Property Market Outlook 2012 by First National Real Estate

CONTENTS INTRODUCTION

NATIONAL OUTLOOK

MARKET TRENDS

COMMERCIAL PROPERTY MARKET

RURAL/REGIONAL PROPERTY MARKET

CHANGING MARKET CONDITIONS

BURLEIGH OUTLOOK 16 NEW SOUTH WALES OUTLOOK

VICTORIA OUTLOOK

QUEENSLAND OUTLOOK

SOUTH AUSTRALIA OUTLOOK

WESTERN AUSTRALIA OUTLOOK

TASMANIA OUTLOOK

NT/ALICE SPRINGS OUTLOOK

SOURCES

2012 PROPERTY MARKET OUTLOOK FIRST NATIONAL REAL ESTATE

INTRODUCTION First National Real Estate has again surveyed its 350+ member network to provide its 2012 Property Market Outlook. This Outlook serves to contrast actual market conditions with the predictions of economic commentators and property market analysts. First National Real Estate members are broadly distributed across Australia, throughout cities, suburbs and country towns. As such, the network’s estate agents are exposed to mainstream Australia and are intimately acquainted with the views of the public, their response to government initiatives, their levels of confidence and their approach to property investment. Our agents’ survey responses have been compiled to develop a picture of the Australian property market’s performance over the last six months, and their outlook for the coming six to twelve months. Results and trends highlighted in this document represent the majority view across all respondents. A full breakdown of survey responses can be provided if requested. There is an overall Australian outlook, followed by a state-by-state outlook and then, most importantly, an outlook that provides an in-depth overview of what the residential, rental and commercial property markets are doing at the local level. 2011 saw the worst floods and cyclones in a generation, a European debt crisis which may yet worsen (even potentially resulting in the collapse of the Eurozone), rising living costs and a spate of industrial disputes. The global economy has softened, terms of trade peaked and inflation is likely to be consistent with the RBA’s 2–3 per cent target in 2012 and 2013. As a result, Australia continues to have a two-speed economy with weak sentiment but a strong corporate sector, which makes it an opportune time to invest domestically. The Australian share market has been susceptible to the US money market and volatile European economies, creating uncertainty and nervousness amongst consumers, businesses and investors alike. Add to that local Australian events, such as political instability, the impact of new government taxes and charges, lack of clarity about future interest rates, rising job insecurity as well as volatile asset markets, and consumer sentiment starts to weaken.

FIRST NATIONAL REAL ESTATE 2012 PROPERTY MARKET OUTLOOK

INTRODUCTION However, in light of all this, there is still some optimism amongst Australians, bringing their traditional “she’ll be right mate” attitude to the fore. A recent survey found the majority of Australians, six out of 10, believe the economy will remain strong and that the property market will improve. Already there are signs that things can only get better on the property front: • Larger crowds are attending auctions • Real estate agents are experiencing increased numbers of enquiries. Our own survey of members reveals there has been a strong increase in activity by upgraders and investors • Auction clearance rates stabilised early in 2011, and, apart from the final weeks of December, are slowly creeping up. In Melbourne alone, during November, around 1,000 auctions were held (clearing around 50 per cent), making it one of the busiest periods of the year. In Sydney, the last weekend in November was one of the best-selling weekends for this spring, with 55 per cent of properties reportedly being cleared from around 1,100 scheduled auctions • First home buyers and investors are also being tentatively tempted back into the market. First National members indicate investor activity represents one of the strongest growth areas over 2011, along with upgraders. First home buyers are starting to become active again, and 12 per cent of our members indicate they expect this to strengthen in 2012 as prices bottom out • Interest rates are coming down after a sustained period of stability. The rate cut on 1 November this year was the first one for eight months. A second rate cut in December may be followed by a third in the New Year. Any rise in interest rates will slow, if not hinder, the market in Australia. While demand is still expected to remain relatively soft into 2012, a recent sharp rise in the “time to buy a dwelling” index may be the cue for a housing upturn. This will, however, be dependent on ongoing interest rate cuts, job security and resulting positive consumer sentiment. Our members optimistically indicated they expect interest rates to drop further. Cuts in interest rates of up to 0.5 per cent are expected although they could be as much as 0.75 per cent or even 100 basis points. Any future interest rate cuts are expected to bolster the market and create renewed interest, as well as stimulate buyer activity as confidence to buy will improve and refinancing options will be considered, ultimately strengthening the property market.

2012 PROPERTY MARKET OUTLOOK FIRST NATIONAL REAL ESTATE

INTRODUCTION On the other hand, any increases to interest rates may see an escalation of mortgage distress, particularly among the more exposed households, which may result in a moderate decline, of an average 10 to 15 per cent, in residential property prices. There is evidence, however, that households continue to have a capacity to take on debt, and household savings continue to climb. Currently households are saving more than in the past two decades and there has been a moderation in borrowing behaviour. There appears to be a general recognition that the property market is less able to replace stock market losses incurred since late 2007, and that homeowners need to actively save more. While home buyers appear more cautious about buying property at the moment, this is seen more as a result of economic perception, rather than their actual personal financial status. Most adults are not particularly debt stressed. Consumers have put themselves into the position to act when confidence returns â&#x20AC;&#x201C; high savings means they are probably waiting for the right time to buy. Population growth, which was running at levels not seen since WWII, peaked in December 2008 at 2.2 per cent per annum. Since then, the growth rate has declined marginally to 1.4 per cent in the year to 30 June 2011. In real terms though, this means there was still an increase of 320,800 persons and in all states and territories, positive population growth has occurred. This puts upwards pressure on housing demand and will continue to underpin the market. The underlying strength of the Australian economy and the continuing shortage of residential housing in Australia, together with stable interest rates, are expected to largely support Australian housing prices, despite the slowing correction evident in some markets. Current strong levels of affordability are expected to continue, and may even improve. A long period of stable prices, while wages growth outpaces any changes in house prices, will help to improve affordability. Ongoing uncertainty concerning global economic conditions is expected to continue to affect the property market and cap house prices generally. But an important note for property pundits is that the Australian housing market is affected by daily international updates as well as foreign and local commentary. Consumer sentiment is therefore likely to remain variable throughout 2012 and global shocks could dampen market performance periodically, or protract recovery. 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 anticipated market directions only. First National Real Estate takes no responsibility for actions taken on the basis of this report and encourages all vendors and buyers to conduct their own research.

FIRST NATIONAL REAL ESTATE 2012 PROPERTY MARKET OUTLOOK

NATIONAL OUTLOOK Buyer confidence will be a driving factor in any property market recovery in Australia and will driven by a combination of interest rates, local market conditions and the global economy generally. The majority of First Nationalâ&#x20AC;&#x2122;s state chairmen said buyer confidence had weakened over the last six months, while the remainder said it had improved. What this clearly underlines is the two speed nature of Australiaâ&#x20AC;&#x2122;s property market and the patchiness of demand nationally. However, all Chairmen were unanimous in saying buyer confidence would improve in the coming six months, as a result of lower interest rates, coupled with improving local market conditions and a more stable global economy. The state chairmen also indicated that they consider there is potential for an increase in mortgage defaults, due to rising unemployment, poor lending criteria, interest rate rises, job losses and increased living costs. Some states are already experiencing an increase in mortgage defaults because of worsening global economic conditions and job losses. Any hot spots around the country will be driven by access to amenities, lifestyle preferences and affordability. According to our chairmen, the key challenges for the 2012 property industry will be levels of consumer confidence, affected by the global economy, reduced job security, government policy and legislative changes such as the introduction of the carbon tax and Minerals Resource Rent Tax, changes to first home buyer grants, and interest rates.

2012 PROPERTY MARKET OUTLOOK FIRST NATIONAL REAL ESTATE

MARKET TRENDS RESIDENTIAL The residential market is anticipated to remain subdued in 2012 as consumers continue to pay off debts. However, falling house prices should stimulate some activity, particularly among bargain hunters who have been squirreling away savings and are now cashed up. According to members responding to First National’s 2012 Property Outlook Survey, the vast majority said the market had steadied or fallen (see table below).

Type of Market – Last Six Months 2011 National

VIC

TAS

QLD

SA NSW/ACT

Falling

58%

33%

81%

94%

80%

43%

36%

Steady

36%

34%

19%

–

13%

57%

59%

Rising

33%

–

It is expected the market will further moderate, although some areas have the potential to experience an even greater decline.

Type of Market – First Six Months 2012 National

VIC

TAS

QLD

SA NSW/ACT

Falling

25%

–

31%

–

20%

29%

32%

Steady

66%

83%

69%

89%

60%

71%

59%

Rising

17%

–

20%

–

PROPERTY PRICES It is unlikely uniform property prices will be seen in the 2012 Australian real estate market. Some parts of the market will demonstrate greater price resilience, especially ‘muscle towns’ with direct links to the mining sector or specific agricultural regions. Other parts of the housing market may experience strong price deflations. Prices will stagnate in the main, but this is a normal part of Australia’s long-term cyclical housing market.

FIRST NATIONAL REAL ESTATE 2012 PROPERTY MARKET OUTLOOK

MARKET TRENDS The housing market across Australia has remained soft, with home values dropping in all capital cities for an average dwelling price in October this year of $448,500. Residential property prices are expected to bottom out in 2012, especially if official interest rates are cut below their current 4.25 per cent. The Sydney market will stabilise first, as it has already shown signs of doing, but for some of the other capital cities, like Melbourne, there could still be some way to go. City

Movement Year on Year

Median Dwelling Price

Sydney

-1.1%

$498,000

Canberra

-1.1%

$475,000

Brisbane

-8.0%

$402,000

Melbourne

-5.4%

$458,500

Adelaide

-5.2%

$370,000

Perth

-5.0%

$443,000

Hobart

-4.0%

$310,000

Darwin

-3.1%

$458,000

Regional

-3.4%

$316,000

Lower house prices are the trend anticipated by our members responding to the 2012 Property Market Outlook survey. The combination of lower interest rates, cheaper homes and rising incomes is generating a welcome boost to housing affordability, particularly in those markets where value falls have been more significant. In the coming six months, the majority of our members believe house prices will remain flat, or decrease, with only a small portion saying they may trend upwards.

2012 PROPERTY MARKET OUTLOOK FIRST NATIONAL REAL ESTATE

MARKET TRENDS House Prices – Next Six Months Movements in house prices are expected to be mainly within the vicinity of 1 to 5 per cent, but the majority of survey respondents anticipate them to be less than 1 per cent. Small pockets of Victoria, South Australia and New South Wales/Australian Capital Territory may experience drops of around 10 per cent. National

VIC

TAS

QLD

SA NSW/ACT

Flat

56%

50%

92%

47%

86%

55%

Downwards

28%

17%

50%

–

27%

14%

23%

Upwards

16%

33%

–

26%

–

22%

Tasmanian members all believe house prices will remain steady.

Apartment Prices – Next Six Months Apartment/strata property prices in the coming six months are expected to remain relatively flat although there could be some falls experienced. A small portion of the membership anticipates prices for this segment to rise. Movements for apartment/strata property prices are expected, in the main, to be below 1 per cent although some members say there is a possibility they could move as much as 5 per cent. A very small portion of the membership indicates price movements in the area of 10 per cent. National

VIC

TAS

QLD

SA NSW/ACT

Flat

55%

34%

56%

87%

42%

71%

60%

Downwards

32%

33%

38%

–

42%

29%

20%

Upwards

14%

33%

–

16%

–

20%

LAND PRICES According to the survey, most of our members expect land prices to remain flat, with some predictions for prices to head upwards, and some downwards. Any movements in land prices are expected to be mainly less than 5 per cent with some saying they may be as much as 10 per cent and a minority predicting movements of between 10 per cent and 20 per cent.

FIRST NATIONAL REAL ESTATE 2012 PROPERTY MARKET OUTLOOK

MARKET TRENDS Land Prices – Next Six Months National

VIC

TAS

QLD

Upwards

15%

17%

15%

–

20%

–

15%

Downwards

27%

–

39%

–

27%

29%

30%

Flat

58%

83%

46%

95%

53%

71%

55%

Trend

SA NSW/ACT

RENTAL MARKET Rental growth has been solid, with average gross yields on a capital city houses moving from 3.9% to 4.3%, and on units, from 4.7% to 5.1%. City

Yield – Units

Yield – Houses

Darwin (highest)

5.8%

5.3%

Melbourne (lowest)

4.3%

3.7%

Sydney

5.2%

4.5%

Brisbane

5.3%

4.7%

Adelaide

4.8%

4.3%

Perth

5.0%

4.6%

Canberra

5.5%

4.8%

Hobart

5.1%

According to our members, the majority expect weekly rents to increase while vacancy rates will reduce even further, or remain flat. Vacancy rates are expected to decrease by around 5 per cent, although there are some who believe they may be as much as 20 per cent.

2012 PROPERTY MARKET OUTLOOK FIRST NATIONAL REAL ESTATE

MARKET TRENDS Weekly Rents – Next Six Months Trend Upwards Downwards Flat

National

VIC

TAS

QLD

SA NSW/ACT

61%

100%

44%

–

53%

43%

77%

–

29%

14%

30%

–

50%

97%

47%

28%

Rents are increasing because of low vacancy rates and they are likely to continue rising, on average 5 per cent a year, but prices will remain subdued because of wariness about Europe’s debt problem, the US recovery and China’s slow down.

GROWTH Members surveyed believe the strongest growth in their region will come primarily from upgraders, followed by investors, then retirees and lastly, from first home buyers. Currently, investors outnumber first home buyers by 3 to 1 and make up around 40 per cent of the total market. National investor activity hit a new peak in September 2011, with reports of 37.7 per cent of all new loans purchased in September being for investment purposes – the highest percentage seen for more than a year. However, the benign interest rate environment anticipated throughout 2012 is expected to see first home buyer demand recover. Lower house prices in each capital city and in regional areas, as well as lending rate cuts are expected to spearhead renewed activity, and, by the end of the year, monthly first home buyer demand should be reflecting the underlying level of around 130,000 loans per annum. It is often the movement in first home buyer demand that creates flow-on effects across the rest of the market, providing impetus for other market segments to shift, and ultimately this should seeing the market strengthen even further as 2013 approaches.

National

VIC

TAS

QLD

SA NSW/ACT

Upgraders

38%

20%

19%

92%

50%

43%

36%

Investors

33%

60%

62%

–

13%

29%

27%

Retirees

15%

–

28%

98%

First home buyers

12%

20%

13%

–

20%

–

FIRST NATIONAL REAL ESTATE 2012 PROPERTY MARKET OUTLOOK

MARKET TRENDS Increased investor activity is expected to be mainly around 5 per cent on average nationally, although Victoria and South Australia expect it could be as much as 20 per cent.

Investor Growth Rate Expectations – Next Six Months National

VIC

TAS

QLD

17%%

–

15%

17%

32%

0-1%

SA NSW/ACT

1-5%

52%

83%

53%

86%

46%

50%

42%

5-10%

23%

17%

33%

–

23%

33%

16%

10%+

–

16%

–

10%

–

Investor activity is expected to be driven by the drop in home prices and lower interest rates, making homes more affordable and creating opportunities for investors to grab a bargain. Strong rental returns and higher yields will also prove too attractive for investors to ignore while share market jitters remain.

2012 PROPERTY MARKET OUTLOOK FIRST NATIONAL REAL ESTATE

COMMERCIAL PROPERTY MARKET Australia’s national office market is said to be one of the best performing commercial property subsectors – a position it is expected to retain in 2012, with capital value growth expectations of 2.8 per cent over the next 12 months. It currently outperforms the residential property market and this trend is expected to continue for some time to come. While the amount of empty space in Australian commercial real estate is falling, demand also appears to be moderating so rental growth is slowing with office and industrial space in Sydney and Melbourne. An overall slow down in the Australian economy as well as concerns about financial turmoil in Europe is beginning to take its toll. Buyers have become more cautious and finance has tightened, particularly affecting Sydney’s CBD. Current commercial market conditions have seen commercial property prices basically stabilised, with First National’s commercial members responding to the survey indicating price movements of below 5 per cent have been seen over the last six months. According to survey respondents, a lack of upward or downward movement in commercial property prices is due mainly to stagnated growth, resulting from market uncertainty around job security and global economic conditions. Survey respondents indicated vacancy rates were fairly stable over the last six months, although where members saw increases, they were mostly between 5 and 10 per cent. Moving into 2012, the commercial property market will continue to be a mixed bag, very dependent on the area and local market conditions, but the majority of survey respondents said they expected the market to stabilise. Where members anticipate an increase in prices, they believed it would be in the vicinity of up to 5 per cent, and any price falls would be below 10 per cent. It is expected to be a similar picture for commercial property rents and vacancy rates. For the first 6 months of 2012, all First National Commercial agents responding to the survey indicated they expect interest rates to decrease, which they hope will improve consumer confidence and stimulate Self Managed Super Funds to look into commercial property for their investment dollars. According to First National Commercial members, solar power remains the most popular energy efficient feature in a commercial property, making it more rentable.

FIRST NATIONAL REAL ESTATE 2012 PROPERTY MARKET OUTLOOK

COMMERCIAL PROPERTY MARKET Water recycling, the ability to open windows and motion sensor lights are also sought after energy efficient features. Most of our commercial members said they expected sales of commercial properties to increase in 2012, as a result of their regionâ&#x20AC;&#x2122;s attractiveness, trading up, or new jobs and increased businesses in the region. Growth in commercial property markets is expected to come mainly from the heavy and light industrial sector, followed by the office market and medical industry.

2012 PROPERTY MARKET OUTLOOK FIRST NATIONAL REAL ESTATE

RURAL/REGIONAL PROPERTY MARKET Regional Australia is experiencing some of the most difficult market conditions seen. Falling prices, non-committal buyers, unrealistic vendors and consistently negative market reporting for the majority of 2011 have eroded confidence. However, increased housing affordability, good rains in New South Wales, Queensland and Victoria, and interest rate cuts, should combine to inject some much-needed confidence into the regional housing market. Over 2011, regional property markets have been influenced by economic factors such as the strength of the Australian dollar, commodity prices, demand for Australian produce and nervousness around job security. As such, the market has stagnated but this is expected to change into 2012 as confidence slowly starts to build, eventually returning as the year progresses. While interest is expected to develop for rural and regional properties, especially in the lifestyle sector, according to our rural survey respondents, there is not expected to be much movement in prices. Turnover of farming properties is expected to remain relatively low, however this will be dependent on farmer debt levels, commodity prices and government policies and changes â&#x20AC;&#x201C; especially pertaining to the new carbon tax, council regulations in relation to development and zoning matters and general economic conditions both in Australia and overseas.

FIRST NATIONAL REAL ESTATE 2012 PROPERTY MARKET OUTLOOK

CHANGING MARKET CONDITIONS The introduction of the Governmentâ&#x20AC;&#x2122;s carbon tax is expected to affect the Australian property market in 2012 with most of our members saying it would have a negative impact on the housing market, reducing buyer confidence. Other impacts could be to house prices and rents, which may increase as a result. According to building industry groups, the new carbon tax is also expected to increase home building costs by thousands of dollars, and add 5 per cent to the cost base across the broader construction industry. Based on industry figures, construction of a new house and land package on average involves emissions of around 240,000 tonnes of carbon dioxide. On this basis, a carbon price of $20 per tonne would equate to an extra $6,000 in construction costs. Once the effect of stamp duty and GST is factored in, the cost of a new home would rise by more than $7,000. Overall, the effect of a carbon tax on the housing industry will be to reduce housing affordability, export jobs and substitute off-shore carbon dioxide emissions for local emissions with no net benefit to the environment. There is also nervousness around the impacts of the Minerals Resource Rent Tax, due to come into effect in July 2012. While this has potential benefits for our agents, being small business operators in the main, it is unknown whether it will affect consumer confidence, buyer confidence or prices. This serves to only add further to increasing levels of uncertainty.

2012 PROPERTY MARKET OUTLOOK FIRST NATIONAL REAL ESTATE

BURLEIGH OUTLOOK The Gold Coast property market is showing lots of potential for 2012, with signs already that a slow recovery is underway. In the last six months, the market has been falling, but this is expected to steady as 2012 begins and the effects of the floods and cyclones wear off, and interest rates reduce. The key challenge facing the regionâ&#x20AC;&#x2122;s property market in 2012 will be the lack of sales volumes and reducing consumer confidence. Interest rate drops will also prove a significant factor affecting the Gold Coast property market. The Commonwealth Games in 2018 has improved consumer confidence to some extent, although it will be years before any real benefit is garnered for the Gold Coast region. Although, it is expected, in the short term, that the government will start new construction in 2012 of many new sporting facilities and athletes village for the Games. Construction has been a massive part of the Gold Coast economy but in recent years has taken a dramatic drop resulting in many tradespeople having to commute to northern areas or in some cases, relocating their family to secure work in other states or North Queensland for the mining industry.

RESIDENTIAL MARKET Property Prices Property prices on the Gold Coast are expected to flatten in 2012 across all sectors of houses, apartment/strata and land with movements kept to below 1 per cent.

Rental Market Vacancy rates and weekly rent prices are expected to remain relatively flat in 2012, with movements kept to below 1 per cent.

FIRST NATIONAL REAL ESTATE 2012 PROPERTY MARKET OUTLOOK

BURLEIGH OUTLOOK Growth Investors are expected to represent the strongest growth in activity in the Gold Coast region with increased activity of between 1 and 5 per cent due to reduced prices, possible further rate cuts and increased consumer confidence in the area for construction jobs after securing the Commonwealth Games.

Changing Market Conditions Interest rates are expected to decrease by around 0.75 per cent which should serve to stabilise the market. There have been some increases in mortgage defaults for the Gold Coast region and this trend may continue for the first half of 2012 as a result of continued financial stress and increases in living costs. The introduction of the carbon tax is also expected to impact on the property market, further reducing consumer confidence.

2012 PROPERTY MARKET OUTLOOK FIRST NATIONAL REAL ESTATE

NEW SOUTH WALES OUTLOOK The current trend of a steadying market for New South Wales is set to continue into 2012, with the market improving as the year progresses. Sydney is tipped to be the star performer in both the residential and commercial property sectors. The reduction of First Home Buyer incentives on January 1, 2012, global economic conditions, housing affordability and interest rate decisions are said to be the key challenges to face the New South Wales property market for 2012, especially in the first half of the year. New South Wales has performed well against other states, due to the market cooling off earlier than the rest of the country and as a result of having escaped major impacts from natural disasters during 2011. This positions New South Wales well for 2012, which should place it ahead in the slow recovery process. However, exorbitant government head charges for building blocks (currently around $100,000 per standard block), are seen as stifling new housing development. This will need to be addressed for any planned land releases in 2012, especially if New South Wales is to halt the attrition of developers who currently find other states more attractive. Hot spots for the state in 2012 are considered to be inner city, coastal areas with access to freeways and better lifestyles after work, and mining areas in regional New South Wales. Regions performed solidly in 2011 and the Hunter Valley, in particular, distinguished itself – its economy boosted by infrastructure development and resources activity. Singleton, Branxton and Cessnock’s median prices rose by 8, 7 and 9 per cent and many Newcastle suburbs also put in solid performances. Construction of the $1.5 billion Hunter Expressway is doubtlessly playing a role in underpinning strong confidence. Gunnedah’s median price rose by 12 per cent and Narrabri by 8 per cent.

FIRST NATIONAL REAL ESTATE 2012 PROPERTY MARKET OUTLOOK

NEW SOUTH WALES OUTLOOK MARKET CONDITIONS Buyer confidence has improved in recent months and this trend should continue into 2012, with the biggest influence being interest rates. The majority of our members believe the market will gradually improve in the coming six to 12 months. Survey responses indicate buyer confidence, economic conditions, costs of living, government charges (such as stamp duty) and interest rates would be the key influencing factors on the market in 2012.

RESIDENTIAL MARKET Property Prices Property prices in New South Wales are expected to remain relatively flat across all sectors: House prices – Price movements of below 5 per cent are expected for houses, which will be subject to interest rate movements, the market bottoming out and pressure being maintained on supply, although this is expected to ease somewhat during 2012. Apartment/strata prices – There was general consensus that movements would, in the main, be below 1 per cent with some indications that they could be between 1 and 5 per cent. Apartment/ strata price movements will be due to inflated prices needing to be corrected. This will result in some decreases, but a shortage of supply to meet increasing demand in some locations may produce modest price rises. Land prices – Any increases would be mainly by up to 1 per cent, with a minor percentage of respondents saying they would be between 1 per cent and 5 per cent.

Rental Market Vacancy rates are expected to trend downwards in 2012 in New South Wales. High demand and short supply should see vacancy rates tighten by up to 5 per cent. In some areas, where there is an oversupply of rental properties, vacancy rates could ease mostly by below 5 per cent. Economic uncertainty and job insecurity are also anticipated to influence vacancy rates. Weekly rents are expected to head upwards, due mainly to a shortage of supply and high demand will continue to put upward pressure on prices. The majority expect these increases to be between 1 and 5 per cent.

2012 PROPERTY MARKET OUTLOOK FIRST NATIONAL REAL ESTATE

NEW SOUTH WALES OUTLOOK Any decreases in rents would be due to a combination of oversupply, economic uncertainty and job insecurity.

Growth Increases in investor activity are expected to be up to 5 per cent. According to New South Wales respondents, there is no clear driver of growth in 2012, athough upgraders were anticipated by the most, followed by investors, then retirees, and lastly from first home buyers. Any growth in activity, investor or other, will be driven by improved affordability as a result of falling home prices, lower interest rates and improved yields coupled with better returns.

Changing Market Conditions Interest rates are expected to decrease by NSW members, in the main, by around 0.25 to 0.5 per cent. Lower interest rates are expected to improve buyer confidence, stimulating the market, especially first home buyers, and building on investor momentum, which began in New South Wales at the end of 2011. Many expect the carbon tax to have an impact on the property market, with NSW members saying it will produce higher home and rent prices and reduce consumer confidence.

RURAL/REGIONAL MARKET Broadacre prices have decreased over the period 1 July 2011 to 30 November 2011, due to reduced buyer demand because of uncertainty of economic conditions and nervousness around job security. Lifestyle properties in the New South Wales regional market are still performing quite well, with the majority of members saying their prices were up â&#x20AC;&#x201C; mainly by around 10 per cent, although some said they were as much as between 20 and 50 per cent up.

COMMERCIAL MARKET The New South Wales commercial property market is expected to be fairly steady in 2012. While current commercial property prices have remained relatively stable in 2011, rents have dropped by up to 10 per cent, as a scarcity of bank financing and an uncertain economy drive businesses to try and maintain the status quo.

FIRST NATIONAL REAL ESTATE 2012 PROPERTY MARKET OUTLOOK

NEW SOUTH WALES OUTLOOK There have been some small increases in vacancy rates, which have led to rents dropping slightly in those areas. In the coming 6 months, the commercial property market in New South Wales is expected to stabilise. While demand is low, it will remain constant which means there is not a lot of room for movement in the market. It is expected that current stocks, where available, will be leased, but few new properties will come onto the market. Lower interest rates, which are expected to decrease in 2012, may encourage self-managed super funds to consider commercial property as a means of building their retirement wealth. New South Wales commercial property respondents said they believed the carbon tax would provide a good basis for change, but qualified that by saying they believed the real energy efficiency changes would be made by individuals. Many believed more practical solutions need to be sought at the commercial property owner level. The greater proportion of New South Wales commercial property respondents said between 1 and 5 per cent of their customers sought energy efficient features when looking to purchase or lease a commercial property, while others said it was between 5 and 10 per cent or more than 30 per cent of their customers. The most popular energy efficient feature that New South Wales commercial property respondents identified as making a property more rentable was solar power, followed equally by motion sensor lights and the ability to open windows. Most New South Wales commercial property members believed sales would decrease in the next 12 months, due to ongoing uncertain economic conditions forcing businesses to leave the region, or lack of available finance. Any increases in sales would be due to the individual regionâ&#x20AC;&#x2122;s attractiveness for business operators. In New South Wales, our members said light industrial would be the commercial property sector with the most growth in 2012, followed by the office market and medical.

2012 PROPERTY MARKET OUTLOOK FIRST NATIONAL REAL ESTATE

VICTORIA OUTLOOK The Victoria property market outlook for 2012 will be quite subdued and while there are signs of a recovery on the way, there is still some distance to go. The current falling market in Victoria is set to rebound in 2012, as the market steadies, after price corrections finally bring values to more realistic levels. Sales activity in Victoria is strong, but prices are dropping following substantial growth in house values between 2007 and 2011 of 45 per cent. Price growth will be low, due to record levels of new dwellings and recent state government land releases for new housing developments. These have started to address previous yearsâ&#x20AC;&#x2122; lack of supply. There has been a 65 per cent increase in housing stock as a result of the record building levels over the past year, and, it is hoped this will continue into the early part of 2012. Challenges for the 2012 property market are job security as well as business and Government leadership. Companies need to show confidence and continue to invest to make things happen. For this to occur, financial institutions need to be more flexible and encourage growth. Planning also continues to be an issue for many municipalities across the State. Victoria has already seen an increase in mortgage defaults since August 2011, as a result of increased pressure from financial institutions. It is expected this trend will continue in the next 6 months, influenced by job losses and an ongoing inability to meet big mortgage commitments when incomes are reduced or lost. 2012 hot spots for the state will be driven by amenities and lifestyle appeal and are considered to be inner city Melbourne as well as diverse regional areas with good infrastructure, well serviced by major transport routes such as Shepparton, Ballarat and Wangaratta. The western and eastern growth corridors of Melbourne will also continue to show modest growth, particularly Werribee, Melton, Sunbury, Warragul and Gippsland.

FIRST NATIONAL REAL ESTATE 2012 PROPERTY MARKET OUTLOOK

VICTORIA OUTLOOK MARKET CONDITIONS In the latter half of 2011, consumer confidence fell but it is anticipated to improve in the first 6 months of 2012 as a result of interest rates falling, the global economy strengthening and affordability improving. Victorian members said the market would steady, although a minority said they thought it would still fall. Survey responses indicate gradually improving buyer confidence is expected to be the result of lower interest rates and increased home affordability. These will be the key influencing factors on the market in 2012.

RESIDENTIAL MARKET Property Prices Victoria’s property prices are expected to remain relatively flat across all sectors, with some potential downward trends: House prices – Downward movements, in the main, are expected to be kept below 5 per cent. Apartment/strata prices – The subdued market would be as a result of oversupply and low demand. Land prices – In the main, price movements would be below 5 per cent as new subdivision releases ease the supply situation in some areas. Where supply is still short, price increases are being experienced, but these should level out in 2012.

Rental Market Vacancy rates are a bit of a mixed bag with 38 per cent of Victoria respondents saying they would trend upwards, easing by up to 5 per cent in the main; 25 per cent said they would trend downwards by 5 per cent; and 37 per cent saying they would remain flat. As affordability improves, more people are opting to buy in areas where supply is short for good quality rentals. As a result, there is increased competition among renters. In a soft market, people choose to rent rather than sell so while vacancy rates may tighten, the changes will only be marginal. Weekly rents are expected to head upwards or remain flat.

2012 PROPERTY MARKET OUTLOOK FIRST NATIONAL REAL ESTATE

VICTORIA OUTLOOK Growth Any increases in investor activity are expected to be in the vicinity of 5 per cent. Investor activity is expected to be the strongest growth segment, driven by improved affordability and attractiveness of regional Victoria, along with improved yields and rental returns. This would be followed by upgraders, then first home buyers, and then retirees.

Changing Market Conditions Interest rates are expected to decrease in the main, by between 0.25 to 0.5 per cent, although a few said they could be as much as between 1 and 2 per cent. Lower interest rates are expected to impact on buyer confidence, stimulating the market, especially investors, building on the momentum generated towards the end of 2011. The carbon tax is expected to have an impact on the property market, potentially producing higher home and rent prices, as well as reducing consumer confidence. The Victorian government has been able to keep a lid on government charges per block of land released to around $20,000, which has helped stimulate the new housing market.

COMMERCIAL MARKET Victoria is currently outperforming all other major office markets and it is expected to continue to set the pace until at least the first half of 2012. Melbourneâ&#x20AC;&#x2122;s office market is stronger than Sydney and its prospects over the next two years alone are bright, with a good balance struck between growth in rentals and affordability. The stateâ&#x20AC;&#x2122;s commercial property market is expected to remain strong in 2012, with very little change in market conditions although there is the potential for prices to rise by up to 5 per cent. Vacancy rates may rise by up to 5 per cent, as supply is currently meeting demand and rents will begin to stabilise, perhaps bringing them in line with other states. Lower interest rates, which are expected to further decrease in 2012, should strengthen the commercial property market and create more buyer interest.

FIRST NATIONAL REAL ESTATE 2012 PROPERTY MARKET OUTLOOK

VICTORIA OUTLOOK The introduction of the carbon tax is not expected to impact on the Victorian commercial property market to any great extent. Survey respondents were of the belief that more practical solutions at the property owner level are required. Half the Victorian respondents said between 1 and 5 per cent of customers seek energy efficient features when looking to lease a commercial property, the most popular attributes making properties more rentable being solar power and water recycling. Sales of commercial properties in Victoria are expected to increase in the coming 12 months, due to new jobs or business growth as a result of the regionâ&#x20AC;&#x2122;s attractiveness or trading up by existing local businesses. Heavy industry and the office market sectors are expected to represent the strongest growth areas for the Victorian commercial property market.

2012 PROPERTY MARKET OUTLOOK FIRST NATIONAL REAL ESTATE

QUEENSLAND OUTLOOK The Queensland property market is showing lots of potential for 2012, with signs already that a slow recovery is underway. In the last six months, the market has been falling, but this is expected to steady as we begin 2012 and the effects of the floods and cyclones wear off, and interest rates reduce. The mining sector will underpin activity in resource rich areas in 2012 but buyers in general will remain cautious, due to uncertain economies both here and overseas. Lower property prices and lower interest rates are increasing affordability. Spirits have lifted state-wide and with the announcement of the Commonwealth Games and the accompanying infrastructure investment, buyers should regain confidence in the market and return to the security of property investment. The key challenge facing the stateâ&#x20AC;&#x2122;s 2012 property market is a vastly more competitive property market, which will see stronger negotiations for better deals on price, terms, conditions and settlements. Another challenge will arise from the axing of the stamp duty concessions for owner-occupiers on 1 August 2011. The full implications of this decision are still being played out in Queensland, but it is expected it will deter some home buyers from a purchasing decision given the costs expected to be added to the home â&#x20AC;&#x201C; which may run into the thousands of dollars. Hot spots for the state will be driven around affordability issues and are considered to be around Gladstone, Sarina, Mt Isa and most towns at, or near to, the eastern seaboard or major mining and resources centres.

FIRST NATIONAL REAL ESTATE 2012 PROPERTY MARKET OUTLOOK

QUEENSLAND OUTLOOK MARKET CONDITIONS Queensland sales volumes dropped significantly throughout 2011, and although values have fallen too, they do not reflect the severity of the sales volumes drop. Buyer confidence will improve in 2012 on the back of declining sentiment in the last half of 2011. Confidence has been, and will continue to be at the mercy of interest rates, local market conditions and the global economy in 2012. Based on First National’s 2012 Property Market Outlook survey, the majority of Queensland members said they expected the market to steady. This shows the market is slowly strengthening after 80 per cent of survey respondents said the market had fallen in the latter half of 2011.

RESIDENTIAL MARKET Property Prices Property prices in Queensland are expected to remain relatively flat across all sectors, at least for the short term: House prices – 47 per cent of members said prices would remain relatively steady. Any price rises will be as a result of the market bottoming out, return of investors and an ongoing lack of stock. Apartment/strata prices – The vast majority of members expect prices to continue to fall. Only some pockets of the state anticipate any type of increase. Drops in prices would occur in areas of oversupply as well as a weak economy and increased competition forcing owners to reduce prices to capture sales. Where price increases are expected, they will be minimal and would result in areas where there is ongoing strong demand. Land prices – Land price increases in high growth areas are expected to be as much as 5 per cent, although some areas may see falls as large as 10 per cent. High building and development costs, coupled with any lack of buyer confidence that may emerge may exert downward pressure on prices, however, in areas where supply falls short, this would be counter-balanced.

2012 PROPERTY MARKET OUTLOOK FIRST NATIONAL REAL ESTATE

QUEENSLAND OUTLOOK Rental Market Vacancy rates are expected to trend downwards in 2012. Strong, rising yields and rising demand should see vacancy rates tighten by up to 5 per cent, possibly more so in strong mining areas. In areas where there are limited to no employment opportunities, vacancy rates are expected to increase by around 5 per cent as people seek better job prospects elsewhere. In summary, generally strong demand will keep upward pressure on weekly rents.

Growth Any increases in investor activity are expected to be up to 5 per cent in the main. According to Queensland members, it is the upgrader segment that is expected to produce the strongest growth in 2012, followed by first home buyers, then investors and lastly retirees. Any growth in activity, investor or otherwise, will be driven by improved affordability, higher yields, better returns and the stateâ&#x20AC;&#x2122;s strong resources sector. Buyers will be particularly attracted to value for money properties that make owning their own home a compelling proposition.

Changing Market Conditions Interest rates are anticipated to decrease in the main, (80 per cent) by between 0.25 to 0.5 per cent. Lower interest rates will combine with lower values to further improve affordability and stimulate buyer activity. Most Queensland members expect an increase in mortgage defaults as overcommitted home owners continue to suffer financial stresses as costs of living continue to rise. Job losses in certain areas could also be a contributing factor for some. The carbon tax is expected to have an impact on the property market, somewhat countering affordability gains, as it potentially contributes to rising living and housing costs.

FIRST NATIONAL REAL ESTATE 2012 PROPERTY MARKET OUTLOOK

QUEENSLAND OUTLOOK COMMERCIAL MARKET The Queensland commercial property market is expected to be fairly steady in 2012, offering investors weak prospects with low growth forecasts â&#x20AC;&#x201C; representing the lowest in Australia. The stateâ&#x20AC;&#x2122;s office market is expected to continue to lag behind the rest of the country throughout 2012. Commercial property prices have remained relatively stable in 2011, with some increases of up to 5 per cent but also decreases of around 15 per cent, due to economic conditions and lack of bank funding. There have been some small increases in vacancy rates. Where decreases have been experienced, they have been in excess of 15 per cent, due to market conditions, high infrastructure costs and reduced demand. Rents, however, have risen by between 10 and 15 per cent. In the coming 6 months, commercial property prices are expected to fall by between 5 and 10 per cent due to the scarcity of bank funding and continuing high council infrastructure costs. Vacancy rates in 2012 are set to rise by up to 5 per cent, while rents are expected to fall by up to 10 per cent, losing any gains they made at the end of 2011. Rent prices are expected to stabilise during the year. Lower interest rates, which are expected to further decrease in 2012, may increase the appeal of commercial properties for investors, particularly self-managed super funds. The introduction of the carbon tax is not expected to significantly impact on the Queensland commercial property market as it is expected that more practical solutions will be required at the commercial property owner level to make any real difference. Solar power was considered the energy efficient feature that would make a commercial property more rentable, followed by motion sensor lights and the ability to open windows. Sales were expected to increase by all Queensland survey respondents, as a result of new jobs and businesses being attracted to the region and trading up by existing business operators. In Queensland, most commercial property respondents said light industrial would be the sector showing the most growth in 2012, followed by the office market and medical.

2012 PROPERTY MARKET OUTLOOK FIRST NATIONAL REAL ESTATE

SOUTH AUSTRALIA OUTLOOK The South Australia property market is set to moderate even further in 2012, following a fairly steady but falling market in the second half of 2011. Stamp duty costs and inadequate first home buyer stimulus or concessions continue to stifle the market and as 2012 progresses, consumer confidence will continue to be a challenge for the market to overcome. However, anticipated cuts in interest rates will restore some confidence and BHP’s investment in the expansion of Olympic Dam will be a positive boost to the South Australia economy. Bowden is considered a hot spot for the state in 2012 because of its amenities and lifestyle appeal. City fringe areas will also prove popular for home buyers. Robe, which earlier in the decade was the second fastest growing town in South Australia, is anticipated to continue to benefit from sea-changers, along with Goolwa.

MARKET CONDITIONS Buyer confidence has fallen in recent months but is expected to improve as we enter 2012, as a result of reducing interest rates. Based on First National’s 2012 Property Market Outlook survey, ongoing lack of buyer confidence, the economic outlook and interest rate cuts will see the state’s market steady even further. Any movements will be relatively marginal.

FIRST NATIONAL REAL ESTATE 2012 PROPERTY MARKET OUTLOOK

SOUTH AUSTRALIA OUTLOOK RESIDENTIAL MARKET Property Prices Property prices in SA are expected to remain relatively flat across all sectors: House prices – Any potential decreases are seen as a result of ongoing lack of confidence and market conditions. Decreases, in the main, will stay below 1 per cent Apartment/strata prices – While prices are expected to remain flat, there is the potential or small decreases in some pockets of the state. There was a general consensus among members that movements would in the main be below 1 per cent with some indications they could be between 1 and 5 per cent. Apartment/strata price increases, should there be any, would be a result of improved investment yields, which will also serve to moderate the market to some extent. Land prices – Decreases are expected to be mainly by up to 1 per cent, with some members saying they could be between 5 per cent and 20 per cent. Land price movements were seen as a result of a lack of demand.

Rental Market Vacancy rates are expected to remain flat, or possibly trend downwards in 2012, according to SA survey respondents. Strengthening demand and a contracting supply will see rates ease by up to 5 per cent. For most respondents, vacancy rates would increase by up to 5 per cent due to uncertainty surrounding the economy and job security coupled with an oversupply in some areas. Weekly rents are expected to head upwards or be flat, according to 72 per cent, especially in mining and resource rich areas. Weekly rent movements are expected to be within 5 per cent, with the greater proportion of respondents saying they would be less than 1 per cent.

2012 PROPERTY MARKET OUTLOOK FIRST NATIONAL REAL ESTATE

SOUTH AUSTRALIA OUTLOOK Growth Any increases in investor activity are expected to be around 5 per cent. Investor activity growth will be driven by improved affordability as a result of falling prices, lower interest rates, and higher rents. According to SA respondents, affordability and lower prices will generate the most growth in the upgrader segment in 2012, followed by investors and retirees. First home buyers will be conspicuously absent from the market for the first six months of the year, possibly in the hope that the market has not yet bottomed out and they could still get more for their hard earned savings.

Changing Market Conditions Interest rates are expected to decrease by SA survey respondents with movements in the vicinity of 0.25 to 0.5 per cent, which is expected to instil more confidence into buyers and stimulate activity across the board especially for investors, and potentially for first home buyers. The carbon tax is expected to have an impact on the property market, with 67 per cent of SA respondents saying it will produce higher home and rent prices and reduce consumer confidence.

COMMERCIAL MARKET The South Australia commercial property market is expected to remain relatively stable, with increasing pressure in some areas where demand is met with no supply. Demand is particularly strong for prime quality stock, driven by improved standards of accommodation, better services and energy efficient features. Yields, having been stable at between 7.5 per cent and 9.5 per cent, are expected to tighten to more traditional levels in the coming 12 months. According to the First National South Australia commercial property survey respondents, commercial property prices have been fairly stable with any rises kept to below 5 per cent. Vacancy rates have also remained stable during the year, with any drops kept to below 5 per cent due to reduced demand. Rent movements have been to be kept to below 5 per cent in 2011.

FIRST NATIONAL REAL ESTATE 2012 PROPERTY MARKET OUTLOOK

SOUTH AUSTRALIA OUTLOOK This trend in commercial property is expected to continue into 2012. Interest rates are expected to decrease, which it is hoped will increase buyer confidence. The carbon tax is considered to potentially act as a barrier to any real change in attitudes and behaviours towards energy features in commercial property – although, some business operators are wising up to the many benefits they offer and ‘A’ grade properties are experiencing much more demand. Solar power is considered the leading energy efficient feature which will make a commercial property more rentable in South Australia. Sales of commercial properties in South Australia are expected to increase as more business operators are drawn by the state’s attractiveness. Most growth in the state’s commercial property market in 2012 will come from light industrial.

2012 PROPERTY MARKET OUTLOOK FIRST NATIONAL REAL ESTATE

WESTERN AUSTRALIA OUTLOOK The Western Australia property market outlook for 2012 is that it will continue to perform steadily, following quite an unstable market in the latter half of 2011. Improving market conditions and the market bottoming out will underpin the Western Australia property market for the coming 12 months. Affordability will drive property hot spots for the state. With the strength of the Western Australia economy and a decrease in land and construction costs, it is a great time to reconsider investing in Western Australia. In the Perth market, hot spots will appear around areas that have had the largest price reductions in the last 12 months. Regions like Peel now offer some great opportunities, as do Northam, where current prices are extremely low. The Western Australia regional centres in the Mid and North West still offer some great rental returns. The key challenges in 2012 will be new government policies, such as the flow on effects of the new carbon tax, uncertainty surrounding the world economy and ongoing regional investments. The impending introduction of the Minerals Resource Rent Tax represents another challenge for the WA property market to contend with. For the stateâ&#x20AC;&#x2122;s First National members, as small business operators, it has the potential to generate some real benefits in terms of sharing in the prosperity of the mining boom. It also has potential positives for self-managed super funds that will have more available finances as a result of the increase from 9 per cent to 12 per cent superannuation. However, the Tax also has the potential to place an additional burden on small business operators, such as our members, on having to pay the increased super for their employees, and should Self Managed Super Fund and investor activity increase, it may put upward pressure on prices and rents due to increased competition.

FIRST NATIONAL REAL ESTATE 2012 PROPERTY MARKET OUTLOOK

WESTERN AUSTRALIA OUTLOOK MARKET CONDITIONS Buyer confidence is expected to continue to increase into 2012 as a result of improved market conditions and lower interest rates. Western Australian members said the market would steady, although 17 per cent said they thought it would rise. Survey responses indicate improving buyer confidence and changing market conditions, such as lower interest rates and a strengthening resources sector would be the key influencing factors on the market in 2012.

RESIDENTIAL MARKET Property Prices Property prices for houses and land in Western Australia are expected to remain relatively flat, while apartments/strata property prices are expected to perform quite strongly: House prices – While 50 per cent said prices would remain flat, around a third said they would head upwards. Any price movements will, in the main, be kept to below 5 per cent. Apartment/strata prices – respondents were evenly split between prices remaining flat, increasing or decreasing. Movements would be below 5 per cent due to low demand and difficult selling conditions. Land prices – most said prices would be flat however, 17 per cent said they would increase. Low demand and excessive development costs will curtail price activity, while increased first home buyer activity may help push up prices by up to 1 per cent.

Rental Market Vacancy rates in Western Australia are expected to be flat or trend downwards in 2012 as conditions tighten due to growing demand and diminishing supply. Some markets are already at very low vacancies and there is not much room for movement. Movements in vacancy rates are expected to be below 1 per cent. Weekly rents are expected to head upwards due to a tight rental market. Rents are expected to increase by between 1 and 5 per cent in the main.

2012 PROPERTY MARKET OUTLOOK FIRST NATIONAL REAL ESTATE

WESTERN AUSTRALIA OUTLOOK Growth Any increases in investor activity are expected to be between 1 and 5 per cent, driven by falling house prices, better yields and improved returns. Investors will spearhead growth activity in the Western Australia residential market, followed by upgraders and then first home buyers. Growth is expected to be driven by the strong resources sector in Western Australia providing plenty of employment opportunities and luring more workers to the region.

Changing Market Conditions Interest rates are expected to decrease by between 0.25 to 0.5 per cent by most WA members. Lower interest rates are expected to strengthen the Western Australia property market by stimulating activity, particularly among investors. Respondents were evenly split on whether the carbon tax would impact on the property market. Where an impact was expected, most said it would reduce consumer confidence while some said it would produce higher rents.

RURAL/REGIONAL MARKET Late rains in Western Australia have affected parts of the rural sector, which earlier this season was looking at bumper crops. The outcome will depend on the damage caused by these seasonal factors, which may affect the rural economy and, ultimately, buyer confidence.

COMMERCIAL MARKET The Western Australia office market will strengthen as the resources boom drives up demand for office space in 2012. Commercial property prices are expected to increase by around 5 per cent due to an increase in activity, high costs of developing new land releases and increased demand. Lower interest rates, which are expected to continue to decrease in 2012, should improve confidence in the Western Australia commercial property market.

FIRST NATIONAL REAL ESTATE 2012 PROPERTY MARKET OUTLOOK

WESTERN AUSTRALIA OUTLOOK The introduction of the carbon tax is considered a good place to start according to Western Australia members, but the real difference will be made by individuals, with some saying it had the potential to delay any real movement on more energy efficient properties. Half the Western Australia respondents said up to 5 per cent of customers seek energy efficient features when looking to lease a commercial property, the most popular attributes that make properties more rentable being solar power and water recycling. Sales of commercial properties in Western Australia are expected to increase in the coming 12 months, due to new jobs or business growth in the region. Heavy industry is the sector expected to represent the strongest growth area for the Western Australian commercial property market.

2012 PROPERTY MARKET OUTLOOK FIRST NATIONAL REAL ESTATE

TASMANIA OUTLOOK The Tasmania property market will be bolstered by renewed interest in 2012, as home buyers stop marking time, after waiting through 2011 for prime buying conditions to arrive. In the last six months, the market has been falling due to a lack of confidence in the economy and with state government policies, but this is expected to steady in 2012. With current economic uncertainty, state budget cuts and rising unemployment dampening confidence, house sales and new housing construction will remain slow, with prices generally remaining flat. It is expected that extended selling periods will be seen and that values will remain under pressure until the state’s economic prospects improve. The key challenges facing the state’s property market in 2012 will be ongoing low consumer confidence due to State Government budget cuts to health, education and police. Stamp duty concessions for first home buyers ceased in the middle of 2011 and this will continue to impact on first home buyers entering the market, as they will need to save a larger deposit. The government also announced in the budget, that spikes in property land taxes will be smoothed out with a reduction in the valuation cycle from 6 years to 3 years. Cost of living increases, such as rising water/sewerage charges and electricity prices, will continue to negate any gains made from high affordability levels. Hotspots for the state will be centred around amenities and lifestyle appeal, especially for inner city Hobart and Launceston.

MARKET CONDITIONS Buyer confidence will improve in 2012, on the back of decreasing sentiment in the last half of 2011. Confidence has been at the mercy of local market conditions and into 2012, interest rates will be more of a key influencing factor. Based on First National’s 2012 Property Market Outlook survey, Tasmanian respondents said they expected the market to steady in 2012.

FIRST NATIONAL REAL ESTATE 2012 PROPERTY MARKET OUTLOOK

TASMANIA OUTLOOK RESIDENTIAL MARKET Property Prices Property prices in Tasmania are expected to remain relatively flat across all sectors although there is potential for some upward movement of below 1 per cent, depending on what happens with interest rates. Land prices may be sensitive to any decline in building approvals and an oversupply of land in some areas.

Rental Market 2012 could see an easing in rental vacancies, of up to 1 per cent, and moderating rental growth. Rental markets in areas where job losses are being experienced may experience further easing of rental prices and some price drops in weekly rents will be due to people leaving areas in search of employment. This could lead to an oversupply of rental properties. So, weekly rental prices will remain relatively flat in those regions, with the potential of some decreases of up to 1 per cent.

Growth Any increases in investor activity are expected to be up to 5 per cent in the main, as economic uncertainty continues to play a role in investment behaviour and purchase decisions. Any potential increases will only be if investors are able to purchase positively geared properties. According to Tasmanian survey respondents, it is the upgrader segment that is expected to produce the strongest growth in 2012, as buyers seize the opportunity to capitalise on greater affordability and the possibility of lower interest rates, which are expected to further decrease by between 0.5 and 0.75 per cent. While interest rate cuts may increase activity slightly in Tasmania, the real benefit will be any relief it provides to home owners who are facing large increases in their day-to-day living expenses.

Changing Market Conditions The introduction of the carbon tax is expected to further reduce confidence in the state economy and the government that runs it.

COMMERCIAL PROPERTY MARKET Tasmania is currently outperforming all other major office markets and it will continue to set the pace until at least the first half of 2012.

2012 PROPERTY MARKET OUTLOOK FIRST NATIONAL REAL ESTATE

NT/ALICE SPRINGS OUTLOOK The property market in Alice Springs is expected to remain flat into 2012, although there are some factors that may produce highlights for the year. The high proportion of government employees in Alice Springs will continue to bolster the market, providing good employment opportunities. However, consumer confidence will be the key determining factor in whether the market improves to any great extent in 2012. MARKET CONDITIONS Continued pessimism amongst buyers has kept the market on a downward trend, and this is expected to continue into 2012. Alice Springs is insulated to an extent from global issues, however, the severity of the global situation makes it unlikely that it will remain completely unscathed. There may only be a slight effect from the global economic situation, but the Alice Springs market will continue with relatively stable median prices. The biggest issue the market faces is the significant reduction in sales numbers (60 per cent in the unit market alone) this year.

RESIDENTIAL MARKET Property Prices Property prices in Alice Springs are expected to remain relatively flat, with the potential for upward and downward movements of up to 1 per cent â&#x20AC;&#x201C; depending on what happens with interest rates. Significant decreases in interest rates will improve consumer sentiment and may help stimulate market activity.

Rental Market The rental market is expected to remain flat in 2012, although vacancy rates in the early part of the year will be subject to seasonal conditions such as employment contracts finishing and new people moving in during the Christmas and New Year festive season. High demand for good properties will see weekly rents trend upwards, potentially by up to 5 per cent.

FIRST NATIONAL REAL ESTATE 2012 PROPERTY MARKET OUTLOOK

NT/ALICE SPRINGS OUTLOOK Growth Investor activity is expected to increase by between 5 and 10 per cent, driven by interest rate reductions and strong regional employment. The strongest growth, however, is expected to be from the upgrader segment, due to continued strong employment in Alice Springs. Mount Johns Valley will continue to attract steady interest for vacant lots in the prestige sector of the market.

Changing Market Conditions Interest rates, which will determine what happens in 2012 with the Alice Springs property market, are expected to decrease by up to 5 basis points in 2012, providing a slight kick to the market as the year progresses. Current global economic conditions, particularly in Europe, the US and China, will continue to reduce consumer confidence, which presents the greatest challenge for the Alice Springs property market in 2012. The carbon tax is expected to produce higher home prices on its introduction, which may unsettle consumers once again.

COMMERCIAL MARKET Commercial sales and leasing has been relatively busy in 2011. Some significant sales such as an office building in Alice Springs, and a new government office block being built in the CBD catering for growth in the government sector, will impact on the ability of ‘B’ class tenancies to attract premium rates. First National Commercial’s sale of Jacana House in Darwin for $58 million underscores the demand for A grade, energy efficient commercial buildings in the Territory. Commercial property prices will remain fairly stable in 2012, following the trend of 2011, although there is potential for some movements of up to 5 per cent. The anticipated decrease in interest rates may assist the commercial property market in Alice Springs, but banks’ lending criteria will also need to change to have any significant impact. The introduction of the carbon tax has the potential to delay any real movement on more energy efficient commercial properties.

2012 PROPERTY MARKET OUTLOOK FIRST NATIONAL REAL ESTATE

SOURCES First National Real Estate members across the country Newspapers National, metropolitan and local suburban press

Websites Domain.com.au Hotspotting.com RPdata.com

Property Observer Residex QBE LMI Housing Outlook HIA reports

FIRST NATIONAL REAL ESTATE 2012 PROPERTY MARKET OUTLOOK

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2012 PROPERTY MARKET OUTLOOK FIRST NATIONAL REAL ESTATE

FIRST NATIONAL REAL ESTATE 2012 PROPERTY MARKET OUTLOOK

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