the good, the bad, and the ugly

Visitors to the Mount Kosciuszko national park should not be surprised if they see a sweaty, middle-aged man jog past them wearing a T-shirt bearing the words: "I was hopelessly wrong on home prices! Ask me how."

Earlier this year, university economist Steve Keen and Macquarie Bank interest rate strategist Rory Robertson went head-to-head over the future direction of property prices in Australia whomever lost the bet had to walk 200 kilometres from Canberra to Mount Kosciuszko wearing the offending garment.

Judging by the surprisingly positive house price figures being reported by RP Data, it looks like Keen who predicts house prices will fall by 40 per cent in the next decade should be getting in some jogging practice.
The latest housing price index published by RP Data and Rismark International shows Sydney house prices jumped 5.1 per cent in the first five months of 2009. Strong auction clearance rates and loan approvals suggest this upward trend will continue.

Keen, who famously sold his Surry Hills apartment in October to sidestep the expected collapse in prices, has been keeping a low profile since the RP Data figures were released but continues to rail against such "green shoot" predictions in his blog.

However, the head of research at RP Data, Tim Lawless, has no such reservations, saying the figures herald a big turnaround for the Sydney property market, with home values increasing by 3.5 per cent in the 12 months to May 2009, making it the country's third best-performing city after Melbourne and Darwin.

"These results are encouraging," he says. "It has taken just 15 months for values to recover from the February 2008 peak."

Agents of optimism
Such bullish sentiments have been music to the ears of Sydney's typically upbeat realtors, who have weathered months of bad economic news and predictions from doomsayers.

The chief executive of McGrath Estate Agents, John McGrath, believes the latest RP Data results confirm what he has been saying for some time: now is an excellent time for people to go back into the property market.

"Our clearance rates have generally been between 70 and 80 per cent each week and that's as close to a boom-time market as you can get," he says. "The market is far stronger at the bottom end than in the middle and top ends but the improving sharemarket should help the middle tier."

McGrath, a long-time believer in the resilience of the Sydney property market, says anyone serious about buying a house should act immediately:

"If you are buying for five years and you should be buying for a minimum of five years buy now."

His enthusiasm is shared by other leading industry figures, such as the chief executive of Raine & Horne, Angus Raine, who says there has been a noticeable increase in buyer interest since Easter, leading to a shortage of property, especially at the lower end of the market.

"You've got more people looking and less property on the market, so the values are only going to go one way," he says.

Raine says the positive first-quarter results for 2009 foreshadow a sustainable rebound in Sydney property. He predicts strong prices will lure more people back to the market.

"I don't think this is a blip. Things are only going to get better. People can only sit on their hands for so long."

Analysts cautiously upbeat
Even those who are usually more cautious about such things generally welcome the latest RP Data sales figures. The managing director of SQM Research, Louis Christopher, says the latest results are in line with housing finance approvals and auction clearance rates.

"Those figures suggest that the market is holding up a bit better than we all expected throughout the first and second sectors of the year," he says.

"We have to be careful of the RP Data Rismark series, which is a month-by-month series and subject to revision." However, Christopher is reluctant to interpret this set of figures as the end of our housing woes, or a green light for people to return to the property market.

"We're not out of the woods. I don't think we'll ever be able to say we're entirely out of the woods until we see some more confidence returning to the overall economy."

The research and valuations consultant for Australian Property Monitors, Matthew Bell, says that while he is suspicious of month-by-month sales figures, the market's general trend is positive and not just in the lower price range.

"I think people overestimate the incentive of the first home-owner boost," he says. "The other important factors are very low interest rates and unemployment, which is still at acceptable levels.

"Sydney property prices are still well below the peaks they hit in 2003 and 2004. There's still a lot of value in the capital cities."


His enthusiasm is shared by other leading industry figures, such as the chief executive of Raine & Horne, Angus Raine, who says there has been a noticeable increase in buyer interest since Easter, leading to a shortage of property, especially at the lower end of the market.

"You've got more people looking and less property on the market, so the values are only going to go one way," he says.

Raine says the positive first-quarter results for 2009 foreshadow a sustainable rebound in Sydney property. He predicts strong prices will lure more people back to the market.

"I don't think this is a blip. Things are only going to get better. People can only sit on their hands for so long."

Analysts cautiously upbeat
Even those who are usually more cautious about such things generally welcome the latest RP Data sales figures. The managing director of SQM Research, Louis Christopher, says the latest results are in line with housing finance approvals and auction clearance rates.

"Those figures suggest that the market is holding up a bit better than we all expected throughout the first and second sectors of the year," he says.

"We have to be careful of the RP Data Rismark series, which is a month-by-month series and subject to revision." However, Christopher is reluctant to interpret this set of figures as the end of our housing woes, or a green light for people to return to the property market.

"We're not out of the woods. I don't think we'll ever be able to say we're entirely out of the woods until we see some more confidence returning to the overall economy."

The research and valuations consultant for Australian Property Monitors, Matthew Bell, says that while he is suspicious of month-by-month sales figures, the market's general trend is positive and not just in the lower price range.

"I think people overestimate the incentive of the first home-owner boost," he says. "The other important factors are very low interest rates and unemployment, which is still at acceptable levels.

"Sydney property prices are still well below the peaks they hit in 2003 and 2004. There's still a lot of value in the capital cities."

Shortage of stock
Many agents candidly admit the renewed demand for houses in May and June was a welcome relief after a quiet start to the year and they predict better things for the rest of 2009.

"We've been seeing the market in Quakers Hill creeping back [and] gaining momentum for a while now," says Ruma Mundi of Century 21 North-Western. "The latest report is one in a series that has been indicating positive movement, growth and attitudes."

Mundi, who has been selling property in the Quakers Hill district for the past seven years, says recent sales are being buoyed by the Government's first-home buyer grant, which is creating strong demand in the $500,000 to $600,000 price bracket, but is confident the bounce back is no aberration.

"We're seeing increased activity from both owner-occupiers and investors," she says. "I just don't see that things are going to curve downwards again simply because demand is outstripping supply."

Green shoots are also being reported in residential housing markets closer to the CBD. Poh Ling Ee of LJ Hooker Newtown says her biggest problem is having enough stock to satisfy the growing demand.

"I have a lot less stock this year than in 2008," she says. "I've been selling a lot more units than houses. People who want to upgrade to a bigger house somewhere in the inner west are finding it tough. There is very little on the market."

Ironically, this shortage of housing stock is driving up prices, especially at auction, making it even harder for buyers to find anything suitable: "It's like a catch-22," she says.

Ee blames the shortage of housing stock on negative media commentary and home owners being overly cautious about the wider economy.

"The prices are very good; our auctions are always busy," she says. "But people want to read what they want to read. The problem is that many people are negative or cautious."

The story is much the same across town on the Balmain peninsula, where Carol Leddon of Sarah Lorden Real Estate reports healthy demand and good prices but few new listings.

"Anything we do get seems to sell within two weeks," she says. "A lot of buyers aren't even prepared to wait for the auction."

Leddon says Balmain, with an affluent, stable population, is mostly insulated from the economic downturn and she is generally optimistic about the rest of 2009.

"I think we're moving along quite nicely at the moment," she says. "We've got an area that people like to stay in. People around here are probably a little more stable economically. There are very few forced sales. I don't know whether this is a mini boom or just a nice little bubble but, at the end of the day, property is what people want to be in, whether it goes up or down."

A record month
The director of Di Jones Real Estate in Woollahra, Susannah Anderson, is equally bullish about the Sydney property market but disputes the widespread belief that properties in the middle and high-end brackets are still not selling.

A recent open inspection for a house in Paddington priced around $1.3 million attracted 57 groups of potential buyers.

"June was the best month for the agency in the past 18 months," she says.

"May and April were also very good. We've been expecting things to get tougher and everyone is working tirelessly but we've just had a record month."

Anderson says her buyers are mostly locals, often people wanting to relocate from the north shore or country NSW, but there is plenty of demand from overseas buyers, too.

"There are people looking to buy for their children, tenants who have decided to buy a home, investors, people who have moved from the country to the city and overseas buyers," she says. "The one type of buyer I haven't seen and that's the developer who wants to come in, renovate and on-sell the property. [It's] everyone but developers."