The combination of low interest rents and generous government grants has seen the first-home owner market start to pick up in the depths of the doom and gloom of the global financial crises.

But as always in property there is always another side to the story - and it may be that landlords aren’t going to like this one. After years of ever increasing rents, queues of qualified tenants and media stories of well-deserving families sleeping in cars because they couldn’t find a house, the tide may have started to turn in favour of the tenants.

According to The Australian:

Valuation firm Herron Todd White says in its March market review that while the numbers don’t yet show this, the market’s demeanour is an indicator.

HTW says in Sydney there have already been signs of falling rents, particularly in the prestige markets of the lower north shore and inner eastern suburbs.

The lower and middle brackets remain steady, but the days of 50 or more potential tenants showing up for an inspection appear to be over. At the lower end there are still excellent rental returns, although the number of people moving to home ownership may see rental increases slow.

As the costs of renting keep on going up and the cost of owning keeps on decreasing - its safe to say that landlords won’t be able to continue to count on a nice little 10% rent increase each year. In fact for owner’s of  upmarket properties there is the double-wammy of an increase in rental stock as houses that have not sold being rented out instead. For the desperate who can’t sell a property - some rent is better than none- giving the smart renter a welcome chance negotiate themselves a good deal.

Landlords who want to keep their property fully tenanted should be prepared to go back to doing it the old-fashioned way: actually maintaining the property in a superior condition so a good tenant might actually want it!

Well at least handymen and tradespeople are easier to come by for quick tidy-up jobs between tenants than they have been for years!

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Office vacancies are on the rise lets review some of the highlights for the major Australian cities.

Perth

Perth’s CBD office vacancy rate may go as high as 8% within the next two years as the combination of large number of projects being completed and a the collapse of the mining and resources industry create a perfect storm. Companies who are laing staff off by the thousands are also entereing the sub-leasing game to try and recover some of their fixed costs.

The current vacancy rate is still only 1.3%, which is a full 1% higher than six months earlier and the first increase in the rate since July 2004. Existing projects are either pre-committed - or on hold. You just wonder how good those pre-committments are when tenants start shutting up shop?

Brisbane

The listed property trust GPT Group is denying speculation that its $630 million tower in Eagle Street will not proceed. Although the trust doesn’t have committed tenants it still claims to be proceeding with the massive tower.  The One-One-One 54-story tower has been in consturction since last year. The enviroment for commercial tenancy has changed a lot in a few months though in Brisbane.

The CBD vacancy rate for commercial space has risen to 4.2%- up from 3% six months previously. There is a risk of  a supply glut  - with 50,000 sqm of office space being added to Brisbane’s CBD in those same six months.

GPT is still confident that they will able to complete the building on time and instead of doom and gloom they see an opportunity:

“Competing supply has been dropping like flies. demand has softened as it hs throughout Australia, but Brisbane is still the fastest-growing city in Australia”

according to Mr Cope from GPT.

Other projects in Brsibane city are on hold or in doubt:

• Empire Square project has been scrapped
• Transit Centre development won’t go ahead without pre-commitment
• Investa’s Vision project has been put on hold
• the state government has canceled the $1.7 billion Northbank prject.
• Triology ($700 million) is on hold

Adelaide

Adelaide has bucked the trend as the only major city to show a drop in CBD vacancies with the rate down to 3.4% (from 4% six months earlier). Not as much of a boom town as Brisbane and Perth - Adelaide is being seen as in a good position medium term for growth. Not only does it have substantial gold and uranium mining- both metals not much affected by the Chinese downturn, but also the strong defence industry would continue to grow regardless of the world’s economic situation.

Canberra

While most predicted an increasing demand for office space with the election of the Federal Labor government in November 2007 - it hasn’t happened. Instead Canberra now has the highest office vacancy rate in the country - 8.5%. I guess being a one industry town is always bad - even if that industry is the government. There must be a small up side for Canberra when its second biggest industry, tertiary education, starts to boom again as the easy jobs dry up.

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Well I tried really hard to find a more upbeat post on Australian property news compared to my last post. Unfortunately the world is not cooperating with me today. Its all doom and gloom in the property world down under.

West Australian Property Down

The Australian is reporting doom and gloom for the former golden child of Australian property investment - Western Australia. The fall out from the mining boom collapse has seen properties in the over $1million bracket have collapsed 20%.

Real Estate Institute of Western Australia deputy president David Airey said there had been just 85 sales in Perth’s affluent western suburbs in the three months to December, down from 150 the previous quarter and 300 at the same time in 2007, The Australian reported.

“Properties … purchased as recently as a year ago have been listed or sold below their original asking price,” he said.

Mr Airey said house prices in the state were expected to fall further as the global financial crisis continued to unfold and mining companies retrenched staff.

Adviser Edge head of property research Louis Christopher said Perth house prices were expected to fall by between 8 per cent and 12 per cent this year.

So bargain time in the luxury property market in the West

Southern Highlands Property Going South
On the other side of Australia, the prestigious Southern Highlands area south of Sydney is also suffering, thought not as severely as in the west, probably because the boom is neither as recent or as excessive as it was in the west. The figures for Burradoo NSW are that prices are down 10% - though the top end of the market is holding up better in NSW’s Southern Highlands.

Meanwhile those cautious investors who thought that Mortgage Funds were a safer investment option than direct property investment still have their funds frozen.

Again The Australian reports

THE 250,000 investors with more than $25 billion tied up in the frozen mortgage funds sector are unlikely to see their cash until at least next year, with not one fund being unfrozen since the sector was ravaged in October.

Property Investment Research associate director Dugald Higgins said those mortgage funds would unfreeze assets only when investor sentiment in financial markets improved substantially, and no freezes were likely to be lifted until at least 2010.

“Nothing really has changed since the rush of freezing activity in October,” Mr Higgins told The Australian.

The sad part is that these investors are often retirees who thought they were in a low-risk investment and were reliant on the income that these mortgage trusts used to be so good at producing.  More than 30 institutions froze funds in October in response to the Federal government’s guarantee for bank deposits.

The latest new is the PM Kevin Rudd is talking down the economy -saying that it will get worse before it get betters - how much worse is the real question.

Well after all that all I can say is check out our new international property listing service to bag that bargain in international property!

Tired of the doom and gloom of the world share markets and property? Don’t want to know that as of yesterday Australia’s share market was worth exactly 50% of what it was last year? Well I have a word for you: timeshares. The timeshare operators are in the market and are buying up big!

Accor Vacation Club is a major timeshare operator in Australia and has bought a swag of apartments in a prime Gold Coast building. AVC operates well-known brands such as Grand Mecure and Novotel.

According to The Australian newspaper:

it is buying 44 units in one line at what is believed to be a significantly discounted price.

AVC chief executive John Osborne declined to reveal the price paid for the Freshwater Point apartments but local agents said one-bedroom apartments in the Broadbeach complex had been selling for about $400,000 and two-bedroom units for between $500,000 and $700,000.

AVC bought 22 of each. Sources put the value of the deal at about $20 million.

This is not just any old apartment building in need of a refurbishment though. The developer Matthew Property Group had finished the building a year ago and the apartments are a mixture of one and two star apartments all rated 4.5 star. The property is prime real-estate located in the heart of Broadbeach and accross the highway from Jupiter’s Casino, the iconic destination for the Gold Coast.

It seems that times are good for timeshares - the Australian Timeshare and Holiday Ownership Council research shows that timeshare occupancy is running at over 94%. It may well continue to be strong to - especially in Australian’s decide to holiday at home on the back on the much weaker US$ which has dropped from US98c to US67c in less than 4 months.

The Gold Coast is a perennially popular family destination with that magic combination of theme parks, good beaches and cheap food - and Broadbeach is a a prime area of the Gold Coast.

AVC reports that all their properties have occupancy rates of better than 90% including properties Melbourne CBD, Snowy Mountains, Sydney CBD, resorts and Coffs Harbour and Cairns and Sunshine Coast.

It looks like the big player bargain hunter are entering the market: I guess anyone with cash who can afford to buy a significant percentage of a building would be in a great bargaining position with a cash-strapped developer. It works for the timeshare company to, as they normally like to own a fairly large percentage of the building so that they can cost-effectively manage it and control the day-to-day running of the property.