Analysts should start "Realcasting" instead of "forecasting"

Perhaps analysts should start "Realcasting" instead of "forecasting". I can't believe they are surprised about retail sales data, they just need to walk the strip, pop into Westfield (count the bags not the people), ring a few city leasing agents and they will get a better read on whats happening. 

Everyone keeps focusing on the problems and the problems persist, perhaps if we realised that we are actually in better shape than most, the wheels of commerce can turn again and we can change our reality...

The article begins here...

Australian dollar declines after retail sales data

Published 11:40 AM, 30 May 2012 Last update 1:09 PM, 30 May 2012

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QUICK SUMMARY | FULL STORY | AUSTRALIAN DOLLAR | CURRENCY

By a staff reporter, with AAP

The Australian dollar has fallen after data showed Australian retail sales fell in April, against expectations of a rise.

The Australian Bureau of Statistics data showed retail spending slipped 0.2 per cent to a seasonally adjusted $21.212 billion in the month.

At 1129 AEST, the currency was at 98.12 US cents just before the data's release, but it fell to 97.83 cents at 1131 AEST.

The currency finished Tuesday's local session at 98.75 US cents and struck a high of 98.55 US cents earlier today.

The forecast was for a total rise in sales of two per cent for the month.

It was also reported that construction work done rose 5.5 per cent in the March quarter, which was ahead of economists' forecasts.

The Australian dollar fell on Tuesday night after Egan-Jones cut Spain's sovereign debt rating and a Spanish official said the government would fund a massive bailout of Bankia, one of Spain's largest banks.

CMC markets foreign exchange dealer Tim Waterer said weaker than expected Australian retail sales figures, released on Wednesday morning added to the downward pressure on the local currency.

"The Australian dollar can't take a trick at the moment, the retail sales print brought down the currency," Mr Waterer said. "I guess the negative result was exacerbated by the fact that we had pretty poor global sentiment in the past 24 hours regarding Spain.

Mr Waterer said the result would add to the case for more interest rate cuts by the Reserve Bank of Australia (RBA) to help the non-mining sectors of the economy. "The negative retail sales result brought back into focus what is happening with the domestic economy," he said. "It brings back into question what the RBA is going to do with interest rates cuts over the next couple of months.

"It gives the RBA more room to move on the down side with the interest rate and would reduce the appeal of the Australian dollar."

Meanwhile, the Australian bond market was firmer at noon.

At 1200 AEST on Wednesday, the June 10-year bond futures contract was trading at 96.955 (implying a yield of 3.045 per cent), up from 96.920 (3.080 per cent) on Tuesday.

The June three-year bond futures contract was at 97.670 (2.330 per cent), up from 97.620 (2.380 per cent).

Australian BRW 200 Rich List 2012, some interesting facts!!!

Most people who report on where the property market is heading- including me, are not on the BRW Rich List for making their fortunes providing commentary or forecasting where property values will be, or whether it is overvalued, unaffordable or doomed to crash.

But people who know best and over extended periods of time (some decades) have amassed great wealth, obviously see and know something the number crunchers and doomsayers don't.  My guess is that part of what they know is how to create markets or extract something from them, by providing it what it needs as well as wants.  They clearly have to and do crunch the numbers but they also seem to understand the nature of human beings and the reality to - the need to have a roof over ones head, as well as meeting the desire to have places to commune, shop, dine, relax and so on.  They have a grasp on fundamentals that cant be excluded from the collective psyche...

This is reflected in the fact that roughly 55% of the 200 richest Australian's in 2012 - amongst the Global turmoil, have created and sustained their wealth via property.

The extract below is form an article in today's BRW;

PUBLISHED : 24 May 2012 00:01:00 | Andrew Heathcote

The rise in the number of Rich 200 members to make most of their money from property perhaps also points to volatility in equity markets. Although the property market has had its own problems, it remains a relatively safe way to mind money in a downturn.

TABLE: 2012 BRW RICH 200 LIST MEMBERS BY INDUSTRY

 

 

Worry has become an addiction

May 23, 2012

by Malcolm Maiden. Sydney Morning Herald

The Kohlberg Kravis Roberts co-founder and co-chief executive George Roberts visited Australia in June last year and remarked that Australians seemed terrified of a global crisis they had not actually experienced.

Nothing has changed. Boston Consulting's annual global sentiment survey revealed last week that people were gloomier than they were a year ago, and on some measures in worse psychological shape than consumers in countries where the global crisis had wreaked havoc.

The recent March half-profit results from NAB, Westpac and ANZ provided another insight: the three banks all announced tighter margins in Australia, and expanding margins in New Zealand.

There are some structural trends at work there: home loans were 90 per cent fixed rate in New Zealand three years ago, and are now 60 per cent floating rate. The war for deposits that is still squeezing bank margins here also started earlier in New Zealand, and has eased.

But New Zealanders are also in a better mood. Credit and charge card spending in Australia edged up by only $251 million to $21.4 billion between February and March, according to MWE Consulting's payment cards report, to be 1.1 per cent down in a year. In New Zealand, card spending last month was 7.2 per cent higher than a year earlier.

There are, of course, reasons to worry. Fears that another systemic crisis will be spawned by Europe's sovereign debt debacle are far from baseless.

It isn't a concern that Australians hold alone, however, and there are others that we share. Households have been lifting savings and cutting consumption throughout the Western world, and while household savings detract from consumption as they rise, population growth and income growth return as the main spending drivers when savings stabilise, as they appear to have done this year in Australia.

The government pulled demand forward with its crisis fiscal stimulus and created a spending lull that is persisting, but so did other governments, and a baby boomer effect is also transnational. Baby boomers have absorbed five years of sub-par compound investment growth since the global crisis. As the curtain comes down on their peak income-generating years, they are saving more aggressively to compensate. The effect is magnified here because super savings are mainly marked to market, but it is happening across the developed world.

There are some pieces in the jigsaw that have a local flavour, however. Here are a few.

Politics 

Labor's 28 per cent primary voting support betrays widespread unhappiness about the status quo, including the July 1 commencement of a carbon tax at $23 a tonne, more than twice as high as the European equivalent. The Coalition's primary voting support of 49 per cent in the post-budget Nielsen poll meanwhile implies that one in two Australians agrees with Tony Abbott's bleak analysis of the economy, and its management by Labor. Abbott says he will fix things if elected. But there would be execution risks and uncertainty as he moved to end carbon pricing, the mining tax and the national broadband network.

The media

It loves disaster stories, and there's plenty on offer in Canberra. The Merrill Lynch Australia economist Alex Joiner says the media has been reporting about cost of living pressures when the underlying inflation rate is the lowest for more than a decade, giving layoff announcements attention when the economy is close to its full employment level, and running stories about the big banks not passing on all of the Reserve Bank's cash rate cuts without reporting that interest rates are below their long-term average.

The two-speed economy

The Reserve Bank successfully contained cost pressures coming out of the resources boom by keeping interest rates (and through them, the Australian dollar) relatively high, but the non-resources economy took collateral damage that has not been entirely undone by this month's half a percentage point cash rate cut from the Reserve. The flip side, of course, is that we have experienced a boom in our main export commodities that only one other OECD member, Canada, has also enjoyed, but on the east coast that's been a side-bar.

Changing work practices

A global theme, but it is building a head of steam here, and even workers who welcome the renewed push for workplace flexibility and productivity will adapt their behaviour to fit. Part-timers and casuals are inherently more sensitive to instability, or the threat of it.

House prices

In an upbeat piece yesterday about the economy's ability to withstand shocks, the HSBC economist Paul Bloxham said house prices had eased in the past 18 months. Most households were ahead on mortgage payments and ''most of the debt is also held by the wealthy'', he said.

''Plus, a housing undersupply is likely to keep Australia from having the sorts of destructive feedback loop that affected the US and Spain,'' Bloxham said. Still, house prices are twice as high as they are in the US: a cause for caution, even if the crisis continues to be viewed from a distance.

Share market falls make property a more attractive investment

By Michael Matusik
Tuesday, 22 May 2012

 

Things in Europe look worse that many predicted; the Queensland market has just come off a building boost and is waiting for the $7,000 stamp duty relief; NSW’s housing incentives will end on June 30, so investor attraction is there; China’s short- to medium-term growth prospects now look a bit dicey, and we are waiting with bated breath for a federal election. For mine, we need a Republican in the White House.

In short, our frugal mindset is now turning to concern, maybe even fear. The share market falls, plus changes to superannuation, make property investment potentially more attractive. But activity will be slow and all buyers will need thorough third-party endorsement.

Heck, things must be pretty bad – beer consumption is at a 65-year low and total alcohol consumption has fallen for the fourth straight year.

We need to further tighten outgoings, increase our service level, with a return to focus on the old-fashioned things like ringing clients, meeting face-to-face, breaking quotes/processes up into bite-sized and digestible pieces.

We will look for positives in all this gloom, but don’t push the envelope too far. Our new direction will work a treat and fulfil the market’s need.

According to the latest statistics from the Australian Bureau, the money spent by Australians on renovating their homes rose by 2% over the last 12 months. This compares to an 8% fall in the amount spent on buying a new dwelling across the country.

Renovation activity is strongest in Tasmania, Victoria, Canberra and South Australia, but is down in the Queensland, New South Wales and the Northern Territory.

Click to enlarge

When asked “If you were renovating to sell, where would you spend your money in order to gain the best return?” our recent online opinion poll found that kitchens won hands down. Just over half (55%) of our respondents picked renovating a kitchen as the best way to secure the highest return from renovating a residential property.

Painting, with 26% of the vote, came in a clear second, followed by doing up the garden with 10% of the votes followed by renovating the bathrooms (9%).

When it comes to improving the garden, our research has found that a water-wise home will also attract a premium and may, in the future, be a major contributor to achieving a sale.

Another recent website poll by us looked at rain tanks in terms of whether they added value to a home. Two-thirds of our respondents thought they did.

We have started a weekly poll. It will be included as part of the framework in the new-look Matusik Missive, out in early June.

This week’s question about the best place for long-term capital growth can be viewed here. Our polls will only take 10seconds of your time. Go on, give it a go! They will be a good straw test. Results will be reported on the website every Friday and via the new missive and through social media, such as Twitter and Facebook.

Chins up, heads down and try to smile…. laugh if you still are in good health.

Michael Matusik is the director of independent property advisory Matusik Property Insights. Michael is a 25-year veteran in the industry and his firm has helped over 550 new residential developments come to fruition. Michael has launched a new initiative, called Think Matusik. Think Matusik brings together expert opinion and select property opportunities.

15 questions to ask when hiring a real estate agent

John McrGrath provided a list of the 15 most important questions to ask of your potential sales agent, its a good list and an excellent guide.

Of the 15 questions, one of the most important in the current market (and subsequently the answer) is what is the approximate time frame/how long is it taking to sell a well priced listing at the moment?  Over the last 12 months in the Mosman LGA average days on market has been 104 days, in Woollahra/Paddington, its been 63 days, so days on market are a key measure of an agents ability to perform.  In the questions below, you can see he seems to ask the same question twice, this is a good trick question - I think, agents need to be careful how they deal with this, and they certainly don't want to contradict themselves. 

What is the approximate time frame? In the current market the agent might answer 45 days, but later...How long is it taking to sell a well priced property at the moment? The answer here, may well determine if the agent gets the listing or not.  In this market in particular, a well priced property will sell quicker and a good agent will make sure a buyer who has the capacity to perform in the price range the agent and the client have agreed to sell, transacts as quickly as possible, because there may not be another buyer at that level and a property that sits on the "shelf" too long, gets a reputation and leaves room for buyer speculation - neither of which helps you to sell you the property. Less than 45 days in the current market - generally, would point to the more effective agent. Agents who know values the best and have explained this to their client, will want to deal away from the auction room - in many cases, even if there is more than one buyer using the 'sealed envelope bid' strategy, for example.  Price point properties are having more success at auction that is to say, well priced properties up to $1.2 million generally, well set on their block and with good floor plans for example, will sell at auction.

Here's the 15 questions to ask when hiring a real estate agent.

When selling your home, upgrading or downsizing - choosing the best agent to sell your property is the second most important decision in real estate (after choosing the right property to buy).

But from his experience many people are too casual in their approach to this crucial decision.  They ring a couple of agents and choose the one who gives them the highest valuation or has the lowest commission.  Create a series of questions that you want to ask agents, and interview a few as if you’re considering them for a job.

15 QUESTIONS TO ASK WHEN HIRING A REAL ESTATE AGENT

• What do you think my property is worth? How have you come up with that figure?

• How does my house present? What can I do to maximise the sale price?

• What’s the best method for selling my property? Auction or private treaty? Why?

• What’s an approximate time frame?

• What’s it going to cost me?

• Why should I hire you?

• How long have you been working in this area?

• What comparable homes have you sold in this area lately?

• What’s the state of the market?

• How long is it taking you to sell well priced listings at the moment?

• What marketing strategy do you suggest? Why?

• How much will be spent on marketing? Why?

• How much traffic does your website get?

• What will you do to introduce buyers to my property?

• Do you have a list of recent vendors I can speak to?

Really??? Sunnier property market outlook across Australia as vendor discounting peaked in mid-2011: APM

To read the headline story click here

I wouldn't be reading too much into those numbers, there are less properties for
sale on the market, and less buyers, resulting in fewer offers and less transactional activity therefore, vendors don't need to discount.  I love the way statisticians skew numbers to sell a story in attempt to create an illusion a la - David Coperfiled... As buyers agents - actively in the market, I can assure you there is still discounting at the levels of last year on a like for like in many of the Prime Markets (even allowing for lower
numbers). I think what you are seeing is an aberration,  vendors are resting their properties due to time of year (it is the low season), which will also skew the days on market downwards.  Lets look at the Woollahra LGA for example - the Clearance rates and discounts to market; (all data has been sourced from APM for the last 3 months)

Auction clearance rate (houses, adjusted) 37.2%
Average days on market (houses) 81
Average discounting (houses) 10.93%

The headline works in the 'price point' markets of the Sydney LGA for example with units for example, but see what happens to houses!!!

UNITS
 Auction clearance rate (units, adjusted) 62.3%
Average days on market (units) 74
Average discounting (units) 6.12%
HOUSES
Auction clearance rate (houses, adjusted) 54.3%
Average days on market (houses) 66
Average discounting (houses) 8.95%

But take a look at the Mosman LGA;

Auction clearance rate (houses, adjusted) 47.7%
Average days on market (houses) 103
Average discounting (houses) 11.64%

Now take a look at the Leichhardt LGA the inner-west darling;

Auction clearance rate (houses, adjusted) 54.4%
Average days on market (houses) 67
Average discounting (houses) 7.47%

Its still a 'Sunny' outlook for buyers, vendors on the other hand should be more strategic with the sale...there is no point in talking the market up but it is sensible to suggest that it was, is and will remain a good time to buy and trade, no one is going to convince property watchers that the market is entering an upturn, this sort of  'claim' just makes buyers more skeptical and keeps them out of the market longer they need to be.  Commentators should be encouraging buyers and sellers to make informed purchasing/selling decisions and this is the time where buyers in particular,  have the time to do that, no point making them more adversarial and I'm afraid, articles like this are only going to promote the latter...

The GFC has been a boon for some!!!

The graph below shows how the market share of the major banks has jumped from around 80% of the market to over 90% since the onset of the GFC.

Source: ABS

Do the banks have a vested interest in not passing on rate cuts in full (or at all) or being competitive in the home loan market, as well as supporting "low" consumer confidence?

They appear to have managed a correction in the property market (not as much as some would like - Steve Keen and Co), grown their market share, cut costs by shrinking their lending businesses and outsourced the lending piece to brokers who cost the bank nothing unless they write a loan, and they continue to seem to be managing further price adjustments in certain price points with lending strategies. With market share like this, why would they want "new" business when all they need to do is yield manage their existing business better to grow profit.

Oddly, one of the beneficiaries of the GFC and lagging consumer confidence appear to be banks - at least in Australia.

RBA Lowers Official Cash Rate - expect another 25bps at least in June!

At its meeting today, the Board decided to lower the cash rate by 50 basis points to 3.75 per cent

Before diving into the article, the key phrases that lept out for me and point to their concerns and the reason we can expect more loosening are;

• Softening Labour Market conditions = unemployment concerns
• Considerable structural change in the economy =  banks lending policies have changed, its harder to borrow and they needed to incentivise the banks to lend...
• Credit growth remains moderate = going from a nation of borrowers to savers has taken much of the demand out of the cycle and the RBA new a 25bp decrease wouldn't be passed on.
• Stabilsing house prices =  the bank is now happier, they can see the commercial bank balance sheets a stronger, bad debt provisions have lessened, but on the demand side, confidence needed a boost!
• ...Considering the appropriate size of adjustment...50 basis points in the cash rate was, in this instance, therefore judged to be necessary = they new any less would be ineffectual and with rates sitting
•  ...interest rates for borrowers have been close to their medium-term averages over recent months = means, with rates rising in this economic environment, demand will continue to contract, the economy needs stimulus - not only to encourage borrowing, but free up household discretionary spending too!  

 Expect at least, another 25bps in June

 

Statement by Glenn Stevens, Governor Monetary Policy RBA.

This decision is based on information received over the past few months that suggests that economic conditions have been somewhat weaker than expected, while inflation has moderated. 

Growth in the world economy slowed in the second half of 2011, and is likely to continue at a below-trend pace this year. A deep downturn is not occurring at this stage, however, and in fact some forecasters have recently revised upwards their global growth outlook. Growth in China has moderated, as was intended, and is likely to remain at a more measured and sustainable pace in the future. Conditions in other parts of Asia softened in 2011, partly due to natural disasters, but have recently shown some tentative signs of improving. Among the major countries, conditions in Europe remain very difficult, while the United States continues to grow at a moderate pace. Commodity prices have been little changed, at levels below recent peaks but which are nonetheless still quite high. Australia's terms of trade similarly peaked about six months ago, though they too remain high. 

Financial market sentiment has generally improved this year, and capital markets are supplying funding to corporations and well-rated banks. At the margin, wholesale funding costs have declined over recent months, though they remain higher, relative to benchmark rates, than in mid 2011. Market sentiment remains skittish, however, and the tasks of putting European banks and sovereigns onto a sound footing for the longer term, and of improving Europe's growth prospects, remain large. Hence Europe will remain a potential source of adverse shocks for some time yet.

In Australia, output growth was somewhat below trend over the past year, notwithstanding that growth in domestic demand ran at its fastest pace for four years. Output growth was affected in part by temporary factors, but also by the persistently high exchange rate. Considerable structural change is also occurring in the economy. Labour market conditions softened during 2011, though the rate of unemployment has so far remained little changed at a low level. 

Recent data for inflation show that after a pick up in the first half of last year, underlying inflation has declined again, and was a little over 2 per cent over the latest four quarters. CPI inflation has also declined, from about 3½ per cent to a little over 1½ per cent at the latest reading, as the weather-driven rises in food prices in the first half of last year have, as expected, now been fully reversed. Over the coming one to two years, and abstracting from the effects of the carbon price, inflation will probably be lower than earlier expected, but still in the 2-3 per cent range.

As a result of changes to monetary policy late last year, interest rates for borrowers have been close to their medium-term averages over recent months, albeit tending to increase a little as lenders passed on the higher costs of funding their books. Credit growth remains modest overall. Housing prices have shown some signs of stabilising recently, after having declined for most of 2011, but generally the housing market remains subdued. The exchange rate remains high even though the terms of trade have declined somewhat. 

Since it last changed the cash rate in December, the Board has maintained the view that the setting of policy was appropriate for the time being, but that the inflation outlook would provide scope for easier monetary policy, if needed, to support demand. The accretion of evidence over recent months suggests that it is now appropriate for a further step in that direction.

In considering the appropriate size of adjustment to the cash rate at today's meeting, the Board judged it desirable that financial conditions now be easier than those which had prevailed in December. A reduction of 50 basis points in the cash rate was, in this instance, therefore judged to be necessary in order to deliver the appropriate level of borrowing rates.