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Vol 11. No.49

Economic Overview

	Current	+/-	Movement
$AUS/$US	91.40	-0.11
Cash Rate	4.00	Steady
90 Day Bill	4.33	Steady
10 Year Bond	5.620	+0.130
ASX 200	4814.2	-5.8

NSW Property

NSW government to change compulsorily acquisition laws (SMH Pg.1)

• Before June the NSW state government will introduce new laws to create a development authority with powers to compulsorily acquire and rezone private land for resale to developers.
• The metropolitan development authority will buy privately owned land near rail and bus routes for medium- and high-density housing. They will also decide which areas should be included for new housing and employment.
• Cabinet has yet to finalise the details, particularly in regard to compensation paid to the landowners.

Sydney’s auction market (AFR Pg.5)

• The number of dwellings listed for auction in Sydney during March is a record 2,860. Well up on the 1,400 auctions listed in March 2009 and the previous record of 2,300 in March 2007.
• The early auction clearance results for March are approximately 70%, down on the 75% recorded in February and 85% in January.
• The clearance rate on the northern beaches has halved from 60% in February to the current 30%. The lower north shore's clearance rate has fallen from 83% to 67% and in the south west the figures have fallen from 59% to 38%.
• The Canterbury-Bankstown area has witnessed an increase from 79% in February to the current 87%.

Sydney hotel update (AFR Pg.56)

• Riversdale Group has purchased Kinselas Hotel in Darlinghurst for $12 million on a yield in excess of 12% from McHugh Holdings.
• The hotel has 30 poker machines ($400,000/machine).
• McHugh Holdings is believed to have received offers around $28 million for the Steyne Hotel in Manly. The Hotel was purchased for $47 million in 2006.
• McHugh Holdings will auction the Shore Club Hotel on the Manly beachfront shortly.

Victoria Property

Melbourne residential development site sale (AFR Pg.56)

• A residential development site at 212 Victoria Street, opposite the Queen Victoria Market, in Melbourne has been purchased off market by the Austhorne Group for $10 million.
• The 1,011m² ($9,891/m²) site has approval for a 19 level tower and 214 units ($46,719/unit).

National Property

Mortgage stress update (AFR Pg.56)

• A monthly Mortgage Stress Report by Fujitsu has found approximately 581,000 households are experiencing mortgage stress, a 0.7% increase over the month.
• The number is forecast to increase to 673,000 by the end of the year.
• 49% of first home buyers who acquired a property in the last 18 months are anticipated to be experiencing mortgage stress by December due to the increase in interest rates. Approximately 35,000 are predicted to default on their loans.
• In August 2008 the number of households experiencing mortgage stress peaked at 900,000.
• The survey defines mortgage stress as the impact on lifestyle and discretionary spending.

Residential market forecast (AFR Pg.57)

• Westpac Banking Corp has forecast Australian house prices will stabilise in the middle of 2010 due to the reduced government stimulus and higher interest rates placing pressure on affordability.
• Sydney’s housing market is believed to be on its way to recovery following 5 years of stagnation.
• Melbourne’s housing market is expected to record some growth this year, however, the price growth has been deemed as “unsustainable”.

Colonial First State Fund update (AFR Pg.55)

• Colonial First State Global Asset Management will restructure their $2.5 billion unlisted Diversified Property Investment Fund (DPIF) by selling off the industrial portfolio and recapitalising the shopping centre holdings.
• The $270 million industrial portfolio in Sydney, Brisbane and Melbourne will be sold off by the end of 2012 as the fund is not large enough.
• In June the properties were 93% occupied and have a weighted average lease expiry of 3.9 years.
• Industrial assets include Cumberland Green in Rydalmere and 51 Eastern Creek Drive in Eastern Creek, Sydney; and the Myer distribution centre at Altona North, Melbourne.
• The $1.2 billion DPIF retail portfolio will be recapitalised. The portfolio includes 9 assets in NSW, Queensland, South Australia and Western Australia.

Commercial market forecast (AFR Pg.57)

• Westpac Banking Corp believes the office and industrial sectors “will provide better total return over the next 2 to 3 years” compared to the retail market.
• A recovery in rents and values in the office market is “not expected until later in the year or even 2011”.
• Tenant demand is forecast to lift due to job and economic growth.
• Brisbane’s office vacancy rate is expected to rise to 12% this year and peak at 13% next year.
• Melbourne’s office vacancy rate is forecast to fall to 5.3% this year and to 4% in the following year.
• Perth’s office vacancy rate is expected to rise to 15.3% in 2012. Incentives are forecast to be up to 20% for prime office space by the end of 2010 due to new supply. Prime rents are likely to decline by 12% and secondary rents by 13%.