Buyers aren't seasonal, but vendors sure are: Robert Simeon

If the recent federal election is anything to go by – a pivotal role that has emerged has been the aggression expressed on social media – yes, our new digital economy. This in turn has led to the most combative and often under handed strategies ever seen before on the political arena. If this is what is now to be the new norm the next three years will be very interesting.

In the run-up to Saturday’s election the economy was rightfully front and centre, where it should be noted that the Australian economy is performing very well when compared to other western economies.

The RBA has left interest rates on hold which opens the question – has the cash rate bottomed? Certainly the job would be easier to scrutinise if economic and financial forecasting could suddenly turn out to be more accurate for Australia’s $1.6 trillion economy. One thing you can be assured of is that now the LNP have won the election, they won’t be sucker–punched into providing a date when the budget is likely to return to surplus.

A recent report noted that manufacturing has declined for a 26th month and one can only expect to see a slight improvement with this sector given the Australian dollar has depreciated around 15% from earlier this year.

The Australian economy continues to grow at a sluggish pace with the Bureau of Statistics revealing this week the economy grew 0.6% in the June quarter. The annual growth rate is now 2.6% with the trend growth sitting at 3% so we are growing at below trend growth. Whilst we remain at below trend one can rest assured that governments won’t be in a hurry to return the budget to surplus. Of particular interest when the GDP figures were announced was the household savings rate continues to remain high – economists predicted a savings ratio of 10.7% to see it come in at an increased 10.8%.

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I am not of the school of thought that Abbott will trigger a housing boom; “the looming Coalition landslide win on Saturday is now virtually certain to trigger a series of housing booms in Australia. In some areas the boom is not waiting for September 7.”

I agree that some areas are certainly experiencing a mini–boom which we have seen plenty of times before. Presently within a 10 kilometre radius of the CBD we are seeing apartment markets posting very strong sales data although the same can’t be said for housing which remains slow and steady.

One of the problems is that Fairfax Media and News Limited online platforms and newspapers are talking it up in an attempt to get those advertising revenues up in their respective newspapers. Once again easily one of the biggest problems our real estate markets face is Australian stamp duties are the fourth highest in the world for luxury purchases.

I read a report in this month’s REINSW Journal that “stamp duty costs Australian property market 40,000 sales”. Just goes to show how state governments are so economically illiterate when a new study, "How do stamp duties affect the ousing market?", authored by Ian Davidoff and Andrew Leigh – has found a correlation between stamp duty and the stagnation of housing sales in Australia.

According to the study’s findings, an increase in stamp duty rates from 1993 to 2005 led to approximately 39,000 forgone sales in Australia. The study revealed that the short – term impact of a 10% increase in stamp duty is to the lower house prices by 3%.

If the property market is supposed to be booming this theory is certainly not reflective in the property volumes we are currently seeing in Mosman, Cremorne and Neutral Bay, which where yet again down this week. All three demographic markets are significantly down on the same time last year. To put this into perspective the Mosman housing market peaked at 168 last spring/summer yet this week it hovered around the high 70’s to finish at 80. Mosman apartments peaked at 112 this time last year and this week they sit at 61.

I would offer this interesting observation; buyers aren’t seasonal – vendors are!

 


Robert Simeon is a director ofRichardson  Wrench Mosman and Neutral Bayand has been selling residential real estate in Sydney since 1985. 
He has also been writing real estate blog
Virtual Realty Newssince 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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