Australia Property

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I don't get it... ???

Not as if aussie is lacking land to build ??!!! why are they building mickey mouses units?!!
This hot money drive for housing yield is crazy indeed!

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HSBC warns house prices risk rising
THE AUSTRALIAN JULY 30, 2014 4:59PM

Turi Condon

Property Editor
Sydney

THE debate over Australia’s housing bubble continues to find oxygen with investment bank HSBC saying the risk of Australia’s housing prices overinflating is rising, particularly in Sydney where price growth is twice the pace of other cities.

“Australia does not currently have a housing bubble, (but) it seems likely that if the current housing market trends were to persist for too long, there would be a risk of inflating one,” according to chief economist Paul Bloxham.

HSBC singled out Sydney where house prices have risen 15 per cent over the past year compared with an average of 7 per cent in other cities.

“Sydney’s housing market is starting to show signs that merely the expectation of rising housing prices may be starting to drive housing price gains,” Mr Bloxham wrote in a research note.

Record levels of home loans to investors and the rise of property seminars targeting self-managed super funds were among the signs of its frothy housing market, according to Mr Bloxham.

Tempering this is the expectation that NSW will have the strongest income growth.

HSBC noted national house prices increased 16 per cent over the past two years following an 8 per cent fall the two years before. “So part of the rise is just catch-up,” Mr Bloxham said.

“As long as interest rates remain low, we expect the housing boom to

continue, with housing price growth of around 10 per cent forecast for 2014 as a whole.”

The Reserve Bank of Australia was unlikely to cut interest rates given the booming housing market, Mr Bloxham said.

“ Indeed, we expect rates will need to rise to rein in the housing market and secure financial stability.” The cash rate has been on hold at 2.5 per cent for nearly a year with mortgage rates at their lowest ever level, Mr Bloxham noted. HSBC tips an interest rate rise in the first half of next year.

Mr Bloxham warned that the RBA would need to be wary of leaving interest rates too low, for too long, driving excessive risk taking in the housing market.

While new homes loans have risen and investors flooded in, existing borrowers were becoming less of a risk and were two years ahead on repayments.

Despite the ramp up in new house and apartment building, HSBC does not expect an oversupply with new home building still behind population growth.

“A ramp-up in dwelling investment is part of Australia’s great rebalancing act (from a mining-driven economy),” Mr Bloxham said.

Dwelling investment was likely to rise at its fastest in over 10 years during this year and next, moving from contributing nothing to GDP growth in the past three years to

adding around 0.5 percentage points in 2014 and 2015, he said.

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New residential projects go off the boil
KYLAR LOUSSIKIAN THE AUSTRALIAN JULY 30, 2014 3:00PM


THE number of developers looking to start new residential projects has fallen to its lowest level in a year, according to a quarterly commercial property sector confidence survey released by National Australia Bank this morning.

Around 28 per cent of residential developers surveyed planned to start new work in the next six months, a fall of more than 10 per cent since the last survey.

The NAB Commercial Property Index fell from plus three points to negative six for the six months to June, with weaker sentiment across all sectors except CBD hotels.

Sentiment in the office sector fell three points to end at negative 14, while the retail sector dropped two points to negative seven. The industrial property sector saw the biggest fall, down seven points to minus eight, while CBD hotels recorded a four point gain to plus 33.

The survey takes in around 280 real estate agents, property developers, fund managers and larger property investors.

Alan Oster, NAB’s chief economist, said the outlook in Western Australia was particularly bleak.

“What we’re seeing is continued expectation that prices will fall, that rents will fall, and impact of lower mining investment on commercial property will continue,” he said.

And while sentiment from the residential sector was high, it may have peaked, according to Mr Oster.

He said a separate NAB Residential Property Survey, released earlier this month, had seen home price growth expectations moderate across all states, but crashing to near zero growth in Western Australia.

Nevertheless, the sector considered demand for new developments to be at “good” levels, with sentiment improving for the quarter.

Those surveyed for NAB’s more recent release said the availability of suitable stock remained the biggest challenge, although government regulation, although regulation and red tape was increasingly a concern.

But market sentiment is expected to cross into positive territory in the next year, with an expectation that retail and industrial vacancies would “drift down” over the next 12 to 24 months.

Office and retail rents fell further for the quarter, according to the survey, although leasing incentives fell marginally in importance.

The vast majority of the survey participants reported the market was already recovering, with the industrial property sector most bullish.

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http://www.afr.com/p/business/property/p...MHTVTuBxeI

Property spruikers signal overheating market
PUBLISHED: 12 HOURS 53 MINUTES AGO | UPDATE: 10 HOURS 12 MINUTES AGO


JACOB GREBER AND DUNCAN HUGHES
Pat Mesiti, whose mission in life is to create 10,000 millionaires before he dies, wants you.

The Sydney-based organiser of property seminars boasts he can show Australians the secrets of how he and his friends “built fortunes in real estate, starting from scratch with no special skills and not a lot of spare cash”.

All you need do is attend his “property millionaires” tour – in Melbourne this weekend – where you can learn how to develop, renovate and churn property.

“Many of you want to flip properties,” Mr Mesiti declares in a YouTube clip on his website.

“We want to teach you how you do that safely, securely, and make money.”

It’s the kind of pitch that worries analysts watching for signs the property market is overheating.

There are plenty of reasons to worry. Reserve Bank of Australia figures showed this week that investors now account for about 45 per cent of home loan approvals in NSW – a record and well above the previous peak in 2002-03.

RP-Data on Friday said Sydney house prices rose 1.5 per cent last month and are almost 15 per cent higher than a year earlier, a sign price growth may be accelerating.

Experts say an apparent explosion in property investment seminars is a warning parts of the property market are overheating.

“A pick-up in the property spruiking business is a signal things may be getting a little too exuberant,” said Paul Bloxham, HSBC Australia’s chief economist.

The former Reserve Bank official co-wrote a 2010 central bank study into the causes of the 2003 Sydney housing boom and bust.

Housing seminars are a common sight around hotel conference rooms, where they pitch to retirees or younger investors. Direct telephone marketing is also on the up.

Mr Bloxham’s original report noted that one of the alarm bells about Sydney’s overheating market a decade ago was a crackdown on property investment seminars and increased scrutiny by the tax office of rental deductions.

“Some of the tell-tale signs are there,” he said on Friday.

HIGHER THAN EXUBERANT TIMES OF 2003
“The investor share of loans is at a record high, and higher than the very exuberant times of 2003, which ended with house prices falling and parts of Western Sydney doing it tough.”

He says the city appears to be following a familiar pattern, fuelled by record-low official and commercial lending rates that start with price rises based on fundamental drivers, such as a shortage of new homes and rising incomes.

“People then get overly excited about it and start buying assets because the price of those assets is rising.

“The solution is not to leave interest rates too low for too long. It’s one of the reasons the Reserve Bank won’t be cutting rates further and we have in mind they’ll be lifting early next year.”

Chris Curtis, a Sydney property buyers’ agent, said there was no doubt pushers were once again proliferating, but are more sophisticated.

They still use well-worn arguments to drum up business, such as negative comparisons to shares and a shortage of housing supply, while updating the pitch to emphasise affordability of property investments for self-managed super funds and the “globalisation” of Sydney as a haven for global capital.

“They’re quite appalling, and what’s happening now is that everyone is doing this property thing – it’s not just the Gold Coast white-shoe brigade: it’s now happening with credible brands,” Mr Curtis said.

The concern was echoed by last month’s David Murray financial system inquiry interim report, which said borrowing by self-managed funds would create problems if left unchecked.

Regulators, who say co-ordinating enforcement is tricky, fear much of the demand for off-the-plan apartments is being driven by double-digit commissions.

Cash payments of $40,000 are routinely made to advisers who recommend apartments, typically to self-managed super fund investors.

In turn, investors are promised double-digit returns, guaranteed tenancies, regular rental income and perks, such as ‘‘free’’ furniture, in a bid to invest in off-the-plan developments.

Tim Mackay, a financial adviser at Quantum Wealth, said high-pressure sales seminars promising easy wealth had become common.

“Aspirational investors should view it as a canary in the coalmine and tread cautiously.If in doubt seek independent advice,” he said.

Mr Mesiti, one of the spruikers, said that while there were pockets of over-heating other parts were not.

“Property, like life, goes through different cycles at different times,” he told AFR Weekend.

“Everyone is entitled to their view. It think it is a great time to leverage and take control of your own destiny, of your wealth.”

jgreber@fairfaxmedia.com.au
duhughes@fairfaxmedia.com.au

The Australian Financial Review

BY JACOB GREBER

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"The Sydney-based organiser of property seminars boasts he can show Australians the secrets of how he and his friends “built fortunes in real estate, starting from scratch with no special skills and not a lot of spare cash”.
All you need do is attend his “property millionaires” tour – in Melbourne this weekend – where you can learn how to develop, renovate and churn property."....

sounds familiar in sg too!!!! happening all over the world!

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Very confusing... increased competition that will increase supply of housing stock also not welcome... Perhaps the local Aussies are afraid that they are being squeezed out of the market by competition...

http://www.afr.com/p/business/sunday/cal...BDYHix2gYP

Call for more rules for overseas property developers in Australia

PUBLISHED: 6 HOURS 38 MINUTES AGO | UPDATE: 6 HOURS 18 MINUTES AGO


BIANCA HARGE-HAZELMAN
One of the country’s leading property developers has called for tougher regulation of overseas operators in Australia – warning of over saturation and a potential collapse of the market.

David Devine, who is the founder of the $250 million Metro Property Development, told Nine’s Financial Review Sunday program that increased competition from Asian property developers could potentially lead to an oversupply of affordable housing in pockets of Australia’s east coast, namely in apartments.

“Overseas developers are coming in and I understand are paying very high dollars in Melbourne and Sydney. “They will probably come to Brisbane, if fact they are probably in Brisbane at the moment. This needs to be watched,” he said, adding that the Foreign Investment Review Board needed to take a closer look at what was going on.

“Developers who have survived the financial crisis, who understand what is required to be a developer, they are the ones that should be developing. New people coming in that oversupply the market because they don’t understand what is going on,” said Mr Devine.

The fear is in some pockets of Australia’s east coast, too much competition between local and offshore developers would lead to increased construction activity that could exhaust buyer demand, and that oversupply put the breaks on the housing market.

Developer Paul Little head of Little Projects and former boss of transport and logistics company Toll Holdings also told the program that some Asian developers were driving up the prices paid for key development sites, which may inevitably be passed on to customers.

“What is of more concern to us is the offshore buyers being willing to pay higher numbers for sites that perhaps the local developers can or want to,” he said.

He added that whilst he was not against competition and welcomed investment from Asia, customers may not always be getting the best product from companies who are not committed long term to Australia.

“Ultimately whenever you have a healthy market place, it will attract interest from other people wanting to participate in that. If you are an investor you want to make sure that the project which started today will be finished to your satisfaction in four to five years time and you’ll be able to take advantage of that. Also that the company you are dealing with is around still in four to five years time.”

Family First senator Bob Day told the program that the vested interests of governments and developers were to blame for driving up property prices and added that the barriers to compete in Australia needed to be made harder.

“There’s an awful lot they can do regarding the entry point. Ensuring that the entry point, that low entry level into jobs, into housing, into start up business, that should be the role of regulators and that’s where we have this massive distortion.

“In fact in the area of property, not only has it destroyed the home ownership aspirations of a whole generation of young people, it’s distorted the market and it’s distorted the economy to the tune of hundreds of billions of dollars,” he said.

It comes as National Australia Bank warned in a report last week that the gains in house prices were likely to slow as the gap between supply and demand in the property market starts to equalise.

“If you judge where interest rates are, where house prices have got to, where rents have got to, and perhaps the state of the building (market) which has seen some catch up to where the population surge we’ve seen, I think we’re at some sort of equilibrium,” said NAB head of global research Peter Jolly.

“I think we’re definitely going to see some slowing in the rate of growth of house prices.”

Among the biggest and most active Asian developers in Australia are Hong Kong’s Far East Consolidated and China’s Greenland Holdings Group.

Greenland is currently embarking on a major project to turn a large building in the heart of Sydney’s central business district into the city’ tallest residential tower.

While Asian developers, most of which are from China, Hong Kong, Malaysia and Singapore, are not breaking any laws by competing with local building companies, they’re increasing competition at a time when debate is raging about the outlook for property prices and what that all means for the economy.

The government is investigating foreign investment in residential property, with an inquiry due to report in October.

The Australian Financial Review

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LJ Hooker tips investment demand for industrial space to surge

KYLAR LOUSSIKIAN THE AUSTRALIAN AUGUST 04, 2014 12:00AM

INVESTMENT demand for industrial space is set to surge in Sydney, Melbourne and Darwin as investment in non-mining business recovers, according to the latest market update released this morning by LJ Hooker Commercial.

But demand in mining capitals will start to slow, and a move to newer premises will release a large amount of older stock and suppress rental growth, the analysis warns.

Sydney has already seen a 75 per cent increase in the value of factory approvals and a 25 per cent increase in warehouse development approvals for the 12 months to the end of March, thanks largely to a $71m food processing plant in Sydney’s west, the first large factory to be built in Sydney since Amcor’s Botany paper mill in 2012. In Melbourne, a buying spree by institutional players including Charter Hall, ISPT, Australian Industrial Real Estate Investment Trust and Growthpoint Properties has seen the value of industrial properties traded in the last financial year up 50 per cent, jumping from $600m to $900m.

Pushed along by the logistics industry, Melbourne has seen a slew of large new warehouses on the western, northern and south-eastern fringes of the city.

But the LJ Hooker analysis cautioned that as momentum to move to new facilities increased, large amounts of older premises would become difficult to lease.

Total vacancies in Melbourne were up 80 per cent for the year, with rent rising 0.6 per cent.

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Big four banks lead lenders in slashing term deposit rates for savers
THE AUSTRALIAN AUGUST 06, 2014 12:00AM

Michael Bennet

Reporter
Sydney
Term deposit cuts
Term deposit cuts Source: TheAustralian
AMID the hype surrounding the banks’ cuts to five-year fixed home loans, they have also been quietly reducing term deposit rates with far less fanfare.

Since Commonwealth Bank on July 23 slashed five-year fixed loans to its record low 4.99 per cent, spurring rivals to match the offer, the big four banks have reduced five-year term deposit rates for savers by up to 20 basis points, according to data provider Canstar.

National Australia Bank has cut its five-year term rate by 15 basis points to 4.05 per cent, while Westpac — which has been on a multi-year quest to increase deposits — still has the most attractive deal at 4.15 per cent, despite a larger reduction of 20 basis points.

Holding official interest rates at a record low 2.5 per cent yesterday, the Reserve Bank noted low returns from “safe instruments” were forcing savers to scramble for higher yielding options.

Property has been popular, with investor loan approvals at record highs in a trend worrying some economists due to fears that low rates are overheating markets such as Sydney.

But the major banks have not been alone in cutting term deposits. Canstar research manager Mitchell Watson said that in the week following CBA’s move, about half the lenders that reduced their five-year fixed home loans also reduced their corresponding term deposit rates.

Suncorp made the biggest cut, chopping five-year deposits by 40 basis points to 3.6 per cent.

The cuts come as the banks’ funding costs continue to ease, ­allowing them to compete harder for mortgages while still maintaining margins.

The recent spike in the mortgage war will knock less than two basis points from the major banks’ margins due to the fall in term deposit rates — one of their biggest liabilities — according to Deutsche Bank.

The banks are also raising cheap cash by issuing bonds in offshore wholesale markets at prices not seen since before the global ­financial crisis.

“While asset competition has increased we would flag that there has been a substantial reduction in funding costs which will offset the impacts,” Deutsche analyst James Freeman said.

CBA is next week tipped to ­report a full-year profit of about $8.6 billion.

Like five-year fixed home loans, which banking sources say only about 1 per cent of borrowers typically choose, the equivalent period in term deposits is not as popular as shorter terms.

Canstar’s data shows the major banks have also chopped their 90-day term deposit deals in the past six months, but raised some six- month offers and held one-year terms flat. Francesco Mirenzi, a senior analyst at Moody’s, said improved wholesale markets were driving a fall in competition for ­deposits.

While Moody’s held its outlook for the banks at “stable”, the ­ratings agency warned that ongoing strong house-price appreciation was a “substantial” risk. Capital city price rises have slowed this year, but “the risk that a bubble forms is rising”, HSBC economists said last week.

Regulators have warned the banks not to drop lending standards as they strive to write loans amid muted demand for loans from businesses.

Making a fresh assault, Aussie Home Loans yesterday launched a new 4.79 per cent variable rate deal for loans up to $750,000 to build and renovate properties, which are more risky than built housing.

Macquarie, which has been rapidly expanding its mortgage book, is funding Aussie’s new product. In the past fortnight, 71 five-year fixed home loans have been cut by as much as 80 basis points, according to RateCity.

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Office tower values in Brisbane and Perth tipped to fall
THE AUSTRALIAN AUGUST 07, 2014 12:00AM

Greg Brown

Property Reporter
Sydney
VALUES and rents in Perth and Brisbane’s prime office towers are expected to fall over the next few years as the markets cope with sluggish tenant demand and a supply onslaught.

Economic forecaster BIS Shrapnel expects prime values in Perth to drop by 35 per cent by 2018, while Brisbane could suffer falls of 17 per cent.

This compared to an expected rise in values in Sydney and Melbourne of about 25 per cent over the same period, said BIS Shrapnel senior project director Christian Shilling.

Charter Hall joint managing director David Harrison said that effective rents (excluding incentives) would be flat in Melbourne and Sydney over the next two years, and were likely to drop by about 5 per cent in Perth and Brisbane.

“Over the next two years, if we don’t start seeing incentives fall in all markets, then yes there will be potential downward movement in values. (But) I don’t subscribe to the fact that Perth and Brisbane are necessarily going to be more adversely impacted,” Mr Harrison said, adding that offshore investors would be attracted to the higher yields.

“When demand does rebound in the smaller markets (of Brisbane and Perth) the potential reduction in vacancy is far more pronounced.”

Mr Harrison said he was concerned about the level of development in all markets, not just Perth and Brisbane.

JPMorgan equities analyst Richard Jones is less pessimistic than BIS Shrapnel, tipping Perth’s office values to fall 10 per cent over the next two years and Brisbane’s by 5 per cent.

He said vacancy rates could reach 20 per cent in Perth, with rents falling 20 per cent over the next two years, bringing the total correction in effective rents since last year to 40 per cent.

CBRE senior director of office services Andrew Denny said conditions in Perth were the best for tenants in nine years.

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Landlords hit as vacancies creep up
THE AUSTRALIAN AUGUST 07, 2014 12:00AM

Greg Brown

Property Reporter
Sydney

AUSTRALIA’S office landlords are feeling the pinch of the mining slowdown with nearly 12 per cent of Perth’s office towers empty while Brisbane saw its office vacancies rise to nearly 15 per cent, the highest in the country.

At a national level, office vac­ancy rates crept up to 10.6 per cent last month, a more than 15-year high.

Conversely, Sydney was the best performing CBD market, with vacancies falling from 9 per cent in January to 8.4 per cent.

Vacancies also decreased in Melbourne, from 8.7 per cent to 8.5 per cent.

The office market is reflecting the changing nature of the economy in the post-mining boom period, with tenant demand across the six months to July rising in the financial services centres of Sydney and Melbourne, and falling away in Perth, Brisbane and Adelaide, according to the Property Council of Australia.

“The federal government is looking for the real economy to come back and we are seeing some good indications of that from (Sydney and Melbourne),” Property Council of Australia chief executive Ken Morrison said in his first report since taking up the role last month.

“But certainly Queensland and Western Australia continue to be hard hit by the slowing resources sector.”

Brisbane extended its record high January vacancy rate of 14.2 per cent to 14.7 per cent last month, while low tenant demand in Perth saw the number of empty offices rise from 9 per cent to 11.8 per cent of the market.

Office vacancies increased in Canberra and Adelaide, to 13.6 per cent and 13.8 per cent respectively.

Perth and Brisbane are expected to struggle with higher vacancies during the next few years, with a wave of new development resulting in office tower projects being less than half committed.

More than 150,000sq m of off­ice space is planned for in Perth by 2017, which is 10.4 per cent of the market.

Developers in Sydney are expected to add than 400,000sq m of office space (8.5 per cent of the space of the market) and nearly 200,000sq m in Brisbane (8.8 per cent).

There is less development planned in Melbourne (5.9 per cent of the market), Canberra (2.4 per cent) and Adelaide (2.8 per cent).

Michael Cook, head of capital transactions, commercial development and leasing at Investa ­Office, said landlords had become more competitive in the hunt for tenants.

“We have abolished the word no from our vocabulary. When you get a tenant inquiry you treat it like it is your last,” Mr Cook said.

“We have to be more flexible on (a tenant’s request for) growth and on contraction, and on the general lease terms. We have to respond quickly, get back to tenants quickly. If we can do something we do it; if we can’t then we move on.”

ISPT chief executive Daryl Browning said the group, which owns a number of Brisbane office buildings, was working harder to ensure prospective tenants were serious about leasing space, rather than creating competitive tension with another landlord.

“That’s the hardest thing: tenants are spoiled for choice and are in the driving seat,” he said.

Mr Browning said the conversion of old office buildings into apartments would help the Sydney and Brisbane markets. But he was not convinced the Sydney market was in a period of recovery. “Not by any stretch,” he said.

“I would like to see it more sustained with stronger levels of demand. We are looking for the bounce back in white-collared employment and until that really takes hold I think you are going to see a fairly moderate outcome for office.”

Colliers international director of office leasing Cameron Williams said office landlords, particularly in Sydney, were adapting their space to accommodate the growth of trendy IT companies.

“These organisations place a high emphasis on staff retention, so providing their employees the best amenities available is critical. Their workforces are typically younger and they’re looking for a 24-hour location.”

JLL head of office leasing Tim O’Connor said Sydney was past the trough of the demand cycle and said he expected the city’s vacancy to stay in single-digit figures during the next year.

The suburban office market is facing less vacancies than CBDs for the first time since 2001, with tenant demand on the rise. Suburban vacancies fell from 10.6 per cent to 10.4 per cent in the past six months

The Gold Coast is still nudging out Brisbane as the market with the most empty office space, at about 15 per cent.