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SQM Research Newsletter - Thursday 29th April 2014
Property Valuations
Research Reports
Discounted/Distressed Properties
Funds Research
Black Dragon's
Words for the Week


"The person who writes for fools is always sure of a large audience."
--Schopenhauer



 
Rude Real Estate Realities 

Apparently Sydney is about to get its own version of New York's high line with work commencing on the new pedestrian thoroughfare, linking Darling Harbour to Central Station. Do you think this will positively effect dwelling prices in the area? 

Disused rail corridor being converted into goods line pedestrian link that will transport Pyrmont and Ultimo

No Major Drop in Listings During April, Signalling Market Lull


The number of Australian residential property listings dipped very slightly during April, with national stock on market coming to a total of 348,222 – a monthly decrease of -1.2%. However, this is not the seasonal norm for this period, with the nation’s stock levels usually dropping more substantially during April.



The lack of a major drop in listings during April is due to the minor rises in Darwin, Melbourne and Perth, all which have recorded figures which buck the seasonal trend.
Even Sydney which has on average been recording yearly decreases in stock levels at approximately 17% in recent months, revealed a far more modest yearly fall of-13.5%.
 
Although these results are at this stage, not significant enough to interpret as a definite halt in what has so far been a booming market during 2014; they serve as an indicator of a potential lull. SQM Research will be closely following the figures released in the coming months to assess whether or not this will be an ongoing trend or simply a monthly anomaly.

Louis Christopher, managing director of SQM Research says, “Listings did fall during the month, however this was expected due to the multiple long weekends. The fact they did not fall much, and indeed rose in some cities, provides an indication that the market might be in a brief lull, overall. However as we have already said prior to today, each city is telling its own story. I for one am not convinced yet that the boom is over in Sydney. On the other hand, there appears to be ample evidence now that the mining downturn is affecting the Perth and Darwin housing markets.” 


 
Distressed Property of the Week
 
This week's distressed property comes from South Australia - a four bedroom home in the suburb of Balaklava. What makes this listing a "distressed sale" slightly differs from some of the others we have provided in recent weeks, the vendor is desperate to sell because they are going into retirement.

What originally was priced at $265,000- $275,000 when it was initially brought onto the market back in July 2010, is now being advertised as "äll offers considered" - a term that commonly attracts bargain hunters. 

A desperate sell due to retirement could potentially be a genuine opportunity to pick up a home at a good price because often these homes have been completely paid off for some time and thus the vendor does not need to fetch a certain dollar figure in order to avoid selling at a loss. Although this is not always the case, in this particular circumstance, seeming as the notion of the vendor retiring has been used as a selling point, it does appear as though this could be a factor at play here.

To get your hands on other distressed properties for sale - check our our Distressed Properties Report HERE.
 

Some Words From Our MD, Louis Christopher

 
Asking prices stagnant
 
Each and every Tuesday we update our weekly asking prices/vendor sentiment index for the previous week. Last week, capital city asking prices for houses fell by $800 to $727,900 while for units there was a slight rise of $100 to $471,500. 

However as you can see from the chart, capital city asking prices have been flat since the start of the year for houses, while units have risen just over 2%.

The key influences behind the recent movements in the capital city average results include falls in Melbourne, Canberra and Perth, with Sydney recording lower than expected rises. Lets quickly go through each of these cities.
 
Melbourne has now been recording falls in asking prices since the start of the year.
The falls have been modest to date, but falls they are. This is consistent with what has been lower auction clearance rates recorded for the start of the season. Real clearance rates in the late 60's is soft for Melbourne  and it is consistent with some ongoing high stock levelsFor now we will stick with our +3 to +6% capital growth forecast for 2014 but I am thinking it will now be a figure closer to 3% rather than 6%.
 
The drops in Canberra are looking very sizable now.
  Asking prices on houses are off 13% for the last three years - that’s a full blown downturn. Back in September within our National Housing Boom and Bust report we forecast a -1 to -4% decline for the year and I would say that forecast will be correct or slightly understating the falls that are being recorded to date.
 
The Perth housing market is looking weaker. Last week we spoke about the rapid decline in rents and since then stock on market for Perth recorded an unseasonal (albeit slight) rise in listings during April to 20,507 residential properties.On top of this, asking prices fell by 1.3% for the last 90 days for houses. Units fell by 0.8%. 
Our forecast of a 4-8% increase in dwelling prices on Perth is looking a little shaky at this point in time.
 
There have been some indicators of late to suggest the Sydney market is not running at the rate of knots seen in the last quarter of 2013 and 1st quarter of this year. Auction clearance rates after revisions are now in the low 70's. In the March quarter they were in the 80's for what was a record opening to the year.  Meanwhile asking prices for houses have paused since the highs of December.


But in this instance I am cautious of the data, as we know there have been record levels of auction listings and a record low number of properties listed with asking prices. As mentioned above, stock levels are still at very low levels.

So is the housing boom over in Sydney?

Not a chance.

Sure there is going to be periods where capital growth will oscillate in the overall recovery.  It takes a powerhouse economy to have 6%+ growth rates every quarter and we don’t have that. But to suggest that the boom is over because growth rates are less than 6% in a quarter is laughable. So far, each and every source I have on the ground in Sydney is telling me demand is still running hard. So we are sticking with our 15-20% call on Sydney.
 
Overall the market remains in recovery but it does not appear to be right now, a strong, surging recovery. I wonder if the somewhat benign conditions are related to what came out today on consumer confidence.

For those who did not read the news, consumer confidence
 fell sharply over the past month.

As the chart shows, the confidence that was in the community immediately post the election has completely vanished. Indeed it is now lower than prior to the election.  Surely now, the debt levy is on the scrap heap? I am a believer that it is important to get the budget back into the black over the medium term, and that takes some pain. But there are better ways of doing this than adding a new tax during a time when GDP growth and confidence are running below trend. But I suspect now the levy idea may well get scrapped. Negative gearing changes anyone?!
 
An Update On Under-quoting

Since our push for the publication of auction reserves some weeks back, there has been extended coverage of the Petition created by Sydney buyer’s agent, Patrick Bright. We welcome the additional media coverage which was given by Property Observer, then News Limited and finally Fairfax stepped in. But what was most surprising was last week was the President of the Real Estate Institute of NSW
 backing the notion of the publication of auction reserves. This is a significant step forward and I am now becoming a little more confident that real change can happen.

But that real change still requires you to sign the petition. Patrick and I have spoken and agreed that for all the media coverage this petition has now received, there should be more people signing. And yet we are still well short of the 1000 sign ups required.  If the community itself is apathetic to change, then change won’t happen.

To those of you that have signed, thank you very, very much. You are a clear supporter of transparency in the property market.
But for those of you who receive this free newsletter, look up SQM’s free property data and enjoy some free opinions on the market from us, and generally think property market transparency is a good idea, yet you still won’t sign – What's going on there?! Get onto it people! Transparency in the market is the main reason we decide to supply so much useful information for free!

The reality is that without enough support, we may well likely get no price guides at all which is a lose, lose for everyone. The Queensland Government has spoken and they have legislated just that – no price guides.  Sure, it stamps out underquoting but in the process, transparency is also taking a hit.

So whether you are an agent, investor, renter, journalist, editor, politician, economist, developer or property bear  – whoever you maybe, sign the petition.

Here is the link again - 


http://www.change.org/petitions/the-honourable-stuart-ayres-mp-nsw-government-make-it-compulsory-to-advertise-auction-reserve-prices-to-stamp-out-underquoting-and-dummy-bidding

Thanks for your support. 
 

Top Ten Most Discounted Properties Nationwide


What's this? Just when we thought we'd seen the last of Queensland properties for a little while, a couple homes from this state have snuck their way into the Top Ten this week! With the two Western Australian regulars going under contract/offer, our breakdown now consists of 3 points to Central Coast, 2 points to Queensland, Tasmania and South Australia and 1 point to Victoria. Nothing from either the ACT or NT, and not altogether surprisingly considering its current market - absolutely nothing from Sydney. 

Interesting to point out that the most expensive property on our list is from Pearl Beach on New South Wales' Central Coast - a region which actually isn't particularly known for its prestige property, making 4 Coral Crescent, Pearl Beach quite a unique listing with an original asking price of $4,250,000, now currently asking $3,000,000.

Judging purely by the home's online advertisement, it seems to be quite an impressive property in an absolute ocean front location, which potentially explains the price tag. However, spending well over a year on the market would take its toll on most vendors which is most likely why they lowered their asking price firstly in January 2013, again in February 2014, and once again in March 2014 - a total of 1.25 million dollars in discounts.

 
Rank Address Suburb Postcode First seen Initial price Now asking Reduction Days on Mkt     Link
1 747 White Kangaroo Road Campania 7026 27/03/2012 $1,600,000 $1,000,000 38% 760     link
2 32 Virginia Court Cranbourne 3977 23/06/2013 $390,000 $250,000 36% 307     link
3 22/138 Coachwood Road Matcham 2250 25/05/2013 $1,750,000 $1,150,000 34% 336     link
4 21 Cotton Court Strathalbyn 5255 06/08/2011 $498,000 $339,000 32% 994     link
5 1/23 Albuera Street Battery Point 7004 17/10/2011 $2,200,000 $1,500,000 32% 922     link
6 99 Green Point Drive Green Point 2251 25/09/2010 $1,150,000 $795,000 31% 1309     link
7 230a Lower Esplanade Aldinga Beach 5173 26/12/2011 $1,390,000 $970,000 30% 852     link
8 4 Coral Crescent Pearl Beach 2256 12/01/2013 $4,250,000 $3,000,000 29% 469     link
9 141 Fourth Av Marsden 4132 11/05/2013 $989,000 $699,000 29% 350     link
10 343 Woodlands Drive Thornlands 4164 23/06/2012 $1,200,000 $850,000 29% 672     link

Want to see where potential bargains could be hiding in your neighbourhood? SQM Research lists all the houses for sale in your chosen postcode that have spent over 60 days on the market, with all the information given above in one report - our Home Discounts Report. To find out more info and get a free sample, click HERE!
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