Australia Property

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Top tower on the block as GIC cashes in

SINGAPOREAN investment giant GIC Real Estate has moved to capitalise on the Asian investment boom by putting one of Sydney’s best towers with residential conversion potential on the block in a $300 million play.

The group has called for submissions on 175 Liverpool Street from real estate agencies as it lures both Asian groups that are prepared to buy office towers and hold them for some years before developing them and mainland Chinese players who are chasing quicker starts.

The north-facing tower is one of the city’s best redevelopment opportunities and offers Hyde Park views. It could be transformed into an apartment development that may even surpass the $600m complex being undertaken by Chinese giant Greenland Holdings Group on the former Sydney Water Board site.

There are few comparable opportunities available in the city, with only AMP Capital’s offer of 338 Pitt Street — on which a 50-storey scheme has been worked up — on the market at over $100m through CBRE and Savills at the moment. Singapore’s sovereign wealth fund, GIC, picked up the Liverpool Street office block for $125m in 1996 and has since built a multi-billion-dollar portfolio of office towers, shopping centres, hotels and stakes in listed companies.

But it has moved to cash in on interest from Chinese players who have set the pace in buying assets in recent months. Notably, it sold the Park Hyatt Melbourne to China’s Fu Wah International Group through CBRE for about $135m after a decade of ownership.

GIC owns about $4 billion worth of real estate in Australia, including Chifley Tower and the Queen Victoria Building in Sydney.

It also owns an 11.64 per cent stake in GPT Group.

GIC last year started fielding approaches from Chinese developers on the Liverpool Street tower, which is also one of the city’s best office assets.

The tower includes 28 upper office levels with a net lettable area of about 46,320sq m. GIC is also converting a mid-rise plant room into two more office floors.
Housing market faces day of reckoning as consumers watch budget

NEXT week’s federal budget is unlikely to contain any surprises for the property market but budget cuts could shake investor ­optimism as consumer confidence tanks.

Real dwelling prices have continued to rise rapidly during 2014 but momentum may have slowed since the end of last month. The growth continues to be centred in Sydney and Melbourne — where investor activity has been strongest — but there has been some ­recent improvement in Brisbane and Adelaide.

Nevertheless, the housing market continues to cause trouble for the Reserve Bank. Housing remains the sole justification for higher rates — a move the RBA is reluctant to make — with the bank expressing concern about the pace of growth earlier in the year. These concerns are certainly justified, but the federal government may have come to the rescue, albeit unintentionally.

Budget leaks suggest that spending cuts will weigh on growth over the next few years. But the biggest concern for the housing market comes in the form of the proposed deficit tax, which will hit Australia’s upper and upper-middle classes with ­either a one percentage point or two percentage point increase in marginal tax rates.

The key question for housing is: how will this affect investor behaviour? Since the recent boom has largely been driven by investors (as opposed to strong income growth), higher taxes on the wealthy could have a disproportionably large effect on the housing market.

Higher taxes will hit the market at the very top (since high-­income earners purchase expensive housing), but also towards the bottom (since investors often favour cheap rental properties).

Since the budget leaks began, consumer confidence has tanked with the ANZ-Roy Morgan consumer confidence measure falling to its lowest level in five years. Property investors are likely to be driven more by confidence or “animal spirits” than the average consumer.

Investors are betting on house price appreciation, but look at the mounting headwinds: higher taxes, budget cuts, lower consumer confidence, a high dollar, a collapse in mining investment and concerns about China.

Any combination of these factors could be enough to spook investors, resulting in dire consequences for the housing market. Investor demand is already running at an unsustainable pace and, if history is any guide, that typically results in ­prices falling.

The Sydney downturn in 2004 offers insight into today’s episode. Then, like now, there was a rapid rise in Sydney house prices that was primarily driven by speculation. When investor demand subsided, house prices declined to such an extent that it took a decade before prices returned to their previous peak.

The problem for the housing market is that there is nothing to replace investor activity if it does deteriorate. Owner-occupiers are already struggling with many of the same headwinds, while first-homebuyer activity has rarely been weaker.

When a market is driven by speculation, it often doesn’t take much for conditions to sour. Households across the country will be tightening their budgets as higher taxes and welfare and spending cuts take their toll.

Combining these factors with a soft economic outlook suggests the recent boom in house prices could soon be a thing of the past.

Business Spectator
Foreign buyers welcome

Nick Lenaghan
627 words
12 May 2014
The Australian Financial Review
Copyright 2014. Fairfax Media Management Pty Limited.

Australia's peak real estate group is urging the federal government not to tamper with foreign investment rules, and says the much-hyped effect of offshore home buyers on prices has been exaggerated.

Instead, foreign buyers play a vital role in increasing the supply of new housing through a preference for off-the-plan purchases.

The Real Estate Institute of Australia has dismissed the influence of foreign buyers in the established home market as "negligible".

Offshore investors, including those from Asia, got the keys for a mere 0.1 per cent of dwelling stock in 2012-13.

The REIA makes a frank assessment in its submission to the ­parliamentary inquiry into foreign investment in residential real estate, which closed to submissions last week.

It is the one to become public from the inquiry, which is chaired by lower house MP Kelly O'Dwyer, whose blue ribbon seat of Higgins covers some of Melbourne's most prestigious property markets, such as Toorak and South Yarra.

"First home buyers are buying different stock to foreign investors," REIA chief executive Amanda Lynch told The Australian Financial Review.

"The preference for first home buyers is very clearly existing housing. Foreign investors are buying new properties off the plan."

Typically, offshore investors buy off-the-plan apartments in higher price categories. In the established market, foreign buyers are active in the higher brackets, so they are unlikely to be competing with the average purchaser or first-time buyers, the REIA found.'Beat-up' about Chinese investment

The REIA chief said there had been a "beat-up" about foreign investment, with most attention on Chinese buyers in the residential sector. By comparison, US and Canadian investment combined into all Australian real estate – commercial and residential – outweighed total Chinese investment.

"There is a fear factor, of being taken over by foreign investment. When we look to the facts that argument does not stand up," Ms Lynch said.

"It's very much an emotive response which is all part of this beat-up. There's a lot coverage about Asian investors. We're keen to have a reality check."

Under current guidelines, ­foreign investors can buy new homes and off-the-plan dwellings, while temporary residents can acquire an established home to live in. The Foreign Investment Review Board approved $17 billion worth of applications to buy ­residential property in 2012-13 in a market with a turnover of over $300 billion.

The REIA found that a "major contributor" to rising house price and declining affordability is the undersupply of housing.

"Unless supply is addressed the gap between supply and demand is forecast to widen to 375,000 dwellings by 2015," it said.

Much recent analysis of ­Australia's housing shortage was ­conducted by the National Housing Supply Council, until it was axed by the Coalition government when it took office last year.

Sydney agent John McGrath has backed the call to keep Australia's residential markets open to offshore investors, as other strong markets such as London and New York are. Mr McGrath said there was "no doubt" Chinese buyers had an impact on prices in a certain, ­limited Sydney localities, but "in the rest of Sydney, it's had very little impact."

In Melbourne, Jellis Craig agent Peter Vigano, who works the wealthy eastern suburbs, said the significant investment visa program had led to a resurgence in Chinese investors.

"There's a lot of Chinese coming in for one or two days, buying and then flying back off."

The REIA has recommended more stringent enforcement of the foreign investment rules and tougher penalties for breaching them. It has called for heavier fines for temporary residents who fail to divest property when they leave the country.

Fairfax Media Management Pty Limited

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Auctions cool off in Sydney, Melbourne
Matthew Cranston
545 words
12 May 2014
The Australian Financial Review
Copyright 2014. Fairfax Media Management Pty Limited.
Sydney and Melbourne house price growth may have slowed in the last few months but that did not stop Goldman Sachs managing director Alastair Lucas from buying the most expensive house sold at auction on the weekend.

The three-bedroom, 125-year-old ­terrace house on Vale Street in the suburb of East Melbourne saw strong bidding despite bad weather, with Mr Lucas prevailing at just over $3 million.

"It's a very good-looking Victorian-era house in good nick," Mr Lucas told The Australian Financial Review. "And being just one kilometre from the city puts it in a special category," he said.

Strong bidding across the city could not prevent Melbourne recording its 10th consecutive week of auction clearance rates below 75 per cent. Caine Real Estate director Paul Caine, who sold the Vale Street property, said the reserve was in the mid-$2 million range.

"We probably see the best of the ­market in this area," Mr Caine said. "We have still got a 90 per cent clearance rate here at the moment."

He said the auction started slowly with a vendor bid of $2 million, but then sped up with three people duelling it out among a crowd of about 150.

Melbourne prices have grown 11.6 per cent over the 12 months to April and the median dwelling price is now $552,000. However, Melbourne prices fell 0.5 per cent in the month of April according to RP Data.Market has 'stepped down a gear'

In Sydney, residential property auctions notched up their fifth consecutive weekend of sub-80 per cent clearance rates, providing further evidence of a cooling in the city's property market. While residential markets around the country have only just experienced the post-holiday "Super Saturday" auctions, Australian Property Monitors senior economist Andrew Wilson said there were no more excuses for softening clearance rates.

"I guess there were some excuses in the last few weeks following the big auctions post the Easter holidays," Mr Wilson said. "However, we have moved back to normal conditions so I think these results show the market may have just stepped down a gear."

The number of reported auctions around the country has almost halved since last weekend, although is still well up on this time last year.

The value of property sold at auction in Sydney compared to last weekend dropped 35 per cent to $240 million.

The most expensive property sold in the city was a three-bedroom unit at Woolloomooloo for $2.85 million.

Morton & Morton's Noel Jenkins, who sold the unit before auction, said the top end was slowing. "That level is not as busy as the under $1.5 million [market] and that's because the lower end is still getting a better return."

He said an owner could still get $700 rent for a $650,000 apartment in Rushcutters Bay, but would be looking at $1400 for a newly purchased $2 million-plus apartment.

While the Sydney housing market recorded yet another increase in price growth of 0.5 per cent in April, it was the lowest rate of monthly growth since its run of 11 consecutive increases commenced in June last year.

Fairfax Media Management Pty Limited

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Housing boom coming off the boil, ABS data shows
AAP MAY 13, 2014 12:08PM

DISAPPOINTING home loan and house price data indicates Australia’s housing boom is starting to pull back.

The number of home loans approved in March fell 0.9 per cent. Economists had expected a 0.5 per cent rise.

Australian capital city house prices continued to rise in the March quarter, by 1.7 per cent, softer than the 2.9 per cent rise economists were expecting.

The Australian Bureau of Statistics figures, released today, show that the housing market was still looking good but had pulled back from the boom seen late last year, JPMorgan economist Tom Kennedy said.

“We saw very, very solid growth in Sydney and Melbourne, and most other major property markets, and what we’re seeing now is a pullback,” Mr Kennedy said.

“Over the past few months, there’s been quite a slowdown and deceleration from the euphoria that we saw in the second half of last year.

“There, clearly, has been a pullback in activity in home loans and I think we’re starting to see that slower pace of demand filter through to house prices.”

He said the earlier higher levels had been unsustainable and “prices are now growing at levels that are perhaps more sustainable over the long term”.

Mr Kennedy said other data such as auction clearance rates and building approvals also showed a wind-down in the housing market.

“I wouldn’t be surprised to see a further deceleration when we get the next quarterly print on house prices,” he said.
Brisbane at the centre of apartment boom

APPROVALS for inner-city apartments in Brisbane have soared to the highest annual rate in a decade, fuelled by the desire for an urban lifestyle and improved developer confidence.

Figures released to The Australian by Colliers International show almost 5400 units were given the go-ahead in the 12 months to the end of March, including 1198 in the first quarter.

Density is set to increase across 28 inner-city suburbs, particularly in South Brisbane, Newstead, Hamilton and Albion. About 3200 units were expected to be released for sale this year as apartment living in the city increases.

Colliers International senior analyst Alex Beer said developers were bringing their sites to market after a period of reduced ­activity from 2008 to 2012. “There was quite a strong ­period between 2002 and 2008, but in terms of quarterly approvals the last 12 months has been the strongest 12-month period,” he said.

Mr Beer said people continued to seek out investment properties or were buying for lifestyle reasons despite rumblings about a looming oversupply and the ­effect on rental returns.

“Demand remains strong, not just from investors, but owner occupiers looking at new apartments,” he said. “The preference for apartment living is becoming more prevalent. There are benefits to being in an apartment; there are benefits to being in a new apartment.”

Through the early 2000s annualised apartment approvals hovered between 2500 and 3000, but in the second half of the decade rates dropped to between 800 and 1300 as interstate migration fell away and the global financial crisis hit.

Approvals have picked up to about 2000 a year over the past three years.

In the riverside suburb of New Farm, which follows the Brisbane River and is next to Fortitude ­Valley, local property developer Silverstone Developments is about to bring two blocks to ­market.

All 14 units in a complex on Brunswick Street sold off the plan, and approval was granted last week for a nearby mixed-use complex of 40 one-and two-bedroom units priced from about $450,000 to $645,000.

Managing director Troy Daffy said there was significant pent-up demand.

“The difference Brisbane has had (from the southern capitals) is we didn’t do anything from about 2008 to 2012,” he said. “We had the floods and we had the natural disasters. A lot is happening ­because the market conditions are good all of a sudden.”

But BIS Shrapnel senior manager of residential property, Angie Zigomanis, warned of the risk of a glut when the developments came on to the market from 2016 and 2017.

He said the most common stock in large blocks could lose in terms of rental values but projects with a point of difference should continue to do well.

“The market will still end up at some level of oversupply and there will be pressure on rents,” he said. Market analyst Michael ­Matusik said investors should be careful of a “sore tooth” period during which rents would bob up and down as the properties came on to the market.

“The trend toward inner-city living and the trend toward gentrification is long-term and it is a trend, it’s not a fad,” he said.

“Most are buying something that has good property bones long-term.”
Chinese ‘drive hardest house bargain’


Chinese Property Buyers Story
Monika Tu specialises in selling homes to Chinese buyers coming from overseas. ‘They don’t pay over the top; they pay just the right price’. Picture: Sam Mooy Source: News Corp Australia
ANECDOTAL tales of wealthy Chinese buyers driving up housing costs paying above-market prices have been undermined by a study that finds they often drive the hardest bargains.

The randomised survey of 74,000 established home sales in Sydney by the Finance Discipline Group at the University of Technology, Sydney revealed buyers with Chinese surnames on average spent about 2 per cent — or $13,800 — less on their homes between 2000 and 2011.

Chinese buyers were willing to pay slightly more to live in a Chinese-dominated suburb — such as Sydney’s Chatswood, Haymarket or Hurstville — but still generally paid market rate.

Researcher Lorenzo Casa­vecchia, who has sent his findings to a parliamentary inquiry, suggests the government ignore populist calls to restrict foreigners’ access to residential markets.

“It’s win-win at the moment. We’re attracting foreign investment without causing prices to increase because of it,” he told The Australian. His data controlled for factors such as suburb, type and quality of dwelling.

Monika Tu, who runs a “property concierge” service for Chinese businesspeople buying prestige homes in Sydney, was unsurprised by the findings. “My Chinese people are very smart buyers, very successful business people. They don’t pay over the top; they pay just the right price,” Ms Tu said. “There’s been a lot more activity, especially in the last two or three years, but I don’t think it has raised prices.”

Chinese homeowners accounted for 6.5 per cent of buyers in 2000, rising to 13.3 per cent in 2010 and 10.3 per cent in 2011.

Dr Casavecchia said he and his research partner, Adrian Lee, intend to conduct a larger survey of one million transactions and include more recent figures.

Meriton, the nation’s largest apartment builder, told the inquiry “excessive local government planning requirements and fees” had been more instrumental in pushing first-home buyers out of the market. In a written submission, Meriton suggested allowing first-home buyers to ­access a portion of their super­annuation to buy a first home.

“Meriton’s data suggests foreign investors are not speculators or absentee owners, but rather acquire their apartments for lease or for use as owner occupiers, including those purchased for children studying in Aus­tralia,” it said.

Meriton said it had heard of departed foreigners abandoning their vacant homes and urged a crackdown by the Foreign Investment Review Board to boost public confidence in the system.

Meriton and the Property Council of Australia noted foreign investment “underpins development” in the sector, generating greater supply for Australian citizens. “Banks won’t extend themselves past a certain percentage, and so presages to foreign buyers provide surety to the development,” the Property Council’s Nick Proud said.

The UTS study noted the FIRB’s data captured only a fraction of overseas buyers, since it did not include purchases by permanent residents or properties bought through an Australian solicitor, friend or relative.
Fear factor of foreign investment hits home
Nick Lenaghan
597 words
16 May 2014
The Australian Financial Review
Copyright 2014. Fairfax Media Management Pty Limited.
Alarmed by rising house prices, home owners and investors have locked horns with property developers over the impact of foreign buyers in the Australian market, in submissions to a parliamentary inquiry into rules on offshore investment into residential housing.

Chaired by Liberal MP Kelly O'Dwyer, the high-profile inquiry into foreign buyers of Australian property was set up in March as property prices were surging.

Sydney prices have added almost 17 per cent in the past year, and the median house price in Sydney has passed $800,000 for the first time.

Concern about foreign investment has grown alongside the booming market and the increasing prominence of Chinese buyers. The inquiry is due to report back in October on the economic benefits of foreign investment in residential property and whether that investment is increasing the supply of new housing.

"Foreign investors are surreptitiously getting around existing rules and buying multiples of the best ­existing homes in Australia," said one anonymous submission to the inquiry.

"This is having a devastating effect on local residents because they cannot gain access to these properties."

Another joint submission from Justin Brooks and Cheriece Johnson, based in Liberal National MP Saxon Rice's electorate of Mount Coot-tha in Brisbane's inner west, urged the inquiry to focus on the existing home market rather than new dwellings.

"We believe that foreign ­investment into new dwellings increases supply of existing homes and jobs but the alternative has a greater impact on affordability," they wrote.

"I'd also like to note that many countries are rife with corruption and the fact that myself and Cheriece, hardworking Australian tax-paying citizens who play by the rules, are competing against someone who's money could come from suspicions practices in other countries, is simply unfair and we ask for a level playing field [sic]."

Against such passionate views from the street level, property industry groups have called for calm and warned against exaggerated claims.

The Real Estate Institute of Australia has discounted the influence of foreign buyers in the established market as "negligible".

On its analysis of foreign investment figures, offshore investors, including those from Asia, accounted for a mere 0.1 per cent of dwelling stock in 2012-13.

REIA chief Amanda Lynch said there had been a "beat-up" about ­foreign investment, with most attention on Chinese buyers in the ­residential sector.

"There is a fear factor, of being taken over by foreign investment. When we look to the facts that argument does not stand up," Ms Lynch told The Australian Financial Review this week. "It's very much an emotive response which is all part of this beat-up. There's a lot coverage about Asian investors. We're keen to have a reality check."

Billionaire developer Harry Triguboff echoed those sentiments and called on the inquiry liberalise rather than restrict existing foreign investment rules.

"If Australia wishes to keep ­housing affordable and to keep developers building, it is imperative that we embrace foreign investment in real estate and the certainty it can bring to industry," the Meriton Group ­managing director wrote.

Mr Triguboff said it was "excessive local government planning ­requirements and fees" that pushed up cost of housing and pushed ­first-home buyers out of the market.

The Property Council of Australia said Australia's foreign investment rules were already amongst the toughest in the world.

"Consequently, these rules do not need to be changed but their ­application could be considered as part of the review," it said.

Key points

Fairfax Media Management Pty Limited

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Housing Downturn On The Cards


A housing boom built on speculation is susceptible to changes in lending activity. Source: Supplied
Is it possible that while our attention drifted to Canberra for the budget, we missed the beginning of the housing downturn?

It’s fair to say that Canberra was the centre of the economic universe this week — at least for Australians — but there are a range of other developments worth keeping an eye on.

For example, dwelling price growth appears to have hit a hurdle, with nominal prices down 0.5 per cent in May to date. Prices in Melbourne are now 2.5 per cent off their March peak. Perth prices haven’t grown since November. Prices in Sydney have stumbled.

Each city is showing a distinct loss of momentum in recent weeks or months. Growth over the past 90 days — an attempt to look through daily volatility — is at its slowest pace since last July.

Speculation has driven the Sydney and Melbourne housing markets over the past year, but history suggests that investors can rarely shine so bright for long.

A boom built on speculation is susceptible to changes in lending activity. Evidence suggests that lending activity is approaching its peak and will begin to trend downwards in coming months. On a trend basis, new loan approvals to owner-occupiers fell by 0.1 per cent in March — the first decline since March 2012.

Investor lending rose by 0.4 per cent in March but the pace of growth has slowed rapidly in recent months.

First-home buyer activity remains subdued but has picked up modestly in recent months. First-home buyer activity has historically been more volatile than lending by either owner-occupiers or investors. First-home buyers are more susceptible to changes in the economic cycle; many are younger with a more marginal attachment to the workforce.

They are also affected significantly by changes in the first-home owners grant. The grant itself does little to improve housing affordability, with the grant quickly incorporated into price expectations, but does encouraged people to bring forth their purchasing decisions.

Though slowing demand would be sufficient to push prices lower, it is by no means the only headwind facing Australia’s $5.1 trillion housing sector.

The deficit tax is set to hit investors and could go either way. Higher taxes will hit the market at the very top, but also towards the bottom (since investors often favour cheap rental properties). On the upside, the taxes themselves could make negative gearing more attractive.

The labour market continues to be subdued and, despite recent improvements, the unemployment rate remains elevated. Wage growth is tracking at its slowest pace in at least 15 years and the participation rate is set to drop further over the next few years.

There is also mounting evidence that China’s economic fortunes are beginning to sour.

Direct foreign investment to residential property may begin to slow, with many investors in China already selling at a discount to find liquidity. There is growing concerns about Chinese residential investment and their housing market looks increasingly overheated.

If domestic investments turn sour then it is only a matter of time before they look to Australia to free up liquidity. If that occurs, then the Chinese influence on Australian property could soon revert from boosting prices to driving them down. The housing sector appears to be showing some signs of fatigue in recent months. Housing loans are slowing and house prices have been fairly weak over the past couple of months. Building approvals have also peaked and are showing signs of moderating.

House prices have been growing at an unsustainable pace for some time and it was inevitable that momentum would slow during 2014. Nevertheless, the number of factors lining up to hit house prices should be concerning for investors and owner-occupiers alike.

Callam Pickering is a columnist for Business Spectator.
Ok I should let the value buddies know this local news, relayed to me by a property agent whom I was discussing the housing market and direction with...

Westpac bank one of the biggest lenders has now shut it's doors to new lending to those that do not have a demonstratable yearly income, as they have reached 50% of their loan portfolio on these type of loans already. This mainly affects many speculators who are aussie PR(quite a big group which you usually see at the auctions in sydney/melbourne) who use overseas cash to buy their first property then leverage on that to get the 2nd or 3rd investment property. They usually do not have any income or they do not want to declare income derived from overseas which is taxable.

If a big bank like that is closing its doors, it means they know something investors dont Big Grin

So I would say despite attractive valuations on property counters and projected good returns from current/future projects, gotta be careful.
Virtual currencies are worth virtually nothing.

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