For the first time in five years we are somewhat upbeat about what lies ahead despite it being an election year. With the election date being announced – September 14 – this is good news for the property markets as it removes uncertainty and speculation.
We are already we are starting to see a more positive approach, with CEO confidence in global economy returning: PWC, with a major survey pointing to stronger confidence. This is critical given confidence has been the missing ingredient within our economy. Aust stocks gain 12.74% over 2012, which is important given investors abandoned our financial markets as a direct result from the global financial crisis (GFC). With interest I read a Eureka Report article by Alan Kohler – Five reasons why I’m bullish in 2013. He points out “All of which means the returns from cash are miserable and falling. Time to invest then, which means taking more risk, but not too much risk – thus, bank shares returned 25% in the second half of 2012.
"In my view this trend has just begun. For five years investors everywhere have been more concerned with not losing their capital than with making a return, and gradually this is changing; they are moving out along the risk curve.” Property markets and financial markets run in parallel lines, then throw in an all time record low cash rate of 3%, and the evidence is overwhelming that our property markets are at a precipice.
Back to the cash rate, which I don’t believe will go any lower, despite Steve Keen and Macquarie Group tipping a cash rate of 2% by year end. Should that be the case this prediction means that the Australian economy is cactus. I’m with HSBC’s Paul Bloxham, the lone rider tipping interest rates to rise in 2013. No doubt each and every one of you has your own thoughts on which direction the cash rate is headed.
It’s difficult to allow the facts to get in the way of a good story – Australian Property Monitors published its December quarter 2012 findings:
• The national median house price rose by 1.9% over the December quarter and is 2.1% higher than at the end of 2011.
• Sydney house and unit prices are now at record levels.
• All capitals recorded house prices over the quarter for the first time since March 2010.
Bear in mind also many of the top-end sales are still to filter through – for example, this week we had a Beauty Point residence settle for $12.8 million, which is the new record for a non-waterfront.
We can also expect fierce rivalry in the home loan market, where the big four banks would have been horrified to read a third of borrowers would ditch the big four banks for 50 basis point discount: CUA. Just as fascinating Banks laughing all the way to the …bank “In a confidential note to its institutional clients, Westpac describes the fall in wholesale funding costs as ‘extraordinary’ “. The days of blaming “high funding costs” are now it would appear irrelevant.
It is all about confidence.
This takes me to the most remarkable property data I have ever seen before!
For some strange reason vendors in Mosman, Cremorne and Neutral Bay appear to be not even remotely interested in selling in 2013. We have never before seen such a tight market with available properties for sale the lowest we have ever seen – otherwise known as a Vendors’ Market. So why would the Reserve Bank of Australia (RBA) even consider lowering the cash rate?
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.