Andrew Bell’s Market Wrap: Are Media Reports & Market Results Contradictory?

Issue 14 | Thursday 14 July 2022 | Are Media Reports & Market Results Contradictory?

Hi Andrew Bell here, I’m certainly feeling for all of our Sydney and regional clients who are again affected by this continuous flooding that we are experiencing in 2022. These warmer ocean temperatures are continuing to hound us, and sadly it appears there will be more to come. Our thoughts are with you.

I am always getting questions about different aspects of the real estate market so I will address two of those today. Firstly, yes it is true that the Gold Coast is fairing better during this price correction phase of the market cycle than most other markets in Australia. It shouldn’t be such a big surprise. The fundamentals of our market are supporting the market. A shortage of properties on the market for sale and continuous strong buyer demand. That’s certainly been evident in the past week when we had 34 properties for auction last Thursday at our in-room auctions. A very large crowd was in attendance which is not surprising when we saw that on average there were between 4 and 8 registered bidders for all excluding 2 of the properties where there were no registered bidders. These bidder numbers are as high as the bidding numbers that we recorded throughout 2021. Strong bidding occurred throughout the day and whilst some prices were softer than could have been achieved six months ago there were still so many properties selling in excess of reserve and record sale prices.

84% of properties on auction day were sold and negotiations are continuing on the balance. Now these are amongst the highest success rates in the country, and yes, I acknowledge that we are the most experienced auction agents on the Gold Coast and do achieve better results, but such a strong performance can’t be achieved without the buyer interest. There were a further 2 auctions on Saturday which saw an old, original, knock-down home in Palm Beach which sold for $2.8 million and a property in Grant Place Broadbeach Waters which recorded 8 registered bidders with an incredible highest bid of $7 million. You will read in the media about poor auction results under the hammer in many parts of Australia, this is not from a lack of buyer interest but more so seller expectations. It doesn’t mean that there are no interested buyers it just means that they are not prepared to pay the prices they were 6 months ago. Please don’t let media reporting of our market mislead you into thinking that buyers have disappeared or that auctions are not achieving results. The properties that do not sell under the hammer sell within days of the auction.

The second feature is in relation to this inflation figure that is driving the sharp increases in interest rates. I was at a market briefing just last week by a leading Economist who pointed out that when looking at inflation and trying to predict what will happen with interest rates moving forward, we should break inflation into two sectors. The first is the core items that are included in measuring inflation year in and year out, and a couple of those factors have really been the items that have jumped in cost and that are causing this higher inflation figure.

There are 3 of those cores, the first is fuel costs, which infiltrate almost every single product that we purchase through production, delivery and so on. This is demonstrated when we go to put fuel in our cars and this is well documented that the cause of this is the Ukrainian War. How long those fuel prices stay high is dependent on how long the War continues and how long other oil producers take to ramp up their production to offset the effects of the war. It’s probably the wildest card of all and it’s probable that we aren’t going to see any joy in that space until sometime next year.

The second is food costs, sharp rises in much of our food items have come from a lack of unskilled labour that is used on the farms in production. With so many of our usual seasonal skilled labour sourced from overseas unable to come to Australia, there just haven’t been people on the ground. In many cases, farmers have had to plough back certain produce into the ground because there weren’t pickers for the crops. The second factor in this area has been the floods that have wiped away crops altogether in many areas, and because of repetitive rain activity it made it near impossible to plant new crops, hence a shortage that has driven up pricing. In many areas, they have been getting back into the cycle of production and as we move through the second half of this year we will see more and more of this produce come online. The third component of these unique inflation drivers has been building materials, it’s a worldwide problem with demand for all forms of building materials that have been in strong demand. The fundamental problem here has been production and supply chain issues. Better news on this front as manufacturers have been investing over the past 18 months into higher production capabilities and the supply chains are also starting to get back to normal. Again, something we will not truly notice until we move into 2023.

The core items that are read to assess inflation would put inflation around 2%, but it’s been these one-off factors that have pushed it so high. There is a growing belief, that during the course of 2023 most of those will start reducing and hence the pressure on interest rates will start easing.

So, yes expect some interest rate rises through the balance of this year, but let’s watch those inflation figures to see whether we might in fact see a reduction in interest rates somewhere in 2023.

The last thing for this fortnight is that I would like to thank so many of you who were very generous in your support for my CEO Sleepout. I can tell you it was the coldest night I had ever experienced in these sleepouts, but what warmed my heart was that there were approximately 210 fellow CEOs who joined me. Collectively here on the Gold Coast, we raised around $650,000 and it was my great pleasure to have conducted the charity auction that was a great supporter in raising those funds.

It has been a very cold winter, so thank you very much for supporting our homelessness. It shows what a caring and loving society we truly do have. It is not too late for anyone who wants to top up those funds. DONATE HERE

We are into the second half of the year, and it always goes fast. We are already taking bookings for people who want to be part of our big Spring Selection of properties to go to the market, so if you are considering doing so then please reach out via the contact form below. It would be our delight to give you tailored information about your property.

Stay safe and let’s appreciate how lucky we are to be living in our part of the world.

Andrew Bell

Warm Regards,

Andrew Bell, OAM
Chief Executive Officer
The Ray White Surfers Paradise Group

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