residential real estate markets. Real estate will again be the preferred investment strategy of choice in 2015 – more particularly as they continue to propel their self-managed superannuation funds.
After all it’s much easier to monitor the idiosyncrasies of the real estate markets than it is with equities – the latter are global markets where real estate is much more local orientated. Of course an argument will pop up that the global financial crisis (GFC) was global where property prices fell 25% on average approximately. In the vast majority of cases prices are now back (or close to) the 2007 benchmark prices.
When one then looks at the RUOK markets in 2015 – NSW looks like being the star performer again. Western Australia held the mantle for the last three years although with the mining decline and a working population shift it finds itself in correction mode having slipped to third place, with Victoria in fourth and Queensland fifth spot. NSW has now posted constant strong jobs growth which then ricochets to job security which then ricochets to consumer spending.
As a natural progression the high profile debating team of boom and bust will be front and centre in 2015 with the usual ‘Australia has the most expensive housing prices in the world’. Well one would have thought that if the situation was that dire the GFC average correction should have been much more severe – but it wasn’t.
Yes, Sydney prices over the last two years are reportedly up 30% but what conveniently keeps being omitted is that the formula applied is a ‘median’ price and Sydney has the most expensive top end residential real estate in Australia, so this figure is actually inconsequential given Sydney’s top sale for 2014 was $39 million.
Housing markets can be irresponsibly skewed when you have Australia’s number one top end market or, better still, Sydney is using a top end steroid to drive up its median price. A shame this is not pointed out.
He’s baaaack! Steve Keen says the Australian property bubble could keep going through 2015 – For some strange reason (again) I struggled to follow his line of reasoning as to what would prompt a decline in property prices. That nasty four letter word keeps popping up – debt. However, we should remember the word that always precedes debt is managed.
As I predicted last year we will see two 0.25% cash rate reductions in the first half of 2015 with the cash rate sitting at 2% as at 30 June 2015. Of course when the cash rate starts firming back up only then will we see some corrections in property prices as many will struggle to ‘manage their debt’.
We need to look closely at the DNA of those commentating on the Australian real estate markets – and I can’t go past Steve ‘Headline’ Keen.
Back in September 2008, he told Jonathan Chancellor that he was listing his Surry Hills, Sydney apartment with $500,000 expectations. His reason for selling at the time, “partly to put my money where my mouth is and partly due to changed personal circumstances.”
I’m sure based on current comparable sales he wouldn’t be that happy to observe that if he had held on, he would be up approximately 50% today from when he sold.