Property News

Queensland looks good to investors

06 October 2006

Queensland is making its move on Western Australia in the property investment stakes, but the real cash continues to move offshore, according to a number of surveys released last week.

And residential property is expected to remain in the doldrums, particularly in NSW, as respondents predict further interest rate rises and higher fuels costs.

But all is not lost as - thanks to persistently weak conditions in the housing sector - commercial, retail and industrial property has benefited from any extra cash coming into the market.

Ashe Morgan Winthrop's (AMW) 21st annual Property Investors Survey has shown that while Perth remains attractive for investors, the locals have reduced support for their own state.

AMW managing director Michael Rothner said one of the more significant findings [of the survey] was the extent to which WA property professionals had reduced their support for their own state, with a 22.3 per cent reduction in support for WA as the preferred investment destination.

The AMW survey covers 928 property professional including lenders, fund managers and advisers. They were asked a number of questions covering interest rate sentiment, the outlook for overseas and domestic patterns and which sector was likely to be the best performer in the year ahead.

"The Western Australia property market is clearly the strongest in the country," Mr Rothner said

"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 in their market.

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

AMW's marketing director John Winter said respondents were upbeat about prospects for the commercial property sector but remained cautious when it came to residential markets, in particular NSW.

"Office property investors are the more bullish about their investment likelihood with a total of 67.1 per cent [of respondents] indicating an expectation of investing in the next six months," Mr Winter said.

"Retail, industrial and residential are all clustered closely with between 56 per cent and 56.6 per cent total positive investment expectations being recorded."

Mr Winter said the mantle for the most positive investment intentions for any state now went to Queensland, with a total 64.4 per cent of all respondents in that state indicating they were either definitely or quite likely to invest in the next six months.

In the Australian Property Institute's bi-annual Property Directions Survey, the respondents also indicate that the greatest growth potential is seen in commercial property in Sydney and Melbourne in the next two years, peaking in 2008.

Tom Webster, API's NSW president, said the issues influencing the commercial markets were the continuing reduction in vacancy rates, the steadying of incentive levels in Sydney, reduction in incentive levels in Brisbane and the anticipated rental increases above the expected CPI in Sydney, Melbourne and Brisbane.

"There is the potential for a reduction in yields for quality classes of development due to the high competition between cashed up funds to find an investment home," Mr Webster said.