There's never been a better time to buy: Robert Simeon

I have no doubt that Sydney’s property markets are set for rapid growth at the lower price ranges which will flow to the top-end, however it will be a trickle not a tsunami. They say: when you make a mountain out of a molehill, don’t expect anyone to climb up to see the view. You see the view is otherwise known as an opinion with the voice coming from the Reserve Bank of Australia (RBA). The Sydney Morning Herald conveniently published this week – how to spot a housing bubble.

When looking at the view of our local market look no further than this week’s sales which identifies in Mosman, Cremorne, Cremorne Point, Neutral Bay and Cammeray there were 32 sales with 22 of those sales being apartments, making up 69% of the week’s sales. 

RBA tells Sydney to get real when the RBA released its financial stability review this week. “Over the past year or so there has been an increase in property market activity. This is not surprising given the reductions in interest rates. The pick – up in demand, which has been sharper in New South Wales and from investors more generally, has been associated with recent increases in housing prices. It is important that those purchasing property do so with realistic expectations of future dwelling price growth.”

Reserve warns DIY super may set new property debt trap although what needs to be pointed out is that Australia’s mortgage market is worth a whopping $1.2 trillion with the SMSFs totalling approximately $80 billion. If you want to throw another hand grenade: the RBA could start a rumour that the Abbott government is looking at abolishing negative gearing. Now that would add plenty to the spinning property fan.

Christopher Joye, writing for the Australian Financial Review wrote only fools ignore bubble trouble; “residential property is the biggest source of household wealth and underlies the most important asset – home loans – held by Australia’s colossal and concentrated banking industry, which accounts for 30% of the share market’s value. There is $4000 billion of housing and $1300 billion of debt held against it. It is our most significant investment class. So are we in the throes of a bubble, and should we worry about the risks of one materialising?”

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Source: RP Data, ABS, Australian Financial Review

The main issues as I see it is that banks maintain a lending responsibility given our economy still harbours strong concerns with what is happening overseas. What many seem to forget is that despite Australia experiencing a record low cash rate of 2.5%, if the property markets take-off so too will the cash rate. So with all these warnings and variables it would be fair to say there has never been a better time to buy given the cash rate will go-up, so lock and load the present rates in.

Another factor that is being missed is record number of Chinese buyers pump up property prices in Sydney. Then you have the combination of Chinese and local investors buying $300m of Barangaroo apartments, which sold out within hours, an expected result given its unique location. Agents today are being taught and advised on marketing your property to Chinese buyers as significant investor bias holders target high – end Sydney properties.

It will be most interesting to see what the newly elected Abbott government does with the previous government’s Significant Investor Visa (SIV). SIVs were introduced on November 24 2012, and have attracted over 100 applications from wealthy Chinese investors looking to spend at least $5 million in Australia. Whilst some are suggesting that the Abbott government will scrap this initiative it should however be noted that this is aimed at the top-end markets which are showing just a pulse in terms of activity.

Another week of tight listings which continue to remain well down on previous year’s volumes. With school holidays finishing on October 8 we should see just how confident our market is, although I expect that we won’t see much difference from what we have seen all year.

Another reason why (in my opinion) that we have such a strong focus on what’s happening to the property markets at the moment is that there is not that much to write about. Newspapers are renowned for talking real estate up due to them trying to reignite their “rivers of gold” print revenues.

That’s my conspiracy theory.

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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