Please find below the latest email reports from the Ray White real estate agent with a particularly pessimistic outlook on the housing market (previous reports are available here, here and here).
As always, these reports make interesting reading – both for their summary of domestic and global property-related news flow as well as their unique insight into how the real estate industry has shifted to talking-down the market in order to reduce sellers’ price expectations and increase sales.
The first report, which is especially pessimistic, is from 13 October 2011:
As always, macro conditions have a significant effect on buyer sentiment and must be taken into consideration in tandem with local area conditions. As was widely expected, the Reserve Bank (RBA) decided to once again leave the official cash rate on hold last week at its monthly board meeting. After the announcement, the Australian dollar sank to a one year low of under 95 US cents.
In a Herald Sun article, head of Australian Retailer’s Association Russell Zimmerman said the lack of an October rate cut was a blow for the retail sector given how bad the year has been. A Sydney Morning Herald article reported that a rate cut is now almost certain to come on Melbourne Cup day. A separate Herald article said economists are still divided with the most bullish, Westpac, still predicting rates will fall by 1% over the next twelve months. At the other end of the spectrum, stockbroker ICAP is predicting rates to rise by 1% over the same time frame.
Regardless, a Herald Sun article later in the week said the savings from any rate cut will be wiped out by soaring petrol prices, with unleaded fuel now costing 30 cents a litre more than it was this time last year. The price is expected to continue rising in the lead up to Christmas.
Overseas, Greece may be bankrupt within weeks, with news.com.au reporting the Greek Government has conceded it cannot meet the deficit targets agreed as part of the recent bailout agreement. According to the article, a Greek debt default will ruin the balance sheets of many European banks, leading to more financial chaos. Stock markets around the world reacted harshly to the news, suffering further heavy falls.
Locally, the latest RP Data/Rismark House Price Index shows Australian home prices continued to fall in August in all capital cities apart from Darwin, which posted a gain of .2% and Sydney, where prices remained flat. RP Data’s latest finalised auction data showed clearance rates in Sydney and Melbourne have fallen to just 44% and 47% respectively, while Brisbane and Adelaide cleared at 25% and 56%. Volumes in other capital cities were too low to yield meaningful averages.
In the face of almost unprecedented uncertainty and an unclear future, all activity around your property should be carefully considered this week.
The second article, which at least contains some positive news-flow, is from 20 October 2011:
Global events form part of the macro conditions which must be considered in conjunction with the local market environment, in light of the potential impact on buyer behaviour and sentiment. Ongoing speculation over the European debt crisis is creating a high level of uncertainty at all levels.
In an AAP article early last week, Bank of England Governor Sir Mervyn King said the world is facing its worst financial crisis since the 1930’s, if not ever. The Bank’s Monetary Policy Committee announced it would electronically create 75 billion pounds of new money in a desperate attempt to stave off a new credit crisis and a UK recession.
Despite King’s comments, the Australian dollar rallied late in the week against the US dollar, rising more than five percent over the week to hit US$1.02. A Bloomberg article said the rise has little to do with the strength of the Australian economy and more to do with a rekindled investor confidence in the outlook for the global economy.
Unemployment figures released on Thursday showed better than expected results, with the jobless rate falling from 5.3% to 5.2%. A news.com.au article said the surprise fall means an interest rate drop in November is now unlikely. Nomura chief economist Stephen Roberts said he doesn’t expect any change in the official cash rate until the first part of 2012. Conversely, a Herald Sun article reported ANZ and Westpac continue to predict that a weakening domestic economy and more global shocks will force the Reserve Bank to cut interest rates before Christmas.
Meanwhile, the number of housing loans approved in August increased for the fifth month in a row. JP Morgan economist Ben Jarman told AAP the figures show the housing sector is stabilising rather than rebounding. Jarman said he doesn’t expect any change in interest rates until mid-2012 unless Europe collapses and the world experiences another GFC.
According to the latest finalised auction data from researcher RP Data, clearance rates in Melbourne and Sydney remained subdued but stable at 49.9% and 47.5% respectively. Adelaide’s clearance dropped significantly to 27% while Brisbane remained level at 26%. Volumes in other capital cities were too low to yield meaningful averages.
With the very real possibility of worsening conditions going forward, we encourage you to carefully review all activity around your property this week.
It will be interesting to see whether the Melbourne Housing Valuation Report receives a mention next time.
