Sales Market Review
Monday, November 03, 2008
We are currently in the midst of complete economic uncertainty which is not only plaguing the stock market but is genuinely affecting the property market. If you’re in any doubt, our graph confirms turnover has seriously declined by as much as 70% this year. In our reported period there were 25 transactions during the traditionally busy Spring sale season compared to 79 transactions in the same period last year.
The Federal Government delivered its economic stimulus package during October in an effort to stop the ‘economic’ fear, encourage spending and create jobs. Time will tell how effective this package will be in reducing the impact of the global financial meltdown. In the property sector, the Government's package will increase the First Home Owners Grant from $7,000 to $14,000 for existing properties and to $21,000 for newly constructed homes. This news, on the back of declining interest rates, is certainly a positive shot in the arm for those looking to secure their first home.
Locally we are seeing some very interesting developments. Quality homes under $1m are moving very quickly and offers of or above an asking price are not uncommon. The market becomes slightly patchy above $1m as buyers start to extend themselves a little further and become more critical of potential flaws in a property. If a property is reasonably priced sellers can still expect to achieve a positive result within four weeks of marketing, but the price must reflect current market conditions. Once we move above $2m the pool of ready to act buyers has been significantly reduced as banks tighten lending and many people are less willing to commit to a larger level of debt.
Many people are uncertain of where to turn in this market. We have a number of clients who are selling investment properties to invest in what they see as an extremely cheap share market with potential gains that will outstrip property. Others take the view that with falling interest rates blue chip property is the best secure long term option. Whatever the case, there are plenty of people sitting on the sidelines monitoring the climate and seemingly waiting for a sign of long term improvement.
Local property transactions during our reported period indicate 19 properties were scheduled to be auctioned with only five selling under the hammer. Our office conducted the only successful auction in Balmain during the period. There is no doubt property affordability has crystallised for many and the days of banks providing foolish loans and buyers' preparedness to borrow big are over. The good news is that our market is adjusting quickly and transactions are improving accordingly.
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