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Pre-Election Info & Real Estate Update

As we head into the final weeks of the election campaign and winter, real estate agents are madly trying to sell their auction listings prior to Election Day which is notoriously and traditionally a quiet day in real estate. This election also marks the beginning of the spring auction campaign but there is a marked drop in auctions scheduled. Ideally you select an auction date either side of the election weekend but this year it was particularly hard due to the political turmoil in Australia and the shifting dates, and some properties have been caught in the shifting dates. On the weekend prior to the election there are 13 auctions scheduled to go ahead in our area, whereas on Election Day there are only 7 currently up for auction. As is always the case the following week the auction numbers will pick up dramatically and this happens no matter if there is a change of government or if there is a status quo, for some reason buyers don’t feel the need so urgently to buy a house at auction on Election Day.

Most agents are looking forward to the election being over so we can list more properties because winter has been a period of very limited stock and lots of frustrated buyers combined with attractively low interest rate opportunities. We are hoping that Spring and an increase in political confidence and stability will trigger down to encourage vendors to sell. Most encouraging for vendors is that Winter 2013 has seen a dramatic rebound in prices across Sydney, in particular in the $700,000 – $1.3mil price range. Surely this will encourage vendors to sell!

Where to vote?

Polling places will be open for voting between 8am and 6pm on Saturday 7th September. The Cook electorate covers as far west as Bonnet Bay & Como, east of the train line at Sutherland, all suburbs north of the Hacking River (from Grays Point to Cronulla and all suburbs south of the Georges River & Botany Bay) as per the map below.

The polling booths below fall between Cronulla & Caringbah:

  • Uniting Church Hall – Cnr Burke Rd & Gosport St, Cronulla
  • Cronulla Public School – 18-24 Burraneer Bay Rd, Cronulla
  • St. Aloysius Primary School Cronulla – 18 Giddings Ave, Cronulla
  • Cronulla South Public School – 121 Ewos Pde, Cronulla
  • Cronulla High School – Captain Cook Drive, Cronulla
  • Woolooware Public School – Riverview Ave, Woolooware
  • Burraneer Bay Public School – 161 Burraneer Bay Rd, Burraneer
  • Lilli Pilli Public School – Turriell Bay Rd, Lilli Pilli
  • Caringbah Public School – Port Hacking Rd, Caringbah South
  • Laguna St Public School – 204 Caringbah Rd, Caringbah South
  • St. Philip’s Anglican Church Hall – 402 Port Hacking Rd, Caringbah
  • Caringbah High School – 85 Willarong Rd, Caringbah
  • Sutherland Hospital Clinic – Kingsway, Caringbah

Cook09-page-001

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Poliltics, weather and real estate

Last week I wrote a blog about how great it is to sell in winter right now, how there is no stock, the WEATHER has been relatively mild, the federal election not till September…

I think I jinxed myself. Today we have a new/old Prime Minister, they are talking about an election in August, not September and the weather has been, in the last week, nothing short of diabolical.

On a positive note, if you are a buyer and you have a serious interest in a property, looking at real estate in monsoonal rain is a smart move. But you also have to be practical, with the weather we have had in the last week, not many houses would come out the other end without a small leak, pool of water in the backyard. And ask yourself how your own home managed.

With regard to Australian politics and how they will affect the real estate industry in the next few months, it is really hard to say. The public seems to be completely over the shenanigans of our politicians so will we just go about our business, buying and selling real estate, until we have the chance to have our say, or will we sit tight and wait for August/September election day…

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Who sells their property in winter?

Smart people do!
Well at least this winter, if you do decide to sell, you would be considered a savvy vendor.

Winter weather has been relatively mild with few rain days, so most properties are still very presentable. Traditionally people wait till Spring, but I stress traditionally because now it’s not just the weather that affects the sale price.I would argue that supply and demand is one of the major influences on property prices. In recent months in the Sutherland Shire and across Sydney open house numbers have dramatically increased, days on the market have significantly reduced and prices are on the up, up, up!

If you are thinking of selling, I ask you this question, do you think you will get a better price in spring when you could be competing with lots of properties in a similar price range but the flowers are blooming in your yard? Or do you think you will get a better price in winter, when there are just a few similar houses on the market and an abundance of buyers clammering for the same home, your home?!

And just to throw a spanner in the works this spring, we have a federal election. Every time there is an election, the few weeks either side of that date, (for whatever reason) buyer activity drops off.

No year is ever the same with economic and political circumstances affecting the supply and demand of the real estate market, but this year, most agents are seeing a shortage of good properties to sell and very competitive bidding from buyers.

HSBC this week dropped their 2 year fixed rate to 4.59%! Who would have thought a fixed rate under 5% was possible even 12 months ago! It is now cheaper to have a mortgage than pay rent for a lot of people in a lot of suburbs in Sydney. This will only encourage more buyers into the market this winter.

So if you are considering making a move this year, I would encourage you to do it right now!

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Putting Commonwealth Debt in Perspective

The liberal election campaign is, to a large extent, based on the fact that the Rudd-Gillard Government is borrowing $100million every single day. In actual fact if you average out Labor’s budget shortfall over the 1000 or so days it has been in power, the figure is much higher. Currently however it is slowing down and it is forecast to drop away almost completely in 2012-2013.

In the mean time, Australian government debt should reach $150billion by June 2012, and the government will issue bonds to pay for this shortfall in revenue. These bonds will be eagerly sought by superfunds and the public, so the Commonwealth won’t have to pay more than 6% per annum in interest. At that level the Australian government interest bill should be no more than $25m per day, compared to Australian government expenditure of $1000m or $1billion per day (i.e. about 2.5cent in the dollar). This compares with 10p in the pound in the UK and 14c in the US dollar.

When considering the upcoming election, issues on Government debt need to be thrown out the window. Even after Rudd’s stimulus package last year, Government debt should peak at 12.5% of GDP provided total debt can be limited to $150billion.

Comparatively, Australia still has one of the lowest Government debts in the world. England, for instance, has a Government debt equivalent to 62.2% of their GDP (according to the UK Office for National Statistics). The United States is sitting on a national debt of 93% of their GDP (according to the CIA World Fact Book). If America decided they wanted to pull themselves out of debt tomorrow, it would cost each US citizen over US$30,000… every man, woman and child. For an interesting international debt comparison, check out Visual Economics.

It’s a bit embarrassing that debt management even features as a key policy this election. A more pressing issue is private debt, which is around 150% of GDP or 27 times greater than Government debt. The global financial crisis sorted out the private companies that should not have borrowed overseas (e.g. Babcock & Brown, Allco, ABC Learning, Rams home loans), as they all went bankrupt. The majority of companies that borrow overseas have offshore earnings to offset the risk they take on currency movements. So when this is factored in, even private debt levels are not overly concerning. Just as long as the debt is used to add to our income producing stock of capital and not wasted on casinos, or property in the wrong area, or on more coal power stations or other investments that are likely to become redundant with climate change.

On the revenue side Australia’s position is even better by international comparison. Our mineral exports are booming. For example, our iron ore costs around US$20 per tonne to dig up (or scrape off the mountain) and US$10 to ship to China. Spot prices are currently US$150 per tonne. Tax proceeds, even under the scaled down new mineral tax, should boom.

The important thing is that Australia uses this wealth wisely, because once their gone these minerals cannot be replaced. Hopefully, our politicians will invest this once in a century mineral bonus in schools, hospitals, roads and rail infrastructure for the future.

The major political parties sparring over the “national debt issue” is ridiculous. What we should be asking our future leaders is how they plan on spending the money from the minerals boom?

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My Money is on No Rate Rise Tomorrow

Inflation figures out last week were within the 2.5-3% annual range thought acceptable to the Reserve Bank of Australia (RBA) so that interest rates may not now rise tomorrow (3/8/10). Before the release of the June quarter inflation figures I tended to think we would be slugged again tomorrow.

Labour bottlenecks seem to be reappearing. On my recent trip up north,  I could see how the Queensland resources industry is boosting its economy.

On the other hand, the retail industry in NSW has fallen into a hole in the June quarter. The USA was starting to benefit from a weak dollar by lifting exports but the dollar has come back again because of the flight out of the euro (sovereign debt risks).

There are other ticking time bombs out there:

  1. massive and growing US public debt.
  2. sovereign debt risk (Greece, Spain, Iceland, Ireland)
  3. inflation and real estate bubbles in China

When these time bombs go off we will experience the double dip recession. It’s just a matter of time. Interest rates will then fall again.

In the meantime, a Federal election has been called. The real estate industry always goes into hibernation when elections are called. Pent up demand rises and consumers end up paying more when the floodgates open again. Till then rates should stay on hold. If the double dip recession kicks in because one of the above time bombs goes off, rates should start to fall again.  We are on the knife’s edge.

Land tax

One of my pet hates is land tax. Because Queensland does not charge it, that state is growing much faster than NSW. Fact. The NSW Treasury has become dependent on it.  So much so it has been known to adjust values twice in one year in order to be able to send out two assessments in one year. So when Centro bought Bankstown Square (valued at $357m) it structured the deal in such a way that it only paid $765! (SMH 27 july,2010). NSW Treasury missed out on up to $13m. Good for Centro! Not so good for ordinary taxpayers if Treasury is going to try and make up the loss by hitting us harder.

***UPDATE***

09/08/2010 – After further research, I have found that owners of free hold land in Queensland may have to pay land tax. Their threshold is much higher ($600,000) and the rate is much lower (maximum of 1% up to $1,000,000). If you need further information, check out www.osr.qld.gov.au

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