Property markets brace for hysteria and usual faux pas: Robert Simeon

If some people think a declining clearance rate is a solid key performance indicator for our real estate markets they are badly mistaken as research identifies that the markets remain 60 per cent private treaty and 40% public auction.

Clearance rates are in my opinion more a mood indicator as to consumer confidence levels and not much more, although some commentators would have you believing they are the be all and end all.

If we are to better understand the intricate machinations of what is happening in our demographic markets I would like to see the property portals thinking in greater detail. For example, when a property appears on the market there should be two colour codes one for owner occupier sales and the other for investor sales. These are two entirely different market demographics although they today are bundled together despite being two totally different markets.

As I mentioned last week there will be a number of markets to watch in 2016 plus of course tax reform which is now looking much more likely with the changing of prime minister and new ministers running new portfolios. That too means new dialogue where it was quite interesting to listen to Treasurer Scott Morrison who said “the deficit reflects a spending problem, not a revenue problem”. The previous Treasurer Joe Hockey kept telling us Australia has a revenue problem not a spending problem.

You can rule out any changes to negative gearing by Messrs. Turnbull and Morrison whom will be watching what happens with the investor market, especially should the off – the – plan market have a run of defaults which is highly likely. Already the banks are starting to aggressively pull back lending for new construction projects in Sydney and Melbourne as they see some difficult times ahead with sales completions for overseas investors.

This week the Baird Government announced that 35,000 new homes would be made available in Western Sydney which would be expected to sell very quickly to owner occupiers so these developments won’t have any trouble attaining finance from the banks as this is an entirely different market demographic. Sydney urgently needs to address the owner occupier markets and housing affordability although for those watching these markets it’s getting more difficult to understand.

The Australian Bureau of Statistics (ABS) announced this week that Sydney house prices have jumped by 21.5 per cent over the past year. The Sydney House Price Index (HPI) rose 9.8 per cent over the June quarter which just so happens to be the largest single increase since the ABS commenced the series back in 2002. Just imagine the clarity if the ABS could differentiate these increases between owner occupiers and investors when we know that the investors were the ones really driving these gains.

This is further explained by why the banks are cutting back lending on the new residential markets as many believe a large percentage of the foreign buyers who jumped all over the new releases in Sydney and Melbourne are having a change of heart. Such observations then allow intelligent commentaries where investment bank Morgan Stanley declared this week that the housing boom had peaked. What we are seeing at the moment is much tighter lending rules, a very strong likelihood that Sydney now has an oversupply of new apartments and migration rates are slowing.

When this happens we can expect to see the apartment sales slowing considerably and prices starting to significantly ease which is long overdue. The difference that must be noted is this time around prices may ease naturally as against crashing where today we need to remember we are looking at an entirely different market specific.

If the overseas investors withdraw from the new developments then the prices only in those individual developments would be affected. Although we then find ourselves back at mood indicators where consumer confidence would decline significantly which then flows onto property prices.

Having said that the overseas investors have been clearly the most dominant with the off – the – plan sales so there are still a very large number of local investors waiting to absorb whatever re – sales come onto the market. What we don’t know is how sympathetic they will be to the developers pricing where the previous sale price won’t be that relevant. The developers have already pocketed the 10 per cent deposit although depending on the number of defaults the new pricing could be down by 20 per cent plus given the hype is not there anymore.

There are two topics that will be intriguing in 2016 – coincidentally they both start with the letter “p”;  property and of course politics.

MOSMAN – 2088

• Number of houses on the market this time last year – 60

• Number of houses on the market last week – 52

• Number of houses on the market this week – 51

• Number of apartments on the market this time last year – 41

• Number of apartments on the market last week – 51

• Number of apartments on the market this week – 52

CREMORNE – 2090

• Number of houses on the market this time last year –9

• Number of houses on the market last week – 7

• Number of houses on the market this week – 5

• Number of apartments on the market this time last year – 18

• Number of apartments on the market last week – 22

• Number of apartments on the market this week – 21

NEUTRAL BAY – 2089

• Number of houses on the market this time last year – 6

• 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 last year– 35

• Number of apartments on the market last week – 29

• Number of apartments on the market this week – 28

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.