One-third of real estate agencies likely to go broke in next two years

The OECD this week declared the bleeding obvious. The world economy is slipping back towards recession! It was made very clear who was to blame for this slide and yes, you guessed it, politicians!

Kicking the can towards a global recession, a sensitive issue where re-election is paramount over effective policy strategy. “The Australian economy is forecast to grow by 3.25% in 2013, but it ‘remains marked by substantial sectoral disparities’." The government may need to slow budget consolidation and will definitely need to boost “productivity by pursuing reforms in taxation, infrastructure and innovation”. Unlikely, as 2013 is an election year, which will be all about promises that will never see the light of day.

Coincidentally, this week marked the 22nd anniversary of the Paul Keating-led ‘recession Australia had to have’ and this week it was announced recession possible in 2014, economist warns – a theory I don’t doubt for one single moment. What needs to be closely scrutinised here is how businesses have adapted to the brave new online world where consumer behaviour has radically changed the “acquisition” mentality.

I may have been harping on with this conspiracy theory for over a decade however, I predict that 2013 will be the year of online and I will have more to say about this next week. Follow the bouncing ball has now been replaced with eyeballs. Online shopping in Aust growing rapidly, the National Australia Bank’s Online Retail Index shows that online sales grew 26% year-on-year to October, compared with 14% year-on-year, in May. Consumers have now moved to cyber shopping markets, and the problem within Australia is that traditional markets simply don’t get or understand this seismic shift to the new cyber markets.

Recently, I suggested that at a bare minimum, 30% of Australia’s 10,000 + real estate agencies will be broke within 24 months simply because the cost of property transactions within Australia is too expensive. This takes us directly to the Australian OECD warning regarding taxation. Australian consumers are now saving and not spending!

No better example than smaller banks and non – banks to offer borrowers better mortgage deals in 2013: Delloitte, simply because consumers are eyeballing the cyber markets from the comfort of their homes as against making appointments to be interviewed by a bank manager. Further evidence boom days are over for banks: Kelly, where Westpac’s chief executive announced the days of Australian banks posting returns on equity of 20% or more are long gone.

Let’s look at the Mosman example, where this week we extrapolate the data for Mosman 2012 apartment and townhouse sales – and yes, the market this further declined.

MOSMAN APARTMENT AND TOWNHOUSE SALES – 2010, 2011 AND 2012

Source: Domain Property Data

• 2012 Sales – 370*
• 2011 Sales – 472
• 2010 Sales – 467

*Sales still being compiled although it would be reasonable to suggest that sales will be significantly down on previous years. On these figures sales are 22 percent down on 2011.

• 2012 Total Value – $296,096,984*
• 2011 Total Value – $379,388,525
• 2010 Total Value – 379,388,525

*Sales still being complied although on this data another 22 percent reduction on 2011.

• 2012 Average Price – $800,262
• 2011 Average Price – $803,789
• 2010 Average Price – $848,928

Next week, we will examine Mosman house data comparisons.

Property listings in Mosman keep declining and Mosman houses fell below the dreaded 100 mark this week. It is most obvious that that the 2010 and 2011 housing markets bear no resemblance. There is a strong argument that in the 2012 market, “the price is right”. Next year, we will have a federal election, and property confidence is generally much stronger under a Liberal government.

Another grubby week of politics PM responds ‘So what?’ to new AWU claims where despite four files conveniently going missing, the major file is in Seattle. Former Slater & Gordon partner Nick Styant-Browne conveniently copied the file and keeps drip feeding the Australian media. I think PM Julia Gillard is gone. The Gillard government spent a motza to get a seat on the United Nations General Assembly then abstained on its first vote. Gillard reassures Israel of backing despite UN vote. More a case of Gillard UN vote backdown to save her job, which would explain precisely what the OECD was alluding to.

The Reserve Bank of Australia (RBA) meets tomorrow for the final meeting of 2012. My prediction? The cash rate will be dropped -0.25 points to 3% to match the global fiinancial crisis (GFC) rate in April 2009 at 3%. The ‘World’s Greatest Treasurer’ will announce that under Australian Labor, it delivers the lowest interest rates. Some may conclude that it is more a case of its economic policies – refer OECD for example A.

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.