News Items

Market Overview

Over the last six months Australia has performed well in comparison to other developed economies and has to date, managed to avoid recession. However, growth (real GDP) will continue to slow as rising unemployment and reduced household wealth weigh on consumer spending despite policy stimulus. GDP growth is expected to be just 0.1% and 0.5% for the 2009 and 2010 calendar years respectively, whilst a recovery is expected in 2011 with GDP at 3.1%. Unemployment is expected to rise to 8% by mid 2010 from a low of 3.9% in February 2008 (source: ANZ economic outlook, July 2009). Commercial and retail property values continue to decline. This is driven by reduced demand as a result of the limited availability of capital and funding, as well as a number of distressed sellers weighing down the market. The residential market however has bucked the trend and prices remain resilient.

Commercial Property
According to analysts Morgan Stanley, further correction in corporate profitability and rising unemployment will see average vacancy levels rise to 12%, while rents will come down by 20% from the September 2008 peak (Source: Australian Financial Review, 14 July 2009). Fortunately supply remains relatively low in most markets, the exceptions being Brisbane and Canberra in 2009 and Perth in 2010. Capital values are expected to remain soft for some time, until liquidity and investor confidence returns to the market.

Retail Property
As economic growth has slowed, we have witnessed the impact on the ability of retail tenants to expand their operations or pay increased rents. Consumer spending will be impacted by rising unemployment, which in turn will place pressure on occupancy rates throughout the country. Retailers of a non discretionary nature will outperform, whilst we expect discretionary spending to ease. As with the office market, retail property valuations are expected to continue to remain flat over the next 12 months.

Residential Market
While house prices in most other developed economies have tumbled significantly since the beginning of the global financial crisis, Australian house prices have proved resilient, softening only 1.2% in the year to May 2009 (Source: ANZ Economics and Market Research: Housing snapshot, June 2009). Prices have remained solid on the back of significant interest rate cuts and Government
initiatives such as the First Home Owners’ Grant will continue to support land sales.

Western Australia Land Sales Update
Recent information released by the Department of Treasury and Finance shows that the First Home Buyers’ Grant stimulus has continued to have a positive impact on the market with the number of applications steadily increasing since October 2008 in Western Australia. Total applications have increased since September 2008 by 128%. Applications for new homes have increase by 49% in June, compared with the previous month.

The Residential Development Council of Australia has forecast that by 2013, Western Australia will have a shortfall of 17,000 houses with a population growth of 39% by 2027. The latest forecasts are expected to place further pressure on planning commissions, with regard to where land releases are going to be located and infrastructure.