Better than expected Company profit reporting, continuing growth (although up and down) in the ASX and some record profit taking over the last week may be very positive indicators for the investor side of the residential and commercial property markets.

Profit taking results in funds available to reinvest in other areas such as property and given the volatility of the share market property looks very attractive for the medium to long term.

Savvy investors have already re-entered the market. Even though there has been some artificiality in the market caused by first home buyers there are still bargains out there.

Neil Fisher, chief executive of the Real Estate Institute of Australia, in an article in the Australian, said that investors re-entering the market should be aware that interest rates were likely to rise.

“Anecdotally, evidence suggests investors are starting to come back,” Mr Fisher said.

“That’s generally a result of low interest rates.

“A cautionary note though, we’ve seen the Reserve Bank governor say interest rates are at all-time lows and say there will be increases in interest rates, probably at the start of next year. The astute investor will take that into account.”

In the same article, Dan Molloy, managing director of the Real Estate Institute of Queensland, said that while early 2009 was dominated by the activity of first-home buyers, the past couple of months had seen a resurgence in investor involvement. “We are seeing investors looking at the marketplace again,” Mr Molloy said.

The challenge for the Real Estate professional is to use this knowledge to profile and identify investor attractive stock and to relentlessly prospect and then to prospect some more.  It can be easier to attain the listing if you can demontrate that you can market effectively to investors. It is important to develop good investor databases however remember that many households include investors.  The RBA identified that over 17% of general households include a property investor. Changed regulations on borrowing by self-managed Superannuation funds could also widen the market for investment buyers. Paul Newall, Raine & Horne Financial Services has developed some solid experience and expertise in this area.

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Good news for the Australian property sector. In his announcement yesterday that interest rates would stay on hold, Governor of the Reserve Bank Glenn Stevens commented that while household spending is “likely to slow somewhat,” stronger dwelling activity and government spending “will start to provide more support to overall demand soon, and is likely to firm into 2010”.
Stevens is concerned that if the already record low interest rates are allowed to remain they may fuel a housing bubble and destabilize the economy.  The change has been largely due to improvements in Australia’s second largest export market, China.  
Paul Brennan, an economist at Citigroup Inc. in Sydney predicted “The next step will be for the Reserve Bank to begin to withdraw at least some of this accommodative setting,” starting in December with a quarter-point increase”.

Craig James, a senior economist with the Commonwealth Bank of Australia, suggests that Stevens is “certainly not suggesting that rate hikes are imminent.”  “The Reserve Bank will want to ensure the economy can stand on its own two feet — without being propped up by the government — before deciding to lift rates,” James said.
 Stevens also noted that home loan approvals had been solid, with housing prices rising over recent months indicated by increases in the median house price over the eight capitals. However, disturbingly, business borrowing was in decline as companies postponed investment plans in order to reduce debt financing.

Courier mail article. 

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Do Google and Microsoft really want to beat each other up? In a fascinating article which first appeared in the Wall street journal and in the Australian on the 23rd of July 2009, columnist, Holman W Jenkins Jr, develops a compelling argument. 

Jenkins writes:

Microsoft and Google…have the power to damage each other, and are better off if they don’t. They spend a lot of money on deterrence….Even more than the Cold War superpowers, they have every incentive quietly to agree to be deterred without investing quite so much on an arms race….

Their little secret is that neither Google nor Microsoft really have an interest in challenging each other’s core franchises, if it means risk to their own. Their posturing is primarily defensive–fear of loss is greater than hope of gain.

And both companies by now have a well-earned reputation for being willing to invest large sums simply to threaten the profits of companies that potentially threaten theirs. Ownership may also be from commen source investors.

Google has Google Apps and Microsoft have Bing, and Microsoft is developing its online advertising to keep Google from thinking too hard about Chrome OS.

The question is, do these two rivals really want to upset their positions of dominance in order to take on their competitors’ markets?

Jenkins may be right: every move and counter-move each takes against the other is almost certainly meant to warn more than seriously hurt.

The opportunities for Google and Microsoft  lie in discovering and profiting from innovation in the market. It is unlikely that Google really want to challenge Microsoft Office on the desktop but more likely in the clouds.

Instead, Google is investing in collaboration and e-mail with Wave, which may position Google squarely into the office market.

It will be interesting to see how strategies unfold over the next critical two years. 

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The Australian website has an article with the rumour that Mortgage Choice is close to buying LJ Hooker for between $60m and $70m.  The article claims that Ray White and Century 21 were also previous bidders.

In my opinion it is just the exchange of one finance group ownership for another.  If any real estate franchise group is owned by anyone who does not have real estate and franchising as its core business then you run the risk of major conflicts of interest which can only end in tears.

The article states “The listed broking group is believed to be close to striking a deal for between $60 million and $70m for Australia’s second-largest real estate agency chain.

Suncorp wanted between $90m and $110m when it first put LJ Hooker up for sale in September last year.

However, the 700-strong real estate agency franchise business was later pulled from the market as the banking crisis deepened and Suncorp became caught up in an internal crisis that resulted in the departure of chief executive John Mulcahy.

The situation was further complicated in March when LJ Hooker managing director Warren McCarthy resigned.

Suncorp yesterday declined to comment on the sale of the real estate group it has controlled for the past 17 years.

A spokesman said Suncorp did not comment on market speculation, and LJ Hooker remained strategically important to Suncorp’s future.

Mortgage Choice spokeswoman Kristy Shepphard said it was inappropriate to make any public comment because Mortgage Choice was in a market blackout ahead of its August 21 results announcement.

However, industry sources said Mortgage Choice had agreed to buy the chain after rival mortgage group AFG dropped out of the bidding only days ago.

Although a sale between $60m and $70m is well below Suncorp’s original asking price, it is well above the $40m to $50m believed to have been offered by other real estate groups.”

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It was reported on the ABC yesterday by Murray Cornish that a Townsville real estate agent in north Queensland is facing legal action for exposing a staff member to mould.

The article said “Lawyers launched a workplace health and safety action against the real estate agent after a complaint from an employee that long-term exposure to toxic mould has left her with ongoing health problems.

It is believed to be the first legal action of its kind in Australia.

Lawyer Rebecca Jancauskas says if successful, it could have wide ranging implications.

“If you are a landlord letting out premises, you know you have someone living in those substandard conditions then absolutely … you could be brought to account,” she said.

She says the action highlights the dangers of failing to adequately clean commercial premises.

“The injury and ill health caused is very substantial in that it impacts on all aspects of one’s life including one’s employment capacity - the compensation could be substantial,” she said.
The Sunday Mail also reported the action and the Sun Herald include additional information.
This action is a wake up call to all employers that staff complaints are not to be trivialised and should be taken seriously and investigated thoroughly.  Such action may extend to the employer, the tenant, the property manager and the property owner.

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Paul Newall, Raine & Horne Financial Services, advised yesterday of some changes in Bank policies that may severely limit any upturn in the property resale market.

It is no secret that the current market is attempting a very slight upturn driven from the bottom end predominently fuelled by the First Home Buyer (FHB) boost. Approximately 40% of all sales last month were to FHB, with 12,500 subsidy applications received, by the Federal Government, in February. Investors accounted for approximately 10% of purchases.

Many FHB’s have taken advantage of lending policy that has allowed loans of 100% and 95% of valuation.  Last week RAMS removed the 100% loan leaving the St George Bank as the main lender still offering 100% loans.  The major banks who offer 95% loans are now insisting on proof of saving over a period of 3 to 6 months.  Further it is rumoured that some banks will reduce their lending policy to 90% of valuation.  This will effectively neutralise the FHB Boost and stop the market in its tracks.

The fact that the banks and many consumers do not take accout of is the very high cost of rent today.  After paying the highest rents Australia has ever seen there is not much left for many FHB to use to save.  The Banks have to recognise this and view a good rental payment history as a major contributor to the loan application.

The major Banks, who largely caused the Global Financial Meltdown, are now at risk of worsening the situation just so that they can improve their balance sheets and stock price and the Federal Government and Reserve Bank do not seem to be doing anything.

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It is in times of hardship that the real value of a brand shines through.  Raine & Horne is a well respected and very special brand to be privileged to be a part of. As Angus Raine keeps saying “we are now 126 proud years of age”.

Raine & Horne has seen good times and not so good times, has weathered each storm, learnt from the experience, and is still here providing real estate services of a very high quality. It also says a lot where the family still own the business with Max and Angus Raine still running the company.

With an international network and offices in every state and Territory in Australia the Raine & Horne brands, Residential, Commercial, Rural, Valuations and Financial Services provide a full range of property services.

When we look around the world at Corporate Icons falling from grace it is a good feeling to be a part of a group that is so proud of its heritage.  Raine & Horne and all who form a part of the delivery of its services must jealously protect and guard the brand by providing ethically driven services with a high level of customer service.

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It would appear that the trials and tribulations of Suncorp who own LJ Hooker may have filtered down into the real estate group.

This week saw the rumoured departure of CEO Warren McCarthy and GM Angelo Nicholson although the media LJH media march 2009.pdf  statement put out on wednesday states they have both taken leave and that Alan Lambert is assuming their responsibilities.

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