Industry declares war on government

Posted on Friday, May 25 2012 at 1:35 PM

The Property Council of Australia (PCA) will campaign against plans to double the withholding tax on managed trusts for foreign investors, claiming $1 billion in deals have been lost since the move was announced.

In its Budget last month, the Federal Government outlined plans to increase the rate from 7.5 per cent to 15 per cent from July 1, drawing the ire of lobby and industry groups.

Australia’s reputation on the international stage as a haven for investors has been “trashed”, the PCA says in a statement.

“This will make it harder to attract the international capital that has underpinned commercial property markets since the GFC (global financial crisis).

“Investors need simple, stable rules. More than a billion dollars of deals have already headed to the airport.”

The group will actively campaign against the tax hike, it announced.

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Solution demanded to stop soaring strata insurance

Posted on Thursday, May 24 2012 at 2:21 PM

The Queensland Government has until December 1 to announce how it will bring affordable insurance back to the north and far north Queensland region, according to Federal Member for Leichhardt Warren Entsch.

Thousands of unit owners in
north and far north Queensland are becoming crippled by hiking strata insurance
costs, as insurers blanket ban strata insurance coverage simply to minimise
their exposure to cyclone-prone coastal areas, in many cases north of Mackay.

Unit owners are angry because on
buildings valued at $5 million-plus they’re left with the choice of only two
insurers – a duopoly – translating to escalating costs on what is a mandatory
insurance obligation for body corporates.

The other insurers who’ve
dropped like flies from the region have not considered each suburb and area on
a case-by-case basis or even the structural integrity of a building and its
ability to withstand a cyclone; or if a building has ever been damaged by a
cyclone.

Entsch said since a public inquiry took place in late January, he’s heard
many stories of insurance quotes that have skyrocketed.

“One letting agent in
Cairns, Linda Tuck, reported that last year the cost of insurance for a
two-bedroom, one‐bathroom duplex with
a value of around $350,000 was $941,” said Entsch.

“This year, she was told
that the insurer… had withdrawn from domestic property insurance for all
locations above Mackay.

“With only two insurers
willing to quote, the prices jumped to the ridiculous level of $4803… and $4439
with (the other two insurers).”

In his speech to parliament
recently, Entsch made it clear the market had “clearly and totally failed”.

The Federal Government has
until October 1 to complete the reviews recommended by the Standing Committee
on Social Policy and Legal Affairs as tabled in its second In the Wake of Disasters report in
March.

The government then has
until December 1 to outline its solution on how to reduce the insurance costs
for unit owners and make policies more competitive again.

You can read more about this issue and how unit
owners are dealing with it in July’s Australian
Property Investor magazine, out on June 1.

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Brisbane and Gold Coast new apartment sales on the increase

Posted on Tuesday, May 22 2012 at 4:19 PM

New apartment sales in Brisbane are picking up, with Queensland’s capital city experiencing its strongest March quarter in almost 10 years.

Colliers
International Research
and Forecast Report says there were 365 unconditional sales
totalling $208 million in the March quarter, which is Brisbane’s best result
since 2003.

“This may suggest
that certain stimulus measures coupled with consecutive interest rate changes
had a positive impact on the new apartment market,” the Colliers International
report says.

“Underlying
fundamentals remain strong with above average quarterly transaction volumes and
positive price growth.”

Inner-Brisbane’s
vacancy rate also tightened (1.4 per cent), while rental growth for one-bedroom
units climbed eight per cent. Rental growth for two-bedroom units in Buranda,
Dutton Park and Woolloongabba increased by 20 per cent and three-bedroom units
in Ascot and Hamilton were also popular.

“Demand for CBD
apartments increased over the quarter, with 55 unconditional sales recorded
across four projects,” Colliers International says.

“This is the
strongest result since the same period in 2011.”

The Gold Coast
appears to be getting some of its glimmer back – the glitter strip
reported an increase in new apartment sales, which is the first increase in 12
months and 49 per cent higher than figures from the previous year.

“High-rise sales
within the Broadbeach precinct were reignited during the March quarter, with a
total of 23 occurring, making it the best performing high-rise precinct in
terms of sales volume.

“The low-rise
sector was the standout performer during the March quarter, with a total of 46
unconditional sales, overtaking the high-rise sector sales rate for the first
time in six years.”

Overall, Colliers
International believes the March results are extremely encouraging and
oversupply on the Gold Coast is slowly being absorbed.

“The recent
announcement of a 50 basis point reduction to the cash rate by the Reserve Bank
will result in a welcome lift in confidence. If this confidence results in
potential buyers looking to purchase, they may be surprised at the limited
choice of new apartments across the Gold Coast.

“Based on the
current quarterly selling rate, the supply of new apartments could be taken up
within 2.75 years. If the sales rate increases, this timeframe will be reduced.
Availability will continue to fall with no new stock entering the market in the
short term. This will lead to supply shortages in some areas, particularly the
low-rise sector.”

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Builder confidence on the rise

Posted on Friday, May 18 2012 at 11:25 AM

Sentiment in the building industry is on the up and expected to be more positive over the next 12 months, according to The Citi Australian Residential Housing Survey – May 2012.

The survey, which
questioned builders across Victoria, New South Wales, Queensland and Western
Australia, paints a more optimistic picture for the coming year.

“Sentiment was
more positive than we anticipated, given the low consumer confidence, with
government policy/leadership and economic conditions the biggest causes for
concern regarding activity levels,” the survey says.

“Fifty six per
cent of the builders reported an improvement in their order book versus six
months ago. Forty per cent of respondents were confident about activity levels
in residential housing over the coming 12 months, while only eight per cent had
a negative view.

“Interestingly,
none of the respondents were worried, which was again a better-than-expected
outcome.”

However, the
survey adds the new carbon tax is an issue that worries builders and the costs
will likely be passed onto consumers.

“Carbon tax looks
to be the driver of inflation, with 51 per cent of respondents intending on
increasing prices by up to five per cent and a further 27 per cent by up to 10
per cent plus.

“Builders seeing
cost increases of more than five per cent are likely to increase their prices
by a similar amount, potentially implying some margin expansion. While 75 per
cent of respondents expected costs to increase up to five per cent, only 50 per
cent of respondents expect to increase prices by up to five per cent,
suggesting these builders may be happy to accept lower margins to maintain
volumes.” 

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Rate cuts boost homebuyer sentiment

Posted on Friday, May 18 2012 at 3:38 PM

Buyers in Australia are more confident about buying a house or apartment now than they were six months ago, according to the latest CBA/Mortgage and Finance Association of Australia Home Finance Index.

The index shows Australian
households are at their highest levels of financial confidence since May 2011.

The survey of
1447 people also found 51.7 per cent of homebuyers believe now is a good time
to buy a new home, compared with 36.1 per cent six months ago.

Fewer respondents
feel financially worse off in March 2012 (35.1 per cent) compared with 38.8 per
cent six months ago.

Homebuyers’
optimism is being driven by flat property prices and lower interest rates, both
creating a ‘buyers’ market’. Increasing rents have also led more than two
thirds of first homebuyers (65.4 per cent) to re-evaluate the trade-off between
renting and buying.

Mortgage and
Finance Association of Australia chief executive officer Phil Naylor says the
renewed confidence is a positive indicator for the mortgage market.

“While the cost
of living pressures and employment uncertainty are placing a strain on some
households, these concerns are balanced by positive factors such as lower house
prices and interest rate cuts,” he says.

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Tax hike ‘hurts foreign investment’

Posted on Wednesday, May 16 2012 at 9:51 AM

Australia is at risk of alienating foreign property investors after the Federal Government announced plans to double taxes on investment trusts, one group has warned.

In last week’s Budget, the government
flagged an increase to the Final Withholding Tax (WHT) on managed investment
trusts from 7.5 per cent to 15 per cent.

Andrew Cannane, head of corporate client
services at The Trust Company, said the move was concerning.

In 2007, the WHT was lowered to its current
level. According to research by Colliers International, foreign investment in
property increased from $1.2 billion in 2008 to $5.5 billion in 2011.

“Our clients tell us that on a relative
risk weighting, Australia is an attractive investment destination,” Cannane
says. “This is partly due to our strong economy as well as the relative
strength of the Australian dollar.

“Changes to the rate undermine the
confidence of foreign investors to invest into Australia with certainty.”

As part of the Budget, capital gains tax
discounts for non-residents were also scrapped.

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Australian commercial property ‘safe haven’

Posted on Monday, May 14 2012 at 2:52 PM

Investors from Hong Kong, Singapore, Malaysia and China are turning to the Australian commercial property market in search of higher rental returns, according to CommercialAsia.com.

National sales
manager for Australia and New Zealand Corey Weekes says Australia’s steady
economy and commercial property sector, particularly in the areas connected
with the resources boom, offers Asian investors attractive yields to preserve
and grow their wealth.

“Region-wide
cooling measures for property investment by Asian governments are also driving
many Asian investors to explore offshore options like Australia,” Weekes say.

Offshore-based
institutions and private investors accounted for 37 per cent of Australia’s
commercial sale transactions in 2011.

City sales
director with Knight Frank, John Bowie Wilson, adds the number of offshore
investors interested in the Australian commercial market is increasing on a
daily basis, as prices rise in Singapore and as Hong Kong awaits a currency
correction against the US dollar.

“Asian investors
are typically capital-rich and have a good understanding of the requirements
when investing in Australian property,” Wilson says.

“The recent drop
in interest rates is helping local private and institutional investors to
return to commercial property investments, however it’s still a challenge for
many domestic investors to raise capital.”

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Renting out rooms a popular option

Posted on Wednesday, May 09 2012 at 2:44 PM

One in three homeowners have considered renting out their spare room to help pay their mortgage, a poll has found.

The results, compiled by PRDnationwide,
found 14 per cent of respondents already have someone renting a room. Another
11 per cent said they would if they had the space.

Tough economic conditions are most likely
behind the results, according to PRDnationwide research director Aaron Maskrey.

“Getting onto the property ladder is
increasingly difficult for first-time buyers and homeowners are making unused
space earn its keep,” Maskrey says.

A similar poll was conducted in 2009 when
the global recession had begun to bite, but the results weren’t as high, he
says.

“Finding a lodger has become easier with a
range of websites advertising for rooms to rent and flatmates.”

Of those surveyed, 44 per cent say they
wouldn’t consider renting their spare room.

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Light switches on in Rockhampton

Posted on Thursday, May 10 2012 at 10:15 AM

Since API profiled Rockhampton in its April issue this year as the next place to watch, the city’s residential property market has started sizzling with buyer numbers at open home inspections tripling and tenant competition firing up for rentals, according to Prime Properties Rockhampton principal Todd Brandon.

The media
certainly plays a part in triggering this recent flurry of activity and
“turning on the switch”, particularly after the good mileage of attention given
to Gladstone and Mackay, said Brandon. “Interest rate drops don’t hurt either.
It’s only natural that Rockhampton is increasingly attractive to buyers as it’s
only 40 minutes from Gladstone and of equal distance to other major mining
centres.

“Buyers
are recognising Rocky as affordable compared to its neighbours of Gladstone,
Emerald, Blackwater and Mackay and it has better infrastructure.”

Investors are mostly arriving
from outside of Rockhampton, he said. “They’re literally flying in, wanting to
see properties for sale, and flying out.”

They like the yields and the
security of the Rocky market, Brandon said. “On $300,000 houses or units
returns can be $350 per week plus, in some cases, the benefit of depreciation.”

Even better yields can be found
across the city depending on the dwelling type and location, he said.

Because Rockhampton’s economy
has remained relatively stable throughout the global financial crisis, with
beef, education and health industries holding strong, owner-occupier confidence
has also returned, particularly those upgrading, said Brandon.

The city still firmly remains
beef capital of Australia and this week hosts Beef Week 2012 with 18,000
visitors expected through the gates. The event demonstrates Rockhampton’s
strength and innovation in the beef industry.

Buyer confidence across the
“full spectrum” of the Rockhampton residential market – not only from property
investors – demonstrates the sustainable future of the housing market in
Rockhampton, Brandon said. “Activity creates activity. When vendors see more
sold signs they think ‘now is the time to put the property on the market’ and
investors think ‘now is the time to buy’.”

Vacancy rates are down to around
two per cent “with very good applications at the moment and people without good
rental history more likely to miss out on a property”, said Brandon.

The rental demand has been
influenced by a surge of new workers to the city, not only for mining jobs but
also for the various other jobs available and the housing affordability, he
said.

When API profiled Rockhampton, a
possible passenger rail connection to mining boomtown Gladstone was mentioned.
Brandon said the discussion of providing four passenger services daily on
existing infrastructure continues between local and state governments.

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Victoria scraps first homebuyer bonuses

Posted on Thursday, May 03 2012 at 11:31 AM

Victoria’s residential property market faces a fresh blow after the government announced it would wind up first homebuyer bonuses from July 1, to help reduce the state’s budget deficit.

In handing down the 2012-13 State Budget on Tuesday, the government
blamed a significantly trimmed down stamp duty revenue as a result of dwindling
property transactions – down $366 million for 2011-12 and estimated to be $1.13
billion lower between 2012-13 and 2013-14.

First homebuyers were eligible for bonuses of $13,000 for new
properties priced up to $600,000, with an additional $19,500 on offer for new
homes in regional areas.

Critics say scrapping the incentives will only further dampen the
confidence of new homebuyers at a time when Victoria’s unemployment rate sits
at 5.8 per cent – the highest of any mainland state or territory – and new
housing is in a position of oversupply.

Melbourne-based small developer Troy Harris of Rookie Developer says
the move will cost construction jobs and hurt the greater economy.

Harris also believes it will create a “mini rush” over the next several
weeks, “to buy before the bonus evaporates”.

“I think there will be a little run of first homebuyers of new homes
bringing forward their purchases from later this year – that’s if they can move
in time given the short notice period which I think is very poor form,” Harris
says.

“I doubt (this) will affect small developers as much as it will your
Metricons and the like, as they have a higher percentage of first homebuyers
and they also engage full-time employees who can be laid off, whereas small
developers like myself just engage a builder per project.”

The first homebuyer bonus was initially launched off during the global
financial crisis to prop up jobs. “Now at a time when construction jobs genuinely
are under pressure they remove it. My gut feeling is they are going to regret
it.”

Other austerity cuts include more public service job bloodshed and the
likely canning of a new children’s hospital in Melbourne’s southeast, ninemsn reports.

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