Hope clings, as property swings

ROD WISE

“I BELIEVE we’re in a buyer’s market at present, due mainly to the impact on property of mortgage stress, and that’s the result of very high petrol prices and the last two interest rate rises.”

That opinion was voiced by Mr Sean O’Connor, the principal of O’Connor First National Real Estate in Wollongong, who was commenting on the release this week of the First National franchise group’s annual publication, The 2008 Property Outlook.

A measure of how volatile and patchy the real estate market now is can be gauged by the fact that First National’s Property Outlook, signed off at March 31, is already starting to look dated and tired.

Referring to the Illawarra region, Property Outlook had said: “The residential market will remain tight in Wollongong as a result of employment levels and scarcity of land, helping house prices continue the recovery begun in 2007.”

However, anecdotal evidence plus the reality of falling auction clearances, reveal that that statement is at the very least, optimistic.

Mr O’Connor said that “we still take the view that in the last quarter you can see the softness in the market that always follows a change of government, although it’s not as soft as those who were panicked by the US sub-prime collapse thought it would be”.

“Nevertheless, with the impact of two interest rate rises denting confidence, this has been the toughest year to predict,” he added, by way of sympathising with the First National parent body’s difficulty in putting out, in such a fragmentary market, a comprehensive national outlook that retains its relevance.

Mr O’Connor said that after 25 years in the real estate business, including working through three property booms, he still more or less believes in the seven-year cycle.

“As the last boom ended in the December quarter 2003, six years ago, I think that the indicators suggest we are nearing the end of the current round of interest rate rises – they really do flatten the market – and that the market could level out by the end of this year and perhaps start turning around next year.”

Ms Aleisha Peers, the principal of Shellharbour First National confirmed the patchiness of the present market at the southern end of the Greater Wollongong metropolitan area.

“Properties close to the beach at Barrack Point and Shellharbour Village have hardly slipped at all from boom-level prices,” she said, “whereas in the mortgage belt, such as at Shell Cove and Flinders, the price falls have been almost 20 per cent down on what they were a few years ago.

“In Albion Park, the decline in prices has been even worse.”

While prices in the mortgage belt have been hit hard, both Mr O’Connor and Ms Peers report that in the Illawarra there have been few signs of the distress than has torn apart western Sydney, outer Melbourne and the Gold Coast.

“In our area,” Ms Peers said, “we have had only two mortgagee sales in the past 12 months.”

Whether this remains so, depends almost entirely on whether the Reserve Bank has run its race with interest rates, and on this, Mr O’Connor retains some modest hope.