Property News

Market promising despite looming rate rise

03 October 2006

Property markets are continuing to look surprisingly buoyant despite predictions of another 0.25% interest rate rise, according to the latest Ashe Morgan Winthrop Property Investors Survey.

The bi-annual survey questioned property professionals on a range of issues including interest rate expectations, investment expectations, property market movements, impediments to development, and if current market conditions are forcing them to look beyond traditional property investments.

Ashe Morgan Winthrop's Managing Director, Michael Rothner, said the Western Australian property market is undoubtedly the strongest in the country.

"However it might be getting too much interest, with local WA property professionals easing back their own expectations, most likely in the face of the enormous influx of eastern state investors investing in their market," Mr Rothner said.

"The demand for development in the West has completely outstripped supply in many markets, especially in construction services," he added.

Despite the overwhelming view that the RBA will increase rates within the next six months, 67.8% of all respondents believe that rates should remain stable for the coming half year while 9.8% advocate a rate reduction. Only 21.7% of those surveyed believe that the RBA should raise rates and of this group 16.1% believe that a rise should be limited to 25 basis points.

Support for the RBA has fallen by 11.6% since the last survey, down to 69.1%, which is the lowest level of support recorded since the Spring 2003 survey.

"This concurs with the increasing view among property professionals that the RBA should hold rates firm, despite the overwhelming expectation that rates will actually be increased. The number of those rating the RBA as ineffective has risen 6.9 percentage points to 9.5% since the last survey," Mr Rothner said.

"Despite increases in interest rates in the last six months and the expectation of more rate rises to come, investment intentions have only slipped 2.0%, with 57.9% of all respondents indicating that they are either definitely going to invest or quite likely to invest."

A shifting pattern of investment intentions is apparent with Western Australian based property professionals cutting their positive investment intentions by 15.5% since the last survey.

"Despite a slight easing in support, residential property remains the property investment of choice amongst property professionals with 44.5% of those surveyed reporting it to be their preferred option," Mr Rothner said.

Western Australia has now surpassed Queensland as the state that is the most favoured property investment destination.

"One of the more significant findings is the extent to which Western Australian property professionals have reduced their support for their own state, with a 22.3% reduction in support for Western Australia as the preferred investment destination,” Mr Rothner said.

"Despite the continually gloomy reports, property professionals have lifted their view on the outlook for the residential property market. This survey highlights a 2.5% increase in the total percentage of those forecasting an improving outlook for residential property,” Mr Rothner added.

Almost 40% of the respondents anticipate vacancy rates to fall within the next six months.