Forget talk of a boom, Sydney's property market is just about right: Robert Simeon
By all accounts when one reads the news our property markets are apparently booming.
As they say if you want to make a mountain out of a mole – hill just keep adding dirt. It’s very easy to use the boom word just as its very easy to use the word bust. What the vast majority forgets is that real estate is not an exacting science, if it’s such a great time to buy now then why did the markets fail to react from 2008 to 2010 when prices dropped by 30%?
Sydney’s property bubble hysteria is unfounded where it was correctly pointed out by Terry Ryder that “three years ago BIS Shrapnel, which makes part of its living from mis – forecasting property markets, declared in 2010 that capital city prices would continue to rise strongly. By 2013 Perth would be up 22% and both Sydney and Adelaide would have added 20%. Nothing of the sort happened, of course. Three years on, Perth is up about 7% and Sydney a meagre 4%. Adelaide is still down 3%. These are not statistics that support bubble theories.”The capital growth rates (average annual growth in median prices over the past ten years) have Mosman at 2.4%, Cremorne at 2.8% and Neutral Bay at 3.5%. Our demographic property markets are performing currently at their highest level in six years albeit with the tightest stock levels not seen before in decades. If you are, for example, looking to buy a house presently in Mosman, Cremorne or Neutral Bay you have a choice of 110 homes, for apartments your choice is 112.
Sydney’s property market is a bit like the porridges of the three bears in Goldilocks – too hot or too cold and, for some, just right – I would put our market in the just right category; “Data from Australian Property Monitors shows 40% fewer homes selling in the $4 million to $6 million price range in the first half of this year compared with the same period in 2010 when the market was enjoying a fillip.”The top four suburbs with the highest number of $4 million to $6 million sales in the six months to June 30, 2013:
1. Mosman (19 sales) 22 sales in the 2010 fillip
2. Vaucluse (9 sales) 14 sales in the 2010 fillip
3. Bellevue Hill (6 sales) 15 sales in the 2010 fillip
4. Woollahra (5 sales) 5 sales in the 2010 fillip
All up sales of $4 million to $6 million sales in Sydney, in six months to June 30, 2010: 187 compared to in six months to July 30, 2013: 111.
The last time the Reserve Bank of Australia (RBA) moved the cash rate up was back on November 3, 2010 to 4.75%, so it’s little wonder that we are seeing engagement in the property markets given today it sits at 2.50%.
Interest rates increase an eventual risk for borrowers: Fitch warning – monthly home repayments will rise 40% if interest rates return to 2008 highs and banks might not be taking this into account when lending. Since October 2011 the RBA has now delivered eight cuts so it’s inevitable that they will start increasing the cash rate – the warning signs already are starting to appear.
When I want an accurate gut – feel for our property market I look no further than the available stock levels which still remain in decline. For houses Mosman is averaging a twenty% decline on previous years and to be honest I can’t really see this changing anytime soon.
MOSMAN – 2088
• Number of houses on the market this time 2012 – 99
• Number of houses on the market last week – 85
.Number of houses on the market this week – 84
• Number of apartments on the market this time 2012 – 99
• Number of apartments on the market last week – 59
.Number of apartments on the market this week – 63
CREMORNE – 2090
• Number of houses on the market this time 2012 – 15
• Number of houses on the market last week – 3
.Number of houses on the market this week – 7
• Number of apartments on the market this time 2012 – 18
• Number of apartments on the market last week – 17
.Number of apartments on the market this week – 13
Neutral Bay – 2089
• Number of houses on the market this time 2012 – 17
• Number of houses on the market last week – 11
.Number of houses on the market this week – 13
• Number of apartments on the market this time 2012 – 45
• Number of apartments on the market last week – 30
• Number of apartments on the market this week – 36
Source: Australian Property Monitors
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.