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Sydney’s established suburbs have just one thing in common when we talk about their existing houses in that for years now we have seen no new housing developments – they have simply dried up.
They no longer exist nor will we see any more new developments, so the number of houses in a particular suburb is all but fixed forever. Unlike outer Sydney where new housing estates are being released at the fastest rates ever witnessed before to meet the growing consumer demand – however the new markets are totally different from the established property markets.
It’s interesting to note that the established housing markets are contracting with less properties being offered to the marketplace which is underpinning property prices. Just as interesting is the observation that the overseas buyers are now strong participants in the established Sydney property markets followed by the local buyers in close pursuit.
This is what many are calling the perfect storm where if you removed the overseas buyers the Sydney established property markets would bear no resemblance to what we witnessed in 2015. With the NSW government now fixated on high – density residential strata developments many property buyers are observing that established houses are the best investments because production has ceased.
Whilst the NSW government has no problems encouraging the new residential subdivisions of airspace we certainly don’t envisage we will see any outdoor public spaces being converted to residential housing subdivisions.
We can also throw into the ‘perfect property storm’ record low interest rates where households are leveraging their borrowings to the maximum in order to take full advantage of the lowest rates in property history. When they leverage high this takes longer to pay down the principal home loan which in turn slows down the number of properties being offered to the market place which is exactly what we are witnessing today.
Just as interesting is that the last cash rate increase by the Reserve Bank of Australia (RBA) was back on November 3, 2010 when the RBA increased the cash rate +0.25 percent to 4.75 percent.
To show further proof a recent analysis by Digital Finance Analytics identified that 13 percent of households with an owner occupied loan would be in financial discomfort if rates were to rise at all. This is a smaller proportion to investment property owners who came in at 27 percent. However, more than one third of households said that they would be in difficulty if rates rose by 3 percent.
With many property owners closely following the cash rate musings emanating from the RBA – they may be better advised to watch their respective lenders a lot more closely.
Business analysts warned this week if there are no RBA cuts in 2016 then the banks would again act independently by announcing their own independent rate increases. Many quickly forget that in 2015 the big banks joined hands and raised their respective rates between 15 and 20 basis points.
Based on this data, for that to happen we would see the investment property hardest hit with a very distinct possibility of surging nervous investors trying to off – load their newly acquired investment properties. On the flip – side the major banks are most concerned that this newly created investment property loan portfolio has them exposed – so we in all probability will see them massaging their mortgage books in 2016.
This of course does not bode well for all the new developments awaiting release to the respective marketplaces where Melbourne has approximately another 20,000 new apartments ready to be released over the next five years with Sydney sitting at around 6,000 new apartments.
Then of course we have the dilemma with the apartments already sold off – the – plan with plenty of talk that many of those won’t proceed with their contracts. In particular the Big Four banks are only too well aware of their exposure to these new markets. That would explain why they have commenced their whisper campaigns – where we can expect to read plenty more in coming months.
When the property flows are weak the prices shoot up which is exactly what has happened to the established markets. The new investment markets are the ones that dominated in 2015 so there is a very good chance they may dominate conversations in 2015 for all the wrong reasons. What also needs to be factored in are the new developments where 100 per cent of these apartments were sold offshore. It’s anyone’s guess what may happen should we see these newly created markets start showing the first signs of panic.
<h5>MOSMAN – 2088</h5>
• Number of houses on the market this time last year – 58
• Number of houses on the market last week – 36
• Number of houses on the market this week – 45
• Number of apartments on the market this time last year – 43
• Number of apartments on the market last week – 32
• Number of apartments on the market this week – 38
<h5>CREMORNE – 2090</h5>
• Number of houses on the market this time last year – 8
• Number of houses on the market last week – 9
• Number of houses on the market this week – 11
• Number of apartments on the market this time last year – 18
• Number of apartments on the market last week – 11
• Number of apartments on the market this week – 15
<h5>NEUTRAL BAY – 2089</h5>
• Number of houses on the market this time last year – 4
• Number of houses on the market last week – 6
•Number of houses on the market this week – 6
• Number of apartments on the market this time last year– 37
• Number of apartments on the market last week – 23
*Number of apartments on the market this week – 27
 ROBERT SIMEON is a director of <a href="https://www.rwm.com.au/" target="_blank" title="RWM" rel="nofollow">Richardson Wrench Mosman and Neutral Bay</a> and has been selling residential real estate in Sydney since 1985.  He has also been writing real estate blog <a href="https://www.rwm.com.au/news/" target="_blank" title="Virtual Realty News" rel="nofollow">Virtual Realty News</a> since 2000. 
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Simply put, property will be as steady as she flows: Robert Simeon

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When the Budget was released this week I kept reading with great interest that the government had failed to address ‘housing affordability’. Truth be known the only thing that the Abbott government actually controls is foreign buyers and taxation such as negative gearing and capital gains tax. With regard to foreign buyers it has been well documented that with regard to this portfolio they have Failed it with a capital ‘F’.
In fairness the Federal government would respond by saying that to the contrary they have already unleashed the Australian Taxation Office (ATO) to forensically investigate all property transactions that they believe have contravened the laws. Well if it wasn’t for some bloggers and journalists who pointed this out to the Abbott government foreign buyers would be still running amok. I believe the findings will leave most property observers gobsmacked because I believe we are talking about thousands and thousands of sales.
It’s interesting to note that last week a Senate committee made 40 something recommendations pertaining to housing affordability which included calls to review negative gearing and the appointment of a federal minister for housing, to name just two. Well I have been vocal on not having a housing minister since the Abbott government came to office. More interesting was that Coalition senators immediately rejected the findings – well no surprises there.
If you look closely at the housing affordability debate it can be quickly summed up that data shows we are not building enough high density developments. I wrote about this recently – <a href="robert-simeon/42509-may-6-observer-lots-of-positives-from-discussing-negative-policies-robert-simeon" target="_blank" style="line-height: 1.3em;">Lots of positives from discussing negative policies</a> where the NSW government has recognised the problem stemming from municipal councils who are rejecting developments despite the Sydney population expanding at unprecedented levels. The NSW government wants to merge councils to free up more development to meet Sydney’s population explosion.
Should the NSW government be successful with its charter then the price of apartments will obviously come down as too rents. So I’m somewhat mystified why property investors are driving up apartment prices when such a major announcement is pending.
The Abbott government needs to take a very serious look at the legislation that allows foreign buyers to purchase off the plan. I believe that it would be sage for the Abbott government to place foreign buyers on – hold until the ATO has released its preliminary findings. What we are seeing today is Chinese developers out bidding the local developers simply because the off – the – plan legislation allows them to sell directly overseas to foreign buyers so these properties never even hit the Australian market. A vast number of these properties are land banked so they remain vacant which again is self-defeating and ludicrous that this can happen in this day and age.
This week we also read that there are foreign criminals trying to buy Australian real estate to wash their money by investing in real estate. Well this is nothing new as I have heard a few examples of agents who questioned some foreign buyers who expressed interest in landmark Sydney residences.
Thailand has had serious problems with the Russian mafia who have bought up significant parts of that country where the government announced a few years ago that it was cracking down hard on these transactions. This is a global problem where Australia immediately needs to take decisive action which also means tightening the many legal loopholes.
Take the recent divestment order on Villa del Mare where it was found that the Chinese purchaser did not have Australian residence. When I wrote about this <a href="/expert-insights/40832-treasurer-joe-s-villa-del-nightmare-robert-simeon" target="_blank">Treasurer Joe’s Villa del Nightmare</a> on March 5 I said that the purchaser would find an Australian resident to buy the property. Well <a href="/news/42684-lola-wang-li-buys-villa-del-mare-the-39-million-point-piper-firb-home" target="_blank">Australian buyer Lola Li emerges with Villa del Mare, the $39 million Point Piper FIRB home.</a>
The good news to come from this debate is that for the first time “the dogs are barking” and the Abbott government has to act – and act fast. Finding a viable solution to foreign buyers will prove a much harder assignment than towing back boats.
With regard to new developments, for starters there should be a selling ratio of foreign buyers to Australian residents established.
The Australian property industry has never before encountered such a debate and much of this stems from record low global cash rates. Investors are chasing returns and Sydney is one of the hottest property markets on the globe.
The Abbott government needs to send a very clear message to foreign buyers which is either buy or bye?
Mosman Market
When you look closely at the actual numbers of properties on the market you will struggle to say that the market is booming or bubbling as some prefer to say. Historically when markets are booming this coincides with record volumes being on the market which is otherwise known as a feeding frenzy. The confusing parts about our local markets are that stock levels are down 50 per cent on this time last year or thereabouts.
MOSMAN – 2088
• Number of houses on the market this time last year – 102
• Number of houses on the market last week – 57
• Number of houses on the market this week – 57
• Number of apartments on the market this time last year – 72
• Number of apartments on the market last week – 50
• Number of apartments on the market this week – 49
CREMORNE – 2090
• Number of houses on the market this time last year – 7
• Number of houses on the market last week – 3
• Number of houses on the market this week – 4
• Number of apartments on the market this time last year – 27
• Number of apartments on the market last week – 13
• Number of apartments on the market this week – 10
NEUTRAL BAY – 2089
• Number of houses on the market this time last year – 7
• Number of houses on the market last week – 3
•Number of houses on the market this week – 3
• Number of apartments on the market this time last year– 48
• Number of apartments on the market last week – 31
• Number of apartments on the market this week – 27
 Source: APM Price Finder
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Do we tell foreign buyers to buy or bye? Robert Simeon

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That pesky property bubble is mainly contained to the investors chasing yields and taking advantage of a chronic under-supply which is driving up rents – well it was however, we are now starting to see rents flat lining given supply has significantly increased.
New lending initiatives are quickly changing the investor landscape where I suspect it will be a very long time before we see lenders offering 90 per cent loans as we are now seeing lending ratios sitting more around the 70% mark. <a href="/expert-insights/43497-overseas-buyers-will-support-sydney-house-prices-during-apra-crackdown-nab" target="_blank">Overseas buyers will support Sydney house prices during APRA crackdown: NAB</a>; it is fair to say that the federal government won’t be tweaking the foreign buyer ratios (presently at 100 per cent) anytime soon.
There is a reason for this; Australia’s population is set to hit 40 million people by 2056. In order to meet this demand we will see the greatest infrastructure spending in Australia’s history given it’s been calculated that by 2056 Australia will need a further 1,100,000 apartments. Across Australia that means an additional 27,000 apartments each year for the next 41 years, it is expected Sydney and Melbourne will do the majority of the heavy lifting. This also plainly identifies why the Baird government wants to amalgamate the councils to ensure that these new developments keep getting approved.
The message is quite clear that if you want to reside in close proximity to the CBD you will have to live with an avalanche of high density developments.
This week the residential data from the 34th Property Directions Survey was released which is an industry based group comprising property experts – Valuers, Fund Managers, Property Analysts and Property Financiers.
<ul>
<li>58% of respondents stated that Sydney residential property was in or entering a bubble, while 53%t of the respondents believe that the Melbourne property market is in the same position. Seventy per cent of the survey respondents do not believe that the Brisbane residential market was in a bubble.</li>
<li>The majority of the respondents also believe residential property prices will continue to rise for 6 to 12 months. Fifty – three per cent of respondents believe that Sydney residential property prices will continue to rise for either 6 or 12 months with 26% stating 18 months. Respondents are more certain in their predictions for Melbourne residential property with 76%seeing prices continuing to rise for 6 to 12 months.</li>
<li>In 2016, Sydney residential property is seen as reaching the top of the property cycle and moving past the top in 2017. In 2016 respondents see Melbourne residential property having passed the top of the cycle but remaining close to the top through to 2017. Brisbane residential property is seen to be just nearing the top of the cycle.</li>
<li>All respondents to the Property Directions Survey see low interest rates as either a significant or very significant driver of demand for residential property in Sydney, while 95% also point to foreign investment being significant or very significant.</li>
<li>Respondents list a number of other factors they also believe play a role in increasing demand in Sydney, such as population growth, low supply over the past decade and the trend towards smaller households.</li>
<li>The major drivers are considered to be similar for the Melbourne residential property market however 94% see foreign investment as a significant or very significant driver and 87% sight low interest rates as significant to very significant.</li>
<li>A large majority of respondents see low interest rates as the main driver of demand and prices for Brisbane and Perth residential property; however this view is not as strong as it is for Sydney and Melbourne. The majority of survey respondents do not view foreign investment as a significant or very significant factor in driving demand in Brisbane or Perth, but believe negative gearing plays a bigger role.</li>
<li>Most respondents believe both interest rates and inflation will remain similar for next year, while moving higher in the next three years.</li>
<li>It’s a different story with foreign investment, with a small majority of respondents believing levels will remain similar for the next six months. Respondents are less certain over the next 12 months, but most see foreign investment at similar or higher levels. Respondents are even more uncertain about the outlook for 2018,</li>
<li>Some respondents listed current or emerging factors which they believe may have an impact on the Australian property market. Factors listed include a slowing Chinese economy, any increase in the unemployment rate and potential changes to foreign investment or immigration rules.</li>
</ul>
So the eastern seaboard is where we will see the majority of the new developments with NSW leading the way. This again will be investor led although it would be reasonable to suggest that with such a huge apartment platform the house prices will continue to rise with less single residential housing being built.
With that in mind it’s scary to think where prices will go for houses within a 15 kilometre radius of the Sydney CBD. Through the roof springs to mind.
As for that pesky property bubble – it won’t be doing any damage when the vast majority of suburbs across Sydney are posting record low stock levels. When markets are booming (or bubbling along) you see record stock levels which is the complete opposite to what we are seeing across Sydney at the present.
<h4>MOSMAN – 2088</h4>
• Number of houses on the market this time last year – 85
• Number of houses on the market last week – 55
• Number of houses on the market this week – 46
• Number of apartments on the market this time last year – 63
• Number of apartments on the market last week – 41
• Number of apartments on the market this week – 43
<h4>CREMORNE – 2090</h4>
• Number of houses on the market this time last year – 8
• Number of houses on the market last week – 7
• Number of houses on the market this week – 2
• Number of apartments on the market this time last year – 9
• Number of apartments on the market last week – 11
• Number of apartments on the market this week – 8
<h4>NEUTRAL BAY – 2089</h4>
• Number of houses on the market this time last year – 9
• Number of houses on the market last week – 3
• Number of houses on the market this week – 2
• Number of apartments on the market this time last year– 42
• Number of apartments on the market last week – 29
• Number of apartments on the market this week – 30
 
ROBERT SIMEON is a director of <a href="https://www.rwm.com.au/" target="_blank" title="RWM" rel="nofollow">Richardson Wrench Mosman and Neutral Bay</a> and has been selling residential real estate in Sydney since 1985.  He has also been writing real estate blog <a href="https://www.rwm.com.au/news/" target="_blank" title="Virtual Realty News" rel="nofollow">Virtual Realty News</a> since 2000. 
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Living with an avalanche of high density development: Robert Simeon

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The Australian property markets find themselves in an unprecedented quandary with record low cash rates that have driven investment property prices in Sydney and Melbourne to record levels. The problem as I see it is that it is highly unlikely that such dizzy heights can be maintained, so that said one can assume that prices should start plateauing. 
The problem with that scenario is that given the present market conditions this is highly unlikely as property investors are only interested in Sydney and Melbourne real estate.
The owner occupier property market is much slower with stock levels at all-time lows which can be attributed to the fact that businesses are no longer paying cash bonuses preferring to reward staff with shares. What this has done is take billions of dollars from the owner occupier property markets which explains in principle why the owner occupier markets are so slow.
Nobody can really explain why property investors are only interested in Melbourne and Sydney especially when Australia is experiencing an unprecedented population explosion. This becomes even more confusing when we hear that Australia’s east coast is the destination expected to feel the full brunt of this population explosion.
This year I have been in dialogue with Richardson &amp; Wrench Projects where I have attended some information seminars to learn more about this fascinating investor market. The problem with real estate agents is that our knowledge is always contained within a particular postcode, hence a reluctance to look outside our comfort zone which is the very same mindset as property investors.
So the first question I wanted to know was where are the next best areas to invest outside Sydney and Melbourne, that are more much affordable with strong capital growth, excellent rental returns and with strong depreciation allowances. My question was answered immediately with two areas – Newcastle and Brisbane – well, that makes sense as they are both on the east coast with strong population forecasts.
With that in mind it was off to Brisbane to have a look around and see just why Brisbane is considered the next area to chase property investor returns. The first thing you notice is their road infrastructure is superior to Sydney’s with nowhere near the traffic congestion. Just like what we are now seeing with NSW where government is now on a record infrastructure spend, although in NSW we keep adding a new lane to infrastructure that was only constructed ten years ago. The government has allocated a further 120 billion dollars for infrastructure over the next three decades.
A new international airport and the big star attraction is the new Las Vegas style $4.000 billion casino – in many instances the South Bank area (which is the area I liked the most) reminded me of what’s happening at Barangaroo on Sydney Harbor. Although at a fraction of the price.
One of the most interesting points that really resonated with me was that the Richardson &amp; Wrench Projects team told me that they actually reject 90 per cent of projects that fail their strict criteria – which was evidenced in their project investment reports which are about sixty pages of research data. Investors in Sydney and Melbourne usually get a one or two page report if they are lucky which always have the usual disclaimers.
So what happens to the ninety per cent of developments that were rejected was my next question? Well, they lure those unsuspecting property investors and stitch them up which explains why property investors stick to the areas that sit well within their comfort zones – even though they know they are paying top dollar.
Australians love investing in property which explains why so much is written about bubbles, crashes and fear factor frenzies. So if you are contemplating stepping out of your comfort zone and looking for an investment area to watch closely we would recommend Brisbane – it’s a very interesting exercise especially for those who insist that you only invest in Sydney and Melbourne. I am the first to admit that this week’s visit to Brisbane has completely changed my property investment train of thought.
It’s important to note that Australia is changing (so must our perceptions) with the latest Bureau of Statistics projections now have Melbourne as Australia’s biggest growing city. Melbourne is tracking to become the country’s biggest city in 2056 and has also overtaken Western Australia to now be Australia’s fastest growing state.
MOSMAN – 2088
• Number of houses on the market this time last year – 74
• Number of houses on the market last week – 46
• Number of houses on the market this week – 43
• Number of apartments on the market this time last year – 57
• Number of apartments on the market last week – 43
• Number of apartments on the market this week – 39
CREMORNE – 2090
Number of houses on the market this time last year – 11
• Number of houses on the market last week – 6
• Number of houses on the market this week – 4
• Number of apartments on the market this time last year –11
• Number of apartments on the market last week – 8
• Number of apartments on the market this week – 12
NEUTRAL BAY – 2089
* Number of houses on the market this time last year – 3
• Number of houses on the market last week – 2
•Number of houses on the market this week – 2
• Number of apartments on the market this time last year– 42
• Number of apartments on the market last week – 30
• Number of apartments on the market this week – 39
ROBERT SIMEON is a director of <a href="https://www.rwm.com.au/" target="_blank" title="RWM" rel="nofollow">Richardson Wrench Mosman and Neutral Bay</a> and has been selling residential real estate in Sydney since 1985.  He has also been writing real estate blog <a href="https://www.rwm.com.au/news/" target="_blank" title="Virtual Realty News" rel="nofollow">Virtual Realty News</a> since 2000.
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Searching for the next investor hot spots? Robert Simeon

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Another fascinating week with Australia experiencing a significant stock market correction followed by the National Reform Summit which in all probability won’t amount to anything given the responsibility rests with our politicians. When it comes to anything economic in Australia we see a typical allergy where they are too frightened to come into contact with these issues.
Since 2013, the internet population grew approximately 20% – from 2.4 billion to 3.2 billion people yet for some strange reason we still struggle to understand data, or is it that the data we should be seeing is withheld? Australia’s misunderstood property markets are a prime example – with Sydney well ahead of the country in terms of inaccuracy in reporting.
One of the main areas for concern to come from the National Reform Summit was productivity where many believe Australia has come to a grinding halt which is replicated with our present GDP growth rates. For some time now I have been carefully watching property growth rates which (wait for it) closely resemble our GDP results.
To further explain we closely looked at sales data from 2009 to 2014 for house and apartment sales in Seaforth, Mosman, Cremorne, Neutral Bay, Cammeray and Northbridge where the total number of households equates to 39,227.Source CoreLogic RP Data.
We need to bear in mind that when you closely examine individual suburb markets at five (5) per cent turnover per annum the market turnover is normal and slightly under-performing. When it gets to ten (10) % per annum turnover the market is considered strong and when the market hits fifteen (15) % turnover per annum that is a boom. The last time we witnessed the market hitting 15% was in 1988.
So we took the six year averages for sales and this is what we found.
<ul>
<li>Seaforth – Average number of sales from 2009 to 2014 per annum – 120 houses which equates to 5.1% of the total market on a per annum basis.</li>
<li>Seaforth – Average number of sales from 2009 to 2014 per annum – 16 apartments which equates to 4.7% of the total market on a per annum basis.</li>
<li>Mosman – Average number of sales from 2009 to 2014 per annum – 312 houses which equates to 5.3% of the total market on a per annum basis.</li>
<li>Mosman – Average number of sales from 2009 to 2014 per annum – 492 apartments which equates to 4.9% of the total market on a per annum basis.</li>
<li>Cremorne – Average number of sales from 2009 to 2014 per annum – 62 houses which equates to 4.6% of the total market on a per annum basis.</li>
<li>Cremorne – Average number of sales from 2009 to 2014 per annum – 278 apartments which equates to 5.0% of the total market on a per annum basis.</li>
<li>Neutral Bay – Average number of sales from 2009 to 2014 per annum – 55 houses which equates to 4.95% of the total market on a per annum basis.</li>
<li>Neutral Bay – Average number of sales from 2009 to 2014 per annum – 323 apartments which equates to 4.8% of the total market on a per annum basis.</li>
<li>Cammeray – Average number of sales from 2009 to 2014 per annum – 56 houses which equates to 5.6% of the total market on a per annum basis.</li>
<li>Cammeray – Average number of sales from 2009 to 2014 per annum – 147 apartments which equates to 5.5% of the total market on a per annum basis.</li>
<li>Northbridge – Average number of sales from 2009 to 2014 per annum – 88 houses which equates to 4.3% of the total market on a per annum basis.</li>
<li>Northbridge – Average number of sales from 2009 to 2014 per annum – 28 apartments which equates to 5.5% of the total market on a per annum basis.</li>
</ul>
When one takes into account that the cash rate at the beginning of 2009 was 3.25% and dropping to 2.50 at the end of 2014 we would have expected the number of properties to be rapidly increasing – which has not been the case. Moreover this reaffirms that business is not doing that well given households are not that interested in taking on more debt, which certainly resonated with a lot that was presented at the National Reform Summit. . The burning question is what is Canberra going to do about this?
<h5>Mosman Houses Sold – Total Number 5,890 Houses</h5>
2009 – 303 2010 – 325 2011 – 264 2012 – 276 2013 – 355 2014 – 350
<h5>Mosman Apartments Sold – Total Number 10,020 Apartments</h5>
2009 – 523 2010 – 453 2011 – 474 2012 – 443 2013 – 543 2014 – 514
<h5>Cremorne Houses Sold – Total Number 1,135 Houses</h5>
2009 – 71 2010 – 65 2011 – 56 2012 – 56 2013 – 66 2014 – 59
<h5>Cremorne Apartments Sold – Total Number 5,481 Apartments</h5>
2009 – 339 2010 – 302 2011 – 288 2012 – 218 2013 – 267 2014 – 255
<h5>Neutral Bay Houses Sold – Total Number 1,109 Houses</h5>
2009 – 61 2010 – 69 2011 – 51 2012 – 51 2013 – 61 2014 – 40
<h5>Neutral Bay Apartments Sold – Total Number 6,638 Apartments</h5>
2009 – 411 2010 – 362 2011 – 287 2012 – 283 2013 – 308 2014 – 286
<h5>Cammeray Houses Sold – Total Number 1,275 Houses</h5>
2009 – 58 2010 – 50 2011 – 50 2012 – 56 2013 – 64 2014 – 61
<h5>Cammeray Apartments Sold – Total Number 2,610 Apartments</h5>
2009 – 156 2010 – 194 2011 – 156 2012 – 107 2013 – 135 2014 – 137
<h5>Northbridge Houses Sold – Total Number 1,914 Houses</h5>
2009 – 88 2010 – 63 2011 – 68 2012 – 89 2013 – 102 2014 – 94
<h5>Northbridge Apartments Sold – Total Number 504 Apartments</h5>
2009 – 32 2010 – 33 2011 – 20 2012 – 23 2013 – 35 2014 – 27
<h5>Seaforth Houses Sold – Total Number 2,317 Houses</h5>
2009 – 113 2010 – 109 2011 – 113 2012 – 121 2013 – 138 2014 – 127
<h5>Seaforth Apartments Sold – Total Number 334 Apartments</h5>
2009 – 21 2010 – 11 2011 – 10 2012 – 14 2013 – 17 2014 – 26 Source – CoreLogic RP Data
<h5>MOSMAN – 2088</h5>
• Number of houses on the market this time last year – 69
• Number of houses on the market last week – 53
• Number of houses on the market this week – 65
• Number of apartments on the market this time last year – 51
• Number of apartments on the market last week – 41
• Number of apartments on the market this week – 42
<h5>CREMORNE – 2090</h5>
• Number of houses on the market this time last year – 7
• Number of houses on the market last week – 2
• Number of houses on the market this week – 4
• Number of apartments on the market this time last year – 15
• Number of apartments on the market last week – 15
• Number of apartments on the market this week – 18
<h5>NEUTRAL BAY – 2089</h5>
• Number of houses on the market this time last year – 5
• Number of houses on the market last week – 4
•Number of houses on the market this week – 2
• Number of apartments on the market this time last year– 36
• Number of apartments on the market last week – 25
• Number of apartments on the market this week – 30
 ROBERT SIMEON is a director of <a href="https://www.rwm.com.au/" target="_blank" title="RWM" rel="nofollow">Richardson Wrench Mosman and Neutral Bay</a> and has been selling residential real estate in Sydney since 1985.  He has also been writing real estate blog <a href="https://www.rwm.com.au/news/" target="_blank" title="Virtual Realty News" rel="nofollow">Virtual Realty News</a> since 2000. 
 
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Data doesn’t lie when you keep misreading it: Robert Simeon

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If one was looking for a single word that is missing from the ongoing property debate, look no further than 'perspective'.
Some are looking at the property market from a perspective that has lead them to a conclusion which is totally and completely wrong.
Investors have got it completely right given (in the case of Sydney) we are suffering from a chronic undersupply which explains why the vacancy rate in a 10 kilometre radius from the CBD has sat below 2% for the best part of a decade.
Never before have we seen a better time to convene an inquiry into the Australian real estate markets because nobody has an accurate perspective as to what is actually happening. Earlier this year I was one of the first to write that something was not right with the influx of overseas buyers.
This brought about an inquiry (that is still going) although it has exposed the Australian Foreign Investment Board (FIRB) to be in total disarray.
Last week, Federal MP Kelly O'Dwyer told ABC Lateline:
"What we've found out though, through the evidence that our committee has received, is that these rules have simply not been enforced through prosecution since 2006 by the FIRB. I think there has been a failure of leadership of the FIRB on this. I think they have dropped the ball. I think if we have rules in place, those rules need to be properly enforced. That is the only way we can give confidence to the Australian people that our foreign investment framework's working as it should. So we would be looking to tighten up exactly what occurs in terms of enforcement penalties that can be applied, but also to make sure that FIRB is doing its job."
Well it's very clear that FIRB have not been doing their job, so in the meantime Ms O'Dwyer should be introducing a temporary ban on all overseas purchases until such time that the government can fully determine how big this matter is.
In my opinion there is no better person qualified to chair the inquiry than Bill Moss who is a former Macquarie Group banker and head of property. Speaking to The Weekend Australian, he said:
"This is the first (property) cycle we've seen where there's a deregulated global market,where capital is free to flow from Asia to Australia. We have a free floating dollar, equity makers are global and now our residential markets are going the same way."
The major concern in Australia is that nobody knows just how many properties have been acquired given nobody has a perspective as to the exact number.
Although, negative gearing presents a much bigger problem in the Australian property markets than overseas investors.
Another person who must be appointed to an inquiry is Saul Eslake, who this week called on Canberra to put an end to negative gearing for new investors as the best way to dampen frothy property markets in Sydney and Melbourne.
It should be noted that he referred to them as 'frothy' not a 'bubble'. He accepts that it is not politically feasible to abolish negative gearing because around 15%of voters are currently taking advantage of negative gearing – which explains why no politician should participate in the inquiry given they have vested interests.
Australian investors are smart and can sense a change to the property tax landscape in Australia, which I pointed out <a href="robert-simeon/36284-a-broken-system-investors-are-laughing-all-the-way" target="_blank">last week</a>.
It is important to note the recommended measures are nothing more than temporary until such time that the government can get a correct perspective on the Australian property markets.
Bill Moss went on to say in his interview that our housing markets were better tackled at a state or local government level, with the federal government or the Reserve Bank of Australia's (RBA) macro prudential tools such as restricting how much banks can lend to investors. "Rather than react to what's happening, what the government needs to do is understand what is going to happen."
The interview keeps getting better, when he commented that "governments should look how to make money from a real estate bubble."
In my opinion, overseas buyers should be paying a much higher Stamp Duty and a Vacancy Tax for all properties where the owners decide to landbank by locking them up. All these taxes should be flowing into new infrastructure strategies.
The problem is that governments have neither perspective nor understanding about real estate machinations. So they need to establish an inquiry to better understand what exactly is going on as against merely flying from the seats of their pants.
 
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The new 'P' in property is perspective

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If there were a term that I would love to see introduced into the Australian property vernacular it would be just the one word – “shifts”.
For some time now I have found it most frustrating the way commentators and (to a much lesser extent) politicians raise topics, such as housing affordability is a fine example, Headlines such as “Australia’s housing affordability improved in the first three months of 2016” mean very little and serve little purpose. The problem with the housing affordability debate is that it focuses on Sydney and Melbourne which are the two most sort after locations whilst there is no mention of the affordable areas.
Rather we should for example look at what’s actually driving our specific market demographics on a suburb by suburb basis. Only then can we actually get a proper idea of what is actually happening where, believe me, we are now seeing some healthy shifts and some alarming shifts.
For example, in many Sydney suburbs we are now seeing record low stock levels particularly with houses – so what caused these shifts? In the vast majority of cases it always comes back to government policies whether federal, state or local. The reason why we are seeing less houses on the markets is because property values have grown to such a level that the barrier is now stamp duty. For a house purchased at $3,000,000 it is $150,490 and a house purchased at $4,000,000 it is $220,490 so home owners are now going to Plan B – refinancing and renovating.
 
When I speak to property valuers in our area I’m told that their workloads are now split 50/50 between purchases and re-financing which is a shift that started 3 years ago. Three years ago in Mosman there would be around 125 houses on the market each week where today there is around 50, so homeowners are refinancing to renovate with a view to a longer hold.
In November 2013, the value of housing finance was 26 percent higher than the previous year. This shift has continued ever since which clearly identifies where homeowners are shifting their monies taking household debts to historic highs with historic low interest rates.
Mosman has 5,890 houses approximately with 55 on the market today. Cremorne has 7,135 houses approximately with 7 on the market today. Neutral Bay has 1,109 houses approximately with 8 on the market today. Cammeray has 1,275 houses approximately with 9 on the market today. Northbridge has 1,914 houses approximately with 10 on the market today and Seaforth has 2,317 houses approximately with 18 on the market today. This has been the pattern for the last three years and don’t expect this to change any time soon.
Now when we look at the shifts in the new apartment markets this is where it gets scary because the blame here is shared equally between the state and federal governments. When the state government starts introducing a strategy for massive high–density developments and the federal government changes the ratio restrictions from 50 per cent to 100 per cent for overseas buyers on off–the–plan purchases, as I said a few years ago – train wreck.
Recently we read that the major banks ceased foreign lending so I immediately thought something is happening here as banks never turn away new revenue streams. Now we read that Westpac and the ANZ have found approximately $1 billion in Chinese mortgage application fraud. No doubt a precursor to the Australian Taxation Office clampdown on non – resident purchases so the anxious buyers then shifted to federal government endorsed off–the–plan purchases. It’s anyone’s guess where this will end up, although you would be right in saying this is only going to get worse. More particularly this has the potential so see a major revaluation of existing apartment purchases significantly down. Little wonder the major lenders announced recently that they were not approving any more loans in many Sydney suburbs.
Now shift your attention to the upcoming federal election where the Liberal party is not going to touch negative gearing and the Labor party are going to only make negative gearing available to new properties. Can you see another potential shift in the markets if negative gearing only applies to the new developments where given what’s currently happening nobody will be buying anything until these markets sort themselves out?
Then I read an article recently where Harry Triguboff announced that recently sales to Chinese buyers had halved and that Chinese buyers over the past few years had accounted for 80 percent of new Sydney apartment sales. Yes – 80 percent! Why is this not an election issue?
Now to put this into further perspective household consumption is actually what’s presently driving the Australian economy. In the December quarter 2015 national accounts household consumption delivered 0.4 percent of the total 0.6 percent growth.
Now there are a few shifts that need much closer examination. First signs for the NSW government will be a dramatic collapse in stamp duty revenues which is happening big time. The once ever dependable existing house market is renovating or has renovated so no financial joy there either. Then there will be a dependence on the off–the–plan purchases actually completing, although that’s looking shaky too. With 93 percent of investors preferring to buy existing properties and now the ALP wants them to but new properties – well that won’t work. We now know that nearly all the off–the–plan sales have gone to Asian investors.
The ALP need to be corrected on this as this policy change to negative gearing is Mining Tax Mark II.
<h4>MOSMAN – 2088</h4>
Number of houses on the market this time last year – 57
Number of houses on the market last week – 51
Number of houses on the market this week – 55
Number of apartments on the market this time last year – 49
Number of apartments on the market last week – 53
Number of apartments on the market this week – 50
<h4>CREMORNE – 2090</h4>
Number of houses on the market this time last year – 4
Number of houses on the market last week – 8
Number of houses on the market this week – 7
Number of apartments on the market this time last year – 14
Number of apartments on the market last week – 24
Number of apartments on the market this week – 23
<h4>NEUTRAL BAY – 2089</h4>
Number of houses on the market this time last year – 3
Number of houses on the market last week – 11
Number of houses on the market this week – 8
Number of apartments on the market this time last year – 27
Number of apartments on the market last week – 25
Number of apartments on the market this week – 21
 
ROBERT SIMEON is a director of <a href="https://www.rwm.com.au/" target="_blank" title="RWM" rel="nofollow">Richardson Wrench Mosman and Neutral Bay</a> and has been selling residential real estate in Sydney since 1985.  He has also been writing real estate blog <a href="https://www.rwm.com.au/news/" target="_blank" title="Virtual Realty News" rel="nofollow">Virtual Realty News</a> since 2000.
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Beware of the Sydney property shifts

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When you start to see politicians debating tax changes you should be afraid – very afraid. We know with the negative gearing debate that neither party has completed any costings preferring to work from the economic theory of guesstimates.
This is a very dangerous path as Australia does not have a Housing Minister and any changes are fraught with danger.
Just this week, the Australian Bureau of Statistics (ABS) revealed that for the first time rental, hiring and real estate service companies made $14 billion before tax in the second half of 2015 while mining companies made $9.8 billion. This is not the time to start meddling with property taxes as an excuse for economic reform policy.
I have no doubt that any changes to negative gearing will distort the market, and should there be an “investor run” prices will inevitably fall.
Australia is currently recording wage growth at a record low of 2.2 per cent a year. This is the lowest annual growth since the ABS started recording annual growth back in 1998. On top of that statistic in the September quarter, the ratio of household debt to income hit a new high of 184.6 per cent which translates to households’ debt now being at 1.85 times their total income.
This record growth in debt is a by-product from record low interest rates. But before we hit the panic button we need to investigate further and try and identify what is causing this.
On many occasions I have said “if there was a gold medal for real estate portfolios Australia would win hands down.” I see no use comparing Australia’s debt ratios with other countries when the Australian model has no tax payable on the principal place of residence and the overseas models do have tax payable on the principal place of residence. Australians work their principal place of residence as their main superannuation platform, which works very well when you have the cash rate at record lows.
If you were a betting person you would definitely be betting that the next cash rate movement will be down. Of course these high debt ratios will be challenged when the Reserve Bank of Australia (RBA) starts increasing the cash rate, but nobody really knows when that will be or in what decade even.
Prior to the Global Financial Crisis the average cash rate over a 25 year term came in at around 7.25 per cent, where based on what we are seeing today mortgage holders are going hard at 2.00 per cent.
Another statistic that is flying well off the radar are reverse mortgages which very few people discuss within the Australian property debate. In its annual Reverse Mortgage Report, Delloitte estimates more than $500 billion of home equity is held by Australians aged over 65, with the total reverse mortgage loan book worth $3.66bn as at the end of 2014.
This figure is naturally added to the Australian household debt figure so this would go part of the way to explaining why we are starting to see record debt levels. Back at the end of 2014 there were almost 40,000 reverse mortgages on issue in Australia with the average size being $92,000, up from $86,000 in 2013. It would then be reasonable to suggest that the number of reverse mortgages would have increased in 2015 as too the average mortgages – this is clearly a growth market.
To put this into further perspective the reverse mortgage market loan book was $3.66bn in 2014 and the Commonwealth Bank home loan portfolio currently sits around $393 billion. With many retirees opting for reverse mortgages this is another reason why we are seeing fewer properties on the market. Although this would change significantly once the cash rate starts increasing or a federal Government starts tampering with negative gearing in an adverse way.
What it does tell us is that Australia needs property investors as they play an integral part in Australian property machinations. If you want to have a rational debate about housing affordability in Australia firstly examine the delays by respective governments who forever and a day burden and choke the supply side of the property industry. It’s obvious to most that they fail to understand the Supply V demand equation.
Furthermore the Labor negative gearing proposal states that this will only apply to new properties. Well somebody should advise them that in December 2008 they lifted the number of properties that can be sold from new developments by foreign buyers from 50 per cent to 100 per cent. Property developers are selling all their new developments directly overseas as that way they can achieve higher prices so the local markets are blocked from buying these developments.
Nor is there any requirement nor legislation stipulating that foreign buyers must rent the property out to the local market – we do know that currently in Australia there are thousands of properties that have been land banked. Politicians are hopeless when it comes to the Australian property market.
The last thing the Australian economy needs is a domino effect with property prices because they are not pretty and should be avoided at all costs. If you want to bring property prices down do it organically by increasing supply which just so happens to be the greatest failure of local, state and federal Governments in the modern economy.
<h4>MOSMAN – 2088</h4>
• Number of houses on the market this time last year – 83
• Number of houses on the market last week – 64
• Number of houses on the market this week – 63
• Number of apartments on the market this time last year – 53
• Number of apartments on the market last week – 52 • Number of apartments on the market this week – 53
<h4>CREMORNE – 2090</h4>
• Number of houses on the market this time last year – 10
• Number of houses on the market last week – 18
• Number of houses on the market this week – 11
• Number of apartments on the market this time last year – 23
• Number of apartments on the market last week – 23
• Number of apartments on the market this week – 25
<h4>NEUTRAL BAY – 2089</h4>
• Number of houses on the market this time last year – 4
• Number of houses on the market last week – 8
•Number of houses on the market this week – 10
• Number of apartments on the market this time last year– 36
• Number of apartments on the market last week – 26
*Number of apartments on the market this week – 25
 ROBERT SIMEON is a director of <a href="https://www.rwm.com.au/" target="_blank" title="RWM" rel="nofollow">Richardson Wrench Mosman and Neutral Bay</a> and has been selling residential real estate in Sydney since 1985.  He has also been writing real estate blog <a href="https://www.rwm.com.au/news/" target="_blank" title="Virtual Realty News" rel="nofollow">Virtual Realty News</a> since 2000. 
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It’s time for the Australian property debate: Robert Simeon

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Once again we see a fast backtrack by many commentators who predicted a strong easing of real estate prices for the March quarter of 2016.
Then again there are those (like myself) who predicted an about-turn in property prices which is precisely what has happened. For the last four years the December quarter has been the worst performing quarter which can be simply put down to human fatigue.
For those who read the property markets wrong they then seamlessly move to Plan B – the debt debate and yes, Australia’s housing market does have a $1.45 trillion debt blister.
This debate is then marinated with housing affordability, which I must admit has everyone confused given the apparent lack of care or interest. Sydney and Melbourne, and Brisbane to a lesser extent, are flooding the markets with new developments, although in the majority of instances these properties are sold direct to non – resident Australians, so how does that work?
Take Sydney for instance – in the 1980’s the average house price ratio to median yearly household income was 3.0. In 2005 this ratio increased in Sydney to 8.5 and in 2015 it climbed to a staggering 12.2. I can’t see this breaking the back of house prices but I do see plenty of trouble ahead for the Sydney apartment market which has approximately another 22,000 new apartments in the investment pipeline over the next 24 months.
This is the market that requires closer examination and should not be confused with the family house market as the two are distinctly opposite.
We also need to look under the bonnet of the Australian economy to see what is driving it more particularly GDP. Sydney is way ahead of the pack with a 23.3 percent share overall Sydney has outperformed the rest of Australia for the last three years. Next in GDP is Melbourne with 17.7 percent, then Brisbane at 9.6 percent, Perth at 9.5 percent and then Adelaide at 4.6 percent.
If you look at the Green Square development (currently under construction) located between Alexandria and Moore Park in South Sydney – this development will deliver 27,276 apartments so they would be hoping that 60 percent are going to owner occupiers, as if! It is more like 80 per cent to property investors this will send rents in that area spiraling down as there will be a market flood when they all hit the market seeking tenants.
Investor beware! Australia is currently locked in to its biggest apartment development boom ever seen and the big problem is that these developments are congested into the same post codes and are not spread, so a cold can quickly turn to pneumonia.
What scares me the most is that we can trace this boom starting back in December 2008 when the ratio of foreign buyers was moved from 50 percent of new developments to 100 per cent. This ignited property developers and respective state and territory governments to move over night without any analysis to high density.
Again without analysis these developments have been contained into developing areas – so what if the foreign buyers decide not to proceed as the vast majority of these developments are yet to be completed?
It will be property investor mayhem because it’s one big Ponzi scheme totally reliant on the good faith of foreign investors completing on their transactions. Melbourne has another 123,622 apartments in the pipeline and Sydney has 88,013 and there are plenty more on the way awaiting approval. In the case of New South Wales, Victoria and Queensland the state governments are only focused on millions and millions of dollars in stamp duty and land tax.
Sorry to tell you but nobody has a contingency plan should these new developments start to collapse, because if they do the prices will drop 30 per cent minimum overnight.
So whilst housing affordability is directly a responsibility of government I, like many, are not feeling comfortable at how they plan to make it more affordable. With Sydney and Melbourne building the lion’s share of apartments we should also note they are contributing 41 per cent of the Australia’s GDP.
This is precisely the conversation our elected politicians need to be having and this should have started years ago. We may be building an apartment revolution but just like the share market we could be looking at the biggest ‘shorting’ in the property market we have ever seen before too.
Very, very happy to be wrong on this.
<h5>MOSMAN – 2088</h5>
• Number of houses on the market this time last year – 72
• Number of houses on the market last week – 54
• Number of houses on the market this week – 48
• Number of apartments on the market this time last year – 61
• Number of apartments on the market last week – 42
• Number of apartments on the market this week – 45
<h5>CREMORNE – 2090</h5>
• Number of houses on the market this time last year – 6
• Number of houses on the market last week – 4
• Number of houses on the market this week – 6
• Number of apartments on the market this time last year – 17
• Number of apartments on the market last week – 28
• Number of apartments on the market this week – 28
<h5>NEUTRAL BAY – 2089</h5>
• Number of houses on the market this time last year – 15
• Number of houses on the market last week – 7
•Number of houses on the market this week – 6
• Number of apartments on the market this time last year– 36
• Number of apartments on the market last week – 26
*Number of apartments on the market this week – 25
 
ROBERT SIMEON is a director of <a href="https://www.rwm.com.au/" target="_blank" title="RWM" rel="nofollow">Richardson Wrench Mosman and Neutral Bay</a> and has been selling residential real estate in Sydney since 1985.  He has also been writing real estate blog <a href="https://www.rwm.com.au/news/" target="_blank" title="Virtual Realty News" rel="nofollow">Virtual Realty News</a> since 2000. 
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Are we about to see our property investors short the market? Robert Simeon

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It never ceases to amaze me just how little some “property experts” actually know about real estate machinations to the point they constantly make fools of themselves with dumb commentaries.
For example, one commentator earlier this week declared on Twitter “Auction clearance rates crumbling Melbourne 66.3% 2yr low Sydney another crash just 57.5% 3yr low” – well, that may be true as west of Sydney is performing badly. I then reminded him that I thought he is the worst property commentator in Australia. Last week, Sydney’s lower north shore recorded a bullish 80.4 % clearance rate up from 76.6 % the previous week – of course this was not mentioned.
It is also worth mentioning just like clockwork as soon as we hit the Melbourne Cup each year the market starts easing off which is exactly what we are presently witnessing – buyers are tired. Having said that, we will see property sales recorded right up to Christmas and what we are presently witnessing is no different to last year, the year before that and so on.
The common denominator is that we are seeing fewer properties on the market. In 2013 Mosman had 100 or more houses on the market in a given week on 33 occasions, in 2014 Mosman could only break the 100 mark on just 11 occasions. In 2015 it never made it to 100 with the highest being on March 12 with 84 and the lowest on July 2 with 42.
There are points that we need to make about many Sydney markets. Firstly, with Chinese buyers we have only just seen the “tip of the iceberg” where we expect in 2016 and beyond that they will be the main driving force behind Sydney property prices. We can also expect that the Foreign Investment Review Board (FIRB) and Australian Taxation Office (ATO) will be pushed to the limit with overseas buying applications.
Six weeks ago I suggested that we were hearing that many investors both local and overseas were getting very nervous and now we hear that one in three off – the – plan buyers are in trouble. This is a major problem for Sydney’s newly created “investor market” as if these properties were to flood the markets prices would capitulate.
It will be most interesting going into 2016 to watch what strategy developers, and more particularly the banks funding these developments, decide to adopt. Will this see the Australian Prudential Regulation Authority (APRA) forced into relaxing the newly introduced LVR’s? The off – the – plan feeding frenzy saw entire developments sold in a minimum of hours. Well I predict it will take months and months to see these properties find new owners. Will the developers offload apartments to parties that are already owners at discounted prices? That would be a sensible option to avoiding adverse publicity.
How many properties will the ATO force back onto the market in the form of Divestment Orders for parties that acquired real estate illegally? If this is as big as some believe (myself included) the Sydney property markets could not sustain these two forces combined – Divestment Orders and Off – The – Plan purchases.
We do need to be clear here in that the newly created “investors’ market” should not be confused with the homeowner markets – although some areas that contain these newly created high density developments will naturally affect the homeowner markets.
The absolute no-brainer here is when the Rudd government moved the ratio for overseas buyers buying off – the – plan from 50 % to 100 % in December 2008. This needs to be reduced back to 50 % as a matter of urgency.
Strange isn’t it how some want to bellow about clearance rates and others want to look at our property market machinations in greater detail. I know what I find the more interesting to discuss.
Historically when property markets start correcting then fewer properties go to public auction. Makes one ponder what some commentators would then be left to bellow about?
<h5>MOSMAN – 2088</h5>
• Number of houses on the market this time last year – 114
• Number of houses on the market last week – 74
• Number of houses on the market this week – 65
• Number of apartments on the market this time last year – 76
• Number of apartments on the market last week – 71
• Number of apartments on the market this week – 60
<h5>CREMORNE – 2090</h5>
• Number of houses on the market this time last year – 14
• Number of houses on the market last week – 13
• Number of houses on the market this week – 15
• Number of apartments on the market this time last year – 31
• Number of apartments on the market last week – 16
• Number of apartments on the market this week – 18
<h5>NEUTRAL BAY – 2089</h5>
• Number of houses on the market this time last year – 10
• Number of houses on the market last week – 8
•Number of houses on the market this week – 8
• Number of apartments on the market this time last year– 42
• Number of apartments on the market last week – 36
*Number of apartments on the market this week – 33
 
 ROBERT SIMEON is a director of <a href="https://www.rwm.com.au/" target="_blank" title="RWM" rel="nofollow">Richardson Wrench Mosman and Neutral Bay</a> and has been selling residential real estate in Sydney since 1985.  He has also been writing real estate blog <a href="https://www.rwm.com.au/news/" target="_blank" title="Virtual Realty News" rel="nofollow">Virtual Realty News</a> since 2000. 
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Robert Simeon

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