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A $80 million AUD luxury development in Point Piper, Sydney, has been handed over to the banks after two of the companies for which property tycoon Michael Bezzina was associated, Caprice Pty Ltd and Pyoanee Pty Ltd, were place in receivership.
Located in Point Piper, Mr Bezzine was expecting to achieve $14 million AUD for the penthouse-style apartments, however, three of the apartments have allegedly exchanged for $10 million AUD each.
The development comprises waterfront apartments, each occupying an entire floor with balconies looking out to the Harbour Bridge and Opera House. They have four bedrooms, four bathrooms and a guestroom, as well as a jetty.
In September, one of Michael Bezzina’s company’s that developed the $100 million AUD Jade complex in Surfers Paradise, was put into liquidation. The company reportedly paid $17 million for the site six years ago, of which six out of the nine apartments have sold, one of which sold for almost $20 million, while the penthouse at the complex remains on the market for $22 million.
It is worth noting that the quality of Bezzina’s developments is outstanding, and his financial troubles should not be allowed to cloud the stunning properties that he has been involved in creating.
Simon Turner
FYI: Read related articles on Sydney Property; or Luxury Homes; or Sydney Harbour
Here are the auction clearance rates for Australia’s capital cities for the week ending December 14, 2008.
Source: RP Data
Simon Turner
FYI: Read related articles on Auctions; Clearance Rates; Buying property
Further to our recent report of the NSW tax hikes to hit the property industry, now it’s been revealed that Queensland Premier Anna Bligh plans to impose a special tax on landholdings worth more than $5 million.
Under the property tax surcharge, part of a series of measures introduced as the QLD Government attempts to plug a $4.3 billon hole in the state’s budget over the next four years, landholders who own parcels of land will pay a 0.5% surcharge from 2009-10.
Sure to hit property developers hard at a time when the industry can least afford it, the decision will also likely cost 3500 jobs. It is important to recognize that the property sector employs one in seven workers in Queensland.
On top of the property tax surcharge, the Bligh Government has also raised vehicle registration costs by an average of 6.5% and delayed the abolition of transfer duty on core business assets by 18 months.
Whilst we are in no way suggesting that the Queensland Government shares similar brain cell(s) or genes than the hapless NSW government, what is concerning is the tendency of Australia’s fiscal “experts”, it would appear, to resort to anything but measures that stimulate and encourage innovation businesses and in turn the economy. Surely reducing land tax – a policy long championed by Australia’s real estate industry – would be a better option to stimulate the sector and economy.
Michael Marquette, Co-President of Marquette Turner Luxury Homes, states “Are the states tightening their belts, penalizing businesses and therefore consumers with the hope that the Federal Government will deal with the aftermath? Whatever it is, the economic credentials of those that run our States and Territories should be seriously scrutinized.”
Isn’t the relative basket case that is NSW – Australia’s most populous State – a good enough example of what not to do?
FYI: Read related articles on the Economy; or the NSW State Government; or the real estate industry
How’s this for short-sightedness: The New South Wales Government’s infinite wisdom to increase taxes by $3.6 billion AUD to compensate for their years of inept mismanagement of states coffers will have a huge impact on the property sector at a time when it can least afford it.
NSW Labor Premier Nathan Rees and Treasurer Eric Roozendaal plans to raise $680 million by increasing the land tax rate from 1.6% to 2% for properties over $2.25 million in land value, essentially a 25% increase, which will increase holding costs for land owners, discourage developments and lead to an increase in rental charges.
The flow on from this will lead to further job losses in the property industry, which is already shedding staff at more than one hundred per week.
We argue that this is not the time for tax hikes, but for the government to show some innovative thought, boost confidence and stimulate the economy. Or at least start spending NSW tax payers money wisely. But then again, given the churn of Premiers in the state and thus their lack of accountability, what do they care?
FYI: Read more articles on the Credit Crunch; or the NSW Government; or Interest Rates
The world’s most expensive location for prime real estate behind Monaco, Central London has seen luxury home values fall for an eighth month. Such locales include Mayfair, St John’s Wood, Regent’s Park, Kensington, Notting Hill, Chelsea, Knightsbridge, Belgravia and the South Bank neighborhoods of London.
As recently reported by Bloomberg, in November the approximate average value of a house or apartment in the city’s nine most expensive neighborhoods fell 3.6 percent from October, according to an index compiled by Knight Frank. This represents the second largest drop since the index started in 1976. Furthermore, the figures show that property values declined 14 percent since the previous year.
Why is this? Quite simply, vendors are not holding out for emotional prices and are accepting that price reductions have to occur for a sale to be achieved.
Prime Central London real estate has taken longer to register declines seen elsewhere in London because of a standoff between sellers and buyers over price. That ended in September, when the bankruptcy of Lehman Brothers Holdings Inc. caused demand to collapse from those employed in financial services, traditionally the mainstay of demand for expensive homes.
Unsurprisingly, the worst banking crisis seen since the First World War has translated into job cuts and reduced bonuses, and in London it’s likely to get worse before it gets better, with as many as 62,000 finance-related jobs forecast to be lost in London by the end of next year.
Interestingly, the properties least affected by the fall in values are those worth more than five million pounds. With the pound sliding it becomes more attractive to wealthy overseas buyers (yes, they still exist) and given the uniqueness of many of the properties in this category, and how infrequently they come onto the market, they still are highly sought after.
Appreciating that for a buyer with US Dollars, a 15 percent property valuation drop equates to a 35 percent slide when exchange rates are taken into consideration, property in excess of five million pounds is great buying.
FYI: Read more articles on Luxury Homes; or London; or Credit Crunch
The Reserve Bank has slashed interest rates to the lowest level in history to 4.25%. The Reserve Bank cut rates by a full 100 basis points (1%), making property an attractive option for those in search of investment options given the volatility of the stock market.
Australian interest rates have averaged over 8% for the last 59 years and the Bank has signaled that it is serious about avoiding a recession. It is projected that Australia will continue to grow in 2009 and avoid recession, one of the few nations predicted by the Organization for Economic Cooperation and Development (OECD) to perform positively.
The massive rate reduction should give buyer confidence a boost and increase the level of buyer enquiry across all price ranges. We have started to see increased levels of enquiry from the United States with the current exchange rate hovering at $0.65-$0.66 US.
I believe that ex-pats and foreign investors will increasingly recognize the benefits of investing in the Australian property market.
Australia’s economy will avoid a recession next year, helped by lower interest rates, government spending and exports.
A recent Report (Economic Outlook No 84) by the Paris-based Organization for Economic Cooperation and Development (OECD) stated that the Australian economy will grow 1.7 percent in 2009 from 2.5 percent this year, before accelerating to 2.7 percent in 2010, despite the depressed international economic environment, the impact of the financial crisis and the fall in the terms of trade should be relatively contained within Australia.
Furthermore, the OECD expects the Australian unemployment rate will increase to 6% from 4.3% by 2010 but inflation will ease.
The forecast is relatively glowing for Australia when compared to the other major economies of the world, stating that 21 of the 30 member economies of the OECD will go through a protracted recession of a magnitude not seen since the early 1980s.
In recent weeks new property listings have shown a substantial decline and this is likely due to the proximity of the Christmas period. Michael Marquette
FYI: Read related articles on Interest Rates; the Economy; and the Credit Crunch
Weekly auction clearance rates do not paint a particularly clear picture. They have quite a small sample size and show a lot of week-to-week volatility.
If clearance rates are on the way up, does this signal an improving property market? Well maybe, but before we pass judgement on the state of the market, we really need to know what the clearance rates measure and what it means to the property investor.
Auction clearances give an instant snapshot of the market, telling us a lot about prices, suburbs and auctioneers. Auctions are far more prevalent in Melbourne and Sydney, at about 50% of market sales, where they are the dominant sales form in the sought-after suburbs.
Auctions account for a smaller portion of the market in Brisbane, Perth and Adelaide and in the outer suburbs and regional areas of all states. Where auctions are not the dominant method of sale, the clearance data is less meaningful.
Clearance rate information is compiled from real estate agents’ reports of properties sold at, before or after auctions. Investors should note that reporting is not mandatory and will not include properties withdrawn from sale.
Sharp-eyed investors will also notice differences between clearance rates reported by different newspapers, the Real Estate Institute in each state, and APM, which can be explained by timing differences of agents reporting over the weekend or when some agents won’t report failed auctions.
The real issue is not the clearance percentage at all; it’s the underlying volume of successful sales transactions. This gives investors a truer picture of the market. For instance, a falling clearance rate can superficially mask a strong market if the supply of property lifts over a short period, so it’s not as reliable an indicator as it first appears.
Plainly then, high clearance rates can point to insufficient supply rather than a buoyant market, and low clearance rates, particularly in Brisbane, Adelaide and Perth, may not reveal a strong volume of successful private sales. Monique Wakelin, The Eureka Report
FYI: Read related articles on Auctions; Buying Real Estate; and Real Estate Market
The Reserve Bank of Australia (RBA) will meet on Tuesday 2 December and, the Marquette Turner team expect, they will make a fourth consecutive cut to the official interest rate.
A survey of 18 economists by the Australian Associated Press revealed the following:
- All 18 economists believe the RBA will cut interest rates
- 11 economists expect the rate to drop by 0.75% (75 basis points) putting interests rates at 4.5% (the lowest since June 2002)
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5 economists believe the cut will be 1% (100 basis points) leaving interest rates at 4.25%, the lowest level ever.
Time will tell who wins the bet, but home owners and buyers alike will be the winners of any rate cut.
FYI: Read related articles on Interest Rates; the Credit Crunch; and the Economy
“Bailout” has been named as the “Word of the Year”, being the word that has been searched the most in online dictionaries and has become suddenly infused into daily language. “Turmoil” was up there too!
Things may be worse than they were perhaps a year ago, but please take a moment to think of all the good things. During this Thanksgiving holiday – an American institution that surely everyone throughout the world should recognise – be thankful for what you’ve had, what you are, and what you can be.
One of the phrases Marquette Turner has coined is “Luxury is…” – this week we share with you some comments people have shared with us.
Please enjoy the stories in our blog, or you can go straight to the e-magazine. We thank you!
Michael Marquette & Simon Turner
“As we express our gratitude, we must never forget that the highest appreciation is not to utter words, but to live by them.” John Fitzgerald Kennedy
Whatever level of real estate, at whatever price, there are still numerous stories of people that, whilst not necessarily “doing it tough” are still struggling to find success in the current real estate market.
The world’s greatest ever tennis player, Pete Sampras (based on Grand Slam titles I must add, before I get heaps of corrections!), recently sold his 10,000 square foot mansion in Beverly Hills, California for $2 million USD less than the $25 million USD he was looking for when he put it on the market in January 2008, having paid $8.3 million USD for the six bedroom property in December 2001.
For those interested, the property has six bedrooms, 12 bathrooms as well as its own guest house, gym, tennis court, and theater.
FYI: Read related articles on Homes of the Rich & Famous; Luxury Homes; Credit Crunch
Overseas property still remain enthusiastic when the right investment is presented to them, as the results of a campaign of 14,000 investors displayed when questioned on the subject of “Irresistible deals”.
investors were presented with the opportunity to acquire an apartment in Paris with a nine year rental guarantee, taxes paid by the government, 100% finance available and with a total investment requirement of $6,100 US (approximately $9,400 AUD , £4,000, 4,700 Euros)
The world of international property investing is changing. The sorts of deals available stack-up from every angle requiring low investment capital, they would have been unheard of a year or so ago.
Another example of what is now available to overseas investors can be seen with properties for sale in Buffalo, New York State where investment homes start from as low as £7,333 see example here: Low Cost Investment property
FYI: Read related articles on Overseas Property Investment; Luxury Homes; Credit Crunch
More information: Currency Exchange http://www.xe.com (this is where we took our approximate figures from)
Without fear nor contest, the following listings of Marquette Turner Luxury Homes have received a price reduction in the past week, with the explicit consent of the owner.
FYI: Read related articles on Luxury Homes; or Buying Real Estate; or Investment
This week we present stories such as Luxury Home Sales in Sydney: The Truth and Fiction; The Beckham Effect, where we look at David Beckham’s very first home and what it’s on the market for as well as his current home in California with Posh Spice-wife, Victoria; we also look at the cost of parking your car in some of the most expensive cities in the world; you can customize your bathtub for a pretty penny; and our WISE GUY shows why the Australian dollar suddenly has run out of friends.
And lots, lots more.
To read the latest e-magazine: CLICK HERE
“Be a fountain, not a drain.”
Rex Hudler
It was almost like you went to put the kettle on during the ad break and everything changed with the Australian Dollar: one minute we’re pushing (almost) the 1 AUD for 1 USD and within a few months the AUD is struggling to buy 60 cents US.
Not being an economist, and learning on the run as no doubt many of us are in these historical economic times, I put this question to a friend of mine that I’ve grown up with that now works in the City of London. He’s a bit of a whizz and obviously a busy man, so I really appreciated his answers in layman’s terms, and am glad he’s allowed me to share them with you. Here’s his explanation:
The USD is benefiting from several themes, I will list them:
1) There is a perception that the US is further down the road in this crisis (ie. real estate markets have fallen more dramatically) and they have unveiled a more comprehensive suite of policy measures to deal with their problems than other countries have thus far needed to, Australia included. This has enhanced the USD status as a “safe haven” currency. There is the perception that the rest of the world is now slowing down faster than the US, and so this is encouraging US investors to repatriate foreign investments into USD.
2) Central banks around the world are cutting rates aggressively, and so the interest rate differential between other currencies and USD is narrowing, this increases the relative attractiveness of the USD.
3) The unwinding of “carry” trades (this is where credit is borrowed from central banks with low interest rates and invested in other economies that are higher). Over the past year/18months some investors have borrowed in USD at low interest rates, to invest in AUD at higher rates, and so earning the 4% or 5% interest differential between the two currencies. This money flow was one of the reasons behind a 30% increase in the AUD vs the USD over this period. As volatility in financial markets increased, these investors have unwound these trades and subsequently sold AUD to buy USD.
4) The linkage of the AUD to commodities has not helped it in recent weeks, as all commodities have sold off on expectation of a rapidly slowing economy.
So there you go. Economies are ultimately a huge web of tangled and complicated interests, involve complex strategies and vary in their proclivity to risk. We clearly can’t be expected to understand every single facet with great understanding, particularly when many of the best brains in the world couldn’t.
I do hope, however, we’ve given you a few little tips that mean your “flapping in the wind” a little less. And of course, there’s certainly a need in the world for Wise Guys!
FYI: Read more articles on the Credit Crunch, Buying real estate; or Recession
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Part 2 of a 2 Part Investigation
The low sales volumes that we have seen in 2008 have resulted from fear, necessity and pride. Each has played a role in reducing the number of sales.
In so much as fear has contributed people are always cautious during times of upheaval or unrest.
Economically it has been a minefield of a year with Sydney property prices generally being stable or heading south. The stock market has shed billions of dollars and nervous investors and even more nervous fund managers have either panicked or halted all activity to see where it would lead – we certainly have a good idea of that now.
As interest rates increased early in 2008 many people feared that the return of Labor to the Federal Government would bring devastatingly high interest rates and therefore chose not to buy – again they played a wait and see game.
Vendors, convinced that the economic bliss was sure to continue refused to accept lower prices from buyers and the number of unsold properties has increased as the year has gone on. The financial turmoil has seen companies tightening their belts and in some cases withdrawing benefits, bonuses and international transfers.
This has greatly affected the number of “Private Brokerage” level sales and has played havoc with the top end Luxury rental market. Without companies paying absurd amounts of money to house executives the demand for top end rentals has all but dried up – with Luxury Landlords accepting massive cuts in rental amounts, moving back into properties or simply leaving them empty (Not very smart in most cases).
The final and least understood factor that has resulted in decreased “Private Brokerage” level sales is the age old problem of pride. The uncertainty that the year has provided has caused many would be vendors to reconsider plans to sell in case they were seen by family, friends, colleagues and competitors as potentially having financial problems.
It has been reported in Sydney newspapers that journalists were waiting to see which Luxury Homes were put on the market as this may have been an indicator that a company or associated interest was struggling and in need of cash. It is amazing what people will do out of pride and emotion has played a huge part in the decreased sales volumes we have seen.
Fundamentally Sydney is well positioned. It has stunning natural beauty and there is a low rental vacancy rate and net immigration is quite high putting further demand on housing in the city. This should see the market steady and confidence return in 2009, however we cannot ignore the differences between average or low end property and Luxury “Private Brokerage” Sales.
Click on the link for PART 1
FYI: Read related articles on Auctions; Luxury Homes; and the Who’s Who in Luxury Real Estate
Over the last month or so I have had numerous discussions with people from all around the world about the level of Stamp Duty we pay in Australia on property transactions. In my opinion it acts as a huge disincentive for people to transact and puts additional and unnecessary barriers in place for buyers and vendors alike.
For those that aren’t aware buyers in NSW pay around 4% tax to the State Government – in addition to the purchase price of their property when they buy.
Who can forget the effect of the vendor duty that the New South Wales Government (for our international readers, Sydney is the Capital City of the State of New South Wales – NSW) decided to charge on the sale of investment properties. That 2.25% duty on the sale of investment properties (paid by vendors to the Government – calculated as a percentage of the total sale price) stalled the sale of investment property in the State and made purchasing investment property look very unattractive.
Thankfully common sense prevailed and the duty was removed. New South Wales lost hundreds of millions of dollars to States like Queensland as investors chose to purchase elsewhere. South East Queensland did very well out of what can only be described a shocking decision. So what would happen if New South Wales slashed the stamp duty paid by purchasers? Would we see huge amounts of investment coming into the State from Queensland, Victoria and other States?
It’s an interesting question and one I’d like to see debated as increased taxes, tolls or duties is not the way to stimulate the economy. New South Wales is a wonderful part of our country and Sydney is one of the most beautiful cities in world – if only we had a State Government to match.
FYI: Read related articles on Stamp Duty; or New South Wales; or Buying Real Estate
Resources: Buying Advice
It’s difficult to watch the television, read newspapers or generally go outside of your home right now without being bombarded with negative news on the economy. The US economy is all but in recession, New Zealand is already in recession, Japan is in recession and as of today so is the United Kingdom.
The Governor of the Bank of England has predicted no growth in the UK in 2009 and believes that the recession will be as bad as the early 1990’s. The British Pound has hit a six year low against the Euro and inflation in the UK is currently at 5% (the target set by the Bank of England is 2%).
Deflation is now a real threat in the UK which can be just as concerning as inflation. Deflation refers to a general decline in prices, often caused by a reduced supply of money or credit. It can also be caused by a decrease in spending by Governments, consumers or investors. Deflation is simply put as a decrease in price due to decreased demand – therefore the decreased demand results in decreased production and increased levels of unemployment.
With this deflationary threat looming it is likely that we will see interest rates continue to fall with some economists predicting UK interest rates will drop to around 1%. The recent massive 1.5% rate cut in the UK and two consecutive monthly cuts in Australia (1% and 0.75% respectively) are sure signs that central banks have finally seen just how serious the current situation is. I believe it’s a perfect time to purchase property safe in the knowledge that interest rates are going down – this is a wonderful situation.
FYI: Read related articles on Recession; the UK; or Buying Real Estate
The Reserve Bank of Australia’s (RBA) decisions to decrease interest rates over the last few months were welcomed by borrowers and lenders alike, most recently with the 0.75% cut in October and the 1% cut in September.
The reality is, however, that most of Australia’s lending institutions have chosen not to pass on the full cuts, citing the increases in their funding costs.
This has left a gap between the fall in official interest rates and the rate reductions for a standard variable mortgage by most banks. The banks obviously have responsibilities to their shareholders, but the simple fact is that the RBA did not make these cuts out of a flight of fancy. The cuts were made with the intent that the banks would pass on the full rate decrease.
As the Acting President of the Real Estate Institute of Australia (REIA), Chris Fitzpatrick recently stated:
‘The banks really need to think about their corporate responsibility to their customers and pass the entire rate cut to where it is needed and where the RBA have intended the cuts to go, the people. The RBA does not cut interest rates without reason, they are doing what they see fit to take the financial pressure off households around Australia and to stabilize the economy while keeping inflation in check.’
Obviously, the increase in the banks “bad debts” have not helped, with exposure to companies such as the Lehman Brothers, Allco Finance Group, ABC Learning weighing them down. Bloomberg report that Bad debts jumped to A$930 million in fiscal 2008 from A$496 million a year earlier. Bad debts as a proportion of loans increased to 0.26 percent from 0.14 percent a year ago. Australian banks have investments totaling A$7.4 billion in troubled companies and it is predicted that Australia’s four biggest banks will record about A$7 billion in bad debts this year.
Quite simply, however, it is in the long-term interests of lending institutions that homeownership is affordable and an attractive investment option. The will have a positive effect on the overall Australian economy, which is something that right now is what everyone is looking for. Simon Turner
FYI: Read more articles on Interest Rates; or the Australian Economy; or Housing Affordability
More information: Go to the RBA; Bloomberg and REIA’s websites
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