June 2015 · 2018. 7. 31. · Herron Todd White does more than just property valuation. We are fully qualified and accredited property advisors, in all areas and classes of property

June 2015Month in Review

Feature – Mid year in review 3

QS corner 4

Commercial – Office 5

Residential 20

Rural 49

Market Indicators 58

Contents

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When operating in Australia’s property markets, shouldn’t we all take a little break every now and again to sharpen the hypothetical saw? The fact is most of us who operate in this industry need to gauge the progress of the market so we can form our opinions on where it’s set to head. Most buyers and sellers will have an opinion, but it’s worth little if we don’t make time for constructive real estate reflection.

We’ve hit the halfway mark in the year – it’s a natural rest stop with a scenic lookout. A place to turn off the engine, grab the thermos from the boot and to gaze upon what’s been happening over the first half of the year. Stationary but not mentally idle.

This year has brought mixed results across Australia. There have been those hot, hot, hot markets continuing in the big south-eastern capitals for example. In other regions, property that looked set to be smokin’ has fizzled. Many mining centres have also well and truly run their course of course.

If you’re a regular reader of Month In Review you’ll know we’ve recently completed a wrap of the prestige market which has shown a bit of bounce, but what about other price points and property types?

This month, our offices are going to give you a good old fashion round up on how the market has performed thus far in 2015. It’s a set of well-informed opinions from coast to coast on who fired and who failed. We’ve given our offices open slather to chat about market influencers and the impact of interest rates, population growth and job security. It’s simply a chance to answer the question ‘How’s your property market performing?’ We’ve also asked for details on interesting sales around Oz for your enjoyment as well.

This month also, commercial readers will find themselves drowning in office market information. Our commercial operators are putting the sector under the microscope and have come up with a wrap (but not a ‘rap’… that would be weird) of market performance. We’re all about to discover the best place to invest in office space, and what locations to avoid. We get a feel on the impact of interest rate movement, look at what else is influencing offices, and even take time to consider the whole thing from the tenant’s perspective.

There it is for all to enjoy. A mid-year rundown on what in gee willikers is happening around this Great Southern Land. Of course you’d be doing yourself a disservice if you needed specific direction on your real estate holdings and didn’t call your local Herron Todd White office. They’re there 24/7… well… during business hours at the very least… but there, professional and ready to help you make a highly informed decision on the next move for your holdings. So what are you waiting for? Oh that’s right, the sojourn.

Mid-year in review

There’s nothing like a pause in proceedings to help everyone catch their breath before forging on. Intermissions were made for all to gather in the foyer and wax lyrical with opinion. How have the stars played out? Isn’t the supporting cast wonderful? Where is the story leading us?

Month in ReviewJune 2015

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With the official cash interest rate reducing to a new record low of 2% in May 2015, the property market is starting to see a surge of new and existing investors. Combined with the long-term potential for strong yields and capital gains, many property investors feel this is an ideal opportunity to get into the market.

With a buoyant property market, many investors may feel the heat of the completion and find themselves buying on impulse without really understanding or researching the market they are about to enter. The importance of doing your due diligence before any purchase is invaluable. This may be easier said than done, however, as the saying goes, “it’s better to be safe than sorry”.

It is recommended that any investor, new or seasoned, look beyond the low interest rates and low deposit home loans and take a step back to see the bigger picture of property ownership.A big question is always, “where do I buy?” Although that always comes down to each individual’s personal and financial circumstances, a good place to start is median priced properties located close to a CBD. This is considered the smartest way to achieve long-term wealth, as these properties are usually located near schools, transport, employment opportunities and

social venues and are usually the most in demand properties to rent.

When looking for an ideal location in which to invest, many investors get caught up in the excitement of buying and don’t do their homework. Herron Todd White is a professional property advisory firm specialising in market valuations of all types of properties and all around Australia. Why not leave it to the experts to advise on the market value of a property BEFORE you commit to a sale. That way you will have the confidence of knowing that you are not paying too much for your asset.

Another important element to consider is your home loan repayment ability, both now, with record low interest rates and in the future, if an increase should occur. This is especially important as a mortgage is usually based on a 25 to 30 year term and although your mortgage may be based on low rates with low monthly repayments now, you must ask yourself whether you will be able to repay the same mortgage amount with a 1 or 2% rise in interest rates. Past trends have seen a rise in mortgagee sales with property owners feeling the stress of increased repayments with rising interest rates.

Most importantly, make your investment work harder for you - repaint the walls, replace the carpet, build a granny flat, do some landscaping. Whatever it is, increasing the overall appeal and presentation of your property will attract quality tenants and help you to maintain your property to a good standard at

all times. It’s also important to remember that any improvements can be depreciated. An absolute must for all investors of property is a Tax Depreciation Schedule.

While the land component of the property is usually the one that appreciates, the actual dwelling, the bricks and mortar, carpets, blinds and kitchen appliances, wear out and depreciate. It is for this reason the ATO allows owners of investment properties to claim annual deductions for depreciation on their properties.

The best way to have your property correctly assessed for depreciation is to engage a fully qualified and appropriately licensed Quantity Surveyor who is also a registered Tax Agent. That way, your claim will be in accordance with the ATO’s guidelines and with the reassurance that a qualified professional is ensuring that all depreciable items are accounted for and not overlooked, maximising your return and reducing the amount of tax you pay.

Herron Todd White does more than just property valuation. We are fully qualified and accredited property advisors, in all areas and classes of property. If you or someone you know needs Tax Depreciation advice, please contact us at [email protected]. We have fully qualified Quantity Surveyors who are ready to help.


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QS Corner - Low interest rates... Is it the right tome to invest?

Commercial

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OverviewThe office sector throughout Australia has seen mixed performances this year. There was a feeling of increased confidence in some industries, while others have probably been hit harder than expected. This month, our offices are going to give details on how they feel the first half of 2015 has panned out in their specific service areas. It’s an invaluable set of opinions for anyone with a stake in office space.

SydneyShort term market expectations appear fairly positive for the Sydney office market. Total office space in Sydney has tightened over the past year, supporting a fall in total vacancy, which has also been helped by a moderate recovery in office demand. Previously forecast sharp supply driven increases to vacancy levels for the 2015 to 2016 period appear to have been scaled back, with increased certainty around the amount of stock withdrawals likely to occur in the years to come.

The expected level of stock withdrawals over the short to medium term has grown increasingly significant, largely driven by the current strength of demand for new high density residential development.

To put this into perspective, the Property Council of Australia (PCA) has identified a pipeline of around 530,000 square metres of office projects (new builds and full refurbishments) at either construction, plans approved or plans submitted stages as at January 2015, with the vast majority of these projects expected to be completed within the next five years. On the other hand, industry sources are predicting as much as 360,000 square metres of office stock to become withdrawn in the next five years in the Sydney CBD office market alone.

The offsetting effect of stock withdrawals to new supply is expected to be positive news for office landlords in Sydney, as it should help maintain space market fundamentals which are supportive of rental growth. Recent figures are already showing an improvement in Sydney’s physical office market from a landlord’s perspective. The headline vacancy rate across the Sydney office market as monitored by the PCA fell to 8% in January 2015 from its previous peak of 9.3% twelve months prior. The headline vacancy rate fell not just as a result of office demand which undoubtedly increased in the year to January 2015 (around 86,500 square metres of net absorption) but also as a result of stock withdrawals (135,600 square metres) exceeding new completions (114,300 square metres).

Based on PCA’s Consensus Forecasts (Autumn 2015), all monitored markets apart from the Sydney CBD are expected to record falls in vacancy rates

between January 2015 and January 2017. In the Sydney CBD, market expectations are generally for only moderate growth in prime and secondary gross face rents over the next two years (ranging from 2% to 3.8%), with rental incentives expected to reduce most significantly in the second forecast year. On the other hand, non-CBD markets appear to hold greater prospects for rental growth coinciding with falling vacancy levels, particularly for Sydney’s North Shore office markets (North Ryde, Crows Nest/St Leonards and Chatswood).

In terms of buyer demand, we are seeing more investment into commercial property coming from private investors seeking returns higher than currently being offered in the residential market. Sitting tenants in offices transitioning into owner occupiers of their business premises continue to be a common theme in Sydney, driven by the narrowing of the gap between costs of owning premises outright versus renting, as well as the popularity of purchasing business premises through self-managed super funds. Additionally, buyer interest from offshore investors is also driving a portion of demand for smaller office assets across Sydney, spreading outside of submarkets which are traditionally hotspots for these types of buyers.

CanberraThe budget has just been handed down and it appears on first reading that the reduction in the Public Service has been stalled and indeed some

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growth is anticipated. The overall market is heavily into over supply and we quote from the Property Council of Australia figures as released in February 2015 (all measurements are in square metres):

Total Office Stock: 2,393,674

Direct Vacancy 328.745 13.7%

Sub-lease 39,751 1.7%

We then look at some of the individual centres and realise where the space in over supply is located:

Vacancy by location in square metres:

Airport 81,384

City 100,900

Barton and Forrest 62,158

Woden 28,329

Belconnen 11,759

Remaining Office Locations 83,966

Currently we are seeing some strong private sector leasing activity particularly in the Deakin area – RSM Bird Cameron, SAP and ASG each have taken in excess of 1,000 square metres in 70 Kent Street and CSG has secured circa 2,000 square metres at the airport.

However the major tenant in the ACT is government. Currently it is mooted that the Department of Finance will consolidate its operation in a recently completed development in Forrest although there is no certainty that this move will occur as the cost to government is being questioned in Parliament.

The amalgamated departments of Immigration and Customs would like to consolidate under one roof and an opportunity for this to occur has been identified at the airport. However Immigration is one of the keystones of the Belconnen Town Centre and strong debate at a local and national level is occurring. The whole ethos and structure of the design of the ACT assumes decentralisation and is dependent on the strength of town centres.

Office space and waste is being hotly pursued by government and the Australian Government Property Data Collection (PRODAC) unit of the Department of Finance is charged with ensuring that there is no waste.

The Australian Taxation Office is purported to have 6,500 empty desks across the nation. This could amount to 65,000 square metres of excess space under lease. The Department of Human Services in Canberra is understood to be trying to off load substantial space in leased buildings.

It is important that government is seen as an efficient space user and to that end the surplus space will

impact on vacancy rates across the nation, not just in the ACT. The budget papers indicate that smaller agencies will be encouraged to occupy space held by government under lease.

WollongongThe Illawarra commercial property market has shown clear signs of improvement over the past 12 months with an increase in sales volumes, demonstrating improved confidence after a prolonged period of static conditions.

Investment transactions have increased as investors (private and second tier funds) are enticed back to the market by yield arbitrage and a common view that the market has bottomed. However, these investors are still primarily motivated by good quality assets, strong lease covenants and rental security

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although the gap between prime and non-prime assets appears to be closing somewhat.

Price point is also a factor with demand reducing for higher valued assets in the plus circa $2 million to $3 million range. Low interest rates, a recovery in the development site market and the increased buyer depth has resulted in yield compression despite rents largely remaining stagnant. Low interest rates are a significant driver in the local market and prices may be adversely affected if interest rates increase.

Tenant demand at present for large suites in the Wollongong CBD appears to be primarily from government departments and is concentrated on the higher quality A grade space with reduced interest in lower quality stock. There is a trend amongst select large corporations of reducing space as exhibited by the downsizing of AHM/Medibank, Illawarra Mercury, Hatch and One Path and unconfirmed media speculation of Illawarra Coal downsizing its premises at the Innovation Campus. There is limited corporate head office demand with most companies requiring tenancy sizes of less than 500 square metres. Conversely, supply of large functional floor plates within the highest grade office stock is limited. Given

the overall vacancy rate and the market primarily being driven by affordability, it is our opinion that there will be no upward pressure placed on rents in the foreseeable future, despite the fact that there is no significant supply proposed in the market.

NewcastleThe over riding factors hanging over the A and B grade Newcastle office markets have been the continued low vacancy rates and lack of any new stock of significant size in the pipeline. The development market has now responded to this need for new stock and as at January 2015, there was a total of 20,800 square metres of new CBD office property in the construction pipeline. Of this space, 3,700 square metres is currently under construction on the corner of Parry Street and Stewart Avenue in Newcastle West. Completion is due in late 2015. The remaining office property to be constructed is situated at the Doma Group owned Edition mixed use development in Honeysuckle as well as four stories of office property to be constructed over Civic West Carpark. Neither of these developments will be completed until after 2017 and we can expect tight vacancy rates in the upper end of the local office market to continue until this time.

Local agency advice indicates tenant demand remains firm in the A grade sector, however larger users are becoming more difficult to secure. Office rental rates are staying firm at the top end of the

market. In fact, there is an interesting observation on a two level mixed use property in the Hunter Street Mall. The market indicates that for large, older style upper level offices, the market rent is actually on par (on a rate per square metre of gross rent basis) with the lower level, much smaller retail spaces. This is a very unusual situation and indicative of the relative strength of the office market against the weak state of the retail market in that particular location.

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MelbourneThe Melbourne CBD office market has observed a marginal increase in vacancy rates over the past 12 months, with the Property Council of Australia reporting in the January 2015 office market report a total vacancy of 9.1%. This represents an overall increase of 0.6% from the total vacancy of 8.5% observed in July 2014. The overall vacancy rate for the Melbourne CBD market is currently lower than the national January 2015 average of 10.8% and is also notably lower than the overall ‘Australian CBD’ vacancy rate of 11.2%. The PCA reports that during the 2015 calendar year a significant amount of space will be added to the market with a high level of pre-commitment (121,335 square metres with 71% pre-committed) and again in 2016 with a further 55,000 square metres or so to be absorbed (undisclosed

level of pre-commitment). The leasing incentives currently remain relatively high with incentives of approximately 25% to 30% being offered for office space within A and B grade buildings and reports of up to 40% for buildings with relatively high levels of existing vacancy.

The city fringe market has observed a decrease in the vacancy rate from 8.6% to 7%. The outer east suburban vacancy rate remains relatively high having increased from March to September 2014 from 11.4% to 12.9% following the relocation of the ATO to new premises at 913 Whitehorse Road, Box Hill. In the south-east, the vacancy rates have improved somewhat, reducing from 5.3% to 3.4%, primarily due to the conversion of a number of older commercial buildings into residential development opportunities.

Strong overseas investor demand is continuing for good quality office properties within the Melbourne CBD, St Kilda Road and city fringe / inner suburban office markets. This is primarily due to the lack of suitable stock on the market and the sheer weight of local and international capital seeking limited investment opportunities in this segment. Assets in the $15 million to $50 million price point typically appeal to a broad range of private investors, syndicates and Self Managed Super Funds (SMSF). The primary overseas demand is from Singaporean, Malaysian and Chinese private investors with local

investors now required to pay a premium in order to secure suitable investment grade assets. Due to the current economic climate, both locally and internationally, the Melbourne CBD is currently an attractive destination for Asia Pacific investors. This is primarily predicated by the relatively high returns on offer and the generally low risk fundamentals of these CBD assets compared to competing cities in the region.

It is predicted that prime A and B grade CBD office buildings will continue to attract strong demand from both local and overseas institutional investors, syndicates and sovereign wealth funds. We predict that overseas interest will continue to grow in the short term as the next wave of demand comes from Chinese sovereign wealth and pension funds. Recent sales activity suggests that market yields are continuing to firm for well located investment grade assets exhibiting sound fundamentals, such as a strong WALE and limited capital expenditure requirements in the short term.

As an example of this we note the recent sale of 520 Collins Street, Melbourne which was reportedly purchased by an undisclosed private investor for $52 million. This is a B grade 17 level freehold office building, incorporating additional retail and car parking, which was constructed in 1975 and subsequently refurbished over time. The property has a net lettable area of 8,554 square metres, a 2.5

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Star NABERS rating and is situated on an allotment of 836 square metres. The property was sold via an EOI campaign subject to a net passing income of approximately $3,469,142 per annum which reflects a passing yield of 6.67%. Our enquiries indicate that there was considerable depth of interest in this property with multiple competitive bids received from prospective local and international purchasers.

Overseas developers in particular continue to remain extremely active within this market segment and, in many cases, are appearing to be pricing local developers out of the market. Given the relatively weak leasing conditions and the potentially substantial re-leasing and refurbishment costs for older office buildings, in some cases we are witnessing a number of overseas developers secure quite substantial office buildings with the view to convert or redevelop for residential purposes.

Our overall observations however are that due to limited opportunities and substantial capital inflows, many purchasers are disregarding basic property fundamentals to secure well located assets by paying what can be considered a premium for assets with relatively weak lease profiles and significant capital expenditure requirements.

Murray RiverinaCommercial market activity, including smaller scale owner occupiers and larger development sites, has spiked in recent times. Several smaller sales at or around the $500,000 to $600,000 mark have been complemented by development sites including Victracks Ten Pin Bowling Site and the adjoining Bella Cibo site along with a former service station site on High Street and though dated the childcare site in Ogilvie Avenue. While levels of value have not been racing ahead this activity appears to demonstrate improved confidence and a desire to take advantage of current interest rate conditions.

MilduraThe office market remains quiet, with owner occupiers and tenants generally reluctant to move. Several older style buildings have sold during the past six months in the sub $500,000 bracket. In both cases, the buyers intend to refurbish and occupy. Buyers are generally seeking buildings with good natural light and on site carparking. Rental rates and values have remained static during the past two years and we don’t see this trend changing in the near term. Vacancy rates remain slightly above long term average levels.

One of Mildura’s larger office buildings, currently subject to a lease to a national accounting firm, is currently being advertised for sale and will be a good litmus test of the investor market.

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AdelaideThe South Australian commercial property sector appears to be facing an extended period of consolidation that is expected to continue.

While recent interest rate reductions may have contributed to agents reporting improvement buyer sentiment, this appears to be predominantly from owner-occupiers with rental rates still in decline or at best stagnant. Many properties with strong fundamentals still require incentives to secure tenants, making speculative investment office purchases less attractive despite reduced borrowing costs.

Strata office accommodation within the CBD has been notably subdued for some time, but the State Governments ambitious targets to increase the population within the CBD will eventually have flow on effects to retail and office accommodation. Additionally the conversation of out-dated and underutilised office buildings to mixed use residential /office/retail will in time remove the lower grade properties and equalise the market. Although this will take time, the policy directives are in place to strengthen the CBD market and current weak conditions may present opportunities for a brave investor.

Currently city fringe offices are a popular investment opportunity. While these don’t typically provide

strong yields, the underlying demand from owner-occupiers and opportunity for capital growth offers secure investment opportunities. In particular properties on main arterial routes are currently in strong demand due to recent Urban Corridor Zoning changes allowing for higher density mixed use developments. This has come at a time of reduced borrowing cost which is stimulating the market; however, the market demand for the end products remains unclear for office and retail space but if coupled with good car parking and lower overall occupation costs compared to the CBD there is likely to be reasonable demand.

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BrisbaneThroughout the first half of 2015, economic global growth has continued to improve, although it has been uneven, with the threat of deflation and collapsing commodity prices ever present. Australia has experienced two reductions of the official cash rate, in an attempt to offset the high Australian dollar and jump start the broader economy that continues to grow at a glacial pace, with business confidence remaining low.

The latest reserve bank cash rate cut of 25 basis points, in May 2015 has lowered the official cash rate to 2.00% and has left the economy at a cross road, with a great deal of uncertainty overall, stemming from factors such as the collapse of the iron ore price and rising government debt.

With regards to the Brisbane office market, sales of prime CBD office accommodation continues to support the overall poorly performing office market. Interest does remain strong for prime investment grade office properties with good leasing profiles, however secondary office accommodation continues to experience a softening in demand as a result of increasing vacancy rates. At odds with the overall state of the office market, yields have remained relatively stable with the prime office market reflecting yields of circa 7.50% to 8.00% and the secondary market reflecting yields circa 8.50% to 9.00%. Of greater concern appears to be the

softening of sales activity with the year to March 2015 down 72% and almost 59% below the five year average.

From a leasing perspective, the remainder of the year and looking towards 2016 appears to be patchy with Lessors forced to offer large rental incentives in an extremely competitive leasing market. While this offers good value for prospective new tenants providing for affordable rents, demand for office space in the Brisbane CBD is expected to remain low. This will be further exacerbated by the completion of 180 Brisbane on Ann Street in the fourth quarter of 2015, 480 Queen Street in the first quarter of 2016 and 1 William Street in the third quarter of 2016. Combined, this will provide an additional 188,966 square metres of Net Lettable Area and will result in the relocation of many tenants throughout the Brisbane CBD who look to move to high quality, brand new tenancy areas, all the while locking in highly competitive gross effective rents as a result of the subdued market overall. While this will represent a shift in the market as tenants relocate across the Brisbane CBD, vacancy rates will continue to remain high as older office accommodation is vacated which in turn will increase rental incentives as these tenancy areas attempt to be re-leased. Accordingly, the overall vacancy rate is likely to not have yet peaked as new stock enters the market and older stock becomes available. Unless significant stock

withdrawals occur the high office vacancy rate is anticipated to continue until at least 2018.

Overall, the Brisbane office market has the distinction of the poorest performing sector of the property industry and this is highly unlikely to change within the foreseeable future. While yields of prime CBD assets continue to remain relatively stable, investors are advised to use caution when considering the purchase of assets, given the stubbornly high overall vacancy rate and falling face rents as a result of high rental incentives with the condition to remain unchanged for some time.

ToowombaLeasing demand for commercial office accommodation in Toowoomba has been moderate to date in 2015. Office rentals have remained

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relatively static with some lease incentives available for properties with longer term vacancies.

Car parking fees within the CBD have increased over the past six to twelve months. Car park rents are mostly influenced by fees charged by Toowoomba Council for their public car parks and metered street parking. The parking fees charged by Council were increased for the 2014/2015 budget period, which has resulted in an increase in fees achieved in private car parks and car parking attached to commercial office buildings.

There have been no new major office building developments in Toowoomba to date in 2015, with only a small development currently under construction on the corner of Herries and Phillip Streets, however there is a current requirement by the Department of Transport and Main Roads for a 2,500 square metre office tenancy within the Toowoomba CBD or CBD fringe. It is believed that this requirement will be fulfilled by the development of a new building.

The low interest rates have resulted in strong demand for commercial properties by investors, however the lack of supply of quality, fully leased properties has limited the number of investment sales. The largest sale of note was the new Toowoomba Chronicle building in Neil Street which sold in late 2014 for $5,975,000 at a net yield of 8.36%.

Gold CoastReiterating our review of the Gold Coast office market earlier this year, there would appear to be continuing general improvement in both buyer and tenant demand. Again, this sentiment would appear to be riding on the back of reducing vacancy levels and the historically low interest rates, the latter influence providing investors with superior real net investment returns.

There were a number of larger office building sale transactions reported in late 2014, Including 183 Varsity Parade, Varsity Lakes for $8.9 million and the Dascom Building at 165 Varsity Parade, Varsity Lakes for $6.25 million. The Department of Child Services occupied a building at 24 White Street, Nerang which sold in March 2015 for $3.35 million. We are also aware of an off market transaction of an office building within one of the beachside suburbs above the level of the Varsity Lakes sales. Collectively, these sales reflect yields ranging from 7% to 8.5%, with the trend being a compression of yields.

Further tests of the strength of the Gold Coast office market are several current sale campaigns for properties of the calibre of the Foxtel Building at 35 Robina Town Centre Drive, Robina (reported net income of circa $3.6 million per annum), The Rocket at 203 Robina Town Centre Drive, Robina (reported net income of circa $6.24 million per annum) and potentially for the private investor/owner occupier

sector, the far smaller Coral Homes building at 36 Laver Drive, Robina of 1,487 square metres lettable area being offered with vacant possession (and also available for lease).

Activity within the strata office sector would also appear to be improving. This asset class is most prolific in the main Gold Coast office precincts of Southport, Bundall, Surfers Paradise and Robina/Varsity Lakes. Sale prices certainly appear to have stabilised, but there is plenty of evidence of price increases. Value rates for this asset class in our market would broadly range from $2,000 to $4,000 per square metre of surveyed floor area. The lower level being applicable for older, lower quality buildings within Bundall and Surfers Paradise, while the higher rates are being achieved for newer, better quality buildings within areas such as Robina.

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Yields will vary significantly depending on whether purchased for owner occupation (7% to 7.5%) or for investment (8% to 8.75%).

The strata office market continues to offer good opportunities, particularly for owner occupiers who can capitalise on the low interest rate environment where it makes more economic sense to pay interest than rent. An example of a good owner occupation opportunity is the Westlawn Groups Lakehouse project at Robina. There are two existing buildings on a lake setting that are being progressively refurbished and strata titled. The first building will provide up to 18 suites with open car parking. List prices range from $471,000 to $683,000.

Rental levels appear to have well and truly stabilised and are now at the point where landlords are

reducing incentives and anticipating rental growth. B and C grade stock is ranging from $250 to $375 per square metre per annum gross, with A grade space at $400 to $500 per square metre per annum gross.

With an across the board PCA vacancy level of 15.2% in January 2015 and an expectation that the level at July 2015 will move downward, leasing agent optimism is starting to permeate the marketplace.

Office areas with a better ratio of car parking and are readily accessible to the light rail would appear to be attracting a higher level of leasing interest. The office precinct of Southport falls into this category. Tenants are also attracted to more modern buildings with competitive rental rates such as Varsity Lakes.

In an overview sense, based on our observations, the middle tier rental rate range is attracting the higher incidence of tenant enquiry. Inferior, older quality floor space remains more difficult to lease, possibly due to perceived uncertainty in future business conditions being a hindrance for businesses to commit to more expensive floor space at this time.

Overall, there is a general sentiment that the Gold Coast office market is improving. We anticipate that this should build further moving through 2015.

Hervey BayGenerally, the commercial office market in Hervey Bay remains unchanged and slow with little indication

of any change in the short term. However, the variation in leasing rates between primary and secondary property appears to be expanding.

Continued high levels of supply and anxious vendors have resulted in a general softening in leasing rates for older properties or spaces lacking exposure. Current asking rates are as low as $160 per square metre net for secondary space while primary space is still asking in excess of $300 per square metre net.

Buyers continue to lack urgency in making a decision and very few properties have sold over the past six months. Some sales with good tenancy profiles are achieving yields in the 8% to 8.75% range. Owner occupier rates per square metre appear steady in the range of $2,000 to $3,500 in older buildings and up to $3,800 per square metre in the newer buildings.

Leasing rates are likely to remain very competitive until stock is absorbed. Incentives are common and tenants remain cautious, with most local operators negotiating initial one year lease terms with options.

GladstoneContinuing into mid 2015 we consider market conditions will remain volatile in Gladstone’s office sector, with potential for continued market correction on the back of the downturn in local mining industries and reduced local workforce numbers. Demand for office accommodation is weak and there is currently an oversupply of accommodation.

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Tenants that have leases approaching market review are taking the opportunity to renegotiate down from the peak rental levels they were paying throughout 2011 and 2012. It is likely that incentives will be required as part of any new lease negotiations to secure a tenant.

There have been very few investment sales for office accommodation over the past two years, which is reflective of investor sentiment around the current supply and demand in this sector. To appeal to an investor, the property will need to have a solid tenant and strong unexpired lease term.

Vacant office accommodation does not appeal to investors in the current market as securing a tenant is problematic with long letting up periods, especially for older properties in secondary locations. Interest rate cuts are likely to also see more tenants across this sector opt out of renting and purchase their own premises. This has been seen across the board in nearby Central Queensland towns over the past 12 to 24 months and we anticipate this will continue pace while the interest rate remains low.

RockhamptonThe Rockhampton office market has been behaving much like the retail and industrial property markets where tenant demand is moderate and incentives are necessary to attract new tenants. Vacancy rates are stable although with little new office space being produced there has been a slight reduction in available space. We are seeing a growing trend for many tenants to down size as business practices change and modern work forces embrace a wider use of mobile technologies. Agents report most interest from new tenants is for office space below 100 square metres and a small but growing demand for office space that is lettable on an hourly rate.

Rockhampton is somewhat oversupplied with older buildings that have not been updated and in some cases not well maintained. Tenants are not attracted to these older buildings that no longer meet tenant requirements of a modern office. This is an issue for some of the older buildings in Rockhampton, some of which are heritage listed.

Some of the older heritage listed buildings within the city centre which have been used as office space over recent years are now reverting back to their original designs of 100 years ago with residential uses in upper levels and commercial or retail uses on the ground floors. Two buildings within the CBD in this category which also enjoy river views have recently sold at about $1.1 million each to owner

occupiers. We consider the recent interest rate reduction will continue to encourage tenants to purchase and occupy their own premises. This will be a continuation of the owner occupier activity we have seen in the local office market over the past 24 months, with most activity below $750,000, but with price points to about $1.1 million as noted above.

TownsvilleOffice activity into the start of 2015 has remained sporadic and mostly within the sub $5 million price range and not CBD centric, but rather includes suburban locations along major distribution roads.

Unemployment in the region remains higher than the state average, while business confidence in Townsville during the second quarter of 2015 has continued to improve with a slight uplift in the index according to the PwC Townsville Business Confidence Survey.

Anecdotal evidence suggests that the sub $2 million price bracket is a more realistic range for mum and dad investors at this time as this is seen as more affordable and less risky due to smaller floor plates and single tenancy configurations.

Our CBD office survey for the six months from July 2014 to January 2015 indicates that the vacancy rate for A grade office space reduced during this period, however increases in the B and C grade vacancies

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meant that there was an increase in the office vacancy rate overall from 24.5% to 26.3%.

Current conditions are consistent with weak overall demand for office space. Rental rates have suffered downward pressure as a result of the continuing weakness, triggering increases in leasing incentives in order to attract tenants. There is a concern that current incentives are simply attracting opportunistic tenants or new first time businesses into the market that will have little commitment to the longer term.

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DarwinA recent inspection of the new Charles Darwin Centre at the corner of the Smith Street Mall and Bennett Street revealed a well planned functional shell which is already an ornament to the CBD skyline. Fitout works for the NT Government (NTG) tenancy have commenced and it is expected to be occupied before the end of the year.

This building is already a game changer within the Greater Darwin office market. The NTG (the dominant tenant in this market) is already allowing leases to expire in some of its older tenanted buildings in anticipation of relocating to the Charles Darwin Centre.

The twin cutbacks in the NTG office staff numbers and the reduced area required per staff member (due to more efficient building and workplace design) mean that demand for office space is dwindling. We are forecasting a negative net absorption rate for CBD office space over the next couple of years. This does not bode well for owners of buildings with large floor plates designed for NTG occupation, especially buildings that require significant investment to upgrade. It appears inevitable that vacancy rates will rise further.

On a brighter note, demand for smaller scale strata title office space has remained steady. Owner occupiers and their related superannuation funds are purchasing this type of product, taking advantage of the low interest rate environment to buy rather than rent. The Avenue development at Parap is a prime example of this with its proponents now pursuing a similar although smaller scale development at Alice Springs.

View from Charles Darwin Centre 19th floor looking west over the city and Esplanade

View from Charles Darwin Centre 19th floor looking south east over the waterfront

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PerthSince mid-2012, CBD office rents have been subject to downward pressure as increasing vacancy and low enquiry levels impacted the market. The downturn in the market coincided with the beginning of the end of inflated iron ore prices.

Office vacancy in the Perth CBD increased 5.8 percentage points over 2014 to 14.8% at January 2015. Vacancy increased as a result of subdued tenant demand and a number of businesses re-evaluating their staffing and accommodation needs. The rise in vacancy was experienced in both prime and secondary assets; indeed all grades of office accommodation experienced an increase in vacant space over the year, albeit with the lower grades experiencing the largest increases demonstrating the flight to quality that is resulting from the market turning in favour of tenants.

Subdued rents and rising incentives are providing a number of favourable options for tenants in the current market. While vacancy seems high for Perth, it is only marginally higher than the national CBD vacancy rate of 11.2%. The increase in vacancy has come almost entirely from direct vacancy, with

sublease vacancy only increasing by 0.1 percentage points in the 12 months to January. New supply due in 2015 is expected to further increase vacancy which is expected to peak in late 2015 before the new supply is gradually absorbed by the market (beyond 2016). Demand conditions are likely to improve as the effects of reduced interest rates and depreciating Australian dollar are felt in the market and while lease terms continue to favour tenants.

After a record year of transactions in 2013, office sales in 2014 were somewhat restrained. Approximately $133 million worth of office transactions were recorded in the 12 months to March 2015 in the Perth CBD area. This is down 91% from the acute high of $1,541 million in the previous 12 months and down on the five year average of $704 million. Over the past twelve months three properties were reported sold, down from the previous year of 13 and down on the five year average of 11. There were only two transactions of great significance in 2014: the $35 million sale of 220 St Georges Terrace in November and the $91 million sale of 256 Adelaide Terrace in April.

Perth office stock has traditionally been purchased by domestic investors, yet is rapidly growing in esteem with offshore buyers as demonstrated by two major transactions in 2014. Offshore capital continues to look for opportunities in Perth due to its countercyclical nature with the eastern states

allowing a level of diversification. Perth assets also tend to be higher-yielding than those on the eastern seaboard. As a result, both domestic and foreign capital should continue to seek Perth assets with solid lease expiry profiles, however transactional activity is limited by a dearth of stock being presented for sale.

Market yields have gone through a prolonged period of stagnation. Market yields in the Perth CBD as at March 2015 are estimated to range between 7.5% and 8.75% for A grade buildings and between 8.75% and 10.25% for secondary grade buildings. The average yield for A grade office buildings in the quarter to March 2015 is 8.13%, no change over the year.

Capital values have generally eased over the past 12 months especially in secondary grade space predominantly as a function of a fall in effective rents but also a rise in vacancy. Capital values in the Perth CBD as at March 2015 are estimated to range from $6,600 per square metre to $10,000 per square metre for A grade buildings and between $4,150 per square metre and $6,000 per square metre for secondary grade buildings. Average capital values for A grade properties are $8,300 per square metre, no change over the year.

Vacancy rates are at a five-year high and the substantial amount of stock additions due in 2015

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should result in the vacancy rate increasing further. As a result of this increasing vacancy, effective rents are expected to remain under pressure, although to a lesser degree than what was seen over 2014. Incentives may also increase a little further. They currently sit at around 30%, however deals have been done with 50% incentives, mainly for non-premium and A grade stock.

The Perth market is closely correlated with the resources sector, which is known for its rapid changes. It would take several resources projects to be moved into the committed phase or a sustained increase in the iron ore price to spark interest in office space. Perth’s capital transactions market is anticipated to continue to be popular with both foreign and domestic investors over the medium term, as comparatively high yields persist in attracting capital. However actual transaction volumes are severely hindered by the lack of suitable stock being presented for sale.

South West WAThe commercial property market in South West WA remains subdued with business cautious due to the broader economic uncertainty and global economic volatility.

A limited number of office sales transactions in the South West makes it difficult to gauge a clear pattern of values, however weak demand in this segment indicates price softening. Most properties are tightly held which is helping to balance the market but extended selling periods are required.

There has been an increase in demand for good quality office space particularly from government departments within many towns in the South West. This demand has been brought about by the lack of speculative development in this area over the past few years. The result is upward pressure on the rental value of quality office space. Although there have been few sales of quality office space, it is considered likely that values will also increase.

Due to increased banking regulations and tightening margins, speculative developers have been very quiet. The majority of developments undertaken and properties purchased now appear to be by those that already have a use for the property.

There are high levels of owner occupation in the area with the majority of sales activity relating to established property for use by owner occupiers. The equivalent yield range identified from these type sales is usually lower than that of investment sales.

Overall the quality office market can be seen as coming off the bottom of the cycle and is showing initial signs of growth.

Due to population growth and the broad economic diversity of the South West WA region, it stands poised to deliver strong economic growth in the long term which should underpin long term demand for commercial property in the area.

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OverviewTaking time to assess ‘where you’re at’ is a valuable use of your minutes. By pausing and evaluating what’s happened in the past, you’re often more prepared to tackle the hurdles ahead. This month we’ve used the excuse of June’s mid-year position to reflect upon the first half of 2015 in property markets. Each of our offices has handed in their scorecard on how real estate is performing in their area, and the results are compelling.

SydneyIn the first quarter of 2015 we have seen the market continually grow from 2014, astonishing even some of the most optimistic of followers. We are seeing strong activity throughout all levels of the market and this is especially evident below $2 million.

With interest rates at a record low there have been no brakes and activity has remained strong. We have seen record highs of auction clearance in the first quarter of 2015 with the clearance rate averaging 80% in May from around 50% in January. Record numbers of properties appear to be going to auction instead of private treaty to capitalise on the demand/supply ratio. Analysts have predicted that interest rates will remain the same until 2016 or even 2017, so we may see the market continue this way or even possibly strengthen over the next 18 month period.

Given the range of property and value bands within the Sydney metropolitan area we felt it worthwhile to summarise as follows:

PRESTIGE PROPERTY MARKET IN SYDNEYThe prestige residential market in Sydney for both units and houses is generally considered to comprise properties with values in excess of $3 million.

Prestige houses tend to be located either within the eastern suburbs and eastern beaches, lower and upper North Shore, northern beaches, with some waterfront localities in the southern suburbs and the larger rural residential estates to the north-west of Sydney.

Prestige units tend to be located within the eastern suburbs and eastern beaches, lower North Shore and CBD and fringe CBD locations.

Over the past 12 months, the prestige market has shown very early signs of market recovery with an evident minor increase in both buyer interest and transaction activity.

We would consider this is reflective of a general perception that the bottom of this market has been reached, combined with improvements in the share market, the implementation of the Significant Investor Visa and cheaper Australian dollar. Confidence in the prestige market is slowly re-emerging, with moderate signs of a market recovery.

While we note the official cash interest rate was reduced to a new record low of 2% in May 2015, we consider interest movements have reduced impact on prestige residential market performance. More significant drivers of the prestige market

include the state of the equities market, stability in global economic conditions, levels of business and consumer confidence and overall business conditions and the value of the Australian dollar.

Demand for premium apartments is largely driven by overseas buyers and empty nesters seeking to downsize from the family home. With weakness in the prestige dwelling market post GFC and up until early 2013, these empty nesters had been unable to secure a premium price for their existing homes and there was a subsequent reduced demand flow-on into the prestige apartment market.

Over the past six to eight months, the market for prestige dwellings has shown early signs of strengthening, with increased sales activity and selling agents indicating ongoing strengthening in demand. Combined with the impact of the weakened Australian dollar, there appears to be early signs


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of flow-through strengthening into the prestige apartment market.

The Sydney prestige residential market, while highly visible and reported upon widely by the media, does not generally provide any significant indicator as to the state of the general residential market, with both markets moving in different cycles and influenced by different drivers.

While we consider the general residential market and the prestige residential market to have limited influence on each other, we do consider that emerging levels of confidence in the prestige market, including increasing transaction numbers (and an increasing number of trophy home sales), do provide a level of perceived comfort and underlying confidence to the state of the overall Sydney residential market.

Given there has been some gathering momentum in transaction volumes in this market sector, with a corresponding reduction in stock levels and an array of super prestige trophy homes transacting, we would expect that 2015 should show a maintained cautious optimism and confidence in the prestige market and further tempered recovery.

With possible further weakening in the Australian dollar and the possibility of additional interest rate cuts (generally impacting the lower end of the prestige residential market), there may be scope

for increased demand from overseas purchasers (including expat purchasers) and further interest from local high net wealth buyers.

Recent reported high profile sales include:

Villa Del Mare, 63 to 67 Wolseley Road, Point Piper was sold in October 2014 for $39 million by Julia Ross to a Chinese businessman after around three years on the market. This near 1,500 square metre non-water front site improved with a 6-bedroom, 8-bathroom high calibre Mediterranean style home featuring expansive harbour and CBD views and car accommodation for eight cars was recently the focus of Treasurer Joe Hockey when he reportedly announced in March of this year that this purchase was in contravention of the current foreign ownership laws and announced the forced sale of the property.

112 Wolseley Road, Point Piper sold in June 2014 for $37 million. This near 783 square metre absolute harbour front site is improved with a high calibre recently redesigned contemporary home providing 5-bedroom, 7-bathroom accommodation with parking for four cars. Featuring expansive harbour and CBD views with grounds including a private jetty, this home was sold by the reported accused murderer Ron Medich and was originally listed for sale in 2011 for $55 million.

PRESTIGE LIFESTYLE PROPERTIESAt the other end of the prestige scale on the fringes of the greater metropolitan area is that section of the market that is looking at lifestyle acreage parcels. This prestige end paints the picture of improved market certainty, lifestyle buyers looking to up size in the confidence of a secure housing market with lower finance costs and improved market activity at the price point below. Buyers particularly in North West Sydney are happy to up size onto lifestyle sized acreage holdings as they are able to utilise familiar services and amenities.

Currently lower interest rates are bringing up sizers into the market place who are happy to capitalise on record low interest rates and bracket creep in the suburbs.Money spent on infrastructure projects is helping to bring the fringe closer to suburbia. This is giving lifestyle buyers security in the knowledge that services are coming and they won’t feel isolated from usual inner suburban amenities and facilities and transport including the North West Rail Link, South West Rail Link and expansion of major arterial road links (Camden Valley Way, M5 duplication).


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While interest rates remain low, prices at the level below continue improving and the sector above in all likelihood will follow suit. Buyers at the end of the year will look a little further afield into their next ring to find some value for money.

A snapshot of recent market activity within this sub-market:

- Dural has had a minimum of ten sales exceed $3.5 million since July 2014 (two hectare holdings with substantial dwellings and ancillary improvements).

- Denham Court in the south west has seen three sales over $2 million since September 2014 (one hectare holdings with large scale dwellings and associated ancillary improvements).

- Mount Vernon has seen three improved sales in the Capitol Hill estate exceed $2 million and two vacant land holdings in this estate achieve over $1.1 million (all on one hectare holdings).

- 71 Patterson Lane, Grose Vale achieved a new record price of $2.3 million for the prestigious Patterson’s Road community estate to the north of Richmond (2.9 hectare holding). This shows that buyers are looking a little further afield than the traditional acreage districts.

WESTERN SYDNEYThe Western Sydney residential market is full steam ahead with no signs of slowing down as we draw in on the half-way point of 2015. This strong market is no

surprise to many, as inner ring suburbs have priced many families, first time buyers and investors out of the market.

This strong market in the past six months is a result of perceived affordability, low interest rates and improved infrastructure such as the South West Rail Link, proposed North West Rail Link and further development of the West Growth Areas.

A common theme is that agents have limited stock and strong demand with property selling at record prices. This has resulted in more properties being sold via auction to maximise the selling potential in this strong market.

The sub $500,000 class predominantly comprises older style units, particularly in areas such as Liverpool and Fairfield which are both strong regional centres in the south west that have seen significant gains in the past 12 months. Properties that in early 2014 were at the low $300,000 market are now up to the $400,000 range.

Examples of this include:

Hamilton Road, Fairfield: A 1970s 2-bedroom, 1-bathroom unit situated in a low rise complex with a dated fit-out recently sold in April for $390,100;

The Horsley Drive, Fairfield: A 1970s 2-bedroom, 1-bathroom unit situated in a low rise complex with a renovated fit-out recently sold in April for $415,000;

The sub $800,000 is the largest portion of the housing market in the south west and in the past six months has been driven by families and investors due to the low interest rates and affordability.

Examples of this include:

Hinchinbrook: A 1990s single level, 4-bedroom 2-bathroom dwelling with 2-car garage was sold in March 2014 for $620,500. The same dwelling was recently re-sold with the same agency for $737,000 with no significant work being completed. This represents approximately 12% growth in a 12 month period.

Northmead: A 2000s 2-level, 3-bedroom, 2-bathroom townhouse with 2-car garage sold in August 2013 for $630,000 and has recently re-sold in February 2015 for $750,000. This represents approximately 18% growth.


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Hughes Avenue, Ermington; A 2000 built single level, 3-bedroom villa which sold for $500,000 in 2013 recently re-sold for $800,000 in the same original condition. Records show that it took 13 years to go from an original purchase price of $300,000 to $500,000).

HILLS DISTRICTThe Hills are alive with the sound of a new railway line under construction and the commencement of this project has seen significant demand within all submarkets along its new route.

Kellyville has grown up from the stigma of McMansions World in the early 2000s. It offers a wide variety of schools, churches, playing fields, modern shopping centres and access to the adjoining Norwest Business Park. There has been significant demand from families for the classic 4-bedroom, 3-bathroom, double storey project home which will shortly also be on a major transport line.

Since April 2015 there have nine agent advised sales in Kellyville alone ranging from $1,260,000 to $1,650,000 on parcels ranging from 393 square metres to 1000 square metres.

Castle Hill has long been the regional centre of the Hills District and offers a substantial commercial centre, light industrial park and a range of family based facilities. Several train stations are planned throughout the suburb with units adjoining the town centre particularly seeing a benefit.

Widespread media attention was recently focused on a proposed large scale residential unit development which on completion in two years will see several towers with some 20 plus levels completed. Located opposite the proposed station and on the fringe of the shopping centre, sales in the first weekend of release exceeded $150 million.

Also benefitting from a station on the proposed train line is Cherrybrook which just hit a new record with a $2.2 million dollar sale of a Meadowbank home with an inground pool and quality fittings. Perusal of RPData records shows some 26 sales over $1.5 million in this suburb since the start of 2015.

NORTHERN BEACHESDevelopers are buying large parcels of land in the semi rural suburb of Ingleside in Sydney’s Northern Beaches. Pittwater Council, in partnership with Urban Growth and led by the Department of Planning and Infrastructure, has established the Ingleside precinct project plan to rezone large sections of the suburb to make way for up to 2500 homes, sporting fields and two new schools.

CBD FRINGE/INNER WESTWe feel that the CBD and city fringe may be one of the strongest markets as the locality has a lot to offer, having regular transport, a shopping precinct, work opportunities as well as hospitals and universities. One of the most popular products in the Sydney CBD area is new units off the plan. We are

seeing dated contract prices at which we now believe to be below market value. By the time these units are ready for completion, they will have seen substantial increases from the original purchase price. The strongest performers in this sub market are 2-bedroom units with parking. A unit without parking does not appear to be getting the same growth as one with parking.

Units selling off the plan around the CBD are selling in record time and achieving record prices. This market is particularly attractive to overseas investors who are able to purchase new properties, and local downsizers looking to secure a new product.

SOUTHERN SUBURBSAs in most suburbs we have a seen a strong market of owner occupiers, investors and developers in the southern suburbs. The market is predominantly stronger under the $2 million market with the market above $3 million remaining stable. We have seen some big results with one of the most popular products and achieving record sale prices being sites with potential development of either a duplex or triplex. The most popular price point would have to be the million dollar mark which is now the starting price for a dated house in the southern suburbs, although there is still a lot of demand for a semi


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modern unit in the mid $600,000 range. In speaking with local agents there appears to be a lack of stock in all price brackets but a strong demand. We have not yet seen any signs of the market slowing.

Where will we be this time next year? And what will be the catalyst for a change in market confidence? Only time will tell.

CanberraNear record low interest rates and low unemployment levels have resulted in continued strength in the ACT economy and property market, particularly the residential sector. Despite market uncertainty in the lead up to the September 2013 Federal election and the subsequent restructuring and downsizing of the Australian public service in late 2013 and early 2014, the ACT property market and broader economy have remained resilient.

The impact of Mr Fluffy asbestos contaminated homes and the eventual removal of these properties from the market will have a positive effect on the broader ACT economy. Accordingly, demand for residential property is set to increase.

Given current stock levels both for sale and rent, softening dwelling commencement numbers and increased demand levels we anticipate the residential market in the ACT to tighten over the short term with prices to firm. Small segments of the market including units along the Flemington Road corridor in Gungahlin are expected to remain soft plus those

properties situated in less sought after locations or providing inferior accommodation.

In the 2015 March quarter, Herron Todd White research shows the median prices for standard housing and medium density housing at $560,000 and $410,0000 respectively. A total of 1,908 sales were recorded in this quarter which is considered to be slightly below normal quarterly sales numbers with the long term average at circa 2,070 recorded sales.

IllawarraThe Illawarra residential property market has continued its strong growth through 2014 to date. Local real estate agents advise that they are experiencing one of the best first six months in over a decade with many properties selling above reserve or asking price. Record low interest rates combined with a limited supply of properties on the market have contributed to this.

Both the bottom end and top end of the market are seeing capital growth. Units, houses and rural properties are all selling. Auctions are the flavour of the day and if this method doesn’t suit the vendor, marketing is generally on the basis of “offers over ...” as it is increasingly difficult for agents to price properties in this buoyant market.

As in other sectors, we are seeing prices in new residential unit complexes in Wollongong and vacant parcels of land in the new estates of Shell Cove,

Flinders and Brooks Reach Horsley also showing appreciable rises in the past 12 months.

Many of the new unit complexes are selling off the plan even before any construction has begun. Investors are keen to purchase new units as a result of low interest rates while also benefiting from government incentives.

First home buyers are snapping up vacant parcels in these new land estates and also benefiting from low interest rates and government incentives. Overall the fierce competition between investors and first home buyers, combined with the low interest rates and the limited supply of properties on the market, is driving prices upward. Sydney buyers are entering the market more and more as they are driven out by the hot-house prices of Sydney.

Although confidence is still high in the market as it was at the beginning of the year, from our conversations with both vendors and purchasers sentiment is that the current level of market activity is bound to slow down soon. Some local agents and valuers are predicting the market to ease towards the end of the year, despite interest rates remaining low.

Supply in all areas is increasing as tends to occur when confidence is high and this tends to regulate prices. This will result in more properties on the market, longer selling periods and auction clearance rates declining.


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The areas that have seen the most growth are generally those where buyers and lenders should be most cautious. Some areas south of Wollongong have experienced a substantial increase in value over the past 18 to 24 months for instance and may be pegged back in any price correction scenario. As always the top end will be the most susceptible to any slowing in the market. Another sector that has suffered in the past when things go awry is the beach house. Buyers offloading the beach house to ensure they can keep up the mortgage payments on the principal residence is a situation we have seen before in this coastal region.

Unemployment is still high in the region with talk that both extractive and manufacturing sectors have some redundancies to go. This will also affect confidence and impact on prices.Southern Highlands The Southern Highlands residential property market has seen a marked increase in activity in both volume and price over the past twelve months. There has been a noticeable increase in activity by investors; interestingly, rental levels are steady to slightly increasing. The increasing price trend is

very strong at the lower end of the market, up to $800,000. Properties in the up to $1.5 million price bracket are also trading more briskly. There has been good land sales activity in the now established residential subdivision precincts such as Renwick Estate (Mittagong), Bingara Gorge (Wilton) and more recently smaller more affordable lots at Darraby Estate (Moss Vale). This uptick in activity has seen the emergence of residential infill developments in the townships of Bowral and Mittagong, with established larger land lots being subdivided into smaller allotments which are keenly sought after. New construction activity has also been evident, most commonly project style homes within these new residential estates. There has also been renovation/extension activity in the well located, older style and character homes within the townships of Bowral and Mittagong. The increase in prices has been at a steady rate and not as a spike in pricing, so we consider these increases to be sustainable and should continue over the next twelve months. The upper end of the market has bottomed, albeit there is still some caution evident, but we are now starting to see an increase.

Southern TablelandsThe Southern Tablelands region is steady. Goulburn has seen steady to increasing trends over the past five years and has now plateaued. There have been good land sales in the new, modern residential

estates in Goulburn, including the Belmore Estate, Merino Country Estate and Mistful Park Estate. There is good construction activity of new homes being built. The market in Crookwell is also steady.

The rural residential property market (two to 100 hectares in land size) is steady throughout the Tablelands.

NewcastleAutumn is over and winter is fast approaching if recent storms are anything to go by. What does this mean for the Hunter region and its property market? The yearly halfway mark is not far off and house prices are still increasing. According to RPData, over the past year we have seen a 14.5% increase in house prices within the area. This is a substantial increase over a one year period and we are left wondering when this increase will show signs of slowing.

The Hunter region, being the largest coal producing location in Australia, can become a slave to the price of coal and a small pebble thrown in the world pool of coal prices can have an enormous ripple effect on the local Hunter economy. Coal prices were a significant factor in the Hunter weathering the Global Financial Crisis so well. Lately we have seen the price of coal drop significantly and this has been a damaging element to the Hunter property market, especially within Singleton and surrounding suburbs. House prices within this region are trending downwards


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at present with no obvious growth prospects on the short term horizon. Driving through suburbs of Singleton supports this contention as most streets have many properties for sale with little or no sold stickers plastered on the sign boards.

The Newcastle market is still on the rise with house prices seemingly ever-increasing especially in inner city suburbs such as Cooks Hill, The Junction, Merewether and Hamilton. The question is what is driving these prices and we think it primarily comes down to location and scarcity of stock. People want to live close to the beach and within the CBD suburbs and with interest rates taking another cut lately, that makes it a lot easier for many families to justify the move to inner city if they can find the right property. That, however, is easier said than done.

Moving away from Newcastle and up north we come to Nelson Bay, which could be described as the Florida of New South Wales. Surrounded by beautiful bays this is the perfect place to retire with many serviced apartments available for occupation as holiday retreats with beautiful views, excellent facilities and handy to all the local amenities. The property market here shows much stability at present with mortgagee in possession sales seemingly a thing of the past. You can live in a tranquil beautiful serene location and still have the advantage of being close to infrastructure and also less than an hour’s drive to Newcastle.

The Hunter property market could be considered reasonably volatile at present with different drivers being exhibited in different locations, some good and some bad. Given this, investors need to be wary of where they invest, especially out of towners with limited local knowledge. Our advice is to seek local expert information and have a drive around the localities in question. A simple drive around can highlight things of note that are not evident from a sterile sales ad.

NSW Mid North CoastThis month we are having a mid year review looking at how the Mid North Coast has performed so far in 2015.

During the latter part of 2014 we noted increases in residential sales activity and rising values in the larger towns throughout the Mid North Coast region. This trend has continued in the first half of 2015, with the record low interest rates continuing to fuel these markets. These increases have been predominantly in the low to mid range of the residential market with increasing sale rates and slowly increasing values.

The higher value prestige and rural property markets in the region remain relatively slow. There have been more sales numbers but fairly stable prices and there remains a continuing oversupply of product available for sale and limited demand combining to produce generally static values. We expect this to continue for the remainder of the year, with higher value

properties and rural residential properties increasing at a slower rate.

Looking at localities:

Port Macquarie has seen sales often occurring at or close to full list price after minimal time on the market which indicates a rising market where potential purchasers do not wish to be left behind. A lot of this pressure is coming from investors. With a currently very tight rental market and low interest rates, these properties are often positively geared. The rental market has tightened significantly in 2015 due to the infrastructure work underway in and surrounding the town including the Pacific Highway upgrade and the construction of the Charles Sturt University, with rents increasing rapidly and almost no vacancies. This stress on the Port Macquarie market has seen neighbouring areas benefit as purchasers and tenants look to smaller surrounding towns to meet their needs. These areas include Wauchope, Lake Cathie, Bonny Hills and the Camden Haven areas.

Further south, Taree has seen sales rates and values slowly increasing but to a lesser extent than that of the larger regional towns, with rentals up but less demand. After a stagnant market for the past three years, the surrounding areas including Old Bar, Wallabi Point and Harrington are finally seeing improved activity and slowly increasing values. Most of the new estates have seen increased sales of


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vacant land with increased prices and this is flowing through to the established dwelling market.

Forster and Tuncurry are more closely linked to the Sydney market with a longer lag time due to the large amount of holiday accommodation. But it is starting to pick up as demand has increased and has seen prices start to increase as available stock is depleted. A few higher end units and holiday units (over $500,000) are starting to sell, which is an indication of a rising market and more confidence.

Bathurst/OrangeOnly recently in Bathurst an auction of vacant residential allotments in a Council owned subdivision was held where 42 out of the available 57 lots were sold. Demand for new properties remains strong among owner-occupiers and investors alike. Land prices have shown some increases as the availability of potential residential land around Bathurst becomes limited subject to significant investment in services, particularly water.

Numbers at open houses are solid and sales activity remains steady to strong in Bathurst and Orange. The reduction in interest rates has likely helped to maintain values and market activity. These are positive signs at a time when the economy is arguably not performing as well as it could. It is

particularly encouraging news for Orange which has stabilised from a peak in 2014 which was due in part to a local mining expansion. Realestate.com is listing 261 properties for rent and 924 for sale in Orange which is indicative of a continuing buyer’s and renter’s market despite the increased activity.

There are also some signs of a two-speed situation with some smaller localities not performing as well. Sales periods in surrounding villages remain longer than average, particularly for properties over $400,000. This is consistent with potential employment concerns developing outside of the major centres which are experiencing the majority of the population growth.

TamworthDown down, prices are down. Coles has it right when you refer to the current state of the Upper Hunter property market, in particular Muswellbrook. Due to a downturn in mining activity in the region the market is on the decline after the 2012/2013 financial year peak.

RPData reports 245 residential sales of less than one hectare, between $200,000 and $600,000 in the 2012/2013 financial year. Using the same parameters the 2013/2014 financial year reports 137 sales and the current financial year to date is 48 sales. The decline in the number of sales correlates to the vacancy rate, rents and value.

Based on our internal assessment rents have declined up to 20% and property values up to 12%. Unfortunately the floor of the market has not yet been established with mortgagee in possession sales continuing the decline as investors feel the squeeze from high vacancy rates.

The most hit property type appears to be the new builds on small land areas with small floor plans. Older larger properties appear to be holding their values better.


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MelbourneThe Melbourne residential property market is performing well across the board and is described by many property analysts as hot. Units do not seem to be reaching the same levels of growth in some areas, however this can be explained by an oversupply in the market. The overall positivity within the residential market in Melbourne can be attributed to many macroeconomic drivers including the low interest rates, increased foreign investment, population growth and job security. A specific market sale that typifies the positivity of the Melbourne residential property market occurred on 22 April 2015 when 55 Waltham Street, Flemington was sold at auction. This property set a suburban record, selling for $2.9 million. The two level, double fronted, Victorian dwelling hosting 286 square metres of

living area, comprises 4-bedrooms, 3-bathrooms, swimming pool and a separate studio. The property is situated on an above average 974 square metres of land within the heart of Flemington.

Foreign investment is one of the drivers in the current Melbourne market. Chinese buyers are especially active and heavily involved in the eastern suburban, prestige and off the plan property markets. The suburbs being impacted heavily are Doncaster, Balwyn and Templestowe. It is the financial backing of some of these foreign investors that is keeping local buyers out of the market. Chinese investors are competing against one another and are battling it out to enter any of these markets at above market level costs. This impacts the consistency of sale prices, making it particularly difficult to determine what the true market levels in some areas are. Foreign investment has encouraged greater inner city high-rise development, which has subsequently exposed a glut in supply of off-the-plan apartments. This is evident particularly within inner city suburbs such as Southbank and Melbourne’s CBD.

Population growth is another major contributor to the property market performing well. Victoria’s current annual growth rate is 1.77%. This growth is typically occurring on the outskirts of Melbourne in newer suburbs such as Craigieburn, Point Cook and Mernda.

Consider the suburbs of Northcote, Essendon and Carnegie as examples to gauge current market performance. The price point for all three suburbs is medium to high. The main demographic is quite similar, the majority being professional couples, some with children and generally in the medium to high income earnings bracket.

Housing in Northcote is excelling. Median house prices rose 4.2% for the quarter to reflect a median sale price of $943,000. Units are remaining flat or even declining slightly. The median sale price declined 1.81% for the quarter to $487,500. Northcote’s popularity can be attributed to many factors such as being seven kilometres from the CBD and access to extensive public transport, Northcote Shopping Plaza and High Street retail strip. The high demand for housing in this area has forced entry-level prices to rise. Last year entry level buyers could afford partially updated properties in Northcote. The increase in value has forced them into buying houses in original condition. Another trend in the Northcote housing market is investors and owner-occupiers starting to pay more for unrenovated original properties, preferring to do the renovation themselves rather than buying an already updated property. A sale of note is 41 Union Street, Northcote which sold for $1,003,000 on 28 February 2015. This property is a single fronted Victorian gutted shell, meaning the purchaser is buying the skeleton


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of the property and is happy to renovate and extend themselves. Therefore this price is very close to land value, reflecting a rate of $2,500 per square metre, proving that the gap between original and updated house prices in Northcote is closing as purchasers pay a premium for un-renovated dwellings.

Essendon is another suburb that is performing remarkably well. Both housing and apartment markets are strong. House values are steadily increasing at a yearly rate of 9.25% to a $915,000 median price. Units also rose 5.39% for the year to a median of $459,500. The Essendon DFO shopping centre, Buckley Street shopping strip and train line are contributors to the popularity of this suburb.

Essendon has shown a higher rate of interstate investors within the suburb alongside strong local investment. This is due to many factors including its further distance from the CBD and moderate level of boutique low rise / low density apartments in contrast to Northcote’s higher density apartment market. You are far more likely to see local agencies (e.g. Pennisi Real Estate, Raine&Horne) on the contract than the development firm behind the marketing campaign.

Another suburb we have found interesting to watch this financial year has been Carnegie situated within

the City of Glen Eira. This suburb has reflected an impressive 7.19% capital growth for the year in the residential housing market. We saw the highest median sales prices over the past three years at $1,277,500 in March 2015. We predict this is due to the suburb’s increased popularity due to the strong investment in retail outlets such as Officeworks, Spotlight and the all-round convenience of Carnegie Central. Carnegie also has five major parklands throughout the four kilometre radius of the suburb reflecting close to 7% of the total suburban land area according to CoreLogic RPData.

Overall, we have witnessed strong and positive market performance throughout 2015 providing hope for continued growth for the next six months. Foreign investment has been particularly strong in the Melbourne CBD and inner city suburbs, impacting the consistency of apartment sales within these areas as we struggle to find off-the-plan sales meeting the current market range. This investment is predicted to continue strongly over the next year especially while the RBA cash rate remains low at 2%.

Murray RiverinaIt’s a bit better than “steady as she goes” on the residential front in Echuca/Moama with some segments flat in the standard slightly older housing areas and some more modern dwellings tight on supply which is pushing up prices, particularly in Moama. The big shift in the past six months has been

the increase in supply of land in Echuca and Moama and this has seen most of the building providers particularly busy as they look to keep up with building demand.

GippslandThe Sale area in general continues to be steady, with well presented and well priced properties selling well. Low interest rates are also motivating buyers, in particular first home buyers in the $200,000 to $300,000 price bracket. The expansion of the Exxon Mobil gas plant at Longford continues to drive rental demand in the area, with asking rental prices increasing as a result. Agents in the smaller regional townships of Maffra and Stratford are also reporting increased buyer enquiry and higher sale prices than the previous quarter.

Latrobe After a surprising increase in market activity over late 2014 into 2015, the market has slowed slightly with agents looking for listings. Prices remain steady with no major fluctuations in the past 12 months. Housing is seen as affordable. Building should increase in Traralgon with greater residential subdivisions available. The Sale rental market is relatively strong.

Overall prices are steady, so it might be a good time to invest!


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Baw Baw Shire (Warragul/Drouin) The Warragul/Drouin area saw an increase in sales in the first half of 2015. Waterford Rise and other developments in the area are selling at a steady rate however there has been no noticeable increase in market values to date. The predominant buyer in this area is older or establishing families.

East GippslandThe East Gippsland residential market continues to be subdued with demand and prices showing no signs of recovery. Having said that the most active markets for dwellings are $200,000 to $250,000 for new buyers and investors in Bairnsdale, Lakes Entrance and Paynesville.

The stock levels are reduced, however prices have yet to show signs of growth. Sales upwards of $300,000 in Bairnsdale are low in volume with the demand here probably being satisfied by new builds in the Shannon Waters and Eastwood developments. It looks like the market has yet to respond to the recent reductions in interest rates and with the lack of growth in values in the area it is uncertain when the dampened investor and second home buyer market sentiment will improve.

Phillip IslandPhillip Island comprises a number of small coastal townships comprising residential property for owner

occupiers and holiday rentals. Agents have reported that the first half of 2015 has seen the most number of sales and an increase in enquiries for several years. This is yet to have a noticeable upward effect on prices in this locality.

The most notable sale was a waterfront property in Sunderland Bay comprising a 640 square metre vacant lot with ocean views which is currently under offer for $535,000. Vacant land with ocean frontage or views is rare in this locality.

South GippslandThe market has been steady in South Gippsland localities with an increase in both enquiries and sales. This is yet to result in an increase in market values. The best performing area in this locality is Inverloch which comprises an owner occupier market and a large, established holiday rental market.

MlduraThe residential market in Mildura continues to move along at a brisk pace. Agents are reporting good levels of enquiry and marketing periods are relatively short. Values appear to have improved by around 5% to 10% in the past twelve months. The most active segment is owner occupiers looking for good standard homes in the $250,000 to $450,000 bracket. We have also seen strong demand for the limited number of subdivisions recently completed,

with vacant lots typically selling for around 15% to 20% more than in 2013.

Rental vacancy rates remain at close to zero and combined with low interest rates, is resulting in an active investor market. Both owner occupiers and investors continue to show a preference for better standard homes and buyer activity remains slow in the sub $200,000 market.

The first half of the year is generally pretty busy in terms of real estate activity, with the number of homes being placed on the market generally slowing down as the weather cools.


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BrisbaneHere we sit with June upon us and it seems Brisbane is in the midst of another fair-to-middling performance.

2015 started with plenty of promise and certainly there are any number of buyers’ agents and other observers out there claiming the Sunshine State capital is the best prospect for the Australian property investor. Unfortunately, out on-the-ground experts say there’s been a bit of a lull in urgency amongst buyers in those usually firing inner-city northern markets. New Farm and Paddington, for example were two suburbs that were achieving good premiums up until a couple of months ago, but demand has waned a little. Whether it’s a matter of vendors overpricing their property or other factors at work, bidders don’t appear to be hyped-up at auctions and paying the big dollars they once were. Many are adopting a wait-and-see stance with a number of homes hanging around on the market. Despite this general outlook, renovated and brand new abodes with all the bells and whistles in desirable locations sell well and with a bit extra on the contract price.

Conversely, some southern inner-city suburbs are doing fine. Demand for dwellings in in West End and Highgate Hill continues to be strong for both entry level and properties nearing the $2 million mark.

Of course the Brisbane State High catchment continues to help sellers attract a premium.

The gigantic red-flag for Brisbane is inner city units, and their soft pricing is likely to continue for at least the next couple of years. Towards the end of the year and throughout next year, we’ll see a number of large off-the-plan developments settle simultaneously and the ability to absorb the supply looks shaky. Look out for increasing vacancy rates, particularly in second hand stock, as renters start moving into newer developments once they’re constructed. If you must buy a new unit, look for something that has appeal for owner-occupiers to help mitigate the risk.

In our middle-ring northern suburbs, we were seeing a ripple of capital growth, but this too has a slowed a little according to our team. The price point to look for here is entry level, particularly in desirable suburbs. This is the property likely to continue enjoying good results. Mid-ring in the south is experiencing increasing levels of interest, although secondary products sit on the market for extended periods. There’s good rental demand for established units in areas such as Coorparoo and Greenslopes, and proximity to infrastructure and public transport are important factors.

Outer lying suburbs in the northern corridor are doing quite well with a lot of interest evident in the house-and-land packages in new infill estates. Land

purchases are in high demand pushing prices up and, subsequently, sales rates remain quite high.

In the south, outer suburbs are relatively static. Sales are occurring but there’s no evidence of an increase in values.

There are still a number of townhouse developments being built with the predominant purchaser being interstate investors and that means a risk of oversupply and a decline in rental returns.Interest rate cuts haven’t done much to stimulate our market. The biggest impact has been to push existing borrowers towards refinancing in order to improve their cash flows. First home buyers continue to be underrepresented in the market however investors still remain active in our inner ring.

ToowoombaAs we approach the second half of 2015, the Toowoomba residential property market continues to experience an upswing.


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Due to reduced mining activity in surrounding locales as mining projects shift to operational phases, we may see the incline experienced in these areas in the first half of 2015 begin to ease at some point in the second half of 2015.

At present, the greater 4350 postcode demonstrates a vacancy rate of 3% which has increased from the sub 2% recorded in the early stages of 2014 and there has been a reduction in unit and small lot development activity from the investor market.

Despite this, low interest rates and the robust nature of the Toowoomba market have enabled momentum to remain stable in other sectors and land values continue to rise as demand outweighs supply.

As for sales, while there is a firming consumer sentiment as asking prices across all property types continue to rise, it is the sub $450,000 price bracket that is likely to remain the most popular due to its affordability and proven broad market appeal.

Across the board, the Toowoomba residential market has performed in line with expectations and thanks to low interest rates, this period of upswing looks likely to continue into the second half of 2015.

Gold CoastThe Gold Coast was one of the hardest hit regions of Australia following the GFC, with mortgagee in possession sale rates running above 6%. With the

world financial situation, banks tightening their lending and LVR parameters, the Australian dollar soaring in value, the commodity boom and tourism being particularly hard hit, the perfect storm was unleashed.

However, that all seems to be well behind us now as the property market has recovered and turned upwards. Prices are well off the bottom across all residential property categories.

Land values on the God Coast are reported to have increased by 10.7% over the past year according to the Queensland Valuer General’s 2015 annual report dated 5 March 2015.

Very positive economic changes have been driving the property market on the Gold Coast including:

• Increasing population. Current Gold Coast population is now at 535,000 (source: Gold Coast City Council web site) with projections of a population of circa 680,000 by 2021 (source: Queensland Office of Economy and Statistical Research Population Prediction Report dated 2011).

• Tourism is back stimulated by the lower Australian dollar and strengthened by new international flights direct to China and other parts of Asia.

• Increase in building development and infrastructure projects.

• Increase in number of new homes being built and apparent increase in number of substantial renovations of dwellings.

• Increased international investors including the very influential and growing Chinese investment market and cashed up Auckland based Kiwis.

• Increased interstate buyers with many cashed up investors from the very buoyant Melbourne and Sydney markets.

• Predictions of improving employment in the tourism sector and also boosted by the impending 2018 Commonwealth Games.

The increase in volume of transactions is particularly evident since the September 2013 federal election.


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According to our data, purchasers still favour the sub $500,000 price bracket which accounts for 71.5% of transactions, compared to 23.5% for $500,000 to $1 million and 5% over $1 million.

While the prestige residential market proportionately accounts for a small part of the market in terms of number of transactions, the prices are on the rise on the back of overseas investors, locals and interstate buyers taking a shine to mostly waterfront houses and a limited number of luxury high rise units. Examples of sales in 2015 include:

Beachfront Houses:

Address Sold for

123 Albatross Ave, Mermaid Beach $4,100,000

93 Hedges Ave, Mermaid Beach $5,600,000

25 Hedges Ave, Mermaid Beach $5,000,000

13 Oceanview Easement, Mermaid Beach

$3,560,000

1 Surf St, Mermaid Beach $8,420,000

129 Jefferson Lane, Palm Beach $3,750,000

Waterfront Houses:

Address Sold for

201 Monaco Street, Broadbeach Waters $5,800,000

247 Monaco Street, Broadbeach Waters $3,000,000

102 Amalfi Dr, Isle of Capri $3,300,000

36 Southern Cross Dr, Cronin Island $3,350,000

98 Admiralty Dr, Paradise Waters $3,200,000

25 Buccaneer Ct, Paradise Waters $3,600,000

117 Commodore Dr, Paradise Waters $6,600,000

37 Norsemann Court, Paradise Waters $3,000,000

31 Hampton Court, Sovereign Islands $4,000,000

64 The Sovereign Mile, Sovereign Islands

$3,400,000

46 Shearwater Esp, Runaway Bay $3,490,000

100 Regatta Pde, Southport $3,100,000


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Highrise Units:

Address Sold for

Nirvana by the Sea Penthouse, Coolangatta

$3,755,000

Liberty Pacific Penthouse, Main Beach $3,300,000

Soul Penthouse, Surfers Paradise $7,000,000

CENTRAL GOLD COASTGrowth has been solid throughout 2015 in the central areas of the Gold Coast as a result of increased demand across all property types within the area. The main reasons for this increased demand include the reduction of interest rates, improvements in rental returns and increased overseas investments in new developments.

Broadbeach Waters, Mermaid Beach and Mermaid Waters have seen strong growth (25% to 35% increase in land values). An example of this is 145 Allambi Avenue, Broadbeach Waters which sold for $760,000 in August 2013 and was recently resold for $1,015,000 with no improvements to the property.

The unit market in Broadbeach and Surfers Paradise has seen improvement in the lower price points in smaller developments. Most of these sales were to local and interstate investors as the rental returns were covering mortgage and body corporate costs. The larger high rise developments are still seeing

limited growth due to the high body corporate rates restricting the overall investment appeal. We should see increased growth in holiday units as building managers are reporting a decrease in vacancy rates as more tourists come to the Gold Coast.

Robina, typically a popular location for young families, has also seen strong growth as it is within close proximity of amenities such as schools, shopping centres and transport. In recent months demand for rental properties has increased and vacancy rates have dropped as more construction jobs are available on the Gold Coast due to new developments. For example the average townhouse rental rate has increased $20 to $30 per week across all developments.

The majority of new developments across the central areas are showing high sale rates with developments like Sunland’s Concourse Villas/Marina Residences and Robina Land Corp’s City Village and Riverlilly selling out within a few months. The majority of buyers have been overseas investors, although we are seeing an increase in owner occupiers looking to downsize from the family home and first home buyers.

NORTHERN COASTAL (SOUTHPORT TO HOPE ISLAND)This year the Northern Coastal area has performed very well to date. Sales agents continue to report a general lack of sales stock with improved buyer

activity putting upward pressure on values. Notable changes have been a significant reduction of time to sell with many listed properties selling within just a few days. Some properties are selling sight unseen by interstate investors, something not seen since the 2007 boom period and we are also seeing multiple offers and properties selling prior to auction. The strongest performing property categories have been:

1. Vacant residential allotments;

2. $800,000 to $1,500,000 market range; and

3. Lightly improved sites with development potential.

In one Hope Island residential estate, 500 square metre allotments that were selling for circa $250,000 are now selling for circa $290,000. Vacant allotments have jumped circa $100,000 in some of the more in demand canal estates. The traditionally more popular suburbs, generally those close to the Broadwater and Canal Estates, have been the best performers with increases estimated to be as much as 15% to 20%. The $400,000 to $600,000 range for the more typical family suburban style home has performed well. Two and three bedroom duplex units have also been in good demand. The unit market between circa $180,000 to $450,000 range appears to have improved, however, not as well as other sub market categories as stock levels remain high in some buildings. The unit market above $500,000 in the Broadwater precincts has lifted strongly with


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some complexes showing recovery of as much as $100,000 per unit. We note that property managers are reporting that they are now increasing rentals on properties as vacancy rates fall and demand increases. In some cases we have had reports of as many as 50 rental applications for a single property. Some of this demand has been within the more popular school zones.

We further note that the mainly established Northern Coastal property market will continue to strengthen due to the scarcity of land and influences of higher density town planning. The short term outlook is very positive.

M1 NORTH-WEST TO MOUNT TAMBORINEThroughout the first half of 2015 the property market in the north-western Gold Coast, also known as the growth corridor continued to strengthen with agents generally reporting a shortage of stock and strong buyer activity.

Modern dwellings close to infrastructure such as schools and shopping centres appear to be the best performing. Notable estates include Highland Reserve, Riverstone Crossing and Coomera Springs. These estates all comprise predominantly modern dwellings of above average quality with good surrounding infrastructure. Prices in these estates range from $450,000 to $600,000 with an average increase in value over the past 24 months of approximately 10% to 15%.

Vacant land also appears to have strengthened throughout Upper Coomera and Maudsland with land becoming scarce. The more popular estates include Riverstone Crossing, Stone Creek, Coomera Retreat and Highland Reserve.

A notable sale is 16 Murray Circuit, Upper Coomera. This is a vacant 604 square metre allotment which sold mortgagee in possession on 27 August 2012 (arguably the bottom of the market) and is currently under contract for $202,000. This is a reflection of the increasing demand for vacant allotments.

Mount Tamborine appears to have stabilized with an increase in the volume of sales, however there has been no notable increase in values. These types of regional areas generally appear to have a bit of lag in market segment conditions compared to the local markets.

House and land packages remain the most concerning segment. Inferior quality estates in Upper Coomera and Pimpama continue to see large volumes of interstate investors paying a premium for new product. We are also seeing very small lot sizes in these areas (as small as 250 square metres). This product is relatively untested with little to no re-sales to gauge how this style of product will be viewed by the local market.

UPPER NORTHERN CORRIDORThe first six months of 2015 was generally considered

a positive period for the upper northern corridor. Investors have continued to increase their appetites for house and land packages within recently established residential estates. To fulfil this appetite, developers have decreased lot sizes as evidenced in the new stages of The Meadows at Pimpama and Yarrabilba at Yarrabilba, with some lot sizes below 250 square metres. On the other side of the spectrum residential estates such as Gainsborough Greens at Pimpama and Ormeau Ridge at Ormeau Hills have retained lot sizes or only marginally reduced sizes due to these estate attracting a higher percentage of owner occupiers.

Recent sales include:

• 6 Leland Street, Yarrabilba: 250 square metre allotment that sold for $110,500 in January 2015.

• 38 Leland Street, Yarrabilba: 250 square metre allotment that sold for $110,500 in January 2015.

• 13 Matas Drive, Pimpama: 300 square metre allotment that sold for $188,500 in January 2015.

Although there have been no settled sales within Pimpama of allotments below 250 square metres it is present within the new stages.

Values of rural residential properties in the upper northern corridor have remained stable within the first six months of 2015. A number of real estate agents in the area have complained about lack of stock on the market or set to go to the market.


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Owners of rural residential properties in the area are optimistic about changes to upcoming or recently implemented planning schemes; there is optimism that some areas within the historically rural residential only areas could see a reduction in the required lot size per dwelling, therefore increasing the potential to subdivide or construct an additional dwelling on the lot.

Rental amounts in the area remain steady as infrastructure is being approved, on the drawing board or is currently under construction. An example of this is in the Yarrabilba Estate, with the planned kindergarten currently under construction and the recent sale of the school site and shopping centre site. The development of amenities such as these should increase rental amounts in the direct vicinity.

If the first six months are anything to go by, the upper northern corridor will continue to grow in terms of number of dwellings, however there is potential that a trend to decrease allotment sizes will continue and in turn increase the developer’s gain.

Established residential suburbs in the upper northern corridor including Eagleby, Edens Lands and Mount Warren Park have continued to attract owner occupiers. Real estate agents in these areas are noticing reduced time on the market if the property is reasonably priced. Beenleigh is considered the central business district of the upper northern corridor and has historically remained a sleeping

giant for the area. The Beenleigh Town Centre has continued to attract foreign and interstate investment with high purchase prices being noted and purchases of multiple neighbouring properties.

SOUTHERN GOLD COAST AND TWEED COASTIn 2015 there has been a continued improvement in the residential property market across most but not all sectors.

Vacant land has perhaps been strongest with the majority of estates having been sold out or close to selling out. There is reportedly no developer stock available at Casuarina and very strong resales.

There has been a recent resale of a 500 square metre allotment in The Pocket for $520,000 which was originally purchased off the plan for approximately $395,000. There has been an improvement in prices for vacant land at Terranora as demand is now stronger than supply. The Hidden Valley estate at Tallebudgera is almost sold out. Sales have been strong at The Observatory and Varsity Heights Estates at Reedy Creek and also strong at Palm Beach Heights at Elanora.

From Miami to Pottsville the housing sector has continued to improve throughout 2015, being strongest in the under $750,000 price bracket. In most localities, demand is outstripping supply. In many cases sales evidence is not directly supporting new sales, particularly on the Tweed Coast.

There has also been strong sales activity in the over $750,000 price bracket in waterfront localities such as Currumbin Waters, Palm Beach and Burleigh Waters.

Duplex units have been selling well across the board along with townhouse or villa units in small complexes. There is currently a new duplex unit under contract at Palm Beach for $800,000, with very limited sales evidence to support this sale price.

Sales activity and market demand for low rise units in the under $400,000 price bracket is average. There has recently been some strong sales activity for low rise units along The Esplanade at Burleigh Heads.

There have also been some gains in well located high-rise units. There is a 2-bedroom, 2-bathroom unit in the rear Ambience building at Burleigh Heads under contract for $730,000, which previously sold in June 2011 for $625,000.

Caution remains for low rise and high rise units in larger, older buildings in secondary locations where high body corporate fees may apply. Local agents are reporting limited levels of demand for these properties.

There are a number of positive factors currently influencing the property market on the Southern Gold Coast and Tweed Coast including historically low interest rates, population growth and improvement in the local economy.


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SCENIC RIMThe Scenic Rim and Lower Logan localities have started 2015 at a slow and steady pace. While the adjoining areas appear to be gaining momentum, this market hasn’t shown significant price changes so far. Agents are reporting a decrease in stock levels and good enquiry, however the underlying current is that purchasers have the upper hand and vendors firmly believe it is a buyer’s market.

There is more activity in the northern suburb of Jimboomba with enquiry levels and sales rates decreasing through Beaudesert and Canungra as you move geographically further away from Brisbane. Enquiries and rate of sale have increased and while most of the area has shown little value increase, recent sales in Cedar Vale have improved by up to 10% from this time last year. This may be attributed to the new release at Jimboomba Woods which comprises similar 4,000 square metre lots to Cedar Vale however further away from the Mount Lindesay Highway. Purchasers are comparing established three year old homes against a new product and are willing to compromise on dwelling age to be closer to the Highway to commute to Brisbane.

Canungra Rise was released to the market this year. A multi stage and multi product estate within walking distance of the Canungra main street, it is anticipated that purchasers will be the end user local market.

Standard residential lots in the estate are priced from $195,000 to $210,000 and the sales agent is reporting eight sales to date. Construction is due to commence later this year. This is the first new larger subdivision released in Canungra since before 2000.

Sales rates in Beaudesert have been low over recent months. There have been a couple of properties resold that were initially purchased by interstate investors. These 4-bedroom, 2-bathroom, double lock-up garage homes were purchased off the plan in October 2011 for $396,000 and were resold three years later for $345,000. Older houses on more centrally located lots continue to remain static although stock levels below $300,000 are decreasing.

While this area continues on a level path, sentiment from purchasers, vendors and agents varies in each area and is dependent largely on the perceived value. There are still a number of vendors selling under duress and this will continue to hold off any substantial value increases.

Sunshine CoastThroughout the first half of 2015, the Sunshine Coast property market has continued to improve. Demand has improved and sale volumes remain strong due to the continued momentum from the Sunshine Coast University Hospital helping confidence.

The housing market has been strong in the lower value bands. The sub $600,000 on the coastal areas and sub $350,000 in the hinterland towns remain the strongest sectors of the market. Stock levels or the lack of stock is becoming a concern. The higher priced properties have started to benefit as well. The prestige market has become less patchy with significantly improved activity and some price increases.

$4 million plus Sunshine Coast house and home unit sales 2007 to 2014:

Year Number of Sales Highest Sale Price

2007 23 $8,000,000

2008 8 $6,650,000

2009 11 $8,250,000

2010 6 $5,500,000

2011 7 $5,000,000

2012 5 $6,750,000

2013 5 $7,000,000

2014 8 $7,150,000

The land market remains strong with developers pre-selling stages well in advance while also


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increasing prices. The reduction in lot sizes continues to help with market appeal and affordability. The construction of multi tenanted houses (3-bedroom house with a 1- or 2-bedroom flat) and duplexes continue to be popular with investors however the market depth remains unknown with limited re-sales, especially for the multi tenanted houses.

The unit market remains patchy. We have seen an increase in sales volumes, however this is very much area and property specific with units in well located complexes suited to owner occupier or permanent rentals remaining the best performers.. Units in larger complexes with high body corporate or operating costs remain hard to sell. There are a number of new complexes proposed and being marketed which are all good signs.

Activity in the rural residential market has improved also. Personal preferences, presentation and motivation of purchasers can impact heavily on the ultimate sale price and can result in wider parameters than more traditional residential properties.

It is still typical to purchase properties below replacement cost in some cases but the pendulum is swinging.

Hervey BayDemand for residential property in Hervey Bay appears to be steady, with renewed interest in construction activity of late. House and land packages continue to be popular with a range of buyers including some superannuation fund investors for property mainly priced below $350,000. There have been increased sales for higher priced stock between $500,000 and $750,000 which is encouraging. Most of these properties are on sites over 2,000 square metres providing executive modern homes with extensive ancillary improvements. Units located in premier locations situated close to the beach and CBD are reasonably sought after, particularly for onground, 2- bedroom, 1- or 2-bathroom units. Overall, market sentiment seems to be generally optimistic, with confidence gradually gaining momentum.

GladstoneMarket values for established residential dwellings in the city of Gladstone have generally stabilised over the course of 2015. Market activity has also stabilised over the last few months after a flurry of activity at the end of 2014 as property values stabilised to more realistic values.

Vacancy rates have also remained relatively stable since the beginning of 2015 with rates hovering between 4.5% and 5.5% which is still above average for Gladstone and reflective of the oversupply in some market sectors.

The market for inner city apartments and suburban townhouses is still pretty tough in Gladstone and conditions are unlikely to improve in the short to medium term. Sales volumes are very low and the sales that are occurring are showing very significant decreases of between 40% and 50% from sale prices achieved during the peak of the market.

Values for vacant land are continuing to come under pressure. It is much more cost effective in the current market to purchase an established modern home than it is to purchase a block of land and then build. Sales volumes for land are very low.

The Tannum Sands and Boyne Island markets appear to have regained the premium over Gladstone which they lost during the growth stage of the last market peak. Sales volumes have increased slightly in these localities and values have stabilised.

We still consider it a possibility that there will be further market correction in the next 12 months over which time all LNG construction work will cease on Curtis Island. The exact effect this will have on the residential market is unknown.

RockhamptonTo date 2015 has been a sluggish start for residential property across the Rockhampton region. After a notable decline in the strength of the resource industries across Central Queensland we have seen large reductions in sales activity, sale prices and rental prices particularly in newly developed areas


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such as Gracemere and Parkhurst. For example we are now seeing modern 4-bedroom, 2-bathroom homes selling and renting under $300,000 and $300 per week respectively, down from $400,000 and $400 in 2013.

More established localities within Rockhampton City such as Wandal, Frenchville and The Range have weathered the storm with a higher degree of resilience, particularly in the $250,000 to $450,000 range. Properties listed above this price point often require an extended selling period.

In addition to the above factors, 2015 saw an Australian first for the lowest cash rate on record which now sits at a staggering 2%, creating one of the most competitive lending environments seen in a very long time. This is combined with a newly released Federal budget which has been summarised as the Have a Go budget and includes a significant number of tax incentives for new and small businesses.

Moving forward these factors may and will hopefully take the spotlight of the weakening resources industry by creating a positive outlook and increased confidence which should in theory create a stronger residential outlook for the Rockhampton region for the later half of this year.

2015 also saw the first major Cyclone to hit the area in over 40 years. On 20 February, Cyclone Marcia reached Category 5 only hours before hitting Rockhampton and Yeppoon. In many respects a natural disaster such as this has devastating consequences however it has to be said that the aftermath appears to have been in many ways a silver lining to the region. A huge volume of work was created in various fields, community spirit and engagement was enhanced and some insurance claims in many instances will be of overall benefit to the individual landowners upgrading old to new.

In summary 2015 to date and moving forward can be most certainly summarised as a buyer’s market, so for those thinking about entering the property market for the first time or looking for that additional long term investment, now is the time to act.

TownsvilleAt the halfway mark of 2015, the residential property market has to date remained relatively unchanged from the beginning of the year.

Unemployment in the region remains higher than the state average, while business confidence in Townsville during the second quarter of 2015 has continued to improve with a slight uplift in the index according to the PwC Townsville Business Confidence Survey.

Anecdotal evidence suggests that the renovation market has seen more activity of late, potentially attributed to the low cost of finance and the availability of tradesmen in the current environment.

Older established units have also seen reasonable interest due to the low price entry, particularly units priced below $200,000 along with duplex or maisonette style properties that offer increased utility by way of dual income or live in one side and derive an income from the other.

The residential rental market has remained in oversupply into 2015, with a slight increase in the overall trending vacancy rate between January and April 2014 from 5.2% to 5.4%. There continues to be break-leases evident and incentives being offered by way of free weekly rent to entice tenants.

Overall the market remains cautious, with the level of activity being very much dictated by local economic factors.


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AdelaideAs we approach the midway point of 2015 we are hearing lots of positive signals flowing from the eastern states about property prices, strong markets and heated market conditions. This is largely driven by interest rates being at all time lows but despite this the South Australian market remains in a becalmed state. Adelaide in particular has not historically experienced boom and bust conditions. But equally it has not experienced extended flat periods. Its probably best described as at times stronger and sometimes weaker but generally “safe”. Currently there is no doubt that we are in a weaker phase in general.

The market is however segmented which means we need to be careful about generalizing.

Many segments of our market are pretty flat with prices only seeing modest increases in some areas. Inner suburban housing closer to the city, facilities and the coast are showing steady growth in prices and turnover. Outer suburban areas and housing in the sub $500,000 range are reporting flat to negative conditions.

Inner markets are simply supported by stock shortages and the safety of those markets. Values don’t decline in Norwood, Walkerville, Unley and

North Adelaide Council Areas. Houses are often character styles and with a mixed offering from small cottages worth between $500,000 and $800,000 up to more prestigious homes of $1 million upwards where the market continues to rise steadily.

Outer suburbs paint a different picture with rising stock levels, extended selling periods, and uncertainty surrounding employment in the North leading to low confidence levels, limited new investment and potentially zero to negative real growth. It is well recognised that with the closure of traditional manufacturing in this state there needs to be other stimulus and the opportunities are hard to envisage. Many of us are waiting on decisions relating to public spending and stimulus strategies that will hopefully come from the public sector.

The private sector business community is currently increasingly cautious with below average confidence levels and in view of that, growth in many economic areas including property will be subdued.

Unfortunately this paints a somewhat bleak picture for property in the short term. The upside is that, for those of us that can remember, similar conditions existed in the early 1990’s and in time, as it did then, recovery and confidence will be restored. So maybe its just a good time to be considering investment with a view to the longer term. But if doing so be careful and take advice.

A big risk in the Adelaide market is that of generalisation. While some market segments are down, others remain strong with the appeal of inner city and beachside living being strong, values in the inner suburban areas are holding and growing in some places.

The former AAMI stadium (Football Park) is a massive western suburbs project that will bring on stream a variety of housing in a near city location. This project will be a significant factor in the property market in the coming years and we will be reporting on its scale and influence in the years to come. The property is some 23.5 hectares of prime residential and commercial land that has been earmarked for staged development.

Mount GambierThe property market within Mount Gambier is currently relatively stable. There was a slight decrease in house sales for the first quarter in 2015 (January to March) compared to the first quarter of 2014, however sales are still noticeably higher than they were in 2011 when sales levels had softened. The chart below shows that in the first quarters of 2014 and 2015 sales numbers were up on previous years dating back to 2009/10. This is a positive sign for the Mount Gambier housing market. Sales numbers indicate that the Mount Gambier market has stabilised and we are returning to the levels of previous years when there was more positivity in the local property market.


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Sales evidence indicates that most of the dwellings sold in the past 12 months in Mount Gambier were in the $200,000 to $250,000 price range. The $200,000 to $250,000 price range is affordable for owner occupiers entering the market and for investors looking at a property that provides a stable rental return. There has been an increase in the past 12 months of properties that have achieved a value greater than $400,000. This could be due to the interest rates being at record low levels or recent positive news regarding employment in the region. There are few dwellings purchased for under $150,000 or over $500,000. Dwellings under $150,000 are generally in less sought after locations and have limited market activity. Dwellings over $500,000 are at the top end of the market and have a reduced market segment.

Properties located within the Lakes location and centrally around the town centre have shorter listing times than most other areas, as they are tightly held locations. We have not seen much growth, if any, with often decreased values on dwellings within the region since the market peaked. Most properties that have seen growth have been renovated or updated and are in sought after locations. Properties not located in sought after locations generally are not reaching their values when the market peaked and have dropped back.

For growth to become noticeable within the region, sales activity needs to increase. With the new James Morrison Academy and the Dairy Processing Plant in Penola it is expected that this will happen. Construction on the Dairy Processing Plant is due to commence before July this year and will be completed in about a year. It is expected to cost $60 million to develop and to create 50 full time jobs and 80 constructions jobs. It is expected that this will have a positive impact on the economy within the region. It will be an interesting year which we will be monitoring closely to see if sales continue to increase throughout the year.


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Tasmania’s economic data remains relatively stable with unemployment at 6.9%, up slightly on last month. Economic developments, in line with Tasmania’s future economic focus, are mainly tourism and food production. Reported developments include expansion of Hellyers Road Distillery and two new farms in the North West, the opening of Stage 2 of the Blue Derby Bike Trail in the North and in the South, Houston Farm will increase lettuce production for export and Mount Wellington tours are being offered with guides specialising in and focusing on Tasmanian Aboriginal culture. Conversely further contractions will be felt within the forestry industry as Forestry Tasmania undergoes restructure.

Tasmania’s cycle trails are creating quite a buzz enabling Tasmania to build on its tourism market traction which with other tourist draw cards such as Mona, our famous Salamanca markets, Port Arthur, Cradle Mountain and Cataract Gorge will reinforce Tasmania’s image as a sought after worldwide tourist destination. Strengthening tourism and food production industries that create and support employment and business opportunities will create stability and positive flows to other markets such as the housing market.

The Tasmanian residential property market has recently experienced higher volumes of sales across

the state. Launceston in the north has enjoyed the greatest percentage rise in sales volumes relative to previous periods. Newstead, Newnham, Riverside and Mowbray are areas where the greatest volumes of sales have occurred in this region.

Suburbs in the south that have experienced the greatest sales volumes include Kingston, Sandy Bay, Blackmans Bay, Howrah and Lindisfarne. In the North West region Devonport has had the greatest number of sales.

The scheduled reduction of the first home builders boost grant from July 2015 to $10,000 makes this market segment one to watch. With state budgetary challenges there is interest to see if the Government will extend the FHBB grant program to maintain economic and employment momentum within the construction and real estate sectors.


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DarwinIn spite of being able to offer stellar returns to investors and residential property owner occupiers over recent years, the first half of 2015 has witnessed a slow down in Darwin’s property market. The greater Darwin region has seen a steep drop in sales activity for houses, units and townhouses. One of the main factors contributing to the slump is the new First Home Buyers Grant (FHOG) policy that kicked in whereby first home buyers are restricted to contracts to construct or purchase a new home or unit. As a result, the new policy has begun to create two segment markets whereby a significant increase in new housing stock has taken place and established homes, mainly in Palmerston, Sanderson and Nightcliff LGA (northern suburbs), have remained static and decreased in value. According to recent data released by REINT, the first quarter figures indicate a dramatic fall in sales volume for houses in Sanderson LGA of 34.7% while Nightcliff LGA has also declined but by a smaller percentage at 3.4%. Inner Darwin CBD and Nightcliff LGA units and townhouses have followed in a similar fashion, having declined by 42% and 55.3% respectively.

The Australian Bureau of Statistics housing finance data reports that the number of home loans taken out by owner occupiers in the Northern Territory fell by 0.7% in March. We note that in contrast, other states have experienced a jump. The median house

price for dwellings had decreased by 1.7% year on year to $553,000 while units have also move in the same direction and dropped by 0.91% according to CoreLogic RPData Daily Home Value Index year on year to 30 April 2015.

Conversely, the absorption rate of vacant land in the suburbs of Muirhead, Johnston, Zuccoli and Durack have seen continued growth with new housing developments performing strongly and being well received in the market. All in all, it is likely that newly built housing may continue to be on an upward trend whereas the established stock market will remain dampened.

The market for units in Darwin’s inner suburbs has remained relatively flat in the first half of 2015. This is largely due to the considerable amount of new stock coming onto the market in a short space of time with the completion of SOHO, Kube, The Avenue, Wharf 2, Kim on Smith and Catalina Apartments, which have added more than 800 new apartments to the market. At the same time, weak buyer activity and softening population growth has also put downward pressure on house prices in the Northern Territory. Falling house prices coupled with the recently announced rate cuts by the Reserve Bank Australia to a record low seem to be the right opportunity for first home buyers to dip their feet into the dull property market.

The combined influence of the changes in development phase of Ichthys INPEX project, the substantial supply of new units pouring into Darwin’s CBD market and the movement of Defence personnel has had an immediate impact on Darwin’s housing market with rental rates easing and the demand for existing older stock clawing back to show a clear easing in rental demand. Latest SQM Research data showed Darwin house rents dropped by 4.7% year on year to 31 March 2015 but still topped the highest rent yielding cities list at 5.7% for houses and 5.9% for units. Being one of the least affordable housing markets in the country, this drop in rent as a portion of median income spent is good news for tenants to get some much needed rental relief.

Looking at the year ahead, the downward trend is expected to continue through 2015 with a downturn in commodity prices and the winding down of the Northern Territory’s key economic driver, the Ichthys INPEX project. Shortage of affordable housing will remain a key issue for 2015 while increasing supply of smaller lot sizes in Darwin’s northern suburbs and Palmerston and record low interest rates will definitely provide a much needed boost to the housing market and potentially affect home ownership. In addition, the federal government 2015 / 2016 budget putting an emphasis on developing the Top End is certainly a broadly welcomed decision.


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PerthThe Perth Property Market – Long Term OutlookThe Perth property market has been most subdued since iron ore prices started to fall below the magic $80 per tonne. Premier Colin Barnett has been trying to bash Tony Abbott and Joe Hockey up for more of a lion’s share of GST since our royalties from iron ore have fallen through the floor causing a big hole in the state’s budget. He had a small win last week when he was handed $500 million for infrastructure projects in the Federal Budget.

In Western Australia, property prices have been falling, jobs are being cut and projects are on hold. On the other side of the pond, things are still holding up and we can sense the smirks on the faces of the Sydney-siders who must be saying “Cowboys!”.

Well giddy-up Sydney. Here’s our take on the Perth property market.

In most recent months, Perth has seen a fall in confidence in the property market (despite strong demand for new homes, thanks to population growth and low interest rates) with the news over the past few weeks of job cuts in the mining sector weighing down perceptions and market sentiment.

Western Australia has an obvious strong correlation between high commodity prices (iron ore, oil and gas) and the demand and price for property in Perth. So with confidence sagging, prices falling and rents coming down, is it all doom and gloom for Western

Australia? Well, let’s take an optimistic look at the future for Western Australian property.

Iron ore is back to nearly $60 per tonne after falling to a ten-year low of US$46.70 earlier this year. This is welcome news for the Western Australian economy.

Commodity prices have been climbing on the back of tentative signs of supply cutbacks, rising oil prices and economic stimulus in China, with the moves exacerbated as the gloomy rhetoric around the commodity for much of the year ensured heavy short demand.

Meanwhile, oil and gas prices are also surging from lows seen in the past six months. In recent times, major players such as Woodside and Chevron have been cautious, but with higher prices, we are likely to see more natural gas export infrastructure investment in Western Australia. In fact BP Exploration as recently as this week announced its biggest investment project in the Great Australia Bight (off South Australia) with the world’s largest oil rig under construction for that project.

During the mining boom of the mid 2000s to early 2010s, Perth’s property market boomed as speculators entered the market and the population of Perth grew at breakneck pace. We might not see that kind of growth again, but there is every chance a new, lower, yet more sustained period of growth is ahead.

While Perth continues to grow strongly and above historical trend, the boom times are certainly over, with prices cooling from double digit year on year growth to about 5% to 7% capital growth today.

Gone are the days of explosive wage growth and ridiculous beer price inflation. The boom phase of the mining era is over for now. In 2015, it is more about exports and less about capital expenditure, however this is not necessarily bad news in the medium to long term for Perth.

BHP Billiton and Rio Tinto are still pumping out ship loads of ore. Their strategy is to decimate the local Chinese miners, small local firms (FMG, Atlas Iron , BC Iron) and other international players and take market share. According to the Wall Street Journal, it appears to be working. While BHP and Rio may become slimmer operations (BHP has trimmed off and created South 32) and some jobs will go, overall there will likely be sustainable growth in the mining sector.

China now has to import more than 80% of its iron ore meaning that the country must continue to rely on Australia’s cost efficient supplies.

The big three world iron ore miners are bluffing when it comes to more supply according to US iron ore expert, Cliffs Resources Chief Executive Lourenco


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Goncalves: “None of the three majors (BHP, Rio, Vale) can continue to support their massive CAPEX needs without allowing the iron ore price to increase.”

With these reports in mind, the iron ore price is unlikely to tank beyond its current correction of about 50%. In fact iron ore may well be a sustainable business for years to come. Some jobs may be lost, but overall exports in iron ore and other minerals are likely to sit at sustainable levels for some time to come, (perhaps around $50 to $60 per tonne) underpinning realistic and sustainable growth for Perth’s mining sector and government coffers.

While growth in Perth property prices has been subdued in recent months, Perth is likely to see significant long-term capital growth in the coming years. Some of these reasons are outlined below. One of the greatest reasons is the demand for housing and the shortage of options for the people of Perth.

Perth Population Growth

From a domestic perspective, Perth is seeing a number of migrants from the rest of Australia, particularly areas like Sydney and Melbourne which are more crowded and much more costly than Perth and Tasmania and South Australia, where professional and blue collar jobs are more scarce and pay lower. Secondary schools in Western Australia are some of the very best in Australia, especially the private and independent schools in established suburbs.

Perth is also a destination of choice for many international immigrants, particularly well educated and wealthy immigrants from countries such as the United Kingdom, China, Singapore, South Africa, New Zealand, Malaysia and India. Perth’s incredible lifestyle, health and education systems (top universities in particular) are extremely attractive to overseas immigrants, especially those who have discovered the extremely high cost of living and property prices in Sydney and to a lesser extent Melbourne.

Infrastructure Investment

Both the Federal and State Governments have billions dedicated to infrastructure projects in and around Perth. Some of these are already underway, such as the new Perth Stadium, Elizabeth Quay. Other projects kicking off are the extension of freeways and highways, new light rail, Perth airport and other local projects.

Agriculture, energy, minerals, education, high end manufacturing, legal and financial sectors all offer lucrative potential for Perth’s economy in the long term.

The fact that Perth is so close to Asia where there is a rising super middle class of hungry consumers means that Western Australia is going to develop huge wealth and growth over the coming decades in all sectors.

There’s going to be a lot of demand for inner city and near CBD development in the medium term, especially as young people and older Australians


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look to find property closer to essential services and entertainment.

We are already seeing that development take place, particularly in the CBD and other areas such as the City of Belmont and City of Subiaco, with an increase in inner urban living, rather than what occurred in the 1970s, 1980s and 1990s where people just went to a greenfield site up in the north-west corridor. We are doubling the size of most of our largest shopping centres and local authorities are getting on board with urban infill programs. Our new football stadium at Burswood, new hotels and large scale infrastructure projects in the Perth CBD (such as The Link project, Elizabeth Quay and Waterbank) are all underway and will set Perth up to be a greater tourist destination, especially from the South-East Asian market in the years ahead.

Demand for homes in established areas is going to increase dramatically in coming years as attitudes change and urban sprawl creates congestion and social issues in the outer suburbs. High-rise and low rise high density property developments will continue to generate significant interest and wealth for investors and developers.

So, while we like to hear how much Sydney-siders hate us and think we are a bunch of cowboys who live in a boom and bust state, there is much more confidence in the WA economy than that of either NSW or Victoria and our weather, beaches, people and roads are nicer.

South West WAAs we near the middle of the year, agents in the main towns throughout the South West of Western Australia are reporting a stable level of sales throughout the locality with a levelling out of values throughout the lower and middle segments and a slight increase in land values.

The top end of the market continues to be more problematic with continuing weak demand and is characterised by an over supply of properties for sale coupled with a lack of prospective purchasers in that value range. The rural residential market has also slowed. The majority of the sales are below $1 million and properties are also experiencing extended selling periods.

Developers are responding to the lack of land supply with further releases in new subdivisions such as Treendale, Millbridge, Dalyellup, Provence, Vasse New Town, Kealy and Dunsborough Lakes which is likely to see the demand supply balance improve.

The rental market has eased over the past six months, however continues to be relatively tight with

low vacancies. Historically high rents put upward pressure on the first home buyer market and this is bringing investors back into the game.

Smaller lot developments in the new subdivisions have become popular due to their affordability and it is anticipated that this will be a trend going forward. A move away from larger homes to smaller, better appointed homes on small blocks, with limited gardens and the ability to lock and leave is on the rise.

Overall the word on the street is that the property market in the South West is likely to slow for second half of 2015. This is on the back of the Perth metropolitan market slowing significantly throughout the last two quarters of 2014 and the first quarter of 2015. The Perth market historically has had a flow on effect to the South West market. Nevertheless, the South West market to date has remained relatively steady, however is expected to weaken throughout the year.

EsperanceAs we head towards the middle of the year, it is time for a mid year review of the market performance in the Esperance district. In short, erratic is the best way to describe it. Short bursts of activity then nothing have been the norm for the past six months and a smoother spread would be welcomed.


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After a promising end to the 2014 year and start to this year, activity in particular over the most recent month has nearly stopped. Part of the reason is seasonal with cropping programs well underway after a reasonably traditional break to the season. With relatively low interest rates continuing and a broad spread of affordable housing, the lack of recent activity is hopefully only temporary and regular volumes will return in the near future.

The residential market in Esperance has seen sound sales volumes and values in the lower socio economic areas as purchasers realise these areas provide some of the most affordable housing in the region, are well located close to schools, shopping and recreational facilities and can provide the best return on investment for residential property with correspondingly high rentals relative to capital outlay. Values typically range between $180,000 and $220,000 in this area with increased sales compared to the same period last year.

The mid tier market of say $300,000 to $450,000 has seen consistent activity and this range is well represented in volumes and values with a relatively stable correlation between supply and demand. Absent from the market for a short period of time were sales over $500,000 however recent months have seen strong sales above this value and into the mid $600,000s. Prestige residential property is

limited in this area with no $1 million plus sales for over 12 months.

Rural residential lifestyle properties have maintained their consistency in sales volumes with realised sales over all price ranges noted. Lower end property with modest houses and negligible outbuildings have achieved prices within the $400,000 to $500,000 range with other sales pushing upwards to the $900,000 range for more substantially developed properties.

The satellite localities of the Esperance shire have had little to no activity over the first half of the year with limited supply being a factor.

Encouragingly, the small coastal town of Hopetoun has seen sales volumes increase slightly over varying value ranges which is giving some hope that values there may have stabilised. There is still an issue of extensive oversupply of property, especially rural residential land, but in time it is hoped that supply will gradually reduce and allow values to recover.

To the north, Norseman is still struggling with uncertainty over the local mining operations however sales volumes have been strong in comparison to recent years, although at the low end of the market with most transactions typically ranging between $20,000 and $40,000 for established homes. A general consensus is that although there is a lot

of uncertainty in the local market, Norseman still provides some of the most affordable housing in the state, if not the country, for an isolated town having a moderate level of local services.

So, market activity over the first half of the year has been erratic and quietened off lately but overall sentiment is still positive for this region. Later in the year we will provide another summary and see how things have changed between now and then.


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OverviewSince the last Month in Review, the big event of Beef Australia 2015 was held in Rockhampton and overall it was a great event with a high calibre of speakers and seminars, a large contingent of international visitors and a lot of bull and beer. I joked to someone when asked how was Beef Australia, that I saw a lot of bull, heard a lot of bull and ate a lot of bull (actually very nice beef cuts of all varieties), but my major impression of the week overall was the opportunity that is available if the industry can get itself organised to grab it.

The week started with Herron Todd White Rural co-sponsoring a “Nose to Tail” dinner which brought 340 people together on the Sunday evening to work their way through a meal where they was not one loin cut, but meals from other parts of the animal (which were wonderful) while actually having a beast being broken down on the stage and the audience

listening to what could be done with the other cuts. This event also highlighted the global market where international guests offered comment about the other cuts and what they do with them. It was a wonderful evening. The team of Scott Fuller from Dubbo, Frank Peacocke from Darwin, Roger Hill from Townsville, Will McLay and Michael Chaplain from Rockhampton and Doug Knight and Stephen Cameron from Toowoomba were all there and we enjoyed hosting our valued clients for this event.

Then Monday the mad house started in that there was so much to see, so many people to speak with, the occasional function after dark and early breakfasts to be enjoyed. The majority of banks were there in full force with many of their teams from around the country. It was a great show of support for the sector under one roof and I am sure many current and potential clients enjoyed the opportunity to connect and meet other bank executives and talk about the potential to do more business. From my view point it was great to be able to catch up with or meet new contacts across all the banks.

The agents were busy promoting the current market opportunities, investors and fund managers were exploring the same assets and also for some it was about simply educating themselves about the possibilities and the market place. The international guests were from around the globe and I was able to sit in a session hosted by Aux Venture to listen to Detlef Schon from Acquila Capital talk about their view of investment in Australia and why now and also

their insights on why they feel co-investment with current operators is the best model for them. This was also supported by a talk from Andrew Gatenby from Channel Capital about some of the aspects of getting a deal done. It sounds easy but when you do start to really think about it, there is a lot that needs to occur to bring a successful deal to fruition.

The key few takeaways for me from Beef were:

1. There is a significant amount of potential capital looking for opportunity and the beef sector as well as agriculture broadly is well placed to be able to benefit from this.

2. In a global market place, scale is significant. My question is, do we have enough scale of what is being sought?

3. With any business investment, there is the question of who manages the investment, ie operators of these assets, how do you find them?

4. How does an aspiring younger person, family business etc get to open the doors to some of the opportunity as a potential partner to capital?

5. And finally, at my age, six days of going hard during the day and harder at night is not something I may be able to repeat in three years time. I finally got my voice back the Thursday after the event concluded.

To bring my thoughts back to the world of rural property and following on from last month, the potential for new capital entering the market is


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very good and I hope that it does for the right reasons. This may see assets of scale that are well located become very much sought after. I just hope that some of that capital is able to filter to the sub corporate sector which is still under pressure. The market place for property is made up of the big and small and a further disconnect between the two ends could develop if capital remains focused at the top end. I do understand why this is so and wonder if there is opportunity for the sub corporate sector to get a foot in this door. That would create a significant change in the market outlook nationally if it were to evolve.

This month the local updates are highlighting the small but positive trend of increased sales activity in many regions, notwithstanding some local (or for Queensland and north-western NSW) issues of continued poor seasons or predatory pressure.

ContactTim Lane – National Director, Rural (07) 3319 4400

New South Wales North CoastWEATHERVery good warm growing conditions have continued into autumn.

SUGAR CANEA relatively small cane farm in the Condong Sugar Mill area has sold after auction with anecdotal reports indicating a strong price. The property was actively sought by neighbouring landholders.

MACADAMIASHarvest is well underway for 2015 although wet weather during early May slowed progress.

There have been a number of sales of macadamia plantations. Values have firmed. Three recent sales of macadamia farms indicate values for macadamia planted land in the range of $44,000 to $59,000 per hectare including macadamia trees but excluding structural improvements and ancillary land. These sales were in sought after lifestyle localities.

SUMMER CROPPINGAlice Station, a Clarence River front property south of Tabulam comprising about 348 hectares with a dwelling and sheds, has reportedly sold for $1,600,000 following an expressions of interest campaign. This was an ex-Great Southern Managed Investment Scheme forestry property. The property had been cleared of the timber plantation. There

was a 208 megalitre water licence to pump from the Clarence River.

GRAZINGNine ex-Forest Enterprises Australia Ltd Managed Investment Scheme forestry properties between Tabulam and Tenterfield have been listed for sale. These properties range in price from offers over $450,000 to $950,000. These are listed as non core assets. Anecdotal reports are that the purchaser of the ex-Forest Enterprises Australia Ltd plans to retain properties that are suitable for timber and the balance will be cleared for cattle grazing.

Country NSW Northern VictoriaGeneral climactic conditions in the central and western parts of New South Wales continue to be mixed with the north western areas around Walgett continuing to receive below average rainfall. This has prompted many phone calls from clients regarding value levels within this drought affected area and any impact that this may be having. Currently it would appear that there has been limited negative impact on general overall value levels within this area. Whilst this may seem unusual considering the negative impact on general farm cash flows there continues to be reasonable levels of interest in properties within this area. This corresponds to a similar period in New South Wales in 2004 to 2007 where there was severe drought across large areas yet values increased quite substantially during this time.


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One commonality that we are experiencing across all areas that we cover is the increase in the general underlying market sentiment. We believe this is a reflection of the positive cash flows encountered over the last 2 to 3 years for many areas of New South Wales. Whilst these cash flows have been utilised to reduce general debt levels we are beginning to see the refocusing of these cash flows into prospective purchasers of adjoining or nearby allotments. General discussions with bankers in the area also indicate that there appears to be some uplift in their client’s appetite for debt and expansion. Whilst this has not transpired to large lifts in market activity it does auger well for the future.

Currently commodity prices across a range of sectors are quite positive with lambs being able to achieve $120 $140 per head, yearling steers achieving

approximately $1,000 per head and wheat achieving between $200 and $250 per ton.

This increasing sentiment is more evident in the Western section of New South Wales with three major properties either being sold at auction or going under offer in the last four weeks.

The property “Beechworth” was sold under the hammer for $2 million. This property consisted of approximately 66,000 ha of undulating red and sandy loam country approximately 150 km south west of Cobar and 175 km north of Ivanhoe. The property was timbered with Pine Box and scattered Kurrajong. The fencing was considered below the strict average and had basic improvements which included a four bedroom homestead, older shearing shed, workmen’s donga and basic workshop. The property was not connected to mains power. There were numerous inspections of the holding from prospective purchasers located from the Gold Coast to southern Victoria. The sale equates to approximately $30 per hectare overall which whilst is below that of some surrounding sales is a fair reflection of the cost to upgrade the holding to district average level.

The two other sales under offer at present are “The Range” which is a 27,000 ha property located 105 km north-east of White cliffs and 100 km south west of Wanaaring. This property consisted of open red loam to sandy loam country timbered with Mulga

and Rosewood. The property was reasonably well watered and fenced. It included two residences storeroom engine room machinery shed with sheep and cattle yards in place. Whilst we are unaware of the agreed sale price the property was listed at an asking price of $27 per hectare and we would expect that the sale prior price will close to or at the asking price.

The property “Keelambara” is also under offer. This property is a 36,800 ha holding approximately 50 km north west of Tilpa. The property consisted of Cuttaburra and Darling River flood out areas and was well watered and well fenced. Improved with a four bedroom concrete brick Homestead, machinery shed, workshop, shearing shed and well presented shearers quarters. The asking price was $2,500,000 which equates to $67.80 per hectare. Again whilst the exact sale figure is unknown we would expect the final price to closely reflect the asking price. Properties on the Cutterburra and Darling River flood out areas attract good levels of interest due to the considerable increase in production that can be achieved after minor flooding events particularly down the Cuttaburra.

Southern QueenslandOver the course of the past four to six weeks we have seen a big turnaround in local climatic conditions with generally good widespread rains in most of the crop growing regions of southern Queensland and northern New South Wales.


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A recent trip across the Moree Plains highlighted the good season with large tracts of winter crop already being planted and not on a speculative basis either. Much of the crop growing country has a full profile of moisture and in fact it could be argued that many regions especially in the east of the shire have had too much rain. The alternative however could be much worse.

The situation is much the same in southern Queensland. Too much rain in the southern areas has brought planting to a halt, however with the right moisture through the western grain areas of Meandarra and Tara, all crops are now in.

At the end of the day this will guarantee that the crop will get established. Good in crop rains in mid to late July and then again in late August or early September should all but guarantee at least an average crop.

While the rain has in places extended further west to the grazing regions, it has not been to the same extent. However what rain has fallen is most welcome as it will promote some good herbage growth.

THE PROPERTY MARKETThe property market in the broader region is slowly showing signs of an increase in activity. Previous news Month in Reviews have noted a number of holdings currently on the market but as yet to sell and that is still the case with the likes of the

Charleville and Augathella cattle blocks Oak Park, Oakwood and Yo Yo Park.

In the past two to three weeks however we have seen two good sales occur in and around the Condamine and The Gums regions. The first to occur was Deepwater, a 2,201 hectare good Brigalow scrub farming block with approximately 2,000 hectares of cultivation which sold to established adjoining owners for $2,350 per hectare or $950 per acre in the old scale. The apportioned value for the cultivation equated to $2,200 per hectare.

The second sale to occur, again to a large established grower in the region, was Even Downs, a 1,207 hectare mixed farming and grazing scrub block just to the south of The Gums on the Leichhardt Highway. It sold for $2,112 per hectare or about $855 per acre. The sale included approximately 900 hectares of cultivation (half back to grass) which on analysis reflected $2,286 per hectare.

It is too early to suggest that there is a trend beginning to occur, but there is definitely more activity than six months ago. It will be of great interest whether this will continue through the winter and into the prime selling season leading into Christmas.

Central QueenslandAfter a period of relative inactivity in the local grazing property market, there have been two

noteworthy sales in the Mackay district so far this year.

Doraville, situated at Blue Mountain on the Peak Downs Highway between Eton and Nebo, sold in February at a price of $2.47 million including stock, plant and equipment. This is a well improved, 1,052 hectare forest grazing property comprising two adjoining freehold lots. It sold after an extended marketing period. The price shows $1,968 per hectare improved (bare farm).

A mixed 152 hectare cane and cattle property at 287 Sivyers Road, Habana (18 kilometres north of Mackay City) sold at auction in April for $1.55 million including stock, crop and plant equipment to show approximately $8,600 per hectare improved (bare farm). This property sold after good competition from three bidders.

These sales demonstrate sound underlying local demand which is now assisted by falling interest rates, fairly good pasture growing seasonal conditions in the earlier part of the year and an optimistic outlook for the beef industry. We expect sales activity to improve in the months ahead with agents now reporting increased levels of enquiry.

Very dry seasonal conditions persist in the western districts. This has resulted in good demand for the few well grassed offerings and extremely weak demand for droughted properties when tested in the market.


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In this regard we note the sale of Llorac and Pastoria at Muttaburra which was well grassed at the time of sale and sold at auction with competition for $4.65 million. The property comprises predominantly Mitchell grass downs broken by channels and pebbly gidyea and reflects a rate of $224 per hectare or $2,446 per AE.

Further to the south, Burgoyne located 10 kilometres from Jericho sold for $3.9 million with stock and plant. The 6,936 hectare property comprises pulled gidyea scrub and pulled forest, reflecting a rate of $506 per hectare or about $2,784 per AE (bare of stock and plant.

Both sales confirm good demand for properties which are well grassed when offered to the market.

MelbourneThe rural market on the Melbourne fringe and surrounding areas is somewhat fragmented at present, with differing levels of buyer activity and confidence depending on the specific market sector. On the back of a strengthening residential market, the lifestyle property sector is experiencing increased demand levels, resulting in reduced selling periods and increasing values. This is particularly so in the $1 million to $2.5 million price range in areas such as the Mornington Peninsula, Yarra Valley and the Kangaroo Ground region. This increase in activity is heavily influenced by the continuing low

levels of interest rates and strong interest shown by Chinese investors.

Specialised rural sectors such as poultry meat and horticulture are also experiencing strong activity and increasing value levels, particularly for quality properties in well regarded locations. Recent examples include a 125,000 bird broiler farm on the Mornington Peninsula achieving $4.5 million ($36 per bird), and a 123 hectare ex-orchard in the Yarra Valley which sold for $6 million ($49,000 per hectare) to be developed for strawberries.

On the other hand, properties in low rainfall areas such as the cropping and grazing country on Melbourne’s western fringe are suffering from extremely limited buyer interest. This is also the case for properties of poorer quality, whether as a result of poor management in recent times or dated improvements and infrastructure.

In summary, there are positive signs in many of the rural sectors around Melbourne, with an increase in buyer activity resulting firstly in greater turnover of properties and secondly, increasing values as supply levels are absorbed. However, properties in inferior localities or of poor quality have a tendency to remain on the market for significant periods unless very competitively priced.

Mildura/SunraysiaOur focus this month is the Mallee region of both Victoria and South Australia, specifically completed sales in the cereal growing areas.

There has been a recently completed sale of a 702 hectare property located approximately 10 kilometres north-west of Pinnaroo. It contains fully cleared arable cropping land comprising heavy red grey loam flats with sandy loam rises and a small area of salt bush with stock and domestic bore water. It is a well located property and was purchased by a potato grower. There is no irrigation bore but a 34 megaLitre ground water licence was included. After allowance for non arable land, water licence and improvements, the sale shows over $1,600 per hectare for the arable cropping land, reflecting its potential for potato production.

Irrigation in this part of South Australia and north-west Victoria is a relatively new industry that started in the late 1990s. Most irrigators are growing potatoes, supplying a number of larger potato marketers who have potato washing and packaging plants and marketing divisions. Returns, while variable, have generally been attractive and have contributed to greater investment from growers. The climate in this area is suited to growing vegetable crops in the winter months.


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CA 42 Mallee Highway, Cowangie VIC is a 258 hectare property with undulating red sandy loam soils with a small area of limestone. The property has a history of lucerne production and comprises approximately 245 hectares of arable cropping land, with balance shelter scrub and salt affected. The property has not been cropped for years and is not suitable for a 2015 crop. Overall the arable land shows just over $1,000 per hectare.

Sunset Farms, 730 Morrisons Plain Road Cowangie VIC is located 110 kilometres west of Ouyen, Victoria and 60 kilometres east of Pinnaroo, South Australia. It comprises various lots in the parishes of Duddo, Pallarang, Walpa, Tyalla and Koonda. Land varies from inferior heavy and stone country to better rising red sandy loam and light sandy soils. There are also large areas of salt swamps. Several private and government bores supply water to all paddocks. The holding was purchased by a near neighbour and analysis of the sale showed from between just over $500 per hectare for inferior arable country up to $865 per hectare for the better sandy loam cropping country.

Murray RiverinaFlannery Portfolio in Northern Victoria Sets Cracking Pace.Ruralco Cohuna auctioned a portfolio of property on behalf of the Flannery Estate in the Cohuna/Pyramid Hill district on Friday, 10 April with the Bower

Tavern rear room overflowing beyond capacity. The competition for the properties of varying quality and limited management in recent times was still fierce.

No. Property Area (ha)

Price Rate/ha

1 Greens Road 75.70 $400,000 $5,284

2 Home Farm 223.69 $700,000 $3,129

3 Home Farm South

257.70 $385,000 $1,494

4 Bullock Creek 247.79 $240,000 $969

5 Mt Hope Hill 104.81 $150,000 $1,431

6 Flannerys Bridge Block

108.88 $215,000 $1,975

7 L’Huillier Lane 131.43 $71,000 $540

8 Mt Hope Central

107.17 $210,000 $1,960

9 Granite Paddock

11.45 $50,000 $4,367

10 Greens Road South

30.30 $25,000 $825

11 Chuggs Rd 54.79 $126,000 $2,300

The following water auction provided some interesting results with several corporate buyers in attendance and confirmed the red hot water market. The auctioneering method provided some interesting dynamics in the room as the winning bidder was offered as much or as little of the 1,392.5 megaLitre of High Reliability of water on offer across various zones.

For the record, the results were as follows:Water Results

Buyer Price Volume (ML)

1 $2,170 750

2 $2,050 240

3 $2,040 202.5

4 $1,990 100

5 $2,000 100

Total 1392.5 ML

Northern TerritoryFollowing the first quarter pastoral sales activity in the NT which included “Stapleton”, “Bunda”, “Douglas/Douglas South” (northern NT) and “Mount Ebenezer” (south of Alice Springs), now comes the sale of “Moroak/Goondooloo” on the Roper River. We are also aware of signed contracts to purchase another two pastoral aggregations in the Alice


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Springs district as well as two more northern cattle stations that are in advanced stages of negotiation to buy from a range of domestic and international parties. This level of activity speaks volumes for the resurgence of confidence now well entrenched in the NT pastoral market.

For one of the Alice Springs stations above, the competition was reportedly very healthy and the property sold within six weeks. Potential buyers came from South Australia, Queensland, Western Australia and locally. This resulted in a “strong sale” according to the marketing agent - a direct result of competitive tension between vying parties.

The sale of “Moroak” appears to be in line with market expectations for a cattle station in the (Roper River) locality and is reflective of the some of the main drivers of pastoral land values at present. These being road train access, distance from port, quality of country/productive capacity and economies of scale. As we have mentioned in previous MIRs recently, $/Adult Equivalent (or Beast Area Values) appear to have come back to around 2005/06 levels and the sale of “Moroak” tends to confirm this opinion.

To put the mounting sales activity into perspective, in the NT around $127.5 million worth of pastoral leasehold real estate (excluding cattle) has changed hands since the market bottomed circa October 2013 (that’s about 20 months ago when “Riveren/

Inverway” was one of the first to sell). Compare this with the dearth of sales activity over the same period prior (Feb 2012 to October 2013) with total sales of only $31.5 million.

It is this valuer’s expectation that with strong live export prices; increasing demand from Indonesia as well as rapidly growing alternative markets such as Vietnam (where heavy steers 450kg+ are currently making $2.50/kg ex Darwin) and with a potential new market through the Livingston abattoir; the low Australian dollar; significant Federal Government funding for beef roads over the next few years; forecast ongoing high beef prices; and wider opportunity to develop pastoral leasehold land for alternative uses (under new NT Pastoral Land Act Diversification Permit laws) there will be a few more sales occur before the year is through. And with competition building (particularly for “A” quality properties) it is possible that we might see a gradual increase in value levels across the NT and Kimberley (WA) pastoral estates.

With reference to the Kimberley, the IM for well-regarded “Fossil Downs” is now out and heralds the first coming to market of a blue ribbon Kimberley pastoral lease for some time. The property has been owned by same family for 133 years and therefore should have an extensive production history record. It will be very interesting to see how the market reacts to having the luxury of digesting such an

extended production history. It should leave less doubt about what the property can actually produce (given adequate management). It is our experience that the current buyer profile is leaving less to chance. They are doing their due diligence and (in most cases) aren’t paying for blue sky. So in the case of “Fossil Downs” will good transparency equate to higher value? I am confident that the market will give us the answer.

South West WAMany of the Western Australian wheatbelt farmers will be smiling as cold fronts recently crossed many cropping regions providing well needed rain events to enable the continuation of seeding programs and triggering crops into germination. A good start is likely to continue to lift spirits and confidence and should good finishing rains follow, the demand in the rural property market is likely to increase significantly in high and medium rainfall areas on the back of three good years.

Unfortunately, sheep and goat pastoralists in the north are not smiling and have not been for the past five plus years. Droughts and wild dogs have been plaguing many West Australian pastoral properties and have reportedly had a severe impact on sheep and goat properties throughout the Gasgoyne, Midwest and Goldfields pastoral regions. Having recently been in one of these regions and looking at the market activity, the impact that drought and wild


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dogs are having on properties and families is evident.

Sale activity over the past three years has been limited as a result of vendors having unrealistic expectations and purchasers being few and far between. The majority of purchasers have alternative income and target properties with good infrastructure.

The ageing population of pastoralists has resulted in many properties being de-stocked due to drought and wild dog problems and infrastructure not being maintained to an operating standard resulting in purchasers heavily discounting to allow them to bring properties up to standard. Overall the regions are facing difficult times and unlike the northern beef focused pastoral regions, values are in decline.

There is a proposal to build a dog fence in the region which would help to control the dogs but this comes at a cost when government funding is tight following the downturn in the resources sector. Some pastoralists have turned to cattle, but not all the country and stations are suitable for viable cattle enterprises and investment in fencing, water points and yards can prove to be difficult for many to justify and finance.

For two hundred years the commonly used phrase of Australia riding on the sheep’s back has been evidenced by these pastoral properties having grand homesteads and significant infrastructure. It

would be a shame to see these properties continue to decline however if the wild dog problem is not solved then it is more than likely that more and more pastoral properties could be a thing of the past.


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© Herron Todd White Copyright 2015No responsibility is accepted to any third party that may use or rely on the whole or any part of the content of this publication.

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Capital City Property Market Indicators – Houses


Capital City Property Market Indicators – Houses Factor Sydney Melbourne Brisbane Adelaide Perth Hobart Darwin Canberra

Rental Vacancy Situation Balanced market Balanced market Balanced market Balanced market Over-supply of available property relative to demand

Balanced market Balanced market Balanced market

Rental Vacancy Trend Steady Tightening - Steady Steady Steady Increasing Steady Steady Steady

Demand for New Houses Strong Strong - Very strong Strong Soft Soft Strong Strong Strong

Trend in New House Construction Steady Steady - Increasing Increasing strongly Steady Steady Steady Increasing Steady

Volume of House Sales Declining Increasing strongly - Increasing

Steady Steady Steady Increasing Declining significantly

Increasing

Stage of Property Cycle Peak of market Rising market Rising market Start of recovery Declining market Start of recovery Declining market Rising market

Are New Properties Sold at Prices Exceeding Their Potential Resale Value

Occasionally Occasionally Occasionally Occasionally Almost never Occasionally Occasionally Almost never

Red entries indicate change from previous month to a higher risk-rating Blue entries indicate change from previous month to a lower risk-rating


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Capital City Property Market Indicators – Units


Capital City Property Market Indicators – Units Factor Sydney Melbourne Brisbane Adelaide Perth Hobart Darwin Canberra

Rental Vacancy Situation Shortage of available property relative to demand

Over-supply of available property relative to demand

Balanced market Balanced market Over-supply of available property relative to demand

Balanced market Large over-supply of available property relative to demand


Rental Vacancy Trend Tightening Steady Steady Steady Increasing Steady Increasing sharply Steady

Demand for New Units Strong Fair Strong Soft Soft Strong Soft Fair

Trend in New Unit Construction Increasing Increasing strongly Increasing strongly Steady Declining Steady Increasing Steady

Volume of Unit Sales Declining Increasing Steady Steady Steady Increasing Declining significantly

Steady

Stage of Property Cycle Peak of market Rising market - Peak of market

Rising market Start of recovery Declining market Start of recovery Declining market Bottom of market


Frequently Occasionally Occasionally Occasionally Almost never Occasionally Occasionally Almost never



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1

Capital City Property Market Indicators – Office


Capital City Property Market Indicators – Office Factor Sydney Melbourne Brisbane Adelaide Perth Hobart Darwin Canberra

Rental Vacancy Situation Balanced market Shortage of available property relative to demand

Balanced market - Over-supply of available property relative to demand





Large over-supply of available property relative to demand

Rental Vacancy Trend Tightening Tightening Steady Steady Increasing Increasing Increasing Steady

Rental Rate Trend Increasing Stable - Increasing Stable Stable Declining Declining Stable Stable

Volume of Property Sales Increasing Increasing Increasing Steady Declining Declining Steady Steady

Stage of Property Cycle Rising market Rising market Start of recovery Bottom of market Declining market Declining market Bottom of market Bottom of market

Local Economic Situation Flat Flat Flat Contraction Contraction Contraction Flat Flat

Value Difference between Quality Properties with National Tenants, and Comparable Properties with Local Tenants

Small Small Significant - Large Significant Significant Small Large Very large

Red entries indicate change from 3 months ago to a higher risk-rating Blue entries indicate change from 3 months ago to a lower risk-rating


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New South Wales Property Market Indicators – Houses


New South Wales Property Market Indicators - Houses Factor Albury Bathurst Canberra/

Q’beyan Central Coast Dubbo Griffith Mudgee New-

castle Orange Sydney Tam-worth

North Coast

Wagga Wagga

Wollon-gong

Coffs Harbour


Balanced market

Balanced market

Severe shortage of available property relative to demand

Shortage of available property relative to demand




Balanced market

Balanced market

Balanced market

Balanced market

Balanced market

Balanced market


Rental Vacancy Trend Steady Steady Steady Tightening sharply

Steady Steady Tightening

Tightening


Steady Steady Tightening - Steady

Tightening

Demand for New Houses Strong Strong Strong Very strong

Strong Fair Strong Strong Strong Strong Fair Strong Strong Strong Strong

Trend in New House Construction Steady Steady Steady Increasing strongly

Increasing Steady Increasing Increasing

Steady Steady Steady Steady Increasing

Increasing Increasing

Volume of House Sales Steady Increasing Increasing Increasing

Steady Increasing

Steady Steady Increasing Declining Steady Steady Steady Increasing Increasing

Stage of Property Cycle Bottom of market

Start of recovery

Rising market

Rising market

Peak of market

Start of recovery

Rising market

Peak of market

Start of recovery

Peak of market

Rising market - Peak of market

Bottom of market

Start of recovery


Rising market


Occasion-ally

Occasion-ally

Almost never

Almost never

Occasion-ally

Occasion-ally

Occasion-ally

Very frequently

Occasion-ally

Occasion-ally

Occasionally

Occasion-ally

Occasion-ally

Occasion-ally

Occasion-ally



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New South Wales Property Market Indicators – Units


New South Wales Property Market Indicators - Units Factor Albury Bathurst Canberra/



North Coast

Wagga Wagga

Wollon-gong

Coffs Harbour






Balanced market





Balanced market

Balanced market

Balanced market

Balanced market


Rental Vacancy Trend Steady Steady Steady Tightening sharply


Tightening

Steady Tightening

Tightening


Tightening

Demand for New Units Soft Soft Fair Strong Strong Soft Strong Strong Soft Strong Fair Strong Fair Strong Strong

Trend in New Unit Construction Declining Declining Steady Increasing

Increasing Declining Increasing Increasing

Declining Increasing

Steady Steady Steady Increasing Increasing

Volume of Unit Sales Declining Steady Steady Increasing

Steady Steady Steady Steady Steady Declining Steady Steady Steady Increasing Increasing


Start of recovery

Bottom of market

Rising market

Peak of market

Start of recovery

Rising market

Peak of market

Start of recovery

Peak of market


Bottom of market

Start of recovery


Rising market


Occasion-ally

Occasion-ally

Almost never

Almost never

Occasion-ally

Almost never

Occasion-ally

Very frequently

Occasion-ally

Frequently

Occasionally

Occasion-ally

Occasion-ally

Occasion-ally

Occasion-ally



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New South Wales Property Market Indicators – Office


New South Wales Property Market Indicators – Office Factor Albury Bathurst Canberra/



North Coast

Wagga Wagga

Wollon-gong

Coffs Harbour

Rental Vacancy Situation Over-supply of available property relative to demand

Balanced market


Balanced market

Balanced market


Balanced market


Balanced market

Balanced market





Shortage of available property relative to demand - Balanced market

Rental Vacancy Trend Increasing Steady Steady Tightening

Steady Steady Steady Steady Steady Tightening

Increasing Steady Steady Steady Steady

Rental Rate Trend Declining Stable Stable Stable Stable Stable Stable Stable Stable Increasing

Declining Stable Declining Stable Stable

Volume of Property Sales Steady Steady Steady Increasing

Steady Steady Steady Steady Steady Increasing

Steady Steady Steady Increasing - Steady

Increasing


Rising market

Bottom of market

Bottom of market

Rising market

Start of recovery

Rising market

Bottom of market

Declining market

Rising market

Peak of market

Bottom of market

Bottom of market

Bottom of market

Rising market

Local Economic Situation Flat Flat Flat Flat Flat Flat Flat Steady growth

Contraction

Flat Contraction

Flat Flat Flat Flat


Significant Small - Significant

Very large Significant

Significant Significant

Significant Large Small - Significant

Small Significant Significant

Significant Significant - Large

Significant



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Victoria/Tasmania Property Market Indicators – Houses


Victorian and Tasmanian Property Market Indicators – Houses


Factor Bendigo Echuca Horsham Gippsland Melbourne Mildura Shepparton Latrobe Valley

Warrnambool

Burnie / Davenport Hobart Launceston



Balanced market

Balanced market

Balanced market

Balanced market

Balanced market


Balanced market

Balanced market

Balanced market

Balanced market

Rental Vacancy Trend Steady Tightening



Increasing Steady Steady Steady

Demand for New Houses Strong Strong Fair Fair Strong - Very strong

Fair Strong Fair Strong Strong Strong Strong

Trend in New House Construction Increasing Increasing

Steady Steady Steady - Increasing

Steady Increasing Increasing Increasing Steady Steady Steady

Volume of House Sales Increasing Steady Declining Declining Increasing strongly - Increasing

Increasing

Steady Increasing Steady Increasing Increasing

Increasing

Stage of Property Cycle Rising market

Rising market

Peak of market

Peak of market

Rising market Start of recovery

Bottom of market

Rising market

Rising market

Start of recovery

Start of recovery

Start of recovery


Occasionally Occasion-ally

Occasion-ally

Occasionally Occasionally Occasion-ally


Occasion-ally


Occasionally


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Victoria/Tasmania Property Market Indicators – Units


Victorian and Tasmanian Property Market Indicators - Units

Factor Bendigo Echuca Horsham Gippsland Melbourne Mildura Shepparton Latrobe Valley Ballarat

Burnie / Davenport Hobart Launceston


Balanced market

Balanced market

Balanced market





Balanced market

Balanced market

Balanced market

Balanced market

Rental Vacancy Trend Steady Steady Steady Steady Steady Steady Steady Tightening

Increasing Steady Steady Steady

Demand for New Houses Strong Fair Soft Fair Fair Fair Very soft Fair Strong Strong Strong Strong

Trend in New House Construction Steady Steady Steady Steady Increasing strongly

Declining Increasing strongly

Steady Increasing Steady Steady Steady

Volume of House Sales Increasing Steady Declining Declining Increasing Steady Declining Increasing Steady Increasing Increasing Increasing


Rising market

Peak of market

Peak of market


Start of recovery

Bottom of market

Rising market

Rising market

Start of recovery

Start of recovery

Start of recovery


Occasion-ally

Almost never

Occasion-ally

Occasion-ally

Occasionally Almost never



Occasionally



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Victoria/Tasmania Property Market Indicators – Office


Victorian and Tasmanian Property Market Indicators – Office

Factor Bendigo Echuca Gippsland Melbourne Mildura Latrobe Valley Wodonga

Burnie/ Davenport Hobart Launceston

Rental Vacancy Situation

Balanced market


Balanced market


Balanced market






Rental Vacancy Trend

Steady Steady Steady Tightening Steady Tightening Increasing Increasing Increasing Increasing

Rental Rate Trend

Stable Stable Stable Stable - Increasing

Stable Stable Declining Declining Declining Declining

Volume of Property Sales

Steady Increasing Declining Increasing Steady Increasing Steady Declining Declining Declining

Stage of Property Cycle

Rising market

Bottom of market

Bottom of market

Rising market Bottom of market

Rising market Bottom of market

Declining market Declining market Declining market

Local Economic Situation

Steady growth

Flat Flat Flat Flat Steady growth Flat Contraction Contraction Contraction


Small Significant Small Small Small Small Significant Small Small Small



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Queensland Property Market Indicators – Houses


Queensland Property Market Indicators - Houses Factor Cairns Towns-

ville Whit-sunday Mackay Rock-

hampton Emerald Glad–stone

Bunda-berg

Hervey Bay

Sunshine Coast Brisbane Gold

Coast Ipswich Too-woomba


Balanced market






Balanced market



Balanced market


Balanced market

Balanced market

Rental Vacancy Trend Increasing Steady Steady Steady - Increasing

Steady Steady Steady Steady Tightening Tightening Steady Tightening Steady Steady - Increasing

Demand for New Houses Soft Soft Fair Soft - Fair Fair Very soft Soft Fair Fair - Strong

Strong Strong Strong Strong Strong

Trend in New House Construction

Increasing Steady Steady Declining - Steady

Steady Declining significantly

Steady Increasing Steady - Increasing

Increasing Increasing strongly


Increasing

Volume of House Sales Increasing Steady Steady Steady Steady Declining Steady Declining Increasing - Steady

Increasing Steady Increasing Steady Steady


Start of recovery

Bottom of market - Rising market

Declining market

Bottom of market

Declining market

Bottom of market

Bottom of market

Start of recovery

Rising market

Rising market

Rising market

Rising market



Occasion-ally

Occasion-ally

Almost never - Occasion-ally

Occasion-ally

Occasion-ally

Occasion-ally

Frequently Almost never

Occasion-ally

Occasion-ally

Occasion-ally

Occasion-ally

Occasion-ally

Frequently



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Queensland Property Market Indicators – Units


Queensland Property Market Indicators - Units

Factor Cairns Towns-ville

Whit-sunday Mackay Rock-

hampton Emerald Glad-stone

Bunda-berg

Hervey Bay

Sunshine Coast Brisbane Gold

Coast Ipswich Too-woomba



Balanced market


Balanced market



Balanced market


Balanced market

Balanced market

Balanced market



Rental Vacancy Trend Tightening Steady Steady - Increasing

Increasing Steady Steady Steady Steady Steady Tightening Steady Steady Tightening Increasing

Demand for New Units Very soft Fair Fair Soft Fair Very soft Very soft Fair Fair Fair Strong Fair Strong Soft - Fair

Trend in New Unit Construction

Declining Steady Steady Declining Increasing Declining significantly

Steady Increasing Steady - Increasing


Steady Increasing Increasing

Volume of Unit Sales Increasing Steady Steady Steady - Declining

Declining Declining significantly

Steady Declining Increasing - Steady

Increasing Steady Increasing - Steady

Steady Steady

Stage of Property Cycle Start of recovery

Start of recovery

Bottom of market - Rising market

Declining market

Bottom of market

Declining market

Declining market

Bottom of market

Start of recovery

Rising market

Rising market

Rising market

Rising market



Occasion-ally

Occasion-ally

Occasion-ally

Occasion-ally

Occasion-ally

Occasion-ally

Frequently Almost never

Occasion-ally

Occasion-ally

Occasion-ally

Frequently Frequently Frequently



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Queensland Property Market Indicators – Office


Queensland Property Market Indicators – Off ice Factor Cairns Townsville Mackay Rock-

hampton Gladstone Bundaberg Hervey Bay Sunshine Coast Brisbane Gold Coast Too-

woomba Rental Vacancy Situation Balanced

market Over-supply of available property relative to demand

Over-supply of available property relative to demand - Large over-supply of available property relative to demand



Balanced market





Balanced market

Rental Vacancy Trend Steady Steady - Increasing

Increasing Steady Increasing Steady Steady Tightening - Steady

Steady Tightening Steady

Rental Rate Trend Stable Declining Declining Stable Declining Stable Stable Stable Stable Stable Stable

Volume of Property Sales Steady Steady Declining Steady Steady Steady Steady Steady Increasing Increasing Steady


Bottom of market

Peak of market - Declining market

Start of recovery

Declining market

Bottom of market

Bottom of market

Start of recovery

Start of recovery

Start of recovery

Start of recovery - Bottom of market

Local Economic Situation Flat Flat Flat - Contraction

Flat Contraction Flat Flat Steady growth - Flat

Flat Flat Flat


Small Small - Significant

Significant Significant Nil Significant Significant - Large

Significant Significant - Large

Significant Significant



Mar

ket

Indi

cato

rs

1

Northern Territory, South Australia & Western Australia Property Market Indicators – Houses


SA, NT and WA Property Market Indicators - Houses Factor Adelaide Adelaide Hills Barossa

Valley Iron Triangle

Mount Gambier Riverland Alice

Springs Darwin South West WA Perth

Rental Vacancy Situation Balanced market

Balanced market Balanced market

Balanced market

Balanced market


Balanced market

Balanced market

Balanced market


Rental Vacancy Trend Steady Steady Steady Steady Steady Tightening Steady Steady Steady Increasing

Demand for New Houses Soft Soft Soft Soft Fair Soft Strong Strong Strong Soft

Trend in New House Construction Steady Steady Steady Steady Declining Steady Increasing Increasing Increasing Steady

Volume of House Sales Steady Steady Steady Steady Steady Steady Declining significantly

Declining significantly

Steady Steady


Start of recovery Start of recovery

Start of recovery

Bottom of market

Bottom of market

Declining market

Declining market

Start of recovery

Declining market


Occasionally Occasionally Occasionally Occasion-ally

Occasionally Almost never Occasionally Occasionally Almost never Almost never



Mar

ket

Indi

cato

rs

1

Northern Territory, South Australia & Western Australia Property Market Indicators – Units


SA, NT and WA Property Market Indicators - Units

Factor Adelaide Adelaide Hills Barossa Valley Iron Triangle Mount

Gambier Riverland Alice Springs Darwin South West WA Perth

Rental Vacancy Situation Balanced market

Balanced market Balanced market

Balanced market

Balanced market




Balanced market


Rental Vacancy Trend Steady Steady Steady Steady Steady Tightening Increasing sharply Increasing sharply

Steady Increasing

Demand for New Units Soft Soft Soft Soft Soft Soft Soft Soft Strong Soft

Trend in New Unit Construction Steady Steady Steady Steady Declining Steady Increasing Increasing Increasing Declining

Volume of Unit Sales Steady Steady Steady Steady Steady Steady Declining significantly

Declining significantly

Steady Steady


Start of recovery Start of recovery

Start of recovery

Bottom of market

Bottom of market

Declining market Declining market

Start of recovery

Declining market



Occasionally Almost never Almost never Occasionally Occasionally Almost never Almost never



Mar

ket

Indi

cato

rs

1

Northern Territory, South Australia & Western Australia Property Market Indicators – Office


SA, NT and WA Property Market Indicators – Office Factor Adelaide Adelaide Hills Barossa Valley Iron Triangle Riverland Alice Springs Darwin South West

WA Perth

Rental Vacancy Situation Over-supply of available property relative to demand









Rental Vacancy Trend Steady Steady Steady Steady Steady Increasing Increasing Steady Increasing

Rental Rate Trend Stable Stable Stable Stable Stable Stable Stable Stable Declining

Volume of Property Sales Steady Steady Steady Steady Steady Steady Steady Steady Declining

Stage of Property Cycle Bottom of market Bottom of market Bottom of market Bottom of market

Bottom of market Bottom of market Bottom of market

Start of recovery Declining market

Local Economic Situation Contraction Contraction Contraction Contraction Flat Flat Flat Flat Contraction


Significant Significant Significant Significant Large Large Large Nil Significant


Telephone 1300 880 [email protected]

Local expertise. National strength. Trusted solutions.

Herron Todd White is Australia’s leading independent property valuation and advisory group. For more than 45 years, we’ve helped our customers make the most of their property assets by providing sound valuations and insightful analytical advice.

With offices in every capital city, most regional centres, and right across rural Australia, we are where you are. Our valuers work in the property market everyday, providing professional services for all classes of property including commercial, industrial, retail, rural and residential.

Herron Todd White is Australian owned and operated. With directors who are owners in the business, our team has a personal stake in providing you with the best service possible.

Documents

June 2015 · 2018. 7. 31. · Herron Todd White does more than just property valuation. We are fully qualified and accredited property advisors, in all areas and classes of property