On the rebound, Australia may be the star performer of 2014: Robert Simeon

In the modern era we have made confusion an art – form given our tendency to over analyse, which in turn leads to over dramatized responses. The highway of fear is the shortest route to defeat.

Over the past week we have seen some very interesting observations namely: Rate cuts revised where analysts now have all but ruled out another cash rate reduction in 2013. Global growth forecasts for 2014 tend to fluctuate between 3-4% so everyone will be looking for the stand out economies. Many are suggesting that Australia may very well be a star performer.

The National Australia Bank Business Survey showed business confidence rose eight index points to 12 in September – its highest level since March 2010. The jobless rate fell from 5.8% to 5.6% which really surprised everyone given once again our over – analysis had the jobless rate higher.

The heavy lifting for the rebounding Australian economy starts in Canberra – how six senators will transform Australia. “Wake up Australia, wake up. After six years of federal government chaos we now have one of the most stable governments in the developed world. Not only does the government have a strong majority in the lower house but “The Six” plan to support the government in all its major policy decisions.” With the government now assured of a clear passage it can get on with the job of rejuvenating the Australian economy which in itself is a mammoth task.

Australia urged to diversify economy as five “super growth” industries could boost the national economy by $250 billion over the next twenty years. Mining is expected to remain a major driver of prosperity, according to a new Delloitte Access Economics report released on Tuesday, with agribusiness, gas, tourism, international education and wealth management well – placed to join it.

We also saw that “property bubble theory” laid to rest – Is there a property bubble? The experts have their say.  As I’ve said all along the “property bubble theory” in Australia is just a pile of rubbish theory. Housing boom is a necessary evil said HSBC, with house prices having risen 9% since the May 2012 lows, and up 5.5% over the past year, it’s clear that momentum is picking up. I must admit that when these increases are scrutinized much closer we will see that the increases are not reflected in every suburb – more so at the lower end markets although eventually it will move to the top – end markets.

The property markets are simply at the early stages of rebalancing growth and the Reserve Bank of Australia would be most happy to see these green shoots. What many forget is that at the lowest cash rate Australia has ever seen it is very easy to service debt. It only becomes interesting once the cash rate is restored to what many call normality which is somewhere from 5.5% to 7%.

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New lending has been a key driver of the recent pick – up in real estate values where it should be noted that over the last twelve months home loan approvals have risen by 18%. On that basis it is fair to suggest that we will see single digit growth for the remainder of 2013 and this will move to double – digit growth in 2014.

With school holidays now over the anticipated new listings did not materialise this week with just marginal new stock entering the market. Having said that this week’s sales were somewhat on the soft side too it should be added in all fairness. We are now into week one of the selling run through to Christmas where by all intent and purpose it looks like property listings will remain on the subdued side. This is not a bad sign given if we were to see an oversupply of stock to hit the market I would have serious doubts about the market engagement – what would then happen is a stagnated market.

It has been a long time coming, but now strong market fuels dwelling construction and it's great to see the RBA’s monetary policy settings reigniting the construction market again. The NSW region is the driving force behind the surge in dwelling approvals with the latest August data showing a 48% lift in private sector approvals compared to August 2012. Certainly the O’Farrell government can take much of the credit given their relentless push for infrastructure in NSW.

Before we start popping the champagne corks it should also be noted foreign buyers snap up residential property for the three months to September 30, 165 of new property was bought by foreigners up from 11% in the previous quarter. Unfortunately there really is no accurate measure to get an exacting figure as nobody actually offers this service.

Out of frustration we recently set up RWM Research where our number crunchers are busily digesting data for our area so we will have more to report on this in coming months. I personally don’t believe we will be the only real estate agency to have an in-house research team given its importance for market surveillance.

Like most things in our industry we are just happy to be first.


Robert Simeon is a director of Richardson  Wrench Mosman and Neutral Bay and has been selling residential real estate in Sydney since 1985. 

 

He has also been writing real estate blog Virtual Realty News since 2000. 

The RWM real estate model has sold in excess of $1 billion in database sales globally.


Robert Simeon

Robert Simeon

Robert Simeon is a director of Richardson Wrench Mosman and Neutral Bay and has been selling residential real estate in Sydney since 1985. He has also been writing real estate blog Virtual Realty News since 2000.

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