Property Outlook 2010

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CONTENTS The 2010 Property Outlook EXECUTIVE SUMMARY

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TAKING STOCK - 2009 IN REVIEW

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NATIONAL OUTLOOK

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NEW SOUTH WALES OUTLOOK

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VICTORIA OUTLOOK

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QUEENSLAND OUTLOOK

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SOUTH AUSTRALIA OUTLOOK

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WESTERN AUSTRALIA OUTLOOK

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TASMANIA OUTLOOK

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NORTHERN TERRITORY OUTLOOK

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Sources

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First National Real Estate 2010 Property Outlook

Executive Summary Much of the detailed property commentary provided in the Australian market is conducted and presented by analysts a long way from the high street where most property transactions take place. First National Real Estate has more than 400 members on the ground in cities, suburbs and country towns across Australia.

So, we undertook a survey of our member agents to compile a picture of the property market for Australia overall, on a state-by-state basis and importantly, at the local level.

Consensus amongst our members is that property prices will stabilise and slowly increase through 2010.

Supply and demand are still the major issues for the property market. Not enough dwellings are being built to cater for demand from record levels of population growth. This will continue to put pressure on rental markets and drive price growth into the near future.

Two other key factors affecting the property market in Australia over the coming 12 months will be higher interest rates and uncertainty around employment.

Potential exists for employment levels to remain steady, if not grow due to increased demand for Australia’s resources in the mining and agricultural sectors. However, there is an ongoing impact on many businesses from the Global Financial Crisis, from which Australia’s recovery is still uneven.

Opportunities exist for investors and second time buyers to upgrade while, despite forecast increases, Australia will continue to enjoy relatively low interest rates.

Tightening lending policies by banks may also impact on the market.

Disclaimer: There are many uncertainties in forecasting movements in the market such as government policy changes, interest rate changes and global economies. Therefore, the forecasts in this report should be taken to be indicative of market directions. First National takes no responsibility for actions taken on the basis of this report and we encourage all vendors and buyers to conduct their own research.

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Taking Stock – 2009 In Review While much of the world is still crawling its way out of the Global Financial Crisis, Australia seems to have weathered this storm better than most countries, thanks in chief to initiatives and incentives put in place by federal, state and local governments but also at a local level by businesses like those estate agencies in the First National network.

House, Unit and Land Prices While many commentators and experts forecast doom and gloom for the property market in 2009, First National stated in its January 2009 Property Outlook that the network believed where prices fell initially, this was with properties that more accurately reflected their true value compared to the over-inflated prices they had enjoyed. The expectation was that prices would stabilise throughout the year and perhaps experience some small growth towards the latter half of the year.

As First National anticipated, Australia turned the property corner as early as January 2009. Evidence of how correct we were is found in the responses our State Chairs provided in the recent survey we undertook, for property prices in each state. Across the board, the network’s State Chairs responding to our survey indicated that house prices in their respective states had risen in the last six months of 2009 by an average of around 5 to 10 per cent.

Victoria experienced an increase of between 10-15 per cent while South Australia, Western Australia and Queensland all reported house price increases of between 5-10 per cent and New South Wales and Tasmania reported less than a 5 per cent increase.

The median house price in Australia climbed almost $20,000 during the September 2009 quarter, the highest level median prices have reached since the December quarter in 2007.

A similar picture arose for apartment property prices, where State Chairs reported rises of between 5-15 per cent as well. As with house prices, apartment property prices in NSW rose by less than 5 per cent, while South Australia, Western Australia and Queensland all reported house price increases of between 5-10 per cent and Victoria again enjoyed increases of between 10-15 per cent.

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Land prices were reported as having risen by between 5-10 per cent in all states where data was available. The key reason for this increase in land prices is scarcity of land available for residential developments.

First National’s belief is that the key reasons for prices rising in the last six months were the First Home Owners Grant Boost, low interest rates and shortage of housing stocks. These factors combined to help put a floor under prices, stimulating activity and demand.

Rentals and Vacancy Rates Over the last six months of 2009, vacancy rates and rents have either stabilised or risen by less than 5 per cent in all reported cases. Whilst demand still exceeds supply, which would normally result in landlords being able to increase their rents, this was balanced by the increasing number of tenants claiming they are unable to meet the high prices currently being asked.

Many first home buyers did their sums and realised they were better off taking advantage of the government stimulus initiatives and low interest rates to buy their first home, where mortgage repayments would be less than current rents.

These factors have helped stabilise the rental market and kept most rent increases to a minimum.

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First National Real Estate 2010 Property Outlook

National Outlook There seems to be general consensus amongst the First National Real Estate network’s State Chairs with their outlook for the coming six to twelve months.

All, with the exception of Tasmania, predict that there will be ongoing price increases for house, land and units and a rental market that will benefit from ongoing stability, but with the potential for small rent increases.

House prices First National expects that with the exception of Tasmania, house, land and unit prices will continue to increase in the next six months, due to lack of housing stock and a growing economy, particularly in the resources sector. Tasmania is expecting to see prices stabilise over the next 6 months.

The end of the First Home Owners Grant Boost initiative by the Federal Government will further entice investors back into the market. While conditions are ripe for investors and second time buyers to pick up some real bargains, the removal of increased first home buyer activity will make competition more realistic and purchases more affordable.

Population growth will continue to be an issue for Australia for some time to come. It is expected to be the home of more than 35 million people within the next 40 years. Sydney, Melbourne, Brisbane and Perth combined will have almost as many people as the entire Australian population today.

Current high immigration levels and tight land supply means there will be a net shortage of 50,000 new houses, which will underpin prices to some extent in 2010. To keep up with demand, Australia should be building around 180,000 homes a year – yet even in a good year, we typically build only 150,000 new homes.

Rental Market Vacancy rates will stabilise or rise slightly in the first half of 2010. This is due mainly to the fact that for many areas, vacancy rates are already extremely low and there is no real change in the supply and demand equation, with the exception of Tasmania where vacancy rates have increased.

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National Outlook Even though there has been a recent increase in housing approval figures and some projects are due to commence, there is still no indication of an easing in vacancy rates for most areas. Even with additional housing stock coming onto the market, it will not be at the same levels as predicted population growth for those regions.

Rents are expected to either stabilise (or even drop in Tasmania), or experience increases of no more than 5 per cent, in areas where demand is strong and/or availability of supply is poor.

Changing Market Conditions A raft of infrastructure projects is expected to revive the Australian economy over the next few years.

Rising commodity prices and strong demand for Australia’s resources suggest continued growth in the mining sector – which means more labour will be needed in regional Queensland, South Australia, the Northern Territory and Western Australia. Many towns in these areas are already experiencing a chronic shortage of housing.

Contract mining is expected to experience growth, as Chinese demand underpins iron ore and coal exports. Demand for oil and gas, including liquefied natural gas and coal seam methane will support a pipeline of projects worth $150 billion. In addition, the engineering infrastructure markets also look strong over the next five years, reflecting the investment planned for large scale iron ore mines and off shore gas and oil fields, particularly in WA. Infrastructure projects may even recover some of the damage done by job losses in Tasmania.

Engineering construction is expected to more than double to $140 billion by 2018 and according to one senior analyst, “public capital expenditure is forecast to leap 17.9 per cent in 2009-10 as a result of the measures contained in the stimulus package, before expanding at a more moderate rate of 2 per cent over subsequent years to 2014-15”.

The Government, through its National Rental Affordability Scheme (NRAS) is seeking to increase the supply of affordable housing for the key workers who service our cities. It is estimated $1 billion will be invested through the scheme, which will generate an additional $13 billion worth of new affordable rental housing.

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Trends Most economists admit Australian housing is entering a new cycle, one which will be driven by the changing demographics of ageing baby boomers and high population growth, due to more babies being born and higher immigration levels.

The trends that will appear for property to cope with this new cycle are: The Walkabout Factor: Property within walking distance of amenities such as schools, parks and shopping.

The Work Factor: Homes located close to growing new work nodes – which are no longer necessarily in the central business districts of large cities. Suburbs where middle managers in businesses in outer-lying commercial areas live are growing in value as more professionals value time with their family and try and avoid long commuting times.

The School Factor: Schools have always been a strong driver of property values, but with more children being born there will be more of a scramble to live close to quality private and public schools – especially those with good public transport access.

The Green Factor: Climate change, the emissions trading scheme and ageing energy infrastructure means industry experts estimate electricity prices will rise by more than 30 per cent in the next three years. Homes that are insulated, small, have energy-efficient appliances and good orientation will be chosen over older homes that require more electricity to remain comfortable.

Bring on the ethnic architecture: As immigration levels increase, particularly from Chinese and Indian countries, it is expected that more Asian influences in our homes, such as tiled floors and perhaps multi-family dwellings will be seen.

Home Alone: Single person households are expected to grow faster than any other household demographic category, according to research conducted by the Australian National University.

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New South Wales Outlook First National Real Estate State Chair, Mark Millington, anticipates New South Wales’ house prices will rise in the coming six months by between 0-5 per cent after experiencing increases of between 0-5 per cent in the last six months, due mainly to increased investor activity, as a result of low interest rates and high rental yields.

He also anticipates unit and land prices in the region will rise by up to 5 per cent as lower levels of established homes are available for sale, forcing buyers to building new homes.

He anticipates vacancy rates will also fall by no more than 5 per cent due given that the state’s vacancy rates are already low and he has no expectation that situation will change in the near future.

Mr Millington does expect, however, that rents will rise by up to 5 per cent given the shortage of available homes for rent.

Mr Millington attributes around 1-5 per cent of New South Wales’ sales activity in 2009 to investors and expects this to increase by 5-10 per cent in the first half of 2010.

“Investors will continue to be lured back into the market, as the high rental yields, low interest and vacancy rates will prove too attractive to ignore. When compared directly by investors, an unstable stock market makes bricks and mortar seem a more secure option for their investment dollars,” Mr Millington said.

Interest rates are predicted to increase in the first six months of 2010, and coupled with the removal of the First Home Owners Grant Boost it is expected there will be little or low impact as most of the first home buyers have already purchased and now investors are coming back into the marketplace, according to Mr Millington.

“I expect there to be some negative impact on housing affordability, although most buyers currently in the marketplace seem to be aware that interest rates could not stay at the current levels for a long period of time,” Mr Millington said.

The major buyers in the property market are Generation X – those aged between 32 and 45 years and it is predicted sales with this segment will increase over the next 12 months given planned new jobs and businesses in New South Wales.

The proposed introduction of the Government’s emissions trading scheme was viewed by Mr Millington with some caution. He believes it will be the homeowners who ultimately will make the difference.

“Emissions trading is a good place to start, but the real difference will be made by individuals, not by

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New South Wales Outlook companies,” Mr Millington said.

Changing Market Conditions There are a number of planned developments for New South Wales that may impact on the property market in the next six to 12 months including: • The planned $1.3 billion seawater desalination plant at Botany Bay • Development of a second bulk liquids berth at Port Botany at a cost of $75 million • The $1 billion expansion of container facilities at Port Botany • A $200 million intermodal logistics centre at Enfield, the largest fit-for-purpose facility of its kind in Australia Sydney’s population increase is expected to be at 14 per cent to 18 per cent for the period 2006-2021 - among the lowest for the nation.

Hot spots According to Mr Millington, New South Wales’ hot spots are city and coastal areas where he expects there will be consistent price growth because of lower supply of property for sale and increasing buyer demand.

The best affordability will likely be in regional NSW allowing first homebuyers and investors opportunity to secure property.

Other reported hot spots include: • Sydney’s inner west, which is considered a hot spot for first-home hopefuls and professionals with a median house price of $760,000 in the September quarter • Ashfield, where the median price has fallen 7 per cent in the past year • Erskineville, where the median price is still 12 per cent down on where it was a year ago; and • Leichhardt, where the median price has grown a mere 4 per cent in the past six months, underperforming Sydney as a whole.

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Trends Mr Millington said, in his experience, the energy efficiency features that are most popular with homebuyers, and therefore potentially make a home more saleable, are water tanks and solar hot water.

“Currently 1-5 per cent of our customers seek energy efficient features when looking to buy a new home,” Mr Millington said.

There is talk that the Federal Government is considering an energy efficiency regulation of new dwellings, which would introduce a six star-rating system aimed at reducing Greenhouse gas emissions. Mr Millington believes this will have no impact on energy consumption, but would increase the cost of new dwellings.

“Ultimately I do not believe the government should adopt a star rating system, but focus on education and clean power generation,” Mr Millington said.

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Victoria Outlook First National Real Estate State Chair, Ross Nielson, anticipates Victoria’s house, land and unit prices will rise in the coming six months by between 0-5 per cent after experiencing increases of between 10-15 per cent in the last six months, due mainly to a shortage of housing stock.

He anticipates vacancy rates to rise by no more than 5 per cent and that rents will stabilise, again due to poor availability.

Mr Neilson attributes around 10-20 per cent of Victoria’s sales activity in 2009 to investors and expects this to increase by 5-10 per cent in the first half of 2010.

“Investors will continue to be attracted back into the market, after they have been absent for a year or so, as government initiatives impact on the market that is traditionally the space they operate in,” Mr Neilson said.

“Now that much of the stimulus activity is dying down, they are being lured back in with attractive market conditions like relatively low interest rates and less competition at the lower end.”

Interest rates are predicted to increase in the first six months of 2010, and coupled with the removal of the First Home Buyers Boost it is expected there will be a minimal impact on affordability if interest rate hikes are not too excessive, according to Mr Neilson.

The major buyers in the property market are Generation X – those aged between 32 and 45 years and it is predicted sales with this segment will increase over the next 12 months given planned new jobs and businesses in Victoria.

The proposed introduction of the Government’s emissions trading scheme is expected to impact ultimately on the consumer, according to Mr Neilson.

“Something as costly as this is ultimately paid for by the consumer and if the scaremongers are correct, the financial impact could be noticeable,” Mr Neilson said.

With a stable economic outlook, and strong fundamentals underlying the Melbourne market, there is growing consensus that 2010 just might herald a return to a rising market.

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Victoria Outlook Changing Market Conditions There are a number of planned developments being touted for Victoria that may impact on the property market in the next six to 12 months including: • Rumours of a very large apartment development under the NRAS scheme, which could impact the lower end of the rental market • A $3.1 billion desalination plant at Wonthaggi Melbourne’s predicted population increase is expected to be 25 per cent for the period 2006-2021 – among the highest for the country.

Hot Spots Reported hot spots for Victoria include: • Upwey and Lysterfield who were the star performers for the September quarter, with house prices jumping 13.9 per cent in Upwey to $410,000 and 24 per cent in Lysterfield to $607,550 • Suburbs located along tollway corridors such as EastLink making access to major infrastructure and city routes much easier and more desirable • New housing areas which offer great value for first homebuyers • Coastal towns, like Queenscliff and Point Lonsdale, are also on the rise again as the economic outlook brightens.

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Trends Mr Neilson said, based on his experience, the energy efficiency feature that is most popular with homebuyers, and therefore potentially makes a home more saleable, is water tanks. “Currently 5-10 per cent of our customers seek energy efficient features when looking to buy a new home,� Mr Neilson said.

There is talk that the Federal Government is considering an energy efficiency regulation of new dwellings, which would introduce a six star-rating system aimed at reducing Greenhouse gas emissions. Mr Neilson believes this is potentially a good thing for the property industry, and a chance for it to have an even further positive effect on the environment. However, Mr Neilson believes it should be restricted to new homes, as older homes would be unfairly discriminated against and their values decreased.

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Queensland Outlook First National Real Estate State Chair, David Hamilton, anticipates Queensland’s strong Gold Coast Market will ensure house and unit prices rise in the coming six months by no more than 5 per cent after experiencing increases of between 5-10 per cent in the last six months, due mainly to increased first home buyer activity and a shortage of housing stock.

He anticipates vacancy rates in the region will stabilise in the first six months of 2010 and rents rise by no more than 5 per cent, due mainly to a rental property shortage.

Currently, Mr Hamilton attributes around 10-20 per cent of Queensland’s sales activity to investors and expects this to increase by more than 20 per cent in the first half of 2010.

“Investors will continue to be attracted back into the market, as opportunities grow for income and capital gains, and return on shares move below 5 per cent,” Mr Hamilton said.

“Investors will now begin to replace first home buyers in sales activity and the removal of the First Home Owners Grant Boost, through which many renters bought their own place, will mean the volume of available rental properties has shrunk.

“If investors do not come into the market, there will be some softening at the bottom, particularly in cheap three storey walk-ups.”

Interest rates are predicted to increase in the first six months of 2010, and in the light of increased investor activity and reducing numbers of first homebuyers, it is predicted affordability may become more difficult.

“The increases have been telegraphed by the Reserve Bank and factored in,” Mr Hamilton said.

“High inflation, because of the amount of stimulus money going into the economy and government competition for funds could lead to a more than 1.5 per cent increase and throw the whole thing out.”

The major buyers in the property market are Generation X – those aged between 32 and 45 years and it is predicted sales with this segment will increase over the next 12 months given the attractiveness of the Queensland market, particularly the Gold Coast and Tweed region.

The proposed introduction of the government’s emissions trading scheme is expected to delay any real movement on more energy efficient housing, according to Mr Hamilton.

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Queensland Outlook Changing Market Conditions There are a number of planned developments for Queensland that may affect the property market in the next 6 to 12 months including; • The $3.8 billion Queensland section of the PNG to Gladstone gas pipeline • A $1 billion Western Corridor recycled water project in Queensland • Already underway is Brisbane’s North-South Bypass Tunnel and the Gateway Bridge • The construction of berth 10 and completion of the Grain Berth at Port of Brisbane • The state government’s South-East Plan, the largest infrastructure programme in the country, containing 378 identifiable projects and 32 new projects at an estimated investment of about $1.9 billion The local economy in Mackay has boomed in recent years, thanks to nearby mining communities.

Rents have skyrocketed, with the greatest impact on key workers, young people and pensioners.

Some people, who have lived in Mackay all their lives, have had to leave town due to an inability to afford to live there any longer.

A similar situation exists for Emerald and Gladstone.

Developers are still working on 2007 planning approvals and for Queensland to have any hope of addressing much of its housing shortage dilemma, new planning processes are required to make securing approvals much easier.

Brisbane is expected to have one of highest population growths for Australia, in line with Perth, at 32 to 35 per cent for the period 2006-2021 and is expected to have the highest demand for a house within Australia, while South-East Queensland is expected to have the second highest demand for apartments.

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Hot Spots According to First National Real Estate State Chair, David Hamilton, Queensland’s hot spots will be “anywhere on the Gold Coast and Tweed because of population growth”.

South-East Queensland is another hot spot, with predictions of up to 18,000 homes needing to be built in new residential estates each year for the next two decades if the region is to meet the forecast growth projections, developers say.

Trends Mr Hamilton said, based on his experience, the energy efficiency feature that is most popular with home buyers, and therefore potentially makes a home more saleable, is water tanks.

“Currently 5-10 per cent of our customers seek energy efficient features when looking to buy a new home,” Mr Hamilton said.

There is talk that the Federal Government is considering an energy efficiency regulation of new dwellings, which would introduce a six star-rating system aimed at reducing Greenhouse gas emissions.

Mr Hamilton believes this will slow down the supply of new housing for Queensland and that the Government should not adopt a star rating system, but focus on education and clean power generation.

While listings have been slow coming on the market for the past three months, Mr Hamilton expects people will take advantage of good selling conditions and list more property in the first half of 2010.

“More listings equal more sales,” Mr Hamilton said.

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South Australia Outlook First National Real Estate State Chair, Russell Burton, anticipates South Australia’s house, land and unit prices will rise in the coming six months by no more than 5 per cent, given anticipated interest rate rises and the ending of the First Home Owners Grant Boost. This follows increases of between 5-10 per cent in the last six months, due mainly to increased first home buyer activity and the attractiveness of low interest rates.

Mr Burton anticipates vacancy rates in the region to stabilise in the first six months of 2010 and rents to rise by no more than 5 per cent, due mainly to the unchanged supply and demand conditions of the past 12 months.

Currently, Mr Burton attributes around 1-5 per cent of South Australia’s sales activity to investors and expects this to increase by between 10-20 per cent in the first half of 2010.

“Investors will continue to be attracted back into the market, as competition is reduced from first home buyers, returns improve and property offers a solid alternative to the stock market as an investment choice,” Mr Burton said.

“Investors will go some way to replace first home buyers in sales activity although I expect first home buyers will continue to play a role in the market on an ongoing basis.

“The demand for rental property should continue, with a major portion of first home buyers having already left the rental market and stimulation from industry growth and immigration continuing.”

Interest rates are predicted to increase in the first six months of 2010, which is expected to have a negative impact on affordability.

“Obviously affordability will be affected in a negative way with any interest rate rise however, I believe the rise should only be marginal, not much – if anything, no more than 1 per cent over the year,” Mr Burton said.

“But this is dependent on many factors and any increases should be offset by a strengthening economy and subsequent rise in rents.”

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South Australia Outlook The major buyers in the property market are Generation X – those aged between 32 and 45 years and it is predicted sales with this segment will increase over the next 12 months as they seek to trade up in what are still attractive market conditions.

The proposed introduction of the government’s emissions trading scheme is not taken too seriously

by Mr Burton.

“Emissions trading is just hot air, we need to do something more practical at the home owner level,” Mr Burton said.

Changing Market Conditions A key infrastructure project designated for South Australia is the $2 billion desalination plant, already underway and ahead of schedule but continuing to supply excellent employment opportunities and a growing need for housing accommodation.

Major defence contracts will be a major driver of the South Australian property market according to Mr Burton.

“South Australia is known (amongst some other claims) as The Defence State and with some major projects such as the $8 billion construction of Air Warfare Destroyers, the $235 multi-million dollar Collins Class Submarine project, the Orion Aircraft Sustainment Programme together with the relocation of 7th RAR Battalion from Darwin to Edinburgh, there has and will continue to be, a stimulus for the Adelaide economy.”

This is good news for South Australia, which should enjoy a burgeoning economy in 2010, and an even more prosperous property market.

Adelaide is expected to have one of the lowest population increases for the country, at 14 to 18 per cent for the period 2006-2021.

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Hot Spots State Chair, Russell Burton, anticipates hot spots for South Australia will be wherever there is room for the redevelopment of older housing on larger allotments, creating affordable, higher density low maintenance homes with good returns and excellent growth potential, within a radius of 10-20 kms of the city.

Now is said to be a great time to buy property in Adelaide with unprecedented government investment in infrastructure creating thousands of jobs and having a massive impact on future property values in regenerated areas.

Trends The energy efficiency features that are most popular with home buyers, and therefore potentially make a home more saleable are, according to Mr Burton, water tanks, approved garden watering systems and native, drought tolerant gardens. “Currently 5-10 per cent of our customers seek energy efficient features when looking to buy a new home,� Mr Burton said.

There is talk that the Federal Government is considering an energy efficiency regulation of new dwellings, which would introduce a six star-rating system aimed at reducing Greenhouse gas emissions. Mr Burton believes this is potentially a good thing for the property industry, and a chance for it to have an even further positive effect on the environment. However, Mr Burton believes the Government should take a holistic approach, applying regulations to all residences equally.

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Western Australia Outlook First National Real Estate State Chair, Cambell Giles, anticipates Western Australia’s house, land and unit prices will rise in the coming six months by no more than 5 per cent, as a result of continued growth in the state’s resources market which should flow through to the Perth market. This follows increases of between 5-10 per cent in the last six months, due mainly to a shortage of supply with the number of homes for sale in Perth at a two-year low in 2009.

He anticipates vacancy rates and rents in the region will stabilise in the first six months of 2010.

Currently, Mr Giles attributes around 10-20 per cent of Western Australia’s sales activity to investors and expects this to increase by between 1-5 per cent in the first half of 2010.

“Investors will continue to be attracted back into the market, as the serviceability of houses in the cheaper areas is still making investment a strong option to investors,” Mr Giles said.

“Investors are expected to replace first home buyers in sales activity to some extent although I expect first home buyers will continue to play a role in the market on an ongoing basis.

“First home buyers are still receiving some form of grant and, as such, their activity should not change too much in terms of general market share.”

Interest rates are predicted to increase in the first six months of 2010, but it is tough lending criteria and changes in bank lending policy which are having a greater impact, according to Mr Giles.

The major buyers in the property market are Generation X – those aged between 32 and 45 years and it is predicted sales with this segment will increase over the next 12 months due to new jobs and businesses in the region.

The proposed introduction of the government’s emissions trading scheme is received with mixed feelings by Mr Giles.

“Emissions trading is a good place to start but the real difference will be made by individuals, not by companies,” Mr Giles said.

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Western Australia Outlook Changing Market Conditions Western Australia is expected to grow faster than other parts of Australia, with predictions of population growth in the order of 14.5 per cent to 17 per cent of net migration, whereas Western Australia has approximately 10 per cent of Australia’s population at present.

Migration to Perth will be higher than regional Western Australia, and the highest in Australia, with population increasing 32 per cent to 35 per cent in the period 2006 to 2021.

In terms of housing demand, demand for apartments in Perth is expected to be in excess of 52 per cent, compared to the rest of Western Australia where demand is expected to be in the vicinity of 36 per cent. This represents the highest demand for apartments in all of Australia.

Demand for a house in Perth is second only to Brisbane.

As demand for Australian resources increases, the desirability of Western Australia also increases, further enhancing the opportunities for investment in the state by government and private investors.

According to First National Real Estate Western Australia State Chair, Mr Cambell Giles, “The announcement of the $50 billion Gorgon Gas project will bring Western Australia again to the attention of the property investment dollars from around Australia.�

Another key project planned for Western Australia includes the $800 million second pipeline from the North West shelf to onshore Western Australia.

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Hot Spots Cambell Giles anticipates hot spots for Western Australia to be: • Bassendean – 9km from Perth and still enjoying a median house price range under $500K, on a major rail line and conveniently located near Midland • Thornlie – 15 km from Perth with quality amenities and affordable housing • Halls Head – representing good value money based on Mevac Developments in infrastructure adjoining the waterways and family living • Hammilton Hill – close to Fremantle and close to the new marina and adjoining the more affluent suburbs • Scarborough – which still has some very affordable properties for coastal living.

Trends Mr Giles said, based on his experience, the energy efficiency features that are most popular with home buyers, and therefore potentially make a home more saleable, are water tanks, approved garden watering systems, solar hot water and power, and native, drought tolerant gardens.

“Currently 10-15 per cent of our customers seek energy efficient features when looking to buy a new home,” Mr Giles said.

There is talk that the Federal Government is considering an energy efficiency regulation of new dwellings, which would introduce a six star-rating system aimed at reducing Greenhouse gas emissions. Mr Giles cautions that imported building products could replace locally made materials and local jobs, were such a system implemented.

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Tasmania Outlook First National Real Estate State Chair, Deanne Lamprey, anticipates Tasmania’s house, land and unit prices will stabilise in the coming six months, mainly as a result of the recent announcement of up to 1000 job losses in the region, with the closing of McCains’ Wesley Vale and Burnie mills next year.

“The $20 million joint government assistant package should help with these losses on the coast,” Ms Lamprey said.

Ms Lamprey said a large number of units were being constructed with prices starting from the high $200K range. These are primarily being purchased by retirees, thereby stabilising the increasingly competitive apartment property prices in Tasmania.

“The shortage of skilled labour and builders in Tasmania means land prices will also stabilise because not as many new homes are being built as are needed.”

The slow down in the Tasmanian property market, according to Ms Lamprey, follows increases in house prices of up to 5 per cent in the last six months of 2009, driven mainly by the first home buyer market under $200K. “At the end of June, 160 properties were listed in Burnie and 28 properties listed in Somerset, after 261 recorded sales in Burnie, with a median of $202,500 and 44 in Somerset with a median of $219,800 for the first six months of 2009,” Ms Lamprey said.

“As at the 14 December, 231 properties listed in Burnie and 48 in Somerset, with 22 recorded sales in Somerset with a median of $215,000 and 112 in Burnie with a median of $210,000.”

Unit prices in Tasmania stabilised in the second half of 2009, and land prices fell.

“Vacancy rates rose by up to 5 per cent, partly as a result of renters now becoming first home owners as well as job losses in the area with more predicted for the first six months of 2010,” Ms Lamprey said.

Rents in the region stabilised as the higher vacancy rates dictate rents, although Ms Lamprey feels these may fall slightly over the next six months.

“Our office is starting to see an increase in applications for properties, so I think available rentals will be snapped up quite quickly.

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Tasmania Outlook “Rents will also stabilise as a large choice of properties remains available for potential tenants to choose from.”

Currently, Ms Lamprey attributes around 10-20 per cent of Tasmania’s sales activity to investors and expects this to increase by an additional 15-20 per cent in the first half of 2010.

“The reduction in the First Home Owners Grant Boost at the end of December will drive this change in investor activity,” Ms Lamprey said.

“We have received many comments from investors that they will consider purchasing again once the Boost ends as they do not want to compete with first home buyers who they feel have pushed prices up in the market. As always, investors are looking for bargains.”

Ms Lamprey believes investors will inevitably replace first home buyers in the market.

“While we are seeing a reduction in the number of sales, prices are stable and investors are already coming back and I expect this trend to continue,” Ms Lamprey said.

Interest rates are anticipated to increase in the first six months of 2010, but Ms Lamprey said we are still enjoying interest rates at record lows, and with superannuation performing poorly, property is seen as a safe investment.

“We are probably the most affordable state in the country, with prices not rising dramatically,” Ms Lamprey said.

“Gross rental returns remain at approximately 6 per cent, representing excellent investment opportunities.”

The major buyers in the property market are Generation X – those aged between 32 and 45 years but it is predicted sales with this segment will decrease over the next 12 months as a result of job insecurity in the region.

The proposed introduction of the government’s emissions trading scheme will have a minimal positive impact on the property market.

“Emissions trading is a good place to start, but the real difference will be made by individuals, not by companies,” Ms Lamprey said.

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Changing Market Conditions A key project in Tasmania which may offset some of the job losses from the McCain’s closures is the $195 million fast-tracked upgrade of Tasmania’s rail network, which produces the potential for ongoing employment opportunities for a number of years.

However, Hobart has an expected population increase for the period 2006-2021 of between 14 per cent and 18 per cent, among the lowest for Australia.

Another development which may impact the local Tasmanian property market is the commencement of Section 10 of the Property Agents and Land Transaction Act from 1 July, which will introduce cooling off periods, vendor statements and more.

Trends There is talk that the Federal Government is considering an energy efficiency regulation of new dwellings, which would introduce a six star-rating system aimed at reducing Greenhouse gas emissions.

Ms Lamprey is not a strong advocate of the scheme as she believes the resultant imported building products could replace locally made materials and cause even further job losses.

“I also think the government should take a holistic approach, applying regulations to all residences equally,” Ms Lamprey said.

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2010

Property Outlook

34 First National Real Estate 2010 Property Outlook

Northern Territory Outlook Darwin property values continued to grow through 2009 with increases of 26.9 per cent and 15.7 per cent in house and unit median values. Pressure from an increasing population along with economic growth surrounding current gas and oil projects has fuelled these increases.

Vacancy rates of both houses and units have been extremely low due to strong demand and a continuing shortage of housing stock. Good news for investors has been the significant increase in rents received for both houses and units.

It could be said that the future will be more of the same with some very large resource based projects proposed for Darwin. Land release has been a major issue and the government has moved to release more in an effort to cope with increasing demand.

Alice Springs is the second largest population centre in the Territory and services cental Australia.

The story here is much the same with median house and unit values increasing by 30.4 per cent and 32.9 per cent respectively for the year to the end of the September quarter. Again, 2010 should be more of the same.

Pressure from major government projects plus possible future mining in the region will keep vacancy rates low, currently less than 1 per cent and put upward pressure on property values. Alice Springs has also seen strong increases in rents of between 8 per cent and 35 per cent for different sectors of the rental market.

Changing Market Conditions The Darwin market could change dramatically with the confirmation of a number of projects especially the $20 billion Inpex gas plant, which is expected to be a catalyst for development, driving economic growth and social growth in the city and beyond if it proceeds.

Preliminary announcements have already had a significant effect on speculation in Darwin, however, the final go ahead is not due until early in 2011. Principal of O’Donoghue’s First National, Jeremy O’Donoghue, says that an Inpex briefing indicated that over $200 million would be spent on an environmental impact assessment before November this year. ‘The expectation in Darwin is that the project will almost certainly proceed’ says Mr O’Donoghue.

Projects of this calibre will place huge pressure on existing housing stocks, land subdivision and government infrastructure. The Inpex Project alone would employ up to 2,000 people at the peak of construction, and create about 300 new ongoing jobs. Should the Sunrise project also proceed, enormous pressure will be placed on the labour market, as well as the property market, with an additional 1,000 workers required during its construction.

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Northern Territory Outlook Hot Spots Should the Inpex project proceed, Darwin will become the heart of an international gas hub in the Territory, securing its future for decades to come with jobs for Territorians, business opportunities for Territorians and investor confidence in a whole area of the economy. Darwin, of course, will be its epicentre, changing the face of this thriving community forever.

The Alice Springs market is also very hot at the moment, in all sectors especially the unit and middle market for houses.

In an effort to provide more affordable land, the Government has been advertising a proposed development and changes to the planning scheme for the area south of Heavitree Gap. Opportunity may exist for home builders to buy prestige land in the second stage of the Mt Johns Valley likely to be released during the year. We suspect houses in the Golf Course area are still a little undervalued and may present good buying opportunities in the near future.

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2010

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First National Real Estate 2010 Property Outlook 37

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