Property Market Outlook 2011 - Western Australia Midland by First National Real Estate

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CONTENTS 2011 Property Market Outlook NATIONAL OUTLOOK

WESTERN AUSTRALIA - MIDLAND OUTLOOK

NEW SOUTH WALES OUTLOOK

CANBERRA OUTLOOK

VICTORIA OUTLOOK

QUEENSLAND OUTLOOK

SOUTH AUSTRALIA OUTLOOK

WESTERN AUSTRALIA OUTLOOK

TASMANIA OUTLOOK

NORTHERN TERRITORY OUTLOOK

Sources

National Outlook First National Real Estate once again surveyed its 450+ member network who are on the ground in cities, suburbs and country towns across Australia to compile a picture of the property market for Australia in 2011. In this document there is an overall Australian outlook, followed by a state-by-state outlook and then, most importantly, a local level outlook that provides a more detailed overview of what the residential and rental property markets are doing. The property market performed quite strongly overall throughout 2010, but continued to be affected by global economic conditions. 2011 is generally considered to be a turn-around year for property, particularly as investor and first home buying activity return to more normal levels. For the coming 12 months, some markets may still be flat, but growth will occur, although at more moderate rates than in 2009 and early 2010, particularly in areas that slowed the most during 2010, or towns that rely on the resources sector, such as those in New South Wales, South Australia and Western Australia. In general, the market is anticipated to gather more strength in metropolitan markets in the first half of the year, with improved confidence spilling over into regional markets in the second half. While growth rates will not be as spectacular as they have been in previous years, property is still offering substantial returns and will lure investors back in larger numbers. Throughout 2011, the property market will continue to be supported by strong economic fundamentals such as strong population growth, low levels of unemployment and buoyant consumer and business confidence. While business conditions deteriorated towards the end of 2010 among Australia’s small to medium sized enterprises (SME’s), they were nevertheless very optimistic about the yearly outlook as business confidence improved in the December quarter – up 6 to 7 points. Australia’s longterm housing shortage is only expected to worsen over the coming years which will serve to drive and underpin the market, along with rising rents and an improving economy, until the supply situation is properly addressed. In 2010, affordability across Australia was down 18.3 per cent compared to 2009, although there was a slight improvement in the October quarter of 3.6 per cent. According to recent figures, affordability in Australia has reached new lows, recording the largest annual decline in affordability for the decade.

First National Real Estate 2011 Property Market Outlook

Mortgage holders are already under pressure and the country now faces a situation where mortgaged households are heading towards devoting 35 per cent of their income to meeting loan repayments – 30 per cent is considered comfortable, but when children enter the equation, things start to get tight. The proportion of income required to meet loan repayments increased 5.8 percentage points during the year. If interest rates increase much further, this may result in an increase in forced sales due to mortgage defaults. Increases in forced sales often in turn translate into stagnating or falling prices. 62 per cent of our survey respondents expect to see an increase in forced sales due to mortgage defaults. This, they believe, will mainly be due to interest rate increases and general market and economic climate. Areas affected by natural disasters, such as floods, locusts, etc are the most vulnerable.The extent of the increase of forced sales will be dependent on how large interest rate increases are. If rate increases are kept to a minimum, or even remain stable, this will allow people the breathing space they need to adjust and so may avoid forced sales. The current trend is for householders to ‘releverage’ in order to keep up with rising house prices. As housing affordability worsens, house price growth may be tempered. This potentially reduces demand and without heavy demand at the most affordable end of the market, the impetus to upgrade also decreases. We are seeing this happening now, with dwelling turnover weakening. Recently released figures show the total number of loans for housing reducing by 28.3 per cent over 2010. This can be attributed in part, to Australians’ love of renovating which is proving an increasingly popular and cost-effective alternative to upgrading. In 2011/12, the industry expects the value of kitchens turnover alone will rise to $7.6 billion, up from $6.9 billion in 2010. Lending for construction has been trending down over the last year. In the three months to October 2010, loans for construction/purchase of a new dwelling were down 29 per cent on the same period the year before.

First National Real Estate 2011 Property Market Outlook

National Outlook GOOD NEWS â&#x20AC;&#x201C; INVESTORS THE KEY TO UNLOCKING PROPERTY MARKET WOES IN 2011 The good news is, investor activity is generally expected to increase and there should also be some rebound of the first homebuyer market in 2011. Despite increasing finance costs as a result of rate rises, the housing investment climate is improving and should continue to do so into 2011. Investor activity in the property market started to grow in 2010 and is expected to strengthen further in 2011, due to the positive Australian data and the ongoing volatility of other investment forms. Recent reports indicate most investors (55 per cent) intended to increase their exposure in property in 2011, following the lead of savvy institutional investors who are already taking advantage of emerging property investment opportunities as a result of reduced competition and rising tenant demand for industrial space. The First National member survey showed 63 per cent of respondents expected an increase in investor activity in the coming 12 months, as a result of improved returns and increased investor confidence. Self-managed super funds (SMSFs) are already showing serious interest in property as part of their portfolios. Based on Australian Taxation Office (ATO) figures, SMSFs invested $58.4 billion in domestic real property at 30 June 2010 â&#x20AC;&#x201C; compared to just more than $30 billion two years ago. The proposed changes to superannuation regulations in July 2011 that will make it more difficult for SMSFs to gear shares, will further add to property investment appeal.

FIRST HOMEBUYERS AND UPGRADERS As first homebuyer activity improves, increased activity in the upgrader market should follow, but this is dependent on interest rates. The decision by one bank, St George, to recognise rental payments as evidence of genuine savings will also provide a much needed boost for first home buyers. It is expected that other lenders will follow suit. 92 per cent of our respondents think there will be two further interest rate increases in 2011, with the potential for a third. Should interest rate increases be kept to a minimum, the market should hold up. However, if the increases are sizeable enough, affordability will be further eroded, bringing additional

First National Real Estate 2011 Property Market Outlook

pressure on mortgaged homeowners to bear and ultimately slowing the market even more. Upgraders, as the largest segment of the housing market pie (two to three times the size of the first homebuyer segment) have the greatest influence on the property market. Stable interest rates and the strengthening economic environment should give upgraders the confidence to become active again – bucking the current trend to stay put and renovate. This would then free up entry level housing stocks, reinvigorating the first homebuyer sector and see it return to more normal levels. First homebuyers are expected to be more active in affordable regional markets in particular.

RESIDENTIAL MARKET While house price growth slowed in 2010, it is expected to be between 9 per cent and 20 per cent over the 2011-13 period: • • • • •

NSW, SA and WA Qld Tas NT/ACT Vic

20 per cent 15 per cent 13 per cent 11-12 per cent 9 per cent

The following table outlines anticipated price growths across the major capital centres for the next three years, and expected resultant median house prices (mhp): City

p.a.%

Sydney Melbourne Brisbane Adelaide Perth Hobart Canberra Darwin

6.3 3.0 4.8 6.0 6.4 4.0 3.4 4.0

Increase over 3 years - % 20 9 15 18 20 13 11 12

Mhp at June 2013 $750,000 $610,000 $530,000 $490,000 $590,000 $415,000 $580,000 $620,000

First National Real Estate 2011 Property Market Outlook

National Outlook First National Real Estate members across the country were almost evenly split on their predictions for house prices in 2011: • 38 per cent expected house prices to remain flat in 2011; • 32 per cent expected house prices to trend upwards in 2011; and • 30 per cent expected house prices to trend downwards in 2011. There is general consensus amongst First National members that the market is stable at the moment and they expect it to remain so in the early part of 2011, but this is contingent upon interest rates. For 70 per cent of survey respondents, any movement, upwards or downwards, in house prices in 2011 will be in the vicinity of between 1 and 5 per cent, while 20 per cent expect it to be between 5 and 10 per cent and 10 per cent expect it to be more than 10 per cent. A similar picture is seen for apartment/strata property prices – relatively flat with the majority of survey respondents expecting potential for movement of up to 5 per cent. Land prices will also remain relatively flat in the early part of 2011, with the potential for moderate increases of up to 10 per cent: • • •

46 per cent of respondents believe land prices will remain flat; 40 per cent of respondents believe land prices will trend upwards; and 14 per cent of respondents believe they will trend downwards, with any decreases below 10 per cent.

First National members are finding properties remain on the market for an average of 55-60 days in metropolitan areas, and 120-290 days for rural areas. Residential hot spots, or areas of growth outside metropolitan areas, are those that are strategically located such as close to water, transport or high levels of retail and social amenities.

First National Real Estate 2011 Property Market Outlook

RENTAL MARKETS Throughout 2010 rentals performed quite well with moderate increases in returns. Rental vacancy rates were low in Sydney, Melbourne and Adelaide, with slightly more choice in Brisbane and Perth, but these are expected to tighten further in 2011. Ongoing tight vacancy rates will continue to drive moderate to solid rental growth across most capital cities in 2011. Strong rental returns are expected, particularly given the strengthening economic outlook, underpinning employment and income growth. Demand should still increase, especially as rising house prices and higher interest rates make it more difficult for renters to become buyers. The following issues mean that rents will remain under further pressure as conditions improve: • • • • •

Solid population growth Good income growth Jobs growth Lack of housing stocks and rising demand Worsening housing affordability barriers for first home buyers

During the last 12 months, median rents rose in nearly 75 per cent of Australia’s capital suburbs, many increasing by up to 25 per cent, but some as high as 33 per cent or more. According to First National members: • •

59 per cent of respondents saw vacancy rates trending downwards in 2011 by up to 5 per cent in some areas; 24 per cent saw them flattening out; and 17 per cent saw them trending upwards. 67 per cent expected weekly rentals to trend upwards; 22 per cent expected them to remain flat; and 11 per cent expected them to trend downwards.

The chronic undersupply of housing for tenants will maintain upward pressure on rentals, with the potential to push the majority of weekly rental up by between 1 per cent and 5 per cent, with the potential for increases of up to 10 per cent. Investors are also expected to play a greater role in the rental market, especially in relation to pushing rents up higher, as they seek to compensate for any loss in capital appreciation as prices growth slows, and take advantage of more competitive market conditions.

First National Real Estate 2011 Property Market Outlook

National Outlook MARKET CHANGES Mortgage Exit Fees A topical point for the property market at the moment is reducing, or abolishing, mortgage exit fees. First National members were almost unanimous (99 per cent of respondents) in believing that mortgage exit fees should be abolished altogether. This would afford greater flexibility and freedom for mortgage holders and increase competition in the banking sector. Respondents also believed it would serve to act as a control measure for banks considering lifting interest rates above the RBA increase.

Energy Efficient Features First National members were asked if they believed the anticipated electricity price hikes would alter the types of energy efficient features homebuyers would seek. Around 67 per cent of respondents believed it would – making solar hot water the top of the list as the most sought after feature. Already 50 per cent of agents say solar is the most popular energy efficient feature, making properties more saleable. Cost, awareness and education are seen as the key barriers to energy efficient features becoming more of a ‘selling’ feature for a home. Installation costs can be prohibitive and home owners often lack an understanding and awareness of the benefits and options available.

Supply versus Demand Around 90 per cent of survey respondents thought the government should do more to alleviate the imbalance in the supply versus demand equation, and needed to consider: • • • •

releasing more land, allowing more medium density developments, improving planning and approvals processes and controls, and introducing a national planning authority.

First National Real Estate 2011 Property Market Outlook

Banks! An overwhelming majority (73 per cent) of survey respondents thought banks should do more to help maintain a healthy and robust property market, suggesting they consider: • • • • •

Easing lending criteria responsibly Shorter application and loan approval processes Reducing or abolishing exit and other property related fees Keeping interest rates in line with market realities Increased competition with other lenders including competitor banks

Social Networking Social networking is set to play an even greater role in property marketing. According to the First National member survey, SMS/MMS is used by 75 per cent of customers as a means of seeking property market information, around 45 per cent use Facebook and 15 per cent use Twitter. The internet is another major source of information for customers. In 2011, 58 per cent of First National members responding to the survey said they intended to increase marketing properties with Facebook or Twitter.

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.

First National Real Estate 2011 Property Market Outlook

Western Australia - Midland Outlook The Western Australia Midland property market is expected to strengthen in 2011, with house and land price increases of between 1 and 5 per cent, due to a review of zoning in many areas which will encourage investors into the market place. Land prices are expected to increase as a result of a large number of cheaper lots having been sold in 2010. Apartment/strata property prices are also expected to be mixed. There will more than likely be a statistical decline due to a number of concessions into 1 bedroom apartments, however, First National believes that in segmenting the market this will show an overall marginal increase of up to 1 per cent. Vacancy rates are expected to trend downwards in 2011, with decreases of up to 5 per cent in the first half of the year. There are a large number of new units and homes that became available in 2010 combined with owners holding onto property longer which, in turn, added to the vacancy rate. But with the number of new developments coming online, supply of new stock will drop thus showing a reduction in vacancy rates. Weekly rentals are expected to trend upwards with increases of up to 5 per cent due to the rising demand and declining available properties again putting pressure on rentals. Investor activity is expected to increase in the coming 12 months, as speculation in the market is fuelled by current public forums concerning potential zoning changes. The ongoing redevelopment of Midland is expected to impact on the Western Australia property market, with the commencement of a number of major developments in the area. This, plus the major publicity which will occur due to the finalisation of the new hospital, will reconfirm Midland’s ongoing strength as a regional centre. This combined with the 7 day trading now allowed in the Midland CBD will only add to Midland’s exposure, making it an ongoing property hot spot for the state. First National members surveyed believe that banks should be doing more to help keep the property market healthy and robust in 2011 and should consider: • Abolishing mortgage exit fees which will result in increased flexibility for mortgage holders to change banks with ease and adjust their banking needs in line with their personal situation, which can change from time to time. • Keeping their moves on interest rates in line with the RBA rather than move independently. • Easing lending criteria and better transparency so that people can better understand the new requirements placed by the banks.

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Three additional interest rate increases are anticipated which will have a mixed impact on the market – minimal on the lower end of the market, but may affect the higher end more. Widely anticipated electricity price hikes are expected to impact the types of energy efficient features being sought by homebuyers. Older homes with full electric power appliances will need to carefully consider correctly pricing their properties, which will suffer as a result of not offering these types of energy efficient features. Solar hot water and power are currently the most popular energy efficient features being sought by homeowners, and high installation costs are seen as the key barrier for these energy efficiency features becoming more of a ‘selling feature’ of the home. A drastic decrease in the cost of installing such products could offset the selling benefits. First National members feel that the government needs to do more to alleviate the supply versus demand issue such as consider: • releasing more land, • allowing more medium density developments, • improving planning and approvals processes and controls, and • introducing a national planning authority. Midland’s inclusion in the 7 day trading area and initiatives such as free wi-fi for people visiting the CBD has only enhanced the opportunities in the region. This, and further major announcements as part of the Midland Redevelopment Authority, such as privatisation of the new proposed hospital, which will now see this increase in size, and the number of beds available when completed, only adds to the confidence in the direction Midland is heading. 2010 also saw a number of inner city developments finalised which saw close to 100 new residential apartments completed in the Midland CBD. With more apartments scheduled for the CBD and a number of new office complexes, this will further enhance a feeling of confidence and security in the area and the willingness of people from adjoining areas to frequent Midland both during the day and at night.

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New South Wales Outlook The New South Wales property market is expected to strengthen in 2011, led by investors, upgraders and prices trending upwards as a result of an undersupply of properties to purchase or rent across the state to meet pent up demand. House and apartment/strata property prices are expected to increase by between 1 and 5 per cent, while land prices are likely to remain flat. Vacancy rates are trending downwards and weekly rentals upwards as a shortage of available accommodation and worsening housing affordability, making it more difficult for first homebuyers to enter the market. Movements in weekly rentals will be up to 5 per cent in the main, and vacancy rates, already tight, will tighten even further by up to 1 per cent. While the government’s Zero Stamp Duty Initiative, which cuts stamp duty for new homes, will drive supply and lend a hand to home buyers, the banks should be doing more to help keep the property market healthy and robust in 2011 and should consider: • Abolishing mortgage exit fees. This would increase competition in the mortgage industry, give consumers the chance to change lenders for a better deal, as well as help anyone who has to sell for financial reasons to not have to get above market value to cover exit costs. • Keeping their moves on interest rates in line with the RBA rather than independently. Two additional interest rate increases are anticipated which will have a negative impact on affordability as buyers’ borrowing capacity is reduced. Widely anticipated electricity price hikes are expected to increase the number of buyers looking for energy efficient features as well as change the types of features they look for. Solar hot water and power will become the features that make a home more saleable, and there needs to be more done to educate consumers on the benefits of energy efficient features. The state election scheduled for 2011 may impact on the market as a result of the typical uncertainty caused during the lead up.

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Either way, the government needs to do more to alleviate the supply versus demand issue such as consider: • releasing more land, • allowing more medium density developments, • improving planning and approvals processes and controls, and • introducing a national planning authority. Sydney remains a property hot spot for NSW due to rental returns and availability of employment, especially in the south west where house and unit rental returns are at 5.3 per cent and 6.8 per cent respectively. In the west, house and unit rental returns are at 5.1 per cent and 6.1 per cent respectively. Coastal areas will also continue to prove lucrative, especially for investors. Investor activity is expected to increase in the next 12 months, as rising weekly rental prices will improve investor returns. Upgraders and investors are very active in the $600,000 to $1 million range while first homebuyers are still active in affordable markets such as Wollongong and the Central Coast. Canberra remains the best performing capital city for houses, but some slow down of growth is expected, where prices will plateau rather than correct.

First National Real Estate 2011 Property Market Outlook 13

Canberra Outlook The Canberra property market is expected to strengthen in 2011, led by investors, population growth and strong economic conditions. House, land and apartment/strata property prices are expected to increase by between 1 and 5 per cent, due to growth predictions, high wages, secure employment and lack of supply. Vacancy rates are expected to remain steady while rents should increase by between 1 and 5 per cent due to lack of supply and low vacancy rates. Investor activity is expected to increase by around 5 per cent in the coming six to 12 months, driven by low vacancies, stable employment and high wages. It is expected the next six months will see an increase in forced sales due to mortgage defaults in the Canberra region due to rising interest rates. Banks should be doing more to help keep the property market healthy and robust in 2011 and should consider abolishing mortgage exit fees which would create greater competition between the banks and afford mortgage holders with better loans.

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Four additional interest rate increases are anticipated which will serve to slow the market down and make affordability more difficult. Widely anticipated electricity price hikes are expected to increase the number of buyers looking for energy efficient features as well as change the types of features they look for. Water tanks and solar hot water and power are becoming the sought-after feature making a home more saleable, along with any features that will save them money. Price and government policy are seen as the key barriers to achieving this. Uncertainty created by the state election scheduled for 2011 may impact on the market, despite a widely anticipated change of government. Either way, the government needs to do more to alleviate the supply versus demand issue such as releasing more land. Gungahlin, one of the fastest growing regions in the country, is expected to be a property hot spot for the Canberra area. There is currently a lot of money being spent on infrastructure in the area to serve predicted future population growth.

First National Real Estate 2011 Property Market Outlook 15

Victoria Outlook The Victorian property market is expected to strengthen in 2011, with house, land and apartment/strata property price increases of up to 5 per cent as a result of strong population figures and growth potential coupled with lack of available stock to meet growing demand. Land prices will also trend upwards as the cost of development will naturally keep pressure on them. Vacancy rates are expected to trend downwards in 2011, although may increase marginally by up to 1 per cent in the first half of the year. Weekly rentals are expected to trend upwards as natural increases in salaries will improve property values and in turn affect rental values. As a result, movements in weekly rentals will be by up to 5 per cent in the main. Forced sales due to mortgage defaults are expected to increase as a result of a lack of compassion by banks for those home owners suffering as a result of natural disasters, particularly in regional areas. Investor activity is expected to increase in regional areas by between 2 and 3 per cent, as the metropolitan investor market begins looking at regional areas as a cheaper and more stable return for their money. Property hot spots are seen as Shire of Wyndham, Shire of Casey and growth corridors out to the western side of Melbourne: Melton, Sunbury and to the north, Craigieburn and Wallan. First National members surveyed consider that banks should be doing more to help keep the property market healthy and robust in 2011 and should consider: â&#x20AC;˘ Abolishing mortgage exit fees however, this may lessen the number of properties coming onto the market and people may remain in the same property for a longer period. â&#x20AC;˘ Keeping their moves on interest rates in line with the RBA rather than move independently. Two additional interest rate increases are anticipated that, if delivered, have the potential to have a significant impact on the property market if wages do not increase in accord, and particularly if job security is threatened. Recent interest rate increases initially created indecision and concern for first homebuyers, however, with the right advice good turnover was still obtained. Widely anticipated electricity price hikes are expected to impact homebuyers and owners who are already looking at alternative types of energy providers.

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Native, drought tolerant plants are still the most sought after sustainability feature of a home for Victorian homebuyers. However, as increasing costs of services become more apparent, homebuyers will start to seek out more energy efficient features. First National members surveyed considered that the government needs to do more to alleviate the supply versus demand issue such as consider: • releasing more land, • allowing more medium density developments, • improving planning and approvals processes and controls, and • introducing a national planning authority. In particular, more power should be given to local councils to make decisions for their own shire or district, as the policy of one size fits all does not work for a diverse country like Australia.

First National Real Estate 2011 Property Market Outlook 17

Queensland Outlook The Queensland property market is expected to weaken in 2011, with house price decreases of up to 5 per cent as a result of an excess of properties on the market relative to current rates of sale. Some regional areas are doing well, but the majority of the stateâ&#x20AC;&#x2122;s markets are moderating. Apartment/strata property prices are also expected to trend downwards with marginal decreases of between 1 and 5 per cent as the market waits on many project sale properties yet to enter the resale market, coupled with less than desirable market conditions. Land prices are expected to remain relatively flat with developers rarely building or releasing land due to low rates of return. Vacancy rates are expected to also remain relatively flat in 2011, as rents quickly adjust to market conditions. While there is an increase in rental stock, there is also a churn as tenants seek lower rents in response to cost of living increases. Weekly rentals are expected to trend downwards with decreases of up to 5 per cent due to the rising supply of vacancies. Increasing numbers of tenants and properties does not automatically equate to a balanced market. It gives tenants the opportunity to find cheaper premises and move. At current interest rates, landlords have to take the market. Forced sales due to mortgage defaults are expected to increase in the early part of 2011, with most small to medium enterprise (SME) loans tied to property, and Queensland experiencing poor business conditions in most sectors. There are as many sales being brought to market as a result of SMEs as there are from high interest rates themselves. The resources driven areas of Gladstone, Mackay, Emerald and Rockhampton are considered property hot spots for the coming 12 months. However, impacts on production and employment as a result of the force majeure flooding events of Christmas and the New Year will likely depress activity for the first few months of 2011. Mining giants such as Rio Tinto, Anglo American and Wesfarmers have either downgraded earnings forecasts, suspended operations or given notice that they will miss deliveries as a result of the havoc caused by widespread flooding.

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First National members consider that banks should be doing more to help keep the property market healthy and robust in 2011 and should consider: • Abolishing mortgage exit fees which would make banks more competitive as buyers would be free to seek out the best deal for their situation. • Keeping their moves on interest rates in line with the RBA rather than move independently. However, the real point that should be looked at is transferring Mortgage Insurance – which is often crippling for many homeowners. Two additional interest rate increases are anticipated which will have the potential to slow the market even further than it was slowed during 2010. The ‘breaking of the drought’ and widely anticipated electricity price hikes are expected to impact the types of energy efficient features being sought by homebuyers. Solar electricity is becoming increasingly important as people become less worried about lack of water. The key barrier to energy efficiency features such as solar hot water and power becoming more of a ‘selling’ feature of a home is awareness. First National members are of the view that the government needs to do more to alleviate the supply versus demand issue such as consider: • releasing more land, • allowing more medium density developments, • improving planning and approvals processes and controls, and • introducing a national planning authority.

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South Australia Outlook The South Australia property market is expected to strengthen in 2011, with house, land and apartment/strata property price increases of up to 5 per cent as a result of ongoing strong demand and increasing stock levels, underpinned by a reasonably strong economy. Assistance programs by major builders together with First Homebuyers Bonus scheme is also adding stimulus to construction and land sales. Vacancy rates are expected to trend downwards in 2011, although may increase marginally by up to 1 per cent in the first half of the year. Weekly rentals are expected to trend upwards as a result of increasing demand due to a booming resources sector and an ongoing lack of investor presence in the market. Movements in weekly rentals will be by up to 5 per cent in the main as investors slowly realise the long term potential and bargains on offer. Investor activity is expected to increase in the region of between 5 and 10 per cent, as confidence in the market continues to grow. Increased mining activity will improve economic and market conditions such as increased job opportunities, stronger demand for housing wealth creation and investment in property. This should see further investment in transport infrastructure for export and provide stimulus in mining and Port regions throughout the state. Property hot spots are seen as redeveloping areas within a 15 km radius of the city, offering affordable opportunities with good rental returns and growth potential. Greenacres in the north/east of Adelaide is an area to watch as well as Glanville and adjacent suburbs in the West. The Proposed re-zoning at Mt Barker will provide for a huge growth of around 7000 dwellings for the area. First National Real Estate members consider that banks should be doing more to help keep the property market healthy and robust in 2011 and should consider: â&#x20AC;˘ Abolishing mortgage exit fees which would serve as a stimulus to the South Australian property market. â&#x20AC;˘ Keeping their moves on interest rates in line with the RBA rather than move independently. â&#x20AC;˘ Reducing loan fees. Two additional interest rate increases are anticipated which, if kept to below 0.5 per cent, should see the market hold up. Recent interest rate increases, together with the ending of the federal and state first home owners grant boost, have already impacted negatively on the property market which would be further exacerbated if future interest rate increases are above 0.5 per cent combined.

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The recent ‘breaking of the drought’, coupled with widely anticipated electricity price hikes are expected to see a change in the types of energy efficient features homebuyers are seeking. Water is no longer the issue driving energy efficient features – power is seen as the more important consideration. Solar hot water and power, especially solar energy panels and efficient heating, cooling and lighting, will become the features that make a home more saleable. Costs of installation and poor aesthetics are seen as the key barriers to making energy efficiency features become more of a ‘selling’ feature for homes. First National members surveyed were of the view that the government needs to do more to alleviate the supply versus demand issue such as consider introducing incentives for more medium density developments.

First National Real Estate 2011 Property Market Outlook 21

Western Australia Outlook The Western Australia property market is expected to remain relatively flat in 2011, with house prices steadying further and marginal land price increases of up to 1 per cent. Investors are expected to prop up the market, lured back with increases in yield rates on rental properties. The market has seen a large increase in the number of properties available on the market in 2010 which has produced downward pressure on prices. As always, there are exceptions to this and the North West is one such region not experiencing such a dramatic effect. Land may see some slight increases as a result of a shortage of supply. In addition, recent data from REIWA suggesting the level of pre-selling activity is rising, with some 24 per cent of the market still represented by first home buyers, will add further upward pressure to land prices. Recent reports of some 17 Western Australia builders offering a range of incentives - some worth up to $30000 - will further stimulate this market. Whilst there have been reports of the median price increasing recently, the Perth metropolitan area by 12.5 per cent, detailed review of this needs to be considered as there has been an increase in the sale of high price properties that has likely skewed the figures. In regional areas, there has not been an increase in the median price, despite the release of a number of blocks in the Geraldton and Mandurah regions in late 2010. Again, the length of time on the market in other markets such as Broome and Bussleton will effect land prices as well. Vacancy rates are trending downwards and weekly rentals upwards as a shortage of available accommodation and worsening housing affordability make it more difficult for homebuyers to remain active. Vacancy rates in the metropolitan region fell and this has also occurred in some of the major regional areas. It is expected vacancy rates will further decline by 10-20 per cent in the next six months alone. Movements in weekly rentals are a result of the pressure in the rental market and declining vacancy rates will more than likely result in further rental increases. A key project expected to impact on the Western Australia property market is the Western Australian Planning Commission (WAPC) commencing their review of metropolitan planning through an initiative known as Directions 2031 and beyond. This review estimates the current population to be some 1.65 million and it is expected that by 2031 this will increase to 2.2 million, adding more than half a million new residences to the city. Whilst this process

22 First National Real Estate 2011 Property Market Outlook

will continue during 2011, the concepts regarding it will generate further confidence in the market as more information regarding housing and infrastructure requirements and the potential of specific areas is released. First National members surveyed believe that banks should be doing more to help keep the property market healthy and robust in 2011 and should consider: • Abolishing mortgage exit fees. This would provide mortgage holders with greater flexibility in time when they may require a change the most, without incurring further costs. • Better advice as to the bank’s own lending conditions which have made buyers confused in the market place. Two additional interest rate increases are anticipated which will prove more problematic for the middle market than any other. Widely anticipated electricity price hikes are expected to impact properties with full reliance on mains power, which will need to be more competitively priced, as well as an increase in the number of buyers looking for energy efficient features and change the types of features they look for. Solar hot water and power will become the features that make a home more saleable, and there needs to be more done to reduce the costs of installing energy efficient products and services. Surveyed members felt that the government needs to do more to alleviate the supply versus demand issue such as consider: • releasing more land, • allowing more medium density developments, • improving planning and approvals processes and controls, and • introducing a national planning authority. The regional centre of Geraldton, in addition to its other advantages, benefits from adjoining mining and will continue to be a property hot spot for WA due the imminent commencement of a major new project. Other hot spots are considered to be boom town Broome with its lifestyle, employment features and government decisions relating to its future. Bunbury is also tipped for capital gain as a result of planned transport infrastructure. Karratha, Port Hedland will also prove lucrative for investors – all considered boom towns, with strong government focus. Closer to Perth, areas like Mandurah should rebound well, given the current prices of waterfronts, as will areas around Rockingham. The Kelmscott / Armadale region represents great value for first home buyers and areas like Mildand and Scarborough, with their ongoing redevelopment and current zoning reviews, will represent great opportunity for investors. First National Real Estate 2011 Property Market Outlook 23

Tasmania Outlook The Tasmania property market is expected to consolidate in 2011, as waning consumer confidence due to job losses, mainly in the North West of Tasmania, and plentiful housing stocks, begin to stabilise house price growth. There is strong potential for growth in land prices, but this is dependent on the number of land releases in the state. There is a steady supply at present, but building approvals are down as a result of an undersupply of builders locally. There is also negative publicity on “head works” charged by the three water/sewerage authorities in Tasmania, which, if left unresolved, will definitely stifle development projects. Vacancy rates may increase marginally by up to 1 per cent and weekly rentals upwards between 5 and 10 per cent as uncertainty of job prospects in some areas impact on confidence in purchasing, potentially placing an upward pressure on the rental market. Movements in weekly rentals will be between 5 and 10 per cent in the main. Any population growth for Tasmania, which has seen virtually none in the last few years, would impact the state’s property market significantly. The benefit of waving stamp duty or introducing concessions for the over 65’s age group could prove significant. To this end, the government should encourage tourism and more enterprise in regional areas in a bid to encourage population growth and employment opportunities. The water/sewerage authorities need to rethink their obscene ‘head work’ charges that developers are absorbing – freeing them up to develop as they would like. First National members believe that banks should be doing more to help keep the property market healthy and robust in 2011 and should consider: • Abolishing mortgage exit fees and being more flexible with their loan products. Consumers would be the winners, as the major banks would need to be seen as more competitive with rates and may think twice about lifting rates above the RBA. However, there is the risk banks may try and be more creative with other consumer fees. • Keeping their moves on interest rates in line with the RBA rather than move independently. • Educating their customers about why they implement higher rate rises than the RBA. • Mortgage insurers need to be more flexible in lending requirements.

24 First National Real Estate 2011 Property Market Outlook

Three additional interest rate increases are anticipated which will have a negative impact on affordability as buyers’ borrowing capacity is reduced and may eat into what little equity some homeowners have – especially those who purchased in the ‘boom times’. Combine this with pressure on employment and we may still see a shift in values and turnover. Recent interest rate increases have already impacted on the property market, contributing to more of the higher priced properties coming into the market as families are looking to reduce their mortgage debts. Tasmania’s ongoing affordability will continue to prove too attractive for investors to ignore, however they may remain cautious due to future interest rate rises. They will however be fully aware that Tasmania is currently in the declining state of the real estate cycle. Widely anticipated electricity price hikes are expected to increase the number of buyers looking for energy efficient features as well as change the types of features they look for, especially in relation to heating and lighting. Solar hot water and power will become the features that make a home more saleable, with cost and educating being the key barriers to energy efficiency features becoming more of a selling item for the home. Education of consumers on the benefits and savings that can be made of energy efficient features should be a priority, along with reducing the initial cost of installing energy efficient appliances. First National members surveyed feel that the government needs to do more to alleviate the supply versus demand issue such as consider: • Reducing stamp duty and introducing stamp duty incentives for retirees, • Re-working stamp duty scales – the scales have remained the same for years in spite of the sharp increases in property prices over the last decade. • releasing more land, • allowing more medium density developments, • improving planning and approvals processes and controls, and • introducing a national planning authority. Members felt that social networking will continue to gain a greater voice in the property market but that they should be used in conjunction with ongoing face to face customer contact and high levels of customer service. Social networking needs to play along with traditional relationship building activities such as weekend sporting events, local community clubs or casual lunch dates and coffee chats with friends.

First National Real Estate 2011 Property Market Outlook 25

Northern Territory Outlook The Northern Territory property market is expected to strengthen in 2011, with house price increases of up to 5 per cent as a result of strong demand and a continued undersupply of vacant residential land. Apartment/strata property prices are also expected to trend upwards with increases of between 5 and 10 per cent as a result of strong demand, the Home North scheme, and a general shortage of dwellings and units. Land prices are expected to increase by as much as 10 to 20 per cent as a result of very limited supply. Vacancy rates are expected to trend downwards in 2011, with marginal decreases of up to 1 per cent in the first half of the year, given that they cannot really go much lower than current levels. Weekly rentals are expected to trend upwards with increase of up to 5 per cent due to the rising demand. First National members believe that banks should be doing more to help keep the property market healthy and robust in 2011 and should consider: • Abolishing mortgage exit fees which would result in higher stock turnovers. • Keeping their moves on interest rates in line with the RBA rather than move independently. • Adjusting their borrowing percentages in the commercial sector. Three additional interest rate increases are anticipated which will slow the market even further than it has during 2010. Widely anticipated electricity price hikes are expected to impact the types of energy efficient features being sought by homebuyers. Solar water heating, although already popular, will become more so as will PV cells for power generation. The key barrier to energy efficiency features becoming more of a ‘selling’ feature of a home is their prohibitive costs. Members also feel that the government needs to do more to alleviate the supply versus demand issue such as consider: • releasing more land, • allowing more medium density developments, • improving planning and approvals processes and controls, and • introducing a national planning authority.

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Population growth is currently being stunted for the Northern Territory as a result of the chronic shortage of housing. There could be a population increase if the state were able to house more people. The inability of successive governments to plan for land release has meant that we release too little too late and that substantial proposed releases remain in the too distant future. There are businesses in Darwin that would like to employ more people but the inability to house them and the cost of housing has made it almost impossible. The property market has been shrinking in numbers over the past three years, and this only adds to the pressure on prices. Rents remain high and investors are reaping the rewards. A radical plan put forward by residents of the Alice Springs town camp may see new development increase the supply of property in the desirable main part of town. The picturesque site adjacent to the McDonnell Ranges may be sold to private developers in order to fund education and aged care services. This would facilitate home ownership for town camp dwellers and provide employment for Aboriginal people in a commercial joint venture. It is believed that the Yerreytye-Arltere people could reap $30 million from land and property sales and create a new prime real estate suburb in Alice in the process if the Federal Government approves the proposal.

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Sources: National Outlook

Victoria

Newspapers: National, metropolitan and local suburban press.

Domain.com.au

Rebonline.com.au

Residex

RP Data/Rismark Home Value Index (October)

LMI Housing Outlook

BIS Shrapnel –

Housing Outlook 2010-2013; Residential Property Prospects

NAB Business Survey of SMEs

Australian Property Monitors

Yahoo.com

Charter Hall Group Investor Forum Survey

Market Review (Switzer) – John McGrath

Real Estate Institute – National and state chapters

First National Real Estate members across the country

Queensland

South Australia

Newspapers: National, metropolitan and local suburban press.

Domain.com.au

Rebonline.com.au

Residex

RP Data/Rismark Home Value Index (October)

LMI Housing Outlook

BIS Shrapnel –

Housing Outlook 2010-2013; Residential Property Prospects

NAB Business Survey of SMEs

Australian Property Monitors

Yahoo.com

Charter Hall Group Investor Forum Survey

Market Review (Switzer) – John McGrath

Real Estate Institute – National and state chapters

First National Real Estate members across the country

28 First National Real Estate 2011 Property Market Outlook

Western Australia

Northern Territory

Newspapers: National, metropolitan and local suburban press.

Domain.com.au

Rebonline.com.au

Residex

RP Data/Rismark Home Value Index (October)

LMI Housing Outlook

BIS Shrapnel –

Housing Outlook 2010-2013; Residential Property Prospects

NAB Business Survey of SMEs

Australian Property Monitors

Yahoo.com

Charter Hall Group Investor Forum Survey

Market Review (Switzer) – John McGrath

Real Estate Institute – National and state chapters

First National Real Estate members across the country

Tasmania Newspapers: National, metropolitan and local suburban press. Domain.com.au Rebonline.com.au Residex RP Data/Rismark Home Value Index (October) LMI Housing Outlook BIS Shrapnel – Housing Outlook 2010-2013; Residential Property Prospects NAB Business Survey of SMEs Australian Property Monitors Yahoo.com Charter Hall Group Investor Forum Survey Market Review (Switzer) – John McGrath Real Estate Institute – National and state chapters First National Real Estate members across the country

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32 First National Real Estate 2011 Property Market Outlook