It must be the ending of summer – a chill wind has been blowing and it has taken some of the heat from the property market. Of late, the media has been full of the impending falling value of real estate in general and the shift from a vendors market to a buyers market. An amount of the comment is valid, there are certainly more properties for buyers to inspect and choose from, it is probably true that for a while property price increases will be on hold but there is no reason to believe that a significant decline in property values will take place.
Currently, we are experiencing a decline in buying enquiry from our Asian clients simply because so many good alternatives are available in the Chinese domestic market. It is also evident that the uncertainty about the proposed alterations to the taxation regime has slowed investor buyers, the expectations that mortgage interest rates are about to rise has caused the first home and discretionary buyers to take a breath and all buyers as a matter of course are taking more time and are generally more cautious.
Have a look at the table below and note fewer sales, less money and longer time taken to affect the sales.
Month No. of Sales Median Sale Price Median Days sell
September 2009 237 $553,000 27
October 2009 177 $569,000 28
November 2009 202 $573,250 26
December 2009 147 $574,350 33
January 2010 138 $570,000 34
February 2010 147 $550,000 43
The median price is $ 20,000 less than in January. This movement reflects that there were 7 less sales in the $1-2million range in Feb and further that in Feb, 75% of the sales that took place were in the $4-700,000 price range. Fewer expensive properties sold, more of the cheaper – if you can call those cheap – homes sold. Days to sell at 43 is longer , (the 19 year average for February is 38) but nowhere near the 63 days of Jan 09 or the 58-62 days of Jun/Jul 08 .
Volume is the interesting figure. As mentioned previously, the 19 year monthly average sales volume is 230 sales a month, for the past 12 months from Feb the average has been 198 sales, a shortfall of 385 houses for the year – add that to the shortfall for the previous 12 months of 1104 and the demand that has been held in reserve can be seen to be significant. This demand will not evaporate or disappear and will sooner or later be consummated. There are a lot of people currently living in situations that are not of their choice.
Commentary has it that the values of homes will fall with the changes to the Tax regime but Why? The proposed changes are not radical or far reaching, more of a tweak. I believe that losses will be ring fenced and cease to be deductible from other income. I guess at an effect of $ 3000 per property, only drastic to the severely over-mortgaged investor. I believe we have few of those in Eastern Beaches; most of the investors I have dealt with locally are relatively conservative. Most will be able to absorb the short term impact until rents rise – the net effect to landlords over 3-4 years would probably be less than $10,000 and that is less than the cost of selling.
Fundamentally unless there is a real change to the supply / demand situation, or the financial tightening is so tight that buyers cannot buy, then values will essentially hold fast even if fewer sales take pace and they take longer to arrange, it’s certainly not the end of life as we know it. I see no reason to expect a deluge of homes for sale offered by sellers desperate to sell , driving the market down but equally those wishing to sell should be aware of their need to present well and to ask an appropriate price for the property. The silver lining to the fiscal meltdown , if it is possible to see it that way , is a lack of developers , a lack of second tier/ mezzanine finance and a shortage of residential land . Supply will continue to lag behind demand for some years yet , further protecting values in our Eastern Beaches.
I am always happy pursue different points of view .